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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 28, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
THE WACKENHUT CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FLORIDA 59-0857245
(STATE OF INCORPORATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
4200 WACKENHUT DR. #100,
PALM BEACH GARDENS, FL 33410-4243
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (561) 622-5656
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
Common Stock, Series A, $.10 par value New York Stock Exchange
Common Stock, Series B, $.10 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
At February 13, 1998, the aggregate value of 1,922,611 shares of Series
A Common Stock and 8,884,540 shares of Series B Common Stock held by
non-affiliates of the Registrant was $231,636,535.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of the registrant's Annual Report to Shareholders for the fiscal year
ended December 28, 1997 are incorporated by reference into Parts II and IV of
this Report.
Parts of the registrant's Proxy Statement for its 1998 Annual Meeting of
Shareholders are incorporated by reference into Part III of this Report.
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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 and other support 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
56,000 full and part-time employees serving over 17,000 commercial and
governmental customers through an extensive network of offices and operations in
48 states and approximately 50 countries.
The company was incorporated in 1958 to continue the businesses that were
originally established in 1954 by its Chairman 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(R) ("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. Custom Protection Officer is a Registered Service
Mark of The Wackenhut Corporation. 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 54% owned Wackenhut Corrections
Corporation subsidiary ("WHC"). As of January 1998 WHC has contracts to manage
46 correctional and detention facilities, with a rated capacity of 30,144 beds.
From December 29, 1991 to December 28, 1997, WHC's revenues increased from $37.9
million to $206.9 million and operating income increased from $1.7 million to
$16.5 million, representing compound annual growth rates of 32.7% and 46.1%,
respectively. As of February 27, 1998, WHC's total equity market capitalization
was approximately $631.8 million.
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The company has leveraged its management skills to expand into other
support services in addition to its expansion into the Correctional Business. In
1992, the company entered into the foodservice business for correctional
institutions. At December 29, 1996, only 14% of the correctional foodservice
market has been privatized. Consequently, the company believes that as
privatization of correctional food services continues to gain acceptance at
state and local levels, the Correctional Foodservice Management Division will
have opportunities for expansion*.
In the third quarter of 1996, the company entered into the professional
employer organization ("PEO") employee leasing business by establishing Oasis
Outsourcing, Inc., a majority owned subsidiary. During 1997, the company
continued to expand its market presence in these areas and, consistent with that
strategy, Wackenhut Resources, Inc. (WRI), a subsidiary of the company, acquired
the King Companies, in May 1997, and Professional Employee Management, Inc. (PEM
Companies) in December 1997. Both companies are professional employer
organizations and, in addition, a good percentage of the business of the King
Companies is in the temporary staffing business. These two companies were
combined with Oasis Outsourcing, Inc., under Wackenhut Resources, Inc., to form
the Staffing Services Business. By the end of 1997, the Staffing Services
Business, including PEM, had 15 offices and personnel in 35 states.
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 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.
* 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 professional employer organization, 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
- ---------------------
* Refer to Forward Looking Statements included as Exhibit 13.0 - page 21 to this
Form 10-K
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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 in approximately 50 countries
worldwide provides it with an advantage when pursuing contracts with
multi-national corporations.
* CORRECTIONAL SERVICES BUSINESS. WHC's objective is to enhance its
position as one of the leading providers of privatized correctional and
detention services. Key elements of WHC'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.
* STAFFING SERVICES BUSINESS. Professional employer organizations were
founded to take advantage of the trend of small and medium size
businesses to lease employees in order to cut costs and provide more and
better employee benefits. With a national growth strategy, Wackenhut
Resources plans a measured expansion into new markets and regions.
Wackenhut Resources' strategy for growth is to seek a balance between
employee leasing and temporary staffing. It is felt that this broader
blend of human resources services will better meet the needs of our
clients as outsourcing trends continue. In addition to internal growth
the company seeks to increase its presence in staffing services through
selective acquisitions such as the acquisitions of the King Companies,
in May 1997, and Professional Employee Management, Inc. (PEM Companies),
Florida in December 1997.
* PURSUE SELECTED ACQUISITIONS. In addition to internal growth, the
company's growth strategy includes selected acquisitions.
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. 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.
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.
CORRECTIONAL SERVICES BUSINESS. WHC views governmental agencies responsible
for state correctional facilities in the United States and governmental agencies
responsible for correctional facilities in the United Kingdom and Australia as
its primary potential customers. WHC's secondary customers include the INS,
other federal and local agencies in the United States and other foreign
governmental agencies.
STAFFING SERVICES BUSINESS. As a Professional Employer Organization (PEO),
the staffing services group provides integrated human resource administration,
such as payroll, management and risk management services. Client companies
outsource a large part of the human resource function to the PEO. While the PEO
becomes the employer of record for payroll and tax purposes, the client
maintains control of the activities of the worksite employees. Due to the
increasing complexity of the regulatory environment, employment costs per
employee are rising dramatically, and constitute one of the market determinants.
Outsourcing is expected to have a very
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compelling appeal to companies in the process of downsizing and reengineering.
As a result of the acquisition of the King Companies, the staffing services
group also entered the temporary staffing business.
COMPANY ORGANIZATION
The company's business can be divided into the Security Services Business,
Correctional Business and Staffing Services Business. The Securities Services
Business encompasses all commercial and governmental business of the North
American Operations Group (including Wackenhut of Canada Limited) and the
International Operations Group. The Security Services Business provides
security-related and other support services. 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. The Staffing Services Business provides employee leasing
and temporary staffing services. Provided below is financial information for
each business segment for Fiscal 1997, Fiscal 1996 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 17 of
Notes to Consolidated Financial Statements (which also includes a summary of
domestic and international operations) included in Exhibit 13.0 to this Form
10-K.
<TABLE>
<CAPTION>
FISCAL FISCAL FISCAL
1997 1996 1995
AMOUNT AMOUNT AMOUNT
BUSINESS SEGMENT ------ ------ ------
- ---------------- (IN THOUSANDS)
<S> <C> <C> <C>
Revenues:
Security Services................................. $ 828,974 $ 768,065 $ 697,301
Correctional Services............................. 206,930 137,784 99,431
Staffing Services................................. 90,898 207 -
------------ ------------ ------------
Total Revenues................................. $ 1,126,802 $ 906,056 $ 796,732
============ ============ ============
Operating Income:
Security Services................................. $ 20,281 $ 18,736 $ 20,500
Correctional Services............................. 16,545 9,731 7,229
Staffing Services................................. (272) (365) -
Unallocated corporate expenses.................... (14,982) (11,032) (11,955)
------------ ------------ ------------
Operating Income before one time charges and
impairment of assets and relocation costs....... 21,572 17,070 15,774
One time charges and impairment of assets........... (18,300) (750) -
------------ ------------ ------------
Total Operating Income................................. $ 3,272 $ 16,320 $ 15,774
============ ============ ============
</TABLE>
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SECURITY SERVICES BUSINESS
The Security Services Business is conducted through two separate operating
groups: the North American Operations Group and the International Operations
Group. The following table sets forth the contribution of each operating group
to the total revenues and total operating income of the Security Services
Business during Fiscal 1997, Fiscal 1996 and Fiscal 1995.
<TABLE>
<CAPTION>
REVENUES
-----------------------------------------------------------
FISCAL 1997 FISCAL 1996 FISCAL 1995
-------------- -------------- ---------------
OPERATING GROUP AMOUNT % AMOUNT % AMOUNT %
- --------------- -------------- -------------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
North American Operations Group
Commercial accounts................................. $ 421,054 51 $ 379,362 49 $ 331,759 47
Government/regulated industries..................... 290,771 35 285,116 37 255,575 37
---------- --- ----------- --- ----------- ---
Sub-total North American Operations................. 711,825 86 664,478 86 587,334 84
International Operations Group......................... 117,149 14 103,587 14 109,967 16
---------- --- ----------- --- ----------- ---
Total Security Services Revenues.............. $ 828,974 100 $ 768,065 100 $ 697,301 100
========== === =========== === =========== ===
</TABLE>
<TABLE>
<CAPTION>
OPERATING INCOME
-----------------------------------------------------------
FISCAL 1997 FISCAL 1996 FISCAL 1995
-------------- -------------- ---------------
OPERATING GROUP AMOUNT % AMOUNT % AMOUNT %
- --------------- -------------- -------------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
North American Operations Group
Commercial accounts................................. $ 14,251 70 $ 13,665 73 $ 12,486 61
Government/regulated industries..................... 5,846 29 6,328 34 5,136 25
---------- --- ----------- --- ----------- ---
Sub-total North American Operations................. 20,097 99 19,993 107 17,622 86
International Operations Group......................... 184 1 (1,257) (7) 2,878 14
---------- --- ----------- --- ----------- ---
Total Security Services Operating Income...... $ 20,281 100 $ 18,736 100 $ 20,500 100
========== === =========== === =========== ===
</TABLE>
NORTH AMERICAN OPERATIONS GROUP. The North American Operations Group has
historically provided the majority of the company's consolidated revenues. This
group provides security-related and other support services throughout the United
States and Canada. The North American Operations Group is subdivided between
commercial and government and regulated industry accounts. In conducting its
Security Services Business, the company has adopted a quality management
approach. General management responsibilities for each operating group is 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.
COMMERCIAL ACCOUNTS. The company furnishes security officers (armed and
unarmed) to protect its clients' property, in the United States and Canada,
against fire, theft, intrusion, vandalism and other physical harm. Specialized
security services offered by the company include 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.
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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, and members of elite military units and
college graduates with criminology-related degrees. These recruits are prepared
for critical security assignments after completing a Company training program
that surpasses any state or local requirements for security officer licensing.
CPOs perform such functions as prisoner transportation in Maryland and Colorado,
neighborhood and downtown security in Florida, transit security in Wisconsin and
California, 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.
Contracts 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 renegotiations or escalation if related costs increase because of
changes in minimum wage laws or certain other events beyond the control of the
company.
The company designs and engineers integrated security programs using both
security officers and electronic equipment. These services include planning
master security programs for particular facilities, custom designing security
systems, procuring requisite electronic equipment, managing contracts and
construction, training security personnel, and reviewing and evaluating security
programs. Contracts for these integrated security-related services generally
provide for a fixed fee and are awarded by competitive bidding.
The company complements security services provided to its clients with
investigative services, such as employee background screening and insurance
fraud investigations. The company maintains a national research center with the
latest information-gathering technology for public records and a "fraud-waste-
criminal" hotline for employees of clients to report workplace abuses. Clients
ordinarily are charged an hourly rate for investigative services and a flat rate
for background record searches.
GOVERNMENT AND REGULATED INDUSTRY ACCOUNTS. The company provides
specialized security-related and support services for United States federal
government entities, nuclear power generating facilities and prison and jail
commissaries. Wackenhut Services, Inc. ("WSI") provides security services
primarily to United States federal government entities. Services provided by WSI
range from basic security and administrative support to specialized emergency
response. In the United States, WSI provides security-related services at 10
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 company has managed the Rocky Flats Environmental
Technology Site near Denver and since 1964, has managed the Nevada Test Site
near Las Vegas. 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.
The company provides Nuclear Utility customers with highly trained and
qualified security personnel, emergency planning, electronic detection equipment
and integrated security systems to these utility companies. The terms of
contracts entered into by the Nuclear Division generally are multi-year and
include a variety of fee arrangements. The company's experience with
requirements and standards of the Nuclear Regulatory Commission ("NRC") enable
it to assist customers in ensuring NRC compliance.
The company's correctional foodservice business, the second largest in the
industry, provides over 61 million meals annually to over 100 jail and prison
facilities in 27 states throughout the United States. Food for regular,
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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.
INTERNATIONAL OPERATIONS GROUP. The International Operations Group accounts
for approximately 10% of the company's consolidated revenues. The International
Operations 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 45 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 19 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 SERVICES BUSINESS
The company's Correctional Services Business is conducted through the
operations of WHC. WHC is a leading developer and manager of privatized
correctional and detention facilities in the United States, the United Kingdom
and Australia. WHC was founded in 1984 as a division of the company to
capitalize on emerging opportunities in the private correctional services
market. As of January 1998, WHC has contracts to manage 46 correctional and
detention facilities with an aggregate rated capacity of 30,144 beds, 35 are
currently in operation and 11 are under development by WHC. WHC offers
governmental agencies a comprehensive range of correctional and detention
facility 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, WHC 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 WHC's experience in delivering a full range of quality
privatization services on a cost-effective basis to governmental agencies
provides such agencies strong incentives to choose WHC when awarding new
contracts or renewing existing contracts.
WHC's facility management contracts typically have original terms ranging from
one to ten years and give the governmental agency at least one renewal option.
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STAFFING SERVICES BUSINESS
In the third quarter of 1996, the company entered into the PEO employee
leasing business by establishing Oasis Outsourcing, Inc., a majority owned
subsidiary. During 1997, the company continued to expand its market presence in
this area and, consistent with that strategy, the company acquired the King
Companies, in May 1997, and PEM Companies in December 1997. Both companies are
professional employer organizations and, in addition, a good percentage of the
business of the King Companies is in the temporary staffing business. These two
companies were combined with Oasis Outsourcing, Inc., under Wackenhut Resources,
Inc., to form the Staffing Services Business. By the end of 1997, the Staffing
Services Group had 15 offices and personnel in 35 states. Wackenhut Resources is
now one of the largest human resources firms in the Southeast with over 600
clients. In addition to internal growth, the company will seek to increase its
presence in the employee leasing and temporary staffing markets through
selective acquisitions and new marketing initiatives*.
CUSTOMERS
During Fiscal 1997, the Services Businesses provided services to more than
17,000 customers. The company's largest customer was the United States
Department of Energy, which accounted for approximately 11% and 15% of the
company's consolidated revenue in Fiscal 1997 and Fiscal 1996, respectively.
Correctional contracts with governmental agencies of the State of Texas
accounted for 32% and 39% of WHC's revenues in Fiscal 1997 and Fiscal 1996,
respectively and Contracts with the State of Florida Correctional Privatization
committee accounted for 13% and 9% of WHC's revenues in Fiscal 1997 and Fiscal
1996, respectively. The Staffing Services Business provides services to
approximately 600 clients.
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
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.
WHC competes primarily on the basis of the quality and range of services
offered, and its experience and reputation, both domestically and
internationally, in the design and management of facilities. WHC competes with a
number of companies domestically and internationally, such as Corrections
Corporation of America, Correctional Services Corporation, Group 4 International
Corrections Service, Securicor Group, U.K. Detention Services, Ltd., Cornell
Corrections Corporation, and United States Corrections Corp. Some of the
competitors are larger and have greater resources than WHC. WHC also competes on
a localized basis in some markets with small companies that may have better
knowledge of the local conditions and may be better able to gain political and
public acceptance. Potential competitors can enter the correctional business
without substantial capital investment or experience. In addition, in some
markets WHC may compete with governmental agencies that are responsible for
correctional facilities.
The company operates the staffing business mainly in Florida, which is one
of three states with the largest concentration of PEOs. Although the
overwhelming majority of PEOs are small, regionally based firms (the total
number has been estimated at approximately 1,300), the company competes with
other major companies such as Staff Leasing, Administaff and Vicam.
- ------------------------
* Refer to Forward Looking Statements included as Exhibit 13.0 - page 21 to this
Form 10-K
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EMPLOYEES
The Services Business' principal business is labor intensive, and is
affected substantially by the availability of qualified personnel and the cost
of labor. As of February 15, 1998, the Services Business had over 48,000 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 Security Service
business are covered by collective bargaining agreements. Relations with
employees have been generally satisfactory.
At January 30, 1998, the Correctional Business had 6,301 full-time
employees. The Correctional Business employs management, administrative and
clerical, security, educational services, health services and general
maintenance personnel. Employees at seven of WHC's Australian facilities are
unionized.
Staffing Services had approximately 200 administrative employees at
December 31, 1997.
BUSINESS REGULATIONS AND LEGAL CONSIDERATIONS
The Security Services Business is subject to numerous city, county, and
state firearm and occupational licensing laws that apply to security officers
and private investigators. Many states have laws requiring training and
registration of security officers, regulating the use of badges and uniforms,
and imposing minimum bond, surety, or insurance standards. Many foreign
countries have laws that restrict the company's ability to render certain
services, including laws prohibiting security-related services or limiting
foreign investment.
In addition, many state and local governments are required to enter into a
competitive bidding procedure before awarding contracts for products or
services. The laws of certain jurisdictions may also require the company to
award subcontracts on a competitive basis or to subcontract with businesses
owned by women or members of minority groups.
The industry in which the Correctional Business 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. WHC's contracts frequently include extensive reporting requirements
and require supervision and on-site monitoring by representatives of contracting
governmental agencies. WHC's Kyle New Vision Chemical Dependency Treatment
Center is licensed by the Texas Department of Criminal Justice to provide
substance abuse treatment. Certain states, such as Florida and Texas, deem
prison guards to be peace officers and require WHC personnel to be licensed and
may make them subject to background investigation. State law also typically
requires corrections officers to meet certain training standards.
The Staffing Services Business is subject to all federal and state laws
regarding the employer-employee relationship, including numerous federal and
state laws relating to labor, tax and discrimination matters. While many states
do not explicitly regulate PEO activities, a number of states have passed laws
that have licensing or registration requirements for PEO companies and other
states are considering such regulation. Such laws vary from state to state but
generally provide for monitoring the fiscal responsibility of PEO companies. The
company believes it conducts its business in compliance with the licensing and
registration requirements of the states in which it operates and monitors such
compliance annually.
10
<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.
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
91,800 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 $1,758,102 with no escalation during the initial
15-year term.
WHC owns the land and a 66,000 square foot building in Aurora, Colorado,
and the land and a 61,400 square foot building in Queens, New York, which are
operated by WHC as detention centers under contracts with the United States
Government and a 35,000 square foot building operated by WHC as a correctional
facility under contract with the State of California in McFarland, California.
In 1997, WHC purchased and renovated an 86-bed psychiatric hospital in Ft.
Lauderdale, Florida.
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, Puerto Rico and Uruguay that are used for
the operations of its foreign subsidiaries in those countries. All other offices
of the company are leased. The aggregate annual rent for all non-cancelable
operating leases of office space, automobiles, data processing and other
equipment is approximately $10,055,000. The company owns substantially all
uniforms, firearms, and accessories used by its security officers.
ITEM 3. LEGAL PROCEEDINGS
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.
11
<PAGE> 12
EXECUTIVE OFFICERS OF THE REGISTRANT
GEORGE R. WACKENHUT is Chairman of the Board and Chief Executive Officer of
the company and has been 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 is President and Chief Operating Officer of the
company and a member of the Board of Directors and has been since April 26,
1986. Prior to that, Mr. Wackenhut was 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 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 is Executive Vice President of the company and President,
North American Operations Group and has been 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 a M.B.A.
degree from Cornell University.
FERNANDO CARRIZOSA is Senior Vice President and President, International
Operations Group and has been since January 28, 1989. Mr. Carrizosa was Vice
President of International Operations Group 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 a
M.B.A. with honors from Florida International University in 1976.
ROBERT C. KNEIP is Senior Vice President, Corporate Planning and
Development of the company, and Chief Executive Officer of Wackenhut Resources,
Inc. Since he joined the company in 1982, Dr. Kneip has held various positions
in the company including Director, Power Generating Services; Director,
Contracts Management;
12
<PAGE> 13
Vice President, Contracts Management; and Vice President, Planning and
Development. Dr. Kneip started the Staffing Services Business by establishing
Oasis Outsourcing, Inc., a majority owned subsidiary of the Company in 1996 and
continues to be a major factor in the Company's development of the Staffing
Services Business. Prior to joining the company, Dr. Kneip was employed by the
Atomic Energy Commission, the Nuclear Regulatory Commission and Dravo Utility
Constructors, Inc. He received a B.A. (Honors) from the University of Iowa, and
an M.A. and Ph.D. from Tulane University.
PHILIP L. MASLOWE is Senior Vice President and Chief Financial Officer of
the company. He joined the company in August 1997. Prior to joining the company,
Mr. Maslowe was employed by KinderCare Learning Centers, Inc., as Executive Vice
President and Chief Financial Officer since 1993. Before joining KinderCare, he
was Executive Vice President and Chief Financial Officer of Thrifty Corporation.
From 1980 to 1991, Mr. Maslowe was with The Vons Companies, Inc., where he
served as Group Vice President, Finance. Before joining Vons, he was audit
manager with Price Waterhouse and Company. Mr. Maslowe is a graduate of Loyola
University of Chicago and holds a M.B.A. from the J.L. Kellogg Graduate School
of Management at Northwestern University.
SANDRA L. NUSBAUM is Senior Vice President, Human Resources of the company.
Since she joined the company in 1981 Ms. Nusbaum has held various positions in
the company including Personnel Representative, Director of Compensation and
Benefits, and Vice President, Human Resources. Prior to joining the company, Ms.
Nusbaum was employed by DAK Industries. Ms. Nusbaum received a BBA degree in
Personnel Management and Marketing from Florida International University.
JAMES P. ROWAN is Senior Vice President General Counsel and Assistant
Secretary of the company. He joined the company in 1979 as Assistant General
Counsel, became Associate General Counsel in 1982 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 and a C.P.A. from the University of Illinois.
RUTH J. WACKENHUT is Secretary of the company and has been since 1958. She
is married to George R. Wackenhut, Chairman of the Board 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.
GEORGE C. ZOLEY is Senior Vice President of the company and Vice Chairman
and Chief Executive Officer of the Wackenhut Corrections Corporation. He has
served as President and a Director of the Wackenhut Corrections Corporation
since it was incorporated in 1988, and Chief Executive Officer since April 1994.
Dr. Zoley established Wackenhut Corrections Corporation as a division of The
Wackenhut Corporation in 1984, and continues to be a major factor in the
company's development of privatized correctional and detention facilities
business. Dr. Zoley has also served as a manager, director and then Vice
President of Government Services for Wackenhut Services, Inc. from 1981 through
1988. Prior to joining Wackenhut Services, Inc., Dr. Zoley held various
administrative and management positions for city and county governments in South
Florida. Dr. Zoley has a Masters and Doctorate Degree in Public Administration.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this Item is incorporated by reference to page
21 of the Registrant's 1997 Annual Report to Shareholders, EXHIBIT 13.0.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is incorporated by reference to pages
22 through 23 of the Registrant's 1997 Annual Report to Shareholders, Exhibit
13.0.
13
<PAGE> 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this Item is incorporated by reference to pages
24 through 29 of the Registrant's 1997 Annual Report to Shareholders, Exhibit
13.0.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is incorporated by reference to pages
30 through 42 of the Registrant's 1997 Annual Report to Shareholders, Exhibit
13.0, except for the Financial Statement Schedule listed in Item 14(a)(2) of
this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
The information required by Items 10, 11, 12 and 13 of Form 10-K (except
such information as is furnished in a separate caption "Executive Officers of
the Registrant" and is included in Part I, hereto) is contained in, and is
incorporated by reference from, the proxy statement (with the exception of the
Board Compensation Committee Report and the Performance Graph) for the company's
1998 Annual Meeting of Shareholders, which has been filed with the Securities
and Exchange Commission pursuant to Regulation 14A.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following consolidated financial statements of the company,
included in the Registrant's Annual Report to Shareholders for the
fiscal year ended December 28, 1997 are incorporated by reference in
Part II, Item 8:
Consolidated Balance Sheets - December 28, 1997 and December 29, 1996
Consolidated Statements of Income - Fiscal years ended December 28,
1997, December 29, 1996 and December 31, 1995
Consolidated Statements of Cash Flows - Fiscal years ended December
28, 1997, December 29, 1996 and December 31, 1995
Consolidated Statements of Shareholders' Equity Notes to Consolidated
Financial Statements - Fiscal years ended December 28, 1997, December
29, 1996 and December 31, 1995
With the exception of the information incorporated by reference
from the 1997 Annual Report to Shareholders in Part II, Items 5,6,7,8,
and Parts IV of the Form 10-K, the Registrant's 1997 Annual Report to
Shareholders is not to be deemed filed as part of this Report.
2. Financial Statement Schedule
14
<PAGE> 15
Schedule II - Valuation and Qualifying Accounts - Page 20
All other schedules specified in the accounting regulations of the
Securities and Exchange Commission have been omitted because they are
either inapplicable or not required. Individual financial statements of
the company have been omitted because it is primarily an operating
company and all significant subsidiaries included in the consolidated
financial statements filed with this Annual Report are majority-owned.
3. Exhibits
The following exhibits are filed as part of this Annual Report:
EXHIBIT
NUMBER DESCRIPTION
------- -----------
3.1 Articles of Incorporation as amended (incorporated by reference to
the Registrant's Form 10-K Annual Report for the fiscal year ended
December 31, 1995)
3.2 Bylaws currently in effect (incorporated by reference to the
Registrant's Form 10-K Annual Report for the fiscal year ended
December 31, 1995)
4.1 Revolving Credit and Reimbursement Agreement dated December 30, 1997
by and among The Wackenhut Corporation, Nations Bank, N.A.,
ScotiaBanc, and SunTrust Bank, as Lenders, and NationsBank, N.A., as
Agent
4.2 Receivables Purchase Agreement dated as of December 30, 1997 among
Wackenhut Funding Corporation, as Transferor, The Wackenhut
Corporation, as Servicer, Enterprise Funding Corporation, as a
Purchaser, and Nations Bank, N.A., as Agent
4.3 Amended and Restated Credit Agreement, dated December 18, 1997, by
and among Wackenhut Corrections Corporation, Nations Bank, National
Association, Scotia Banc Inc. and the Lenders Party thereto from time
to time (incorporated by reference to Wackenhut Corrections
Corporation's Form 10-K Annual Report for the fiscal year ended
December 28, 1997)
4.4 Amended and Restated Participation Agreement, dated June 19, 1997
among Wackenhut Corrections Corporation, First Security Bank,
National Association, the Various Bank and other Lending Institutions
which are partners thereto from time to time, Scotia Banc Inc., and
Nations Bank, National Association (incorporated by reference to
Wackenhut Corrections Corporation's Form 10-K Annual Report for the
fiscal year ended December 28, 1997)
4.5 Amended and Restated Lease Agreement, dated as of June 19, 1997,
between First Security Bank, National Association and Wackenhut
Corrections Corporation (incorporated by reference to Wackenhut
Corrections Corporation's Form 10-K Annual Report for the fiscal year
ended December 28, 1997)
4.6 Guaranty and Suretyship Agreement, dated December 18, 1997, among the
Guarantors parties thereto and Nations Bank, National Association
(incorporated by reference to Wackenhut Corrections Corporation's
Form 10-K Annual Report for the fiscal year ended December 28, 1997)
4.7 Third Amended and Restated Trust Agreement, dated as of June 19,
1997, among Nations Bank, National Association and other financial
institutions parties thereto and First Security Bank, National
Association. (incorporated by reference to Wackenhut Corrections
Corporation's Form 10-K Annual Report for the fiscal year ended
December 28, 1997)
15
<PAGE> 16
4.8 LC account agreement, dated as of December 30, 1997, and made between
The Wackenhut Corporation, a Florida Corporation and Nations Bank,
National Association, a national banking association, as a Lender
4.9 Amended and Restated Guaranty and Suretyship agreement, dated as of
December 30, 1997
10.1 Form of Deferred Compensation Agreement for Executive Officers (the
"Senior Plan"): Alan B. Bernstein, Fernando Carrizosa, Robert C.
Kneip, and Richard R. Wackenhut
10.2 Amendments to the Deferred Compensation Agreements for Executive
Officers (the "Senior Plan"): Alan B. Bernstein, Fernando Carrizosa,
Robert C. Kneip, and Richard R. Wackenhut
10.3 Executive Officer Retirement Plan (incorporated by reference to the
Registrant's Form 10-K Annual Report for the fiscal year ended
December 31, 1995)
10.4 Amended and Restated Split Dollar arrangement with George R. and Ruth
J. Wackenhut (incorporated by reference to the Registrant's Form 10-K
Annual Report for the fiscal year ended December 31, 1995)
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
(incorporated by reference to the Registrant's Form 10-K Annual
Report for the fiscal year ended December 31, 1995)
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 (incorporated by reference
to the Registrant's Form 10-K Annual Report for the fiscal year ended
December 31, 1995)
10.7 Key Employee Long-Term Incentive Stock Plan dated July 1991
(incorporated by reference to the Registrant's Form 10-K Annual
Report for the fiscal year ended December 31, 1995)
10.8 Second Amendment dated August 1, 1996 to Office Lease dated April 18,
1995 by and between The Wackenhut Corporation and Daniel S.
Catalfumo, as Trustee under F.S. 689.071 (incorporated by reference
to the Registrant's Form 10-K Annual Report for the fiscal year ended
December 29, 1996)
10.9 Amended Non-employee Director Stock Option Plan dated October 29,
1996 (incorporated by reference to the Registrant's Form 10-K Annual
Report for the fiscal year ended December 29, 1996)
10.10 Third Amendment dated December 10, 1997 to Office Lease dated April
18, 1995 by and between The Wackenhut Corporation and Daniel S.
Catalfumo, as Trustee under F.S. 689.071
10.11 Summary description of the amendment to the Key Employee Long-Term
Incentive Stock Plan effective as of January 28, 1997
13.0 Annual Report to Shareholders for the year ended December 28, 1997,
beginning with page 21 (to be deemed filed only to the extent
required by the instructions to exhibits for reports on this Form
10-K)
21.1 Subsidiaries of The Wackenhut Corporation
23.1 Consent of Arthur Andersen LLP
16
<PAGE> 17
24.1 Powers of Attorney
27.1 Financial Data Schedule (for SEC use only)
(b). Reports on Form 8-K.
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
THE WACKENHUT CORPORATION
By: /s/ Philip L. Maslowe Date: March 16, 1998
----------------------
Philip L. Maslowe
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ George R. Wackenhut* Chairman of the Board and Chief Executive March 9, 1998
- ----------------------------------------- Officer (principal executive officer)
George R. Wackenhut
/s/Philip L. Maslowe Senior Vice President and Chief Financial March 16, 1998
- ----------------------------------------- Officer
Philip L. Maslowe
/s/ Juan D. Miyar Vice President and Corporate Controller March 16, 1998
- ----------------------------------------- (principal accounting officer)
Juan D. Miyar
/s/ Julius W. Becton, Jr.* Director March 7, 1998
- -----------------------------------------
Julius W. Becton, Jr.
/s/ Carroll A. Campbell* Director March 9, 1998
- -----------------------------------------
Carroll A. Campbell
/s/ Richard G. Capen, Jr.* Director March 6, 1998
- -----------------------------------------
Richard G. Capen, Jr.
/s/ Anne N. Forman* Director March 11, 1998
- -----------------------------------------
Anne N. Foreman
/s/ Edward L. Hennessy, Jr.* Director March 13, 1998
- -----------------------------------------
Edward L. Hennessy, Jr.
</TABLE>
17
<PAGE> 18
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Paul X. Kelley* Director March 9, 1998
- -----------------------------------------
Paul X. Kelley
/s/ Nancy Clark Reynolds* Director March 13, 1998
- -----------------------------------------
Nancy Clark Reynolds
/s/ Geroge R. Wackenhut* Director March 9, 1998
- -----------------------------------------
George R. Wackenhut
/s/ Richard R. Wackenhut* Director March 12, 1998
- -----------------------------------------
Richard R. Wackenhut
*By: /s/ James P. Rowan Senior Vice President, General Counsel and March 16, 1998
- ----------------------------------------- Assistant Secretary
James P. Rowan
Attorney-in-fact
</TABLE>
18
<PAGE> 19
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in The Wackenhut Corporation's 1997
Annual Report to Shareholders incorporated by reference in this Form 10-K, and
have issued our report thereon dated February 11, 1998. Our audits were made for
the purpose of forming an opinion on those statements taken as a whole. The
schedule listed above in Item 14(a)(2) of the Corporation's Annual Report on
Form 10-K for the fiscal year ended December 28, 1997 is the responsibility of
the company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
consolidated financial statements. This schedule has been subjected to the
auditing procedures applied in the audits of the basic consolidated financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLPs
West Palm Beach, Florida,
February 11, 1998.
19
<PAGE> 20
SCHEDULE II
THE WACKENHUT CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE FISCAL YEARS ENDED DECEMBER 28, 1997, DECEMBER 29, 1996
AND DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED DEDUCTIONS, BALANCE AT
BEGINNING COST AND TO OTHER ACTUAL END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS CHARGE-OFFS PERIOD
- ----------- ---------- ---------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 28, 1997:
Allowance for doubtful accounts.................. $ 1,997 $ 1,249 $ 38 $ (571) $ 2,713
Valuation allowance - deferred tax asset......... $ 142 - - $ (81) $ 61
YEAR ENDED DECEMBER 31, 1995:
Allowance for doubtful accounts.................. $ 1,268 $ 1,362 - $ (633) $ 1,997
Valuation allowance - deferred tax asset......... $ 162 $ - - $ (20) $ 142
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>
20
<PAGE> 21
FINANCIAL REVIEW
The Wackenhut Corporation and Subsidiaries
Market for the Company's Common Equity and Related Stockholder Matters
During the second quarter of 1996, the company sold 2,500,000 shares of its
series B common stock in connection with a public offering at a price of $23.50
per share, before deducting underwriting discounts and commissions and estimated
offering expenses. Net proceeds of $54,020,000 from the offering were used to
repay the outstanding balance on the revolving loan, to repurchase a portion of
the receivables sold under the accounts receivable securitization facility and
for general corporate purposes.
Regular quarterly dividends of $.065 per share on both its outstanding series A
and B common stock were declared and paid for each of the four quarters of
fiscal 1997 and 1996, respectively. The company intends to declare future
quarterly dividends on series A and 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 and B
common stock, as reported on the New York Stock Exchange, for each quarterly
period during fiscal 1997 and 1996. The prices shown in the table have been
rounded to the nearest 1/16th. The approximate number of record holders of
series A and B common stock, as of March 2, 1998, was 682 and 722, respectively.
<TABLE>
<CAPTION>
Fiscal 1997 Fiscal 1996
- ---------------------------------------------------------------------------------------------------------------------------
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 $ 19 $ 16-1/2 $ 15-3/4 $ 13-5/8 $ 20-3/8 $ 14-1/4 $ 17-1/8 $12-3/8
Second 19-3/8 15-3/8 20-7/8 13-3/4 31-1/8 18-3/4 27-7/8 14-3/4
Third 24-1/2 18-3/4 20-5/8 17-1/4 24-5/8 16-3/4 18-1/2 13-3/8
Fourth 24-11/16 19 22-7/8 16-7/8 20-5/8 14-5/8 17-1/4 11-7/8
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Forward-Looking Statements
The management's discussion and analysis of financial condition and results of
operations, corporate profile, letter to shareholders, corporate diversity, and
the February 19, 1998 press release contain forward-looking statements that are
based on current expectations, estimates and projections about the segments in
which the corporation operates. These sections of the annual report also include
management's beliefs and assumptions made by management. Words such as
"expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates,"
variations of such words and similar expressions are intended to identify such
forward-looking statements. These statements are not guarantees of future
performance and involve certain risks, uncertainties and assumptions (future
factors) which are difficult to predict. Therefore, actual outcomes and results
may differ materially from what is expressed or forecasted in such
forward-looking statements. The corporation undertakes no obligation to update
publicly any forward-looking statements, whether as a result of new information,
future events or otherwise.
Future factors include increasing price and product/service competition by
domestic and foreign competitors, including new entrants; rapid technological
developments and changes; the ability to continue to introduce competitive new
products and services on a timely, cost effective basis; the mix of
products/services; the achievement of lower costs and expenses; domestic and
foreign governmental and public policy changes including environmental
regulations; protection and validity of patent and other intellectual property
rights; reliance on large customers; technological, implementation and
cost/financial risks in increasing use of large, multi-year contracts; the
outcome of pending and future litigation and governmental proceedings and
continued availability of financing; financial instruments and financial
resources in the amounts, at the times and on the terms required to support the
corporation's future business. These are representative of the future factors
that could affect the outcome of the forward-looking statements. In addition,
such statements could be affected by general industry and market conditions and
growth rates, general domestic and international economic conditions including
interest rate and currency exchange rate fluctuations and other future factors.
- --------------------------------------------------------------------------------
21
<PAGE> 22
The Wackenhut Corporation and Subsidiaries
Selected Financial Data
(in thousands except per share data)
The selected consolidated financial data should be read in conjunction with the
company's consolidated financial statements and the notes thereto.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED: (a) 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
RESULTS OF OPERATIONS:
Revenues $1,126,802 $906,056
Operating income (b) 3,272 16,320
Income before income taxes (b) 6,029 17,875
Income before extraordinary charge and cumulative effect of accounting change (b) 103 9,057
Extraordinary charge - early extinguishment of debt, net of income taxes
Cumulative effect of accounting change for income taxes
-------------------------
Net income $ 103 $ 9,057
- ---------------------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE - BASIC: (c)
Income before extraordinary charge and cumulative effect of accounting change (b) $ .01 $ .66
Extraordinary charge - early extinguishment of debt, net of income taxes
Cumulative effect of accounting change for income taxes
-------------------------
Net income - Basic $ .01 $ .66
- ---------------------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE - ASSUMING DILUTION: (c)
Income (loss) before extraordinary charge and cumulative effect of accounting change (b) $ (.01) $ .65
Extraordinary charge - early extinguishment of debt, net of income taxes
Cumulative effect of accounting change for income taxes
-------------------------
Net income (loss) - Assuming Dilution $ (.01) $ .65
- ---------------------------------------------------------------------------------------------------------------------------
CASH DIVIDENDS PER SHARE OF COMMON STOCK: (c)
Regular quarterly dividends $ .26 $ .26
Special dividend
Total dividends $ .26 $ .26
- ---------------------------------------------------------------------------------------------------------------------------
FINANCIAL CONDITION:
Working capital $ 116,909 $148,076
Total assets 404,442 323,918
Total debt (d) 15,849 5,890
Shareholders' equity 146,839 148,229
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Fiscal years 1992 and 1987 included 53 weeks.
(b) Fiscal year 1997 includes a one-time pre-tax charge of $18.3 million before
income taxes ($11.3 million after income taxes) or $0.76 per share. as
discussed in Note 2 of the consolidated financial statements.
(c) Restated to reflect a 25% stock dividend declared during fiscal 1995 and
1994 and to reflect a 100% stock dividend, effected in the form of a stock
split, declared during fiscal 1992.
(d) Includes current portion of long-term debt, notes payable and long-term
debt.
22
<PAGE> 23
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991 1990 1989 1988 1987
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 796,732 $ 726,753 $659,256 $615,378 $ 570,411 $521,191 $ 462,181 $400,996 $ 381,972
15,774 6,592 4,496 3,367 13,859 12,097 10,225 5,334 6,032
13,733 3,002 3,371 1,588 11,867 10,664 8,524 7,382 7,915
7,260 2,272 3,609 1,137 7,721 6,963 5,874 5,195 5,660
(887) (1,444)
7,370
- ---------------------------------------------------------------------------------------------------------------------------
$ 7,260 $ 1,385 $ 2,165 $ 8,507 $ 7,721 $ 6,963 $ 5,874 $ 5,195 $ 5,660
- ---------------------------------------------------------------------------------------------------------------------------
$ .60 $ .19 $ .30 $ .09 $ .64 $ .58 $ .49 $ .43 $ .46
(.08) (.12)
.61
- ---------------------------------------------------------------------------------------------------------------------------
$ .60 $ .11 $ .18 $ .70 $ .64 $ .58 $ .49 $ .43 $ .46
- ---------------------------------------------------------------------------------------------------------------------------
$ .60 $ .19 $ .30 $ .09 $ .64 $ .58 $ .49 $ .43 $ .46
(.08) (.12)
.61
- ---------------------------------------------------------------------------------------------------------------------------
$ .60 $ .11 $ .18 $ .70 $ .64 $ .58 $ .49 $ .43 $ .46
- ---------------------------------------------------------------------------------------------------------------------------
$ .24 $ .23 $ .23 $ .20 $ .19 $ .19 $ .19 $ .19 $ .19
.96
$ .24 $ .23 $ .23 $ .20 $ .19 $ .19 $ .19 $ 1.15 $ .19
- ---------------------------------------------------------------------------------------------------------------------------
$ 51,865 $ 75,589 $ 56,163 $ 56,932 $ 48,599 $ 42,413 $ 40,635 $ 38,461 $ 35,588
197,927 212,757 211,297 192,236 172,093 164,085 157,681 150,318 130,439
6,502 42,756 67,940 63,990 47,650 46,850 51,325 47,058 10,600
62,904 57,459 47,362 47,587 42,847 37,865 33,616 30,528 39,653
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE> 24
The Wackenhut Corporation and Subsidiaries
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Tabular information in thousands)
OVERVIEW
The company is a leading provider of security-related and other support services
to business and government and a developer and manager of privatized
correctional and detention facilities. Also, in 1996, the company entered into
the employee leasing and temporary staffing businesses. The company provides
security-related, outsourcing and other support services through the security
services business. Through the correctional business, the company provides
correctional and detention facility design, development and management services
to government agencies. The company's business is organized into four major
groups: North American Operations, Wackenhut Corrections Corporation (NYSE:
WHC), the company's 54% owned corrections subsidiary, International Operations
and Staffing Services.
The company is well established in its core security-related services business
and has expanded into a range of other support services, which include
construction, management and administration of correctional facilities, food
services for correctional institutions, and more recently, employee leasing and
temporary staffing. During 1997, the company continued to expand its market
presence in these areas and, consistent with that strategy, acquired the
businesses and certain assets of the Jim King Companies (King Companies) in
Jacksonville, Florida in May 1997, and Professional Employee Management, Inc.
(PEM) in Sarasota, Florida in December 1997. Both companies are professional
employer organizations.
During the fourth quarter of 1997, the company recognized a one-time pretax
charge of $18.3 million ($11.3 million after income taxes, or $0.76 per common
share). The one-time charge included a loss of $6.0 million ($3.8 million after
income taxes) on the sale of the company's Australian security business. Also,
as a result of a strategic review process and analysis, the company determined
that deferred information systems costs and certain domestic and international
investments were identified as impaired, resulting in a write-off of $12.3
million ($7.4 million after income taxes). These assets were not functional as
part of the company's upgraded information technology platform or impaired due
to their inability to generate future cash flows. The one-time charges will not
result in any significant future cash requirements.
RESULTS OF OPERATIONS
The table on page 25 summarizes results of operations for the company's three
business segments by organizational group.
COMPARISON OF FISCAL YEAR 1997 TO FISCAL YEAR 1996
REVENUES
Fiscal 1997 consolidated revenues increased $220.7 million or 24% over fiscal
1996.
SECURITY SERVICES BUSINESS
Fiscal 1997 security services business revenues increased $60.9 million or 8% to
$828.9 million from $768.1 million in fiscal 1996.
North American Operations
Revenues of the North American Operations Group increased $47.3 million, or 7%,
to $711.8 million in fiscal 1997 from $664.5 million in fiscal 1996. Within the
North American Operations Group, revenues from commercial accounts represented
approximately 59% of total revenues of the group in fiscal 1997 versus 57% in
fiscal 1996. Revenues from government/regulated industries represented the other
portion of revenues. Commercial account revenues increased 11% in fiscal 1997
over fiscal 1996, primarily due to the continued success of the group in
developing its client base of national accounts, which increased 13% over the
prior year, and marketing its higher level of quality security services of the
Custom Protection Officer(R) (CPO), which increased 35% this year as compared to
last year. Revenues of government and regulated industries increased 2% in
fiscal 1997 over fiscal 1996.
International Operations
International Operations' revenues increased $13.6 million, or 13%, to $117.1
million in fiscal 1997 from $103.6 million in fiscal 1996. Revenues in Latin
America and Europe continued to increase principally through expansion of the
core businesses and diversification of services. In December 1997, the company
sold its Australian security subsidiary, which had revenues of $13.8 million in
fiscal 1997 and $13.7 million in 1996.
CORRECTIONAL BUSINESS
Fiscal 1997 correctional business revenues increased $69.1 million, or 50%, to
$206.9 million in fiscal 1997 from $137.8 million in fiscal 1996. The increase,
which reflects the dramatic growth in the industry, was due principally to the
opening of seven domestic facilities and six foreign facilities. Design capacity
of facilities in operation increased by 8,485 beds, or 69%, to 20,720 beds at
year-end, up from 12,235 beds at the beginning of the year. Occupancy increased
to 97.2% of capacity in fiscal 1997 from
24
<PAGE> 25
<TABLE>
<CAPTION>
1997 1996 1995
------------------------ ---------------------- -----------------------
$ % $ % $ %
------------------------ ---------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES (a)
SECURITY SERVICES
North American Operations $ 711,825 63.2 $ 664,478 73.4 $ 587,334 73.7
International Operations 117,149 10.4 103,587 11.4 109,967 13.8
------------------------ ---------------------- -----------------------
828,974 73.6 768,065 84.8 697,301 87.5
CORRECTIONAL SERVICES 206,930 18.3 137,784 15.2 99,431 12.5
STAFFING SERVICES 90,898 8.1 207 0.0
------------------------ ---------------------- -----------------------
CONSOLIDATED REVENUES $1,126,802 100.0 $ 906,056 100.0 $ 796,732 100.0
------------------------ ---------------------- -----------------------
OPERATING INCOME (b)
SECURITY SERVICES
North American Operations $ 20,097 2.8 $ 19,993 3.0 $ 17,622 3.0
International Operations 184 0.2 (1,257) (1.2) 2,878 2.6
------------------------ ---------------------- -----------------------
20,281 2.4 18,736 2.4 20,500 2.9
CORRECTIONAL SERVICES 16,545 8.0 9,731 7.1 7,229 7.3
STAFFING SERVICES (272) (0.3) (365) (176.3)
UNALLOCATED CORPORATE EXPENSES (14,982) (1.3) (11,032) (1.2) (11,955) (1.5)
ONE-TIME CHARGE AND IMPAIRMENT OF ASSETS (18,300) (1.6) (750) (0.1)
------------------------ ---------------------- -----------------------
CONSOLIDATED OPERATING INCOME $ 3,272 0.3 $ 16,320 1.8 $ 15,774 2.0
------------------------ ---------------------- -----------------------
</TABLE>
(a) Represents percent of total revenues.
(b) Represents percent of respective business related revenues.
96.8% in fiscal 1996, and total compensated resident days increased 45% to 5.2
million at the end of fiscal 1997 from 3.6 million for fiscal 1996.
STAFFING SERVICES
Staffing Services was started in the third quarter of 1996, and in May 1997, the
company acquired the business and certain assets of the King Companies. Staffing
Services revenues were $90.9 million for fiscal 1997. In December 1997, the
company acquired the business and substantially all of the assets of PEM.
The operating results of the company included the results of operations of the
King Companies since May 1997 and PEM since December 22, 1997. PEM had revenues
of approximately $200 million for its fiscal 1997. The company intends to
continue developing the staffing services business through internal growth and
acquisitions.*
OPERATING INCOME
Fiscal 1997 consolidated operating income was $3.3 million versus $16.3 million
in fiscal 1996. Before the one-time charges, fiscal 1997 operating income of
$21.6 million was $4.5 million, or 26%, higher than fiscal 1996 operating income
of $17.1 million.
SECURITY SERVICES BUSINESS
Fiscal 1997 security services business operating income of $20.3 million
increased $1.5 million, or 8%, from $18.7 million in fiscal 1996.
North American Operations
North American operating income remained essentially flat. However, operating
results for the second half of 1996, benefited from a one-time reduction
("holiday") in health insurance costs and adjustments to insurance accruals of
approximately $0.8 million.
International Operations
As previously discussed, the company sold its Australian security business and
certain related assets in January 1998. The operating loss of Wackenhut of
Australia was $1.6 million in fiscal 1997 and $2.5 million in fiscal 1996.
International Operations operating income increased $1.4 million to $0.2 million
in fiscal 1997 from a loss of $1.3 million in fiscal 1996. Excluding the loss of
Wackenhut of Australia, International Group operating income was $0.5 million,
or 44%, higher in fiscal 1997 versus fiscal 1996. The operating income of
subsidiaries in Latin American and Europe continued to show significant
improvements as a result
* Refer to Forward-Looking Statements on page 21.
25
<PAGE> 26
of increases in the core security business and diversification into other
security-related services.
CORRECTIONAL BUSINESS
Fiscal 1997 operating income from the correctional business increased $6.8
million, or 70%, to $16.5 million from $9.7 million in fiscal 1996. Operating
margin improved 0.9% as a percentage of revenues from 7.1% in fiscal 1996 to
8.0% in fiscal 1997. The improved results are attributable principally to
increased profit contribution from new facilities, increased utilization of
existing facilities and continued leveraging of overhead.
STAFFING SERVICES
Staffing Services operating loss was $272,000 in fiscal 1997, its first full
year of operations, compared to a loss of $365,000 in fiscal 1996.
CORPORATE EXPENSES AND INFORMATION SYSTEMS
The increase in corporate expenses resulted principally from an increase in
information technology costs in fiscal 1997 compared to fiscal 1996, as the
company redesigns its systems hardware and software architecture. In addition,
there was an increase in personnel related costs attributable to the return to
fully-staffed levels after the relocation of the headquarters facility.
During the current year, management reviewed the information systems
requirements of the company and determined that the investment in deferred
information systems costs was impaired. Consequently, the company wrote off its
investment in deferred information systems costs in the fourth quarter of 1997.
In addition, management developed a plan to address its future information
systems needs and the Year 2000 issue. The preliminary estimate of the total
costs to be incurred in new systems is approximately $21.0 million over the next
two years, of which approximately $19.0 million will be capitalized and $2.0
million will be expensed.
Capitalized costs will be amortized over the software's useful life. The company
has not completely determined the effect of expenditures related to the year
2000 issue, but they are not expected to be significant and will be expensed as
incurred.*
EBITDA
Fiscal 1997 EBITDA, defined as earnings before interest expense, income taxes,
depreciation and amortization, was $20.8 million versus $30.2 million in fiscal
1996. Adjusted EBITDA, which excludes the one-time charges for both years,
increased 26%, or $8.2 million, to $39.1 million from $30.9 million in fiscal
1996. As a percentage of revenues, Adjusted EBITDA improved to 3.5% from 3.4%.
Neither EBITDA nor Adjusted EBITDA represents cash flow from operations as
defined by generally accepted accounting principles.
OTHER INCOME/EXPENSE
Other income increased $1.2 million to $2.7 million in fiscal 1997 from $1.6
million in fiscal 1996, primarily due to the decrease in interest expense of
$1.3 million. Borrowings under the accounts receivable securitization and
revolving credit facilities were at a minimum during 1997, as cash from
operations and cash proceeds from the 1996 public offerings of the company and
Wackenhut Corrections were used for acquisitions, start-up and construction of
new facilities.
INCOME BEFORE INCOME TAXES
Fiscal 1997 income before income taxes was $6.0 million, after deducting the
one-time charge of $18.3 million, compared to $17.9 million in fiscal 1996.
Before the one-time charge, income before income taxes was $24.3 million in
fiscal 1997, compared to $17.9 million in fiscal 1996 for an increase of $6.5
million, or 36%.
INCOME TAXES
The combined federal and state effective income tax rate was 37.7% for fiscal
1997 and 35.3% for fiscal 1996. The higher effective rate in fiscal 1997 was due
to decreases in the utilization of capital loss carryforwards and tax exempt
income of the reinsurance subsidiary.
MINORITY INTEREST EXPENSE
Minority interest expense (net of income taxes) increased to $5.8 million in
1997 from $4.1 million in 1996, reflecting principally the increase in earnings
of Wackenhut Corrections Corporation.
EQUITY INCOME OF FOREIGN AFFILIATES
Equity income of foreign affiliates (net of income taxes) increased $0.5
million, or 28%, to $2.1 million in fiscal 1997 from $1.6 million in fiscal
1996, primarily due to an increase in the income of the joint venture of
Wackenhut Corrections in the United Kingdom.
NET INCOME
Net income was $103,000 for fiscal 1997, or $0.01 per share, as compared to $9.1
million, or $0.66 per share for fiscal 1996. Earnings per share on a diluted
basis was a loss of $0.01 in fiscal 1997 compared to earnings per share of $0.65
for fiscal 1996. Net income for fiscal 1997 was reduced by the one-time charge
of $11.3 million after income taxes, or $0.76 per share.
26
<PAGE> 27
COMPARISON OF FISCAL YEAR 1996 TO FISCAL YEAR 1995
REVENUES
Consolidated revenues increased 14% to $906.1 million in 1996 from $796.7
million in fiscal 1995.
SECURITY SERVICES BUSINESS
Security services business revenues increased 10% to $768.1 million in fiscal
1996 from $697.3 million in fiscal 1995.
North American Operations
Revenues of the North American Operations Group increased $77.2 million, or 13%,
to $664.5 million in fiscal 1996 from $587.3 million in fiscal 1995. Revenues
from commercial accounts represented 57% of the total revenues of the group in
fiscal 1996 versus 56% in fiscal 1995. Commercial accounts revenue increased
$47.6 million, or 14%, in fiscal 1996 over fiscal 1995, primarily due to the
increase in revenues from national accounts and Custom Protection Officer(R)
revenues, which increased by 25% and 15%, respectively. Revenues to the U.S.
Government and regulated industries were 43% of total revenues of the group in
fiscal 1996, versus 44% in fiscal 1995, and increased 12% during the same
period. The increase was due principally to the acquisition of the business of
the correctional Food Services Division of Service America Corporation, which
was partially offset by the loss of the Strategic Petroleum Reserve contract
with DynMcDermott and reductions in government funding at U.S. Department of
Energy facilities.
International Operations
International Operations Group revenues decreased 6% to $103.6 million in fiscal
1996 from $110.0 million in fiscal 1995 due principally to the deconsolidation
of the former subsidiary in Chile which is now a minority-owned affiliate.
Revenues of the Chilean operations for the first nine months of fiscal 1995
amounted to $14.2 million. Excluding the effects of the Chilean operation,
revenues of the International Operations Group were actually $7.8 million higher
than in fiscal 1995 due to the increased revenues in Europe and Australia.
CORRECTIONAL BUSINESS
Correctional Business revenues increased 39% to $137.8 million in fiscal 1996
from $99.4 million in fiscal 1995. Of the increase in fiscal 1996 revenues,
$35.4 million was generated by domestic operations and $3.0 million was
generated by operations in Australia. The increase in domestic revenues in
fiscal 1996 was primarily attributable to an increase in compensated resident
days of 1.2 million resulting from the opening of new facilities and increased
services to existing facilities. Compensated resident days of the Australian
subsidiary of Wackenhut Corrections increased to 440,000 in fiscal 1996 from
420,000 in fiscal 1995.
OPERATING INCOME
Consolidated operating income increased to $16.3 million in fiscal 1996, after
deducting $750,000 for relocation costs, from $15.8 million in fiscal 1995.
Excluding the provision for relocation costs, consolidated operating income
increased 8% in fiscal 1996 versus fiscal 1995.
SECURITY SERVICES BUSINESS
Operating income from the security services business decreased 9% to $18.7
million in fiscal 1996 from $20.5 million in fiscal 1995. The decrease in the
operating income of the security services business can be attributed principally
to the operating losses of Wackenhut of Australia Pty., Ltd. of $2.5 million in
fiscal 1996.
North American Operations
The operating income of the North American Operations Group increased 14% to
$20.0 million in fiscal 1996 from $17.6 million in fiscal 1995. There was a
significant increase in the profit contribution of the core security-related
business resulting from consistent profit margins and higher revenues. The group
also realized a significant increase in operating profits principally due to the
acquisition of Service America's food service unit.
International Operations
The International Operations Group had an operating loss of $1.3 million in
fiscal 1996 compared to operating income of $2.9 million in fiscal 1995. The
operating loss in fiscal 1996 was primarily due to: (i) the operating losses of
$2.5 million from the new security services subsidiary in Australia, Wackenhut
of Australia Pty., Ltd.; (ii) the decrease in operating income which resulted
from the deconsolidation of the former subsidiary in Chile; and (iii) operating
losses in the Czech Republic and other subsidiaries principally in Africa.
CORRECTIONAL BUSINESS
Wackenhut Corrections operating income increased 35% to $9.7 million in fiscal
1996 from $7.2 million in fiscal 1995. Of this increase, domestic operating
income increased 58% to $7.1 million in fiscal 1996 from $4.5 million in fiscal
1995, reflecting the increase in compensated resident days. These increases in
operating income were partially offset by higher overhead expenses of Wackenhut
Corrections.
Wackenhut Corrections international operating income decreased 3% to $2.6
million in fiscal 1996 from $2.7 million in fiscal 1995, attributable to higher
operating expenses at Wackenhut Corrections' Australian facilities.
* Refer to Forward-Looking Statements on page 21.
27
<PAGE> 28
CORPORATE EXPENSES
Corporate expenses decreased 8% to $11.0 million in fiscal 1996 from $12.0
million in fiscal 1995 as a result principally of cost reduction measures
implemented this year.
OTHER INCOME/EXPENSE
Other income was $1.6 million in fiscal 1996 compared to other expense of $2.0
million in fiscal 1995. The increase in interest and investment income of $3.0
million in fiscal 1996 included interest income of approximately $2.1 million
from the investment of the net proceeds of Wackenhut Corrections' public
offering. Interest expense decreased by $590,000 in fiscal 1996 compared to
fiscal 1995, primarily due to a decline in costs associated with the accounts
receivable securitization facility which was repaid with the proceeds from the
company's public offering.
INCOME BEFORE INCOME TAXES
Income before income taxes, which included a $750,000 provision for relocation
costs in fiscal 1996, increased 30% to $17.9 million in fiscal 1996 from $13.7
million in fiscal 1995.
INCOME TAXES
The combined federal and state effective income tax rate was 35.3% for fiscal
1996 and 34.5% for fiscal 1995, respectively. The increase in the effective rate
in fiscal 1996 was due to: (i) the statutory elimination of targeted job tax
credits; (ii) a decrease in capital loss carryforward utilization; and (iii) a
decrease in tax exempt income of the captive reinsurance subsidiary.
MINORITY INTEREST EXPENSE
Minority interest expense (net of income taxes) increased 75% to $4.1 million in
fiscal 1996 from $2.4 million in fiscal 1995, reflecting principally the
increase in earnings of and the public ownership in Wackenhut Corrections.
EQUITY INCOME OF FOREIGN AFFILIATES
Equity income of foreign affiliates (net of income taxes) increased 159% to $1.6
million in fiscal 1996 from $631,000 in fiscal 1995, primarily resulting from
the increased earnings of security services affiliates in South America, the
joint venture of Wackenhut Corrections in the United Kingdom and the inclusion
of the corporation's equity income of the Chilean operations.
NET INCOME
Net income increased to $9.1 million in fiscal 1996, or $0.66 per share, after
the $750,000 provision for relocation costs ($461,000 net of income taxes),
compared to $7.3 million or $0.60 per share in fiscal 1995.
INFLATION
Management believes that inflation has not had a material effect on the
company's results of operations during the past three fiscal years. 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 rate received by the company for its services.*
LIQUIDITY AND CAPITAL RESOURCES
The company's principal sources of liquidity have been from funds from
operations, borrowings under its credit facilities, and from net proceeds in
connection with the public offering of the company's common stock. Cash and
equivalents totaled $45.2 million at December 28, 1997, compared to $52.8
million at December 29, 1996. Of this cash and cash equivalents, $13.9 million
serves as collateral for certain obligations of the company's captive insurance
subsidiary.
The company had additional sources of liquidity available in the form of a $40
million revolving line of credit (previously it was $50 million) which is
available for letters of credit and under which the company may borrow up to $15
million under a swingline to meet short term liquidity needs, and a $60 million
accounts receivable securitization facility. The total amount available to the
company from its revolving credit and accounts receivable securitization
facility is $100 million as of December 28, 1997, or an increase of $15 million
over last year. Additionally, at December 28, 1997, the company's Wackenhut
Corrections subsidiary had in place a $30 million revolving credit facility,
which includes $5 million for the issuance of letters of credit, and a $220
million operating lease facility to acquire and develop new correctional
institutions used in its business.
At December 28, 1997, the company had $13 million outstanding under credit
facility and $24.9 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 $2.1 million. There were
no balances outstanding under the accounts receivable securitization agreement
at the end of fiscal 1997. 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
28, 1997, no amounts were outstanding under Wackenhut Corrections' revolving
credit facility, but four standby letters of credit were outstanding in an
aggregate amount of $0.22 million.
28
<PAGE> 29
During the second quarter of 1996, the company sold 2,500,000 shares of its
series B common stock in connection with a public offering. Net proceeds from
the offering were approximately $54 million, which were partly used to repay the
outstanding balance on the revolving loan, to repurchase receivables sold under
the accounts receivable securitization facility and for general corporate
purposes. In January 1996, Wackenhut Corrections sold 4,600,000 shares of its
common stock in connection with a public offering. Net proceeds from the
offering were approximately $52 million, which were partly used for the
acquisition or renovation of correctional facilities, start-up costs, leasehold
improvements, equity investments in correctional facilities or temporarily
invested.
In May 1997, the company purchased the King Companies of Jacksonville, Florida,
a professional employer organization and temporary employment business, for
approximately $10.7 million in cash and $0.8 million in shares of Wackenhut
series B (non-voting) common stock.
In December 1997, the company purchased the business and certain assets of PEM,
a professional employer organization in Sarasota, Florida for an initial payment
of $18.9 million in cash, together with a series of contingent earn-out payments
which will become payable in cash or shares of the company's series B Common
Stock (at the option of the company) based on performance. In no event, will the
total purchase price exceed $50.7 million.
In June 1997, Wackenhut Corrections purchased the Queens Private Correctional
Facility in New York City, New York, a 66,000 square foot building currently
being used by Wackenhut Corrections as a 200-bed federal detention facility, for
$6.6 million. Wackenhut Corrections also has invested another $4.7 million to
renovate the building.
The company and Wackenhut Corrections anticipate making cash investments in
connection with future acquisitions. In addition, Wackenhut Corrections will
continue to use cash and its available sources of funds to finance start-up
costs, leasehold improvements and equity investments in correctional facilities,
if appropriate, in connection with undertaking new contracts.*
Net cash generated by operating activities was $42.7 million in fiscal 1997
compared to $14.8 million in fiscal 1996.
Cash used in investing activities amounted to $54.8 million in fiscal 1997,
including capital expenditures of $27.7 million, which reflect the investment in
facilities of Wackenhut Corrections and the purchases of equipment related to
the provision of security-related services. Payments for acquisitions amounted
to $30.1 million and included the acquisitions of the King Companies and PEM
mentioned before. In addition, deferred costs, which include deferred start-up
costs of Wackenhut Corrections amounted to $12.4 million. The net decrease in
marketable securities of the company's captive reinsurance subsidiary was $7.6
million.
Cash provided by financing activities amounted to $5.7 million including $8.4
million net proceeds from issuance of debt. Cash dividends paid in fiscal 1997
amounted to $3.8 million.
Current cash requirements consist of amounts needed for capital expenditures,
increased working capital needs resulting from corporate growth and business
expansion, payment of liabilities incurred in the operation of the company's
business, the renovation or construction of correctional facilities by Wackenhut
Corrections, possible acquisitions, investment in information systems 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.
As a result of the public stock offerings, both the company and Wackenhut
Corrections significantly increased their borrowing capacity. In addition,
management believes that cash on hand, cash funds from operations 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.*
MARKET RISK
The company is exposed to market risks, including changes in interest rates and
currency exchange rates. On occasion the company has entered into swap
agreements to reduce the interest rate exposure associated with its bank
borrowings (Note 1). In addition, Wackenhut Corrections is exposed to market
risks arising from changes in interest rates with respect to a $220 million
operating lease facility (Note 16). Based on the company's interest rate and
foreign exchange rate exposure at December 28, 1997, a 10% change in the current
interest rate or historical currency rate movements would not have a material
effect on the company's financial position or results of operations over the
next fiscal year.*
* Refer to Forward-Looking Statements on page 21.
29
<PAGE> 30
The Wackenhut Corporation and Subsidiaries
Consolidated Statements of Income
(in thousands except per share data)
FISCAL YEARS ENDED DECEMBER 28, 1997, DECEMBER 29, 1996 and DECEMBER 31, 1995
<TABLE>
<CAPTION>
1997 1996 1995
- ------------------------------------------------------------------ ---------- -------- --------
<S> <C> <C> <C>
REVENUES $1,126,802 $906,056 $796,732
---------- -------- --------
OPERATING EXPENSES
Payroll and related taxes 835,651 657,275 587,644
Operating expenses 260,946 224,956 187,491
Depreciation expense 6,388 4,735 4,489
Amortization of intangible assets 2,245 2,020 1,334
One-time charges and impairment of assets 18,300 750
---------- -------- --------
OPERATING INCOME 3,272 16,320 15,774
---------- -------- --------
OTHER INCOME (EXPENSE)
Interest expense (1,473) (2,766) (3,356)
Interest and investment income 4,230 4,321 1,315
---------- -------- --------
INCOME BEFORE INCOME TAXES 6,029 17,875 13,733
---------- -------- --------
INCOME TAXES 2,271 6,311 4,742
MINORITY INTEREST, NET OF INCOME TAXES OF $3,816, $2,318, AND $1,217 5,753 4,140 2,362
EQUITY INCOME OF FOREIGN AFFILIATES, NET OF INCOME TAXES OF
$1,359, $957, AND $383 (2,098) (1,633) (631)
---------- -------- --------
NET INCOME $ 103 $ 9,057 $ 7,260
---------- -------- --------
EARNINGS (LOSS) PER SHARE:
Basic $ 0.01 $ 0.66 $ 0.60
Assuming dilution $ (0.01) $ 0.65 $ 0.60
---------- -------- --------
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING 14,746 13,636 12,132
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 14,746 13,878 12,172
- --------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
30
<PAGE> 31
The Wackenhut Corporation and Subsidiaries
Consolidated Balance Sheets
(in thousands except share data)
DECEMBER 28, 1997 and DECEMBER 29, 1996
<TABLE>
<CAPTION>
1997 1996
- -------------------------------------------------------------------------------- -------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 45,168 $ 52,755
Accounts receivable, less allowance for doubtful
accounts of $2,713 in 1997 and $1,997 in 1996 171,373 131,325
Inventories 10,270 10,082
Deferred taxes 3,548 252
Other 21,568 26,160
-------- --------
251,927 220,574
NOTES RECEIVABLE 667 1,181
-------- --------
MARKETABLE SECURITIES AND CERTIFICATES OF DEPOSIT 7,772 14,753
-------- --------
PROPERTY AND EQUIPMENT, - at cost 72,280 46,726
- accumulated depreciation (15,810) (12,184)
-------- --------
56,470 34,542
DEFERRED TAXES 450
-------- --------
OTHER ASSETS
Intangibles and deferred start-up costs 61,565 29,010
Investment in and advances to foreign affiliates, at cost 20,578 13,508
Other 5,013 10,350
-------- --------
87,156 52,868
-------- --------
$404,442 $323,918
- -------------------------------------------------------------------------------- -------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 2,508
Accounts payable 38,640 $ 20,488
Accrued payroll and related taxes 52,456 35,715
Accrued expenses 41,414 16,295
-------- --------
135,018 72,498
-------- --------
RESERVES FOR LOSSES - casualty reinsurance subsidiary 45,786 43,806
-------- --------
LONG-TERM DEBT 13,341 5,890
-------- --------
DEFERRED TAXES 1,165
-------- --------
OTHER 15,528 11,372
-------- --------
COMMITMENTS AND CONTINGENCIES (note 16)
MINORITY INTEREST 47,930 40,958
-------- --------
SHAREHOLDERS' EQUITY
Preferred stock, 10,000,000 shares authorized
Common stock, $.10 par value, 50,000,000 shares authorized in 1997 and 1996
Series A, 3,855,582 issued and outstanding in 1997 and 3,858,885 in 1996 386 386
Series B, 11,085,703 issued and outstanding in 1997 and 10,902,199 in 1996 1,109 1,090
Additional paid-in capital 125,248 120,703
Retained earnings 27,614 31,347
Cumulative translation adjustment (6,418) (4,128)
Unrealized loss on marketable securities (69)
Treasury stock at cost, 87,000 shares of Series B (1,100) (1,100)
-------- --------
146,839 148,229
-------- --------
$404,442 $323,918
- ----------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
31
<PAGE> 32
The Wackenhut Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
FISCAL YEARS ENDED DECEMBER 28, 1997, DECEMBER 29, 1996 and DECEMBER 31, 1995
<TABLE>
<CAPTION>
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS PROVIDED BY (USED IN):
OPERATING ACTIVITIES
Net income $ 103 $ 9,057 $ 7,260
Adjustments -
One-time charges and impairment of assets 18,300
Depreciation expense 6,388 4,735 4,489
Amortization expense 11,129 9,105 7,682
Provision for bad debts 905 1,362 863
Equity income, net of dividends (3,251) (2,130) (562)
Minority interests in net income 9,569 6,458 3,579
Income tax benefit related to stock options 2,227 1,369
Other (2,509) (496) (424)
Changes in assets and liabilities, net of acquisitions and divestitures
(Increase) Decrease in assets:
Accounts receivable (33,713) (20,566) (14,200)
Inventories (5,699) (7,332) (5,460)
Other current assets (4,141) 766 (5,244)
Marketable securities and certificates of deposit (1) (35) 329
Deferred taxes (3,746) 5,918 4,529
Other (1,690) (411) (2,233)
Increase (Decrease) in liabilities:
Accounts payable and accrued expenses 31,788 (4,105) 7,055
Accrued payroll and related taxes 12,765 5,385 3,801
Reserves for losses of casualty reinsurance subsidiary 1,980 3,688 1,668
Deferred taxes (1,165) 1,048 (479)
Other 3,455 944 710
--------- --------- ---------
Net Cash Provided By Operating Activities 42,694 14,760 13,363
--------- --------- ---------
INVESTING ACTIVITIES
Net proceeds from public offerings of subsidiary's common stock 51,581
Net proceeds from exercise of stock options of subsidiary 1,650 766 1,147
Proceeds from notes receivable 9,486
Payments for acquisitions, net of cash acquired (30,090) (13,703) (2,606)
Investment in and advances to foreign affiliates (3,327) (690) (1,410)
Capital expenditures (27,692) (19,917) (6,857)
Proceeds from sales (payments for purchases) of marketable securities 7,619 (9,081) 6,227
Deferred charges (12,397) (6,201) (7,430)
Purchase of treasury stock (1,100)
Sale of headquarters building 1,675
--------- --------- ---------
Net Cash Provided By (Used In) Investing Activities (54,751) 1,655 (9,254)
--------- --------- ---------
FINANCING ACTIVITIES
Net proceeds from public offering of company's common stock 54,020
Proceeds from the exercise of stock options 1,125 1,100 404
Proceeds from issuance of debt 51,738 11,142 314,365
Payments on debt (43,332) (11,792) (344,491)
Dividends paid (3,836) (3,500) (2,909)
Proceeds from sales (payments for repurchases) of accounts receivable (35,000) 35,000
--------- --------- ---------
Net Cash Provided By Financing Activities 5,695 15,970 2,369
--------- --------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (1,225) 185 (101)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (7,587) 32,570 6,377
CASH AND CASH EQUIVALENTS, at beginning of year 52,755 20,185 13,808
--------- --------- ---------
CASH AND CASH EQUIVALENTS, at end of year $ 45,168 $ 52,755 $ 20,185
--------- --------- ---------
SUPPLEMENTAL DISCLOSURES:
Cash paid during the year for - interest $ 1,484 $ 2,774 $ 3,366
- income taxes 2,405 3,380 2,687
Non-cash financing and investing activities:
Common stock issued in acquisition 842
Note received related to sale of headquarters building 9,000
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
32
<PAGE> 33
The Wackenhut Corporation and Subsidiaries
Consolidated Statements of Shareholders' Equity
(in thousands except share data)
FISCAL YEARS ENDED DECEMBER 28, 1997, DECEMBER 29, 1996, AND DECEMBER 31, 1995
<TABLE>
<CAPTION>
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK
Series A
Balance, beginning and end of year $ 386 $ 386 $ 386
--------- --------- ---------
Number of shares, end of year, 3,855,582 in 1997, 3,858,885
in 1996 and 1995
Series B
Balance, beginning of year 1,090 827 579
Proceeds from stock offering 250
25% stock dividends effected in the form of stock splits in 1995 242
Common stock issued in acquisition 7
Proceeds from the exercise of stock options 12 13 6
--------- --------- ---------
Balance, end of year 1,109 1,090 827
--------- --------- ---------
Number of shares, end of year, 11,085,703 in 1997, 10,902,199
in 1996 and 8,272,887 in 1995
ADDITIONAL PAID-IN CAPITAL
Balance, beginning of year 120,703 39,644 38,919
Proceeds from stock offering 53,770
Common stock issued in acquisition 835
Increase due to public offerings of subsidiary's common
stock and exercise of stock options 370 24,833 327
Proceeds from the exercise of stock options 1,113 1,087 398
Tax benefit related to employee stock options 2,227 1,369
--------- --------- ---------
Balance, end of year 125,248 120,703 39,644
--------- --------- ---------
RETAINED EARNINGS
Balance, beginning of year 31,347 25,790 21,681
Net income 103 9,057 7,260
Dividends (3,836) (3,500) (2,909)
25% stock dividend effected in the form of a stock split (242)
--------- --------- ---------
Balance, end of year 27,614 31,347 25,790
--------- --------- ---------
CUMULATIVE TRANSLATION ADJUSTMENT
Balance, beginning of year (4,128) (3,702) (3,552)
Translation adjustment (2,290) (426) (150)
--------- --------- ---------
Balance, end of year (6,418) (4,128) (3,702)
--------- --------- ---------
UNREALIZED (LOSS) GAIN ON MARKETABLE SECURITIES
Balance, beginning of year (69) (41) (554)
Net unrealized gains (losses) for the year 69 (28) 513
--------- --------- ---------
Balance, end of year (69) (41)
--------- --------- ---------
TREASURY STOCK
Balance, beginning of year (1,100)
Purchase of treasury stock (1,100)
--------- --------- ---------
Balance, end of year (1,100) (1,100)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY
$ 146,839 $ 148,229 $ 62,904
--------- --------- ---------
DIVIDENDS PER SHARE
Restated for the effect of the 25% stock dividend
effected in the form of a stock split declared in 1995 $ 0.26 $ 0.26 $ 0.24
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
33
<PAGE> 34
The Wackenhut Corporation and Subsidiaries
Notes to Consolidated Financial
Statements
(Tabular information in thousands except per share data)
FOR THE FISCAL YEARS ENDED DECEMBER 28, 1997,
DECEMBER 29, 1996, AND DECEMBER 31, 1995
(1) Summary of Significant Accounting
Policies
Fiscal Year
The company's fiscal year ends on the Sunday closest to the calendar year end.
Fiscal years 1997, 1996 and 1995 each included 52 weeks.
Basis of Financial Statement Presentation
The consolidated financial statements include the accounts of the company and
its subsidiaries, including its casualty reinsurance subsidiary. All significant
intercompany transactions and balances have been eliminated in consolidation.
The accounts of the captive insurance company have been included in unallocated
corporate expenses for segment reporting. Certain prior year amounts have been
reclassified to conform with current year presentation.
Use of Estimates
The preparation of consolidated 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 consolidated
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, listed on the New York Stock
Exchange as "WHC," and the ownership by foreign investors in several
subsidiaries of Wackenhut International, Incorporated.
Income Taxes
The company accounts for its income taxes using the liability method. 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
In 1997, the company adopted Statement of Financial Accounting Standards No.
128, Earnings per Share (SFAS 128). SFAS 128 requires the disclosure of basic
and diluted earnings per share for periods ending after December 15, 1997 and
restatement of prior periods to conform with the new disclosure format. The
computation under SFAS 128 differs from the primary and fully diluted earnings
per share computed under APB No. 15 primarily in the manner in which potential
common stock is treated. Basic earnings per share is computed by dividing net
income by the weighted-average number of common shares outstanding. In the
computation of diluted earnings per share, the weighted-average number of common
shares outstanding is adjusted for the effect of all potential common stock.
Cash and Cash Equivalents
The company considers highly liquid investments purchased with a maturity of
three months or less to be cash equivalents.
Inventories
Food, alarm systems and electronics inventories are carried at the lower of cost
or market, on a first-in first-out basis. Uniform inventories are carried at
amortized cost.
Revenues
Revenue is recognized as services are provided. During fiscal years 1997, 1996
and 1995, the largest client of the company was the U.S. Department of Energy,
accounting for approximately 11%, 15% and 17%, respectively, of the company's
consolidated revenues.
Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, accounts receivable, other
receivables, notes receivable, notes payable, accounts payable and long-term
debt approximates fair value. Marketable securities are classified as
available-for-sale. Realized gains and losses from the sale of securities are
based on specific identification of the security.
Interest Rate Swaps
On occasion the company enters into swap agreements to reduce the interest rate
exposure associated with a portion of its variable rate indebtedness. These
agreements modify the interest characteristics of the company's variable rate
indebtedness by synthetically converting a portion of the indebtedness to a
fixed rate. The company does not utilize derivative financial instruments for
trading or other speculative purposes.
Interest earned (payable) under the interest rate swap is credited (charged) to
interest expense using the accrual method. The related accrued receivable or
payable is included in accounts receivable or accrued expenses. The fair market
value of the swap agreement is not reflected in the financial statements.
Derivative financial instruments terminated at a loss (gain) prior to maturity
are (credited) charged to interest expense over the remaining original life of
the derivative financial instrument.
The company is a party to two offsetting interest rate swaps. The notional
principal amount under both agreements was $81.2 million and the agreements
expire in December 1998. Based on the interest rates in effect at December 28,
1997, the company was not exposed to a material loss in the event that either
party failed completely to perform according to the terms of the contract.
34
<PAGE> 35
Interest Rate Sensitivity
Wackenhut Corrections is exposed to market risks arising from changes in
interest rates with respect to a $220 million operating lease facility. Monthly
lease payments under this facility are indexed to a variable interest rate.
Management has determined that a 10% change in the current lease rate would have
an immaterial effect on the company's pre-tax earnings over the next fiscal
year.
Stock-Based Compensation Plans
The company has chosen to continue to account for stock-based compensation using
the intrinsic value based method prescribed in APB Opinion No. 25. Accordingly,
compensation cost for stock options is measured as the excess, if any, of the
quoted market price of the company's stock at the date of the grant over the
amount an employee must pay to acquire the stock.
Long-lived Assets
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
requires that long-lived assets, including certain identifiable intangibles and
the goodwill related to those assets, be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of the asset in
question may not be recoverable. Management has reviewed the company's
long-lived assets and has determined that there are no events requiring
impairment loss recognition, other than those disclosed.
Intangibles and Deferred Start-Up Costs
Goodwill represents the cost of an acquired enterprise in excess of the fair
market value of the net tangible and identifiable intangible assets acquired.
Contract value represents the fair market value of existing contracts purchased
in an acquisition. Goodwill and contract value are being amortized on a
straight-line basis over 10 - 30 years.
Project development costs consisting of direct and incremental costs paid to
unrelated third parties that can be directly associated with a specific
anticipated contract are deferred until the anticipated contract has been
awarded. At the time the contract is awarded to the company, the deferred
project development costs are either capitalized as part of the property and
equipment or are amortized over five years as project development costs.
Internal costs associated with securing new contracts are expensed as incurred.
Project development costs are charged to general and administrative expenses
when the success of obtaining a new contract is considered doubtful.
Deferred start-up costs, which consist of costs of initial employee training,
travel and other direct expenses incurred in connection with the opening of new
correctional facilities, are capitalized and amortized on a straight-line basis
over the lesser of the initial term of the contract plus renewals or five years.
Deferred Software and Development Costs
The company capitalizes purchased software which is ready for service and
development costs related to the design and implementation of purchased and
internally developed information systems software with a useful life of more
than one year. The costs of computer software upgrades and maintenance are
expensed as incurred. Deferred computer software costs will be amortized using
the straight line method over the expected useful life of the product.
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 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) One-Time Charge
During the fourth quarter of 1997, the company recognized a one-time pretax
charge of $18.3 million ($11.3 million after income taxes or $0.76 per share).
The one-time charge included a loss of $6 million ($3.8 million after income
taxes) on the sale of the company's Australian security subsidiary. In addition,
deferred information systems costs and certain domestic and international
investments were identified as impaired as a result of the company's strategic
review process and updated analysis, resulting in a write-off of $12.3 million
($7.4 million after income taxes). The one-time charge will not result in any
significant future cash requirements.
(3) Accounts Receivable Securitization
In December, 1997, the company entered into a three-year agreement to sell, on
an on-going basis, an undivided interest in a defined pool of eligible
receivables up to a maximum of $60 million (formally $35 million). 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. There
were no accounts receivable sold under this agreement at December 28, 1997 and
December 29, 1996.
(4) Acquisitions
In May 1997, the company purchased the King Companies of Jacksonville, Florida,
a professional employer organization and temporary employment business, for
approximately $10.7 million in cash and $.84 million in shares of Wackenhut
Series B (non-voting) common stock. The acquisition of the King Companies was
accounted for under the purchase method. The company recorded approximately
$11.3 million of goodwill for the King Companies.
In December 1997, the company purchased the business and certain assets of
Professional Employee Management, Inc., a professional employer organization in
Sarasota, Florida for an initial payment of $18.9 million in cash, together with
a series of contingent
35
<PAGE> 36
earn-out payments which will become payable either in cash or shares of the
company's series B Common Stock (at the option of the company) based on
performance. In no event, will the total purchase price exceed $50.7 million.
The company recorded approximately $17.6 million of goodwill for Professional
Employee Management, Inc.
The results of operations for King and PEM have been included in the company's
consolidated financial statements from the date of acquisition. The following
unaudited pro forma information combines the consolidated results of operations
of the company, King and PEM as if the acquisition had occurred at the beginning
of the periods presented.
<TABLE>
<CAPTION>
1997 1996
- -----------------------------------------------------------------------
<S> <C> <C>
Revenues $ 1,348,484 $ 1,118,367
Net Income 887 9,449
Per share - basic 0.06 0.69
Per share - assuming full dilution 0.05 0.67
- -----------------------------------------------------------------------
</TABLE>
The unaudited pro forma results have been prepared for comparative purposes only
and include adjustments for additional amortization expense as a result of
goodwill and the related income tax effects. The pro forma results do not
purport to be indicative of results that would have occurred had the combination
been in effect for the periods presented, nor do they purport to be indicative
of the results that will be obtained in the future.
(5) Property and Equipment and
Depreciation Methods
Property and equipment are stated at cost, less accumulated depreciation. The
company uses principally the straight-line method of depreciation for property
and equipment. Leasehold improvements are amortized on a straight-line basis
over the shorter of the useful life of the improvement or the term of the lease.
The components of property and equipment and their estimated lives are as
follows:
<TABLE>
<CAPTION>
Years 1997 1996
- ----------------------------------------------------------------
<S> <C> <C> <C>
Land $ 5,062 $ 2,234
Buildings and improvements 20 to 40 40,898 22,386
Equipment 3 to 20 15,205 12,195
Furniture and fixtures 3 to 20 6,489 5,090
Automobiles 3 4,626 4,821
--------------------
$72,280 $46,726
- ----------------------------------------------------------------
</TABLE>
(6) Wholly Owned Casualty Reinsurance
Subsidiary
The company has a wholly owned casualty insurance subsidiary which reinsures a
portion of the company'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. A summary of
operations for the last three fiscal years is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------
<S> <C> <C> <C>
Intercompany premiums $ 20,727 $ 18,624 $ 17,642
Loss expense (21,237) (19,101) (18,239)
------------------------------------
Underwriting loss (510) (477) (597)
Investment income 2,918 2,667 2,245
------------------------------------
$ 2,408 $ 2,190 $ 1,648
- --------------------------------------------------------------
</TABLE>
Marketable securities and certificates of deposit, carried at fair value,
consisted of the following at December 28, 1997 and December 29, 1996:
<TABLE>
<CAPTION>
1997 1996
- ----------------------------------------------------------------
Fair Value Cost Fair Value Cost
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
Municipal Bonds $3,168 $ 3,146 $ 2,061 $ 2,076
Government Bonds 3,504 3,526 6,228 6,243
Preferred Stock 1,098 1,100 3,964 4,040
Other 2,500 2,500
------------------------------------------
$7,770 $ 7,772 $14,753 $14,859
- ----------------------------------------------------------------
</TABLE>
The company has placed in trust, in favor of certain insurance companies, its
marketable securities and $13.9 million in cash and cash equivalents, and has
issued irrevocable standby letters of credit for $21.4 million. Municipal bonds
mature from 2018 to 2026, government bonds mature in periods ranging from 3 to
25 years, and other marketable securities matured in 1997. As of December 28,
1997, the company's reinsurance subsidiary has specific restrictions on future
purchases of marketable securities, and on withdrawals from the trust.
(7) Investment in Affiliates
Equity in undistributed earnings of foreign affiliates approximated $8,846,000
and $5,540,000 at December 28, 1997 and December 29, 1996, respectively, and is
included in "Investments in and advances to foreign affiliates." The following
is a summary of condensed unaudited information pertaining to foreign
affiliates:
<TABLE>
<S> <C>
- --------------------------------------------------------
Balance sheet items as of December 28, 1997
Current assets $ 55,563
Noncurrent assets 31,229
Current liabilities 39,721
Noncurrent liabilities 19,413
Minority interest liability 3,789
Income statement items for the fiscal year
ended December 28, 1997
Revenues $184,933
Operating income 11,565
Net income before taxes 9,111
- --------------------------------------------------------
</TABLE>
(8) Intangibles and Deferred Start-Up Costs
Intangibles and deferred start-up costs at December 28, 1997 and December 29,
1996 consist of the following:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
- -------------------------------------------------
Goodwill $34,199 $ 7,573
Contract value 15,586 15,586
Deferred start-up costs 21,550 11,962
Other 2,105 1,918
-------------------
73,440 37,039
Accumulated amortization 11,875 8,029
-------------------
$61,565 $29,010
- -------------------------------------------------
</TABLE>
36
<PAGE> 37
In April 1997, the Financial Accounting Standards Board issued an exposure draft
that proposed the issuance of a statement of position (SOP) on accounting for
the costs of start-up activities. If adopted, this SOP would require the
expensing of deferred start-up costs as incurred. The effects of adoption, which
would affect principally deferred start-up costs of Wackenhut Corrections, would
be reported as a cumulative change in accounting principle; thus, any costs
previously capitalized would be written off at the time the SOP is adopted. The
adoption of this SOP in 1998 would result in a pre-tax write-off of
approximately $18.2 million (or $10.9 million after income taxes).
(9) Notes Payable and Long-Term Debt
At December 31, 1997, the company had an outstanding note payable of $2.5
million which represented short-term borrowings of an international subsidiary
incurred for working capital, bearing interest at an average rate of 7.2%. The
company intends to pay this note in full in 1998.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------------
<S> <C> <C>
Revolving loan -
6.9% in 1997 and 6.1% in 1996 $12,950 $2,800
Other debt principally related to
Wackenhut Corrections and
international subsidiaries 391 3,090
------------------
$13,341 $5,890
- --------------------------------------------------------
</TABLE>
On December 30, 1997, the company entered into a revolving credit agreement
under which the company may borrow up to $40 million (previously it was $50
million). Concurrently, at December 30, 1997, the company increased its accounts
receivable securitization facility to $60 million (Note 3). The unused portion
of the revolving line of credit was $2.1 million, after deducting $24.9 million
in outstanding letters of credit. The interest payable is, at the company's
option, a function of the applicable LIBOR or certificate of deposit rates. The
agreement requires, among other things, that the company maintain a minimum
consolidated net worth, as defined, and limits certain payments and
distributions.
In June, 1997, Wackenhut Corrections entered into a $30 million revolving credit
facility with a syndicate of banks, which includes a $5 million line of credit
for the issuance of letters of credit. The interest payable is a function of the
prime rate, federal funds rate or LIBOR, depending upon fixed charge coverage
ratios. The facility also limits certain payments and distributions. As of
December 28, 1997, no amounts were outstanding under this facility, but
outstanding letters of credit amounted to $0.22 million.
The total amount of long term debt will mature in 1999.
(10) Preferred, Common and Treasury Stock
The board of directors has authorized 10 million shares of preferred stock. In
October 1995, the board of directors declared a 25% stock dividend, effected in
the form of a stock split. Prior periods' per share data have been restated. The
stock dividends were paid in series B common stock to holders of the company'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.
In early 1996, the board of directors increased the authorized shares of the
company's common stock from 20 million shares to 50 million shares, with 3.86
million shares to be designated as series A common stock and 46.1 million shares
to be designated as series B common stock.
During the second quarter of 1996, the company sold 2.5 million shares of its
series B common stock in connection with a public offering at a price of $23.50
per share, before deducting underwriting discounts and commissions and estimated
offering expenses.
During the second quarter of 1997, the company issued 69.2 thousand shares of
its series B common stock in connection with the acquisition of the King
Companies at a price of $12.15 per share.
The board of directors has authorized the buy back of up to 0.5 million shares
of series B common stock. At December 28, 1997 the company had bought back 87
thousand shares of series B common stock at an average price of $12.64.
(11) Stock Incentive and Stock Option Plans
Key employees of the company and its subsidiaries are eligible to participate in
the Key Employee Long-Term Incentive Stock Plan (incentive stock plan). Under
the incentive stock plan, options for the company's series B common stock are
granted to participants as approved by the nominating and compensation committee
of the company's board of directors (committee). Under terms of the incentive
stock plan, options are granted at prices not less than the fair market value at
date of grant (or as otherwise determined by the committee), become exercisable
after a minimum of six months, and expire no later than ten years after the date
of grant. The committee may grant incentive stock options or non-qualified stock
options. Options are subject to adjustment upon the occurrence of certain
events, including stock splits and stock dividends. The incentive stock plan
authorizes the company to award or grant, from time to time to key employees,
restricted stock and performance stock.
Nonemployee directors of the company are eligible to participate in The
Wackenhut Corporation nonemployee director stock option plan (directors' stock
option plan). Under the directors' stock option plan, nonemployee directors are
granted 2,000 stock options for series B common stock upon their election or
reelection to the board of directors. Under terms of the directors' stock option
plan, options are granted at the fair market value at date of grant, become
exercisable at date of grant, and expire ten years after the date of grant.
At December 28, 1997, 1,331,005 shares of series B com mon stock were reserved
for issuance, including 616,312 shares available for future grants or awards.
Changes in outstanding non-qualified stock options for
37
<PAGE> 38
series B common stock, as adjusted for a 25% stock dividend in 1995, are as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding at beginning of year 597,255 557,818 391,568
Options granted 213,000 202,000 218,750
Options exercised (119,687) (129,312) (52,500)
Options forfeited (21,875) (33,251)
------------------------------------
Outstanding at end of year 668,693 597,255 557,818
------------------------------------
Exercisable at end of year 638,693 424,255 339,068
- --------------------------------------------------------------------------
</TABLE>
Weighted average option exercise price on information for the fiscal years 1997,
1996 and 1995 is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
- -----------------------------------------------------------------
<S> <C> <C> <C>
Outstanding at beginning of year $ 9.75 $ 7.98 $ 6.16
Granted during the year $15.77 $14.00 $10.80
Exercised during the year $10.56 $ 8.50 $ 6.16
Forfeited during the year $ 6.16 $10.69 $
----------------------------
Outstanding at end of year $11.64 $ 9.75 $ 7.98
----------------------------
Exercisable at end of year $11.30 $ 8.02 $ 6.16
- -----------------------------------------------------------------
</TABLE>
Significant option groups outstanding at December 28, 1997 and related weighted
average price and life information are as follows:
<TABLE>
<CAPTION>
Grant Options Options Exercise Remaining
Date Outstanding Exercisable Price Life (Years)
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
04/30/94 192,193 192,193 $ 6.16 6
01/28/95 132,500 132,500 $10.80 7
01/31/96 150,000 150,000 $14.00 8
01/28/97 164,000 164,000 $15.25 9
08/09/97 30,000 $18.94 9
- --------------------------------------------------------------------------
</TABLE>
The company applies APB No. 25 and related interpretations in accounting for its
stock-based compensation plans. Accordingly, no compensation cost has been
recognized for its stock option plans. Had compensation for the company's
stock-based compensation plans been determined pursuant to SFAS No. 123, the
company's net income and earnings per share would have decreased accordingly.
Using the Black-Scholes option pricing model for all options granted after
January 1, 1995, the company's pro forma net income, pro forma net income per
share and pro forma weighted average fair value of options granted, with related
assumptions, are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Pro forma basic net income $ (643) $ 8,425 $ 6,708
Pro forma basic earnings
per share $ (0.04) $ 0.62 $ 0.55
Pro forma diluted net income $ (746) $ 8,374 $ 6,708
Pro forma diluted earnings
per share $ (0.05) $ 0.60 $ 0.55
Pro forma weighted average
fair value of options granted $ 5.65 $ 4.81 $ 4.86
Expected life (years) 5 5 5
Risk-free interest rate 5.9%-6.3% 5.6% 7.4%
Expected volatility 36.0% 36.0% 36.0%
Quarterly dividend $ 0.065 $ 0.065 $ 0.075
- ------------------------------------------------------------------------------
</TABLE>
As SFAS No. 123 method of accounting has not been applied to options granted
prior to January 1, 1995, the resulting pro forma compensation cost may not be
representative of that to be expected in future years.
(12) Retirement and Deferred
Compensation Plans
The company has a noncontributory defined benefit pension plan covering certain
of its executives. Retirement benefits are based on years of service, employees'
average compensation for the last five years prior to retirement and social
security benefits. The plan currently is not funded. The company purchases and
is the beneficiary of life insurance policies for each participant enrolled in
the plan.
The assumptions for the discount rate and the average increase in compensation
used in determining the pension expense and funded status information are 7.0%
and 4.0%, respectively.
Total pension expense for 1997, 1996, and 1995 was $0.45 million, $0.42 million,
and $0.33 million, respectively. The present value of accumulated pension
benefits at year end 1997, 1996 and 1995 was $2.97 million, $2.44 million, and
$1.90 million, respectively and is included in "Other liabilities" in the
accompanying consolidated balance sheets.
The company has established non-qualified deferred compensation agreements with
certain senior executives providing for fixed annual benefits ranging from
$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 company. 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 1997, 1996 and 1995 was $0.59
million, $0.53 million, and $0.47 million, respectively. The liability for
deferred compensation was $3.97 million and $3.48 million at year end 1997 and
1996, respectively and is included in "Other liabilities" in the accompanying
consolidated balance sheets.
(13) Income Taxes
The provision (credit) for income taxes consists of the following:
<TABLE>
<CAPTION>
Fiscal year ended 1997 1996 1995
- ---------------------------------------------------------
<S> <C> <C> <C>
Federal income taxes:
Current $ 1,736 $(3,356) $ 581
Deferred (110) 8,590 3,578
--------------------------------
1,626 5,234 4,159
State income taxes:
Current $ 925 $ 319 $ 104
Deferred (280) 595 479
--------------------------------
645 914 583
--------------------------------
Foreign $ 163
--------------------------------
Total $ 2,271 $ 6,311 $4,742
- ---------------------------------------------------------
</TABLE>
38
<PAGE> 39
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 1997 1996 1995
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Income of foreign subsidiaries
and affiliates $ 2,247 $ 534 $ 1,336
Reserve for losses of reinsurance
subsidiary (523) 4,854 (1,222)
Reserve for claims of employee
health trust (712) 779 (412)
Headquarters building write-down 374 2,976
Deferred compensation (2,190) (765) (491)
Depreciation 150 (8) (824)
Amortization of deferred charges 2,152 2,339 2,601
Non-deductible reserves (5,315) (930) (40)
Non-qualified stock options 3,724 2,289
Other, net 77 (281) 133
---------------------------------
$ (390) $ 9,185 $ 4,057
- ------------------------------------------------------------------------
</TABLE>
The reconciliation of income tax computed at the federal statutory tax rate
(34%) to income tax expense follows:
<TABLE>
<CAPTION>
Fiscal year ended 1997 1996 1995
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Provision using statutory
federal tax rate $ 2,050 $ 6,077 $ 4,670
Capital loss carryforward utilization (241) (358) (330)
Tax exempt interest (40) (128) (167)
Other, net 247 193 21
2,016 5,784 4,194
---------------------------------
State income taxes, net of
federal benefit 255 527 548
---------------------------------
$ 2,271 $ 6,311 $ 4,742
- ----------------------------------------------------------------------------
</TABLE>
The components of the net non-current deferred tax asset (liability) at December
28, 1997 and December 29, 1996 are shown below:
<TABLE>
<CAPTION>
Fiscal year ended 1997 1996
- -----------------------------------------------------------------------
<S> <C> <C>
Income of foreign subsidiaries and affiliates $(9,731) $(7,484)
Deferred charges (5,039) (4,517)
Reserve for claims of employee health trust 5,037 4,325
Deferred compensation 6,105 3,915
Reserve for losses of reinsurance subsidiary 2,161 1,638
Reserves for legal and other expenses 1,603 211
Depreciation 297 447
Capital loss carryforward 61 142
Other, net 17 300
--------------------
511 (1,023)
Valuation allowance (61) (142)
--------------------
Deferred tax asset (liability), net $ 450 $(1,165)
- -----------------------------------------------------------------------
</TABLE>
The components of the net current deferred tax asset (liability) at December 28,
1997 and December 29, 1996 are shown below:
<TABLE>
<CAPTION>
Fiscal year ended 1997 1996
- -----------------------------------------------------------------
<S> <C> <C>
Amortization of uniforms and accessories $(2,004) $(1,939)
Amortization of deferred charges (1,631)
Accrued vacation pay 2,204 1,374
Other reserves 4,979 817
--------------------
Deferred tax asset, net $ 3,548 $ 252
- -----------------------------------------------------------------
</TABLE>
At December 28, 1997, the company had available a capital loss carryforward of
$159,000 of which $129,000 expires in 1998 and $30,000 expires in 2000.
At December 28, 1997, Wackenhut Corrections had federal and state net operating
loss carryforwards of $4.62 million and $4.05 million, respectively. The federal
net operating losses will expire between 2010 and 2011, while certain state net
operating losses will expire between 2000 and 2011. Utilization of net operating
losses in future years may be subject to annual limitations due to the ownership
change limitations provided by the Internal Revenue Code of 1986 and similar
state provisions. Such limitations, if any, are not expected to impact the
ultimate utilization of the carryforwards.
The company's loss carryforwards are solely attributable to Wackenhut
Corrections compensation deductions on its income tax return which were not
recognized for financial accounting purposes. The exercise of non-qualified
stock options which have been granted under the Wackenhut Corrections stock
option plans give rise to compensation which is includable in the taxable income
of the applicable employees and deducted by Wackenhut Corrections for federal
and state income tax purposes. Such compensation results from increases in the
fair market value of the Wackenhut Corrections common stock subsequent to the
date of grant. In accordance with APB No. 25, such compensation is not
recognized as an expense for financial accounting purposes and related tax
benefits are credited directly to additional paid-in-capital. In the years ended
December 28, 1997 and December 29, 1996, such deductions resulted in significant
federal and state deductions which may be carried forward. Utilization of such
deductions will increase additional paid-in-capital.
(14) Wackenhut Corrections Corporation
Public Offerings
In January 1996, Wackenhut Corrections sold 4.6 million shares of common stock
at an offering price of $12.00 per share. Net proceeds of approximately $51.6
million from the offering have been and will be used for possible future
acquisitions, capital investments in new facilities, working capital
requirements and general corporate purposes. After the offering, the company's
ownership in Wackenhut Corrections was reduced to approximately 55%.
During 1997, the exercise of 230,550 non-qualified stock options of Wackenhut
Corrections reduced the company's ownership of Wackenhut Corrections to 54.1% at
December 28, 1997.
The board of directors of Wackenhut Corrections has granted non-qualified stock
options to purchase common stock which, if fully exercised, would reduce the
company's ownership in Wackenhut Corrections to approximately 52%.
39
<PAGE> 40
(15) Earnings Per Share
The table below shows the amounts used in computing earnings per share in
accordance with SFAS No. 128 and the effects on income and the weighted average
number of shares of potential dilutive common stock. The number of shares used
in the calculations in 1995 reflect the declaration of a 25% stock dividend
effected in the form of a stock split. The incremental shares from assumed
conversions of the company's stock options in 1997 are not included because
there was a loss, not income, available to common shareholders for purposes of
computing the diluted earnings per share.
The company has entered into an acquisition (Note 4) which may result in
contingently issuable shares.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
-----------------------------------------------------------------------------------------
Per Share Per Share Per Share
Income Shares Amount Income Shares Amount Income Shares Amount
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Income $ 103 $9,057 $7,260
Basic EPS:
Income available to common shareholders 103 14,746 $ 0.01 9,057 13,636 $ 0.66 7,260 12,132 $ 0.60
Effect of dilutive securities:
Stock options 242 40
Stock options of Wackenhut Corrections (203) (51)
Diluted EPS:
Income (loss) available to common
shareholders $(100) 14,746 $ (0.01) $9,006 13,878 $ 0.65 $7,260 12,172 $ 0.60
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(16) Commitments and Contingencies
The nature of the company'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 company.
The company leases office space, data processing equipment and automobiles under
non-cancelable operating leases expiring between 1998 and 2017. The company
entered into a lease for its new corporate headquarters in Palm Beach Gardens,
Florida, in 1996. The lease requires annual payments of $1.8 million 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 December 28, 1997, December 29,
1996 and December 31, 1995 was $10 million, $9.6 million, and $7 million,
respectively.
In December 1997, Wackenhut Corrections entered into a $220 million operating
lease facility that has been established to acquire and develop new correctional
institutions used in its business. As a condition of this facility, Wackenhut
Corrections unconditionally agreed to guarantee certain obligations of First
Security Bank, N.A., a party to the aforementioned operating lease facility. As
of December 28, 1997, approximately $69 million of properties were under
development under this facility.
The minimum commitments under these leases and the 15 year lease for the new
corporate headquarters, are as follows:
<TABLE>
<CAPTION>
Minimum
Year Commitment
- ---------------------------------------------------------
<C> <C>
1998 $11,450
1999 9,680
2000 8,545
2001 7,405
2002 6,629
Thereafter 16,687
--------
$60,396
- ---------------------------------------------------------
</TABLE>
(17) Business Segments
Security services, correctional services and
staffing services
The company's principal segments are security services, correctional services,
and staffing services. The security services provides security-related and other
support services to commercial and governmental/regulated industries clients. A
subsidiary of the company, Wackenhut Corrections Corporation, provides facility
management and construction services to detention and correctional facilities.
The staffing services provides employee leasing and temporary staffing services.
<TABLE>
<CAPTION>
Fiscal year 1997 1996 1995
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES:
Security services $ 828,974 $ 768,065 $ 697,301
Correctional services 206,930 137,784 99,431
Staffing services 90,898 207
-------------------------------------
Total revenues $ 1,126,802 $ 906,056 $ 796,732
- ---------------------------------------------------------------------------
OPERATING INCOME:
Security services $ 20,281 $ 18,736 $ 20,500
Correctional services 16,545 9,731 7,229
Staffing services (272) (365)
Unallocated corporate
expenses (14,982) (11,032) (11,955)
One-time charges and
impairment of assets (18,300) (750)
-------------------------------------
Total operating income $ 3,272 $ 16,320 $ 15,774
- ---------------------------------------------------------------------------
EQUITY INCOME (LOSS) OF FOREIGN
AFFILIATES, NET OF TAXES:
Security services $ 993 $ 1,029 $ 744
Correctional services 1,105 604 (113)
-------------------------------------
Total equity income $ 2,098 $ 1,633 $ 631
- ---------------------------------------------------------------------------
CAPITAL EXPENDITURES:
Security services $ 2,867 $ 3,871 $ 3,959
Correctional services 23,965 12,476 2,720
Staffing services 294 85
Unallocated corporate 566 3,485 178
-------------------------------------
Total capital expenditures $ 27,692 $ 19,917 $ 6,857
- ---------------------------------------------------------------------------
DEPRECIATION AND
AMORTIZATION EXPENSE:
Security services $ 10,088 $ 9,438 $ 7,891
Correctional services 6,303 3,532 2,303
Staffing services 385 3
Unallocated corporate
expenses 741 867 1,977
-------------------------------------
Total expenses $ 17,517 $ 13,840 $ 12,171
- ---------------------------------------------------------------------------
</TABLE>
40
<PAGE> 41
<TABLE>
- -----------------------------------------------------------------
<S> <C> <C> <C>
IDENTIFIABLE ASSETS:
Security services $171,288 $158,413 $ 98,057
Correctional services 139,203 106,811 38,840
Staffing services 45,137 961
Unallocated corporate 48,814 57,733 61,030
----------------------------------
Total identifiable assets $404,442 $323,918 $197,927
- -----------------------------------------------------------------
</TABLE>
DOMESTIC AND INTERNATIONAL OPERATIONS
Non-U.S. operations of the company and its subsidiaries are conducted primarily
in South America and Australia. Minority interest in consolidated foreign
subsidiaries have been reflected net of applicable income taxes in the
accompanying financial statements. The company 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 company are
provided currently.
A summary of domestic and international operations is shown below:
<TABLE>
<CAPTION>
Fiscal year 1997 1996 1995
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES:
Domestic operations $ 952,978 $ 760,038 $652,723
International operations 173,824 146,018 144,009
----------------------------------------
Total revenues $ 1,126,802 $ 906,056 $796,732
- ---------------------------------------------------------------------------
OPERATING INCOME:
Domestic operations $ 17,085 $ 15,675 $ 11,407
International operations 4,487 1,395 4,367
One-time charges and
impairment of assets (18,300) (750)
----------------------------------------
TOTAL OPERATING INCOME $ 3,272 $ 16,320 $ 15,774
- ---------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------
EQUITY INCOME OF FOREIGN
AFFILIATES, NET OF TAXES:
Domestic operations
International operations $ 2,098 $ 1,633 $ 631
----------------------------------
Total equity income $ 2,098 $ 1,633 $ 631
- ------------------------------------------------------------------
CAPITAL EXPENDITURES:
Domestic operations $ 19,588 $ 16,569 $ 2,911
International operations 8,104 3,348 3,946
----------------------------------
Total capital expenditures $ 27,692 $ 19,917 $ 6,857
- ------------------------------------------------------------------
DEPRECIATION AND
AMORTIZATION EXPENSE:
Domestic operations $ 12,888 $ 9,678 $ 9,512
International operations 4,629 4,162 2,659
----------------------------------
Total expenses $ 17,517 $ 13,840 $ 12,171
- ------------------------------------------------------------------
IDENTIFIABLE ASSETS:
Domestic operations $368,349 $294,066 $141,431
International operations 36,093 29,852 56,496
----------------------------------
Total identifiable assets $404,442 $323,918 $197,927
- ------------------------------------------------------------------
</TABLE>
(18) Selected Quarterly Financial Data
(Unaudited)
Selected quarterly financial data for the company and its subsidiaries for the
fiscal years ended December 28, 1997 and December 29, 1996 is as follows:
<TABLE>
<CAPTION>
First Second Third Fourth
1997 Quarter Quarter Quarter Quarter
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $242,134 $273,592 $294,885 $ 316,191
Income (loss) from operations (1) $ 4,000 $ 4,909 $ 6,680 $ (12,317)
Net income (loss) $ 1,968 $ 2,508 $ 3,330 $ (7,703)
Earnings (loss) per share - basic $ 0.13 $ 0.17 $ 0.23 $ (0.52)
Earnings (loss) per share - assuming dilution $ 0.13 $ 0.17 $ 0.22 $ (0.53)
- ---------------------------------------------------------------------------------------------------
1996
- ---------------------------------------------------------------------------------------------------
Revenues $212,474 $222,904 $236,869 $ 233,809
Income from operations $ 2,063 $ 3,721 $ 5,224 $ 5,312
Net income $ 945 $ 1,907 $ 3,038 $ 3,167
Earnings (loss) per share - basic $ 0.08 $ 0.15 $ 0.21 $ 0.22
Earnings (loss) per share - assuming dilution $ 0.08 $ 0.14 $ 0.20 $ 0.20
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) The results of operations in the fourth quarter were affected by a one-time
charge of $18,300,000 (Note 2)
41
<PAGE> 42
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 December 28, 1997 and
December 29, 1996, and the related consolidated statements of income, cash flows
and shareholders' equity for each of the three fiscal years in the period ended
December 28, 1997. These financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with 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 December 28, 1997 and December 29, 1996, and the results of
their operations and their cash flows for each of the three fiscal years in the
period ended December 28, 1997, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
West Palm Beach, Florida,
February 11, 1998.
Management's responsibility for financial statements
To the Shareholders of
The Wackenhut Corporation:
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles. They include amounts based on
judgments and estimates.
Representations in the financial statements and the fairness and integrity of
such statements are the responsibility of management. In order to meet
management's responsibility, the company maintains a system of internal controls
and procedures and a program of internal audits designed to provide reasonable
assurance that the company's assets are controlled and safeguarded, that
transactions are executed in accordance with management's authorization and
properly recorded, and that accounting records may be relied upon in the
preparation of financial statements.
The financial statements have been audited by Arthur Andersen LLP, independent
certified public accountants, whose appointment was ratified by shareholders.
Their report expresses a professional opinion as to whether management's
financial statements considered in their entirety present fairly, in conformity
with generally accepted accounting principles, the company's financial position
and results of operations. Their audit was conducted in accordance with
generally accepted auditing standards. As part of this audit, Arthur Andersen
LLP considered the company's system of internal controls to the degree they
deemed necessary to determine the nature, timing and extent of their audit tests
which support their opinion on the financial statements.
The audit committee of the board of directors meets periodically with
representatives of management, the independent certified public accountants and
the company's internal auditors to review matters relating to financial
reporting, internal accounting controls and auditing. Both the internal auditors
and the independent certified public accountants have unrestricted access to the
audit committee to discuss the results of their reviews.
/s/ George R. Wackenhut /s/ Philip L. Maslowe
George R. Wackenhut Philip L. Maslowe
Chairman of the Board Senior Vice President and
and Chief Executive Officer Chief Financial Officer
Palm Beach Gardens, Florida,
February 11, 1998.
42
<PAGE> 1
Exhibit 4.1
CONFORMED COPY
AMENDED AND RESTATED
REVOLVING CREDIT AND REIMBURSEMENT AGREEMENT
by and among
THE WACKENHUT CORPORATION,
the Borrower
NATIONSBANK, NATIONAL ASSOCIATION,
as Lender
and
NATIONSBANK, NATIONAL ASSOCIATION,
as Administrative Agent
and
SCOTIABANC INC.,
as Co-Agent
December 30, 1997
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
Definitions and Terms
<TABLE>
<CAPTION>
<S> <C> <C>
1.01 Amendment and Restatement......................................................2
1.02 Definitions....................................................................2
1.03 Rules of Interpretation.......................................................21
ARTICLE II
Revolving Credit Facility
2.01 Commitment....................................................................24
2.02 Amounts.......................................................................24
2.03 Interest Periods..............................................................24
2.04 Advances......................................................................24
2.05 Payment of Interest...........................................................26
2.06 Payment of Principal..........................................................26
2.07 Borrower's Account............................................................27
2.08 Notes.........................................................................27
2.09 Pro Rata Payments.............................................................27
2.10 Reduction in Commitment.......................................................27
2.11 Conversions and Elections of Subsequent Interest Periods......................28
2.12 Fees..........................................................................29
2.13 Deficiency Advances...........................................................29
2.14 Adjustments by Agent..........................................................29
2.15 Use of Proceeds...............................................................30
2.16 Extension of Revolving Credit Termination Date................................30
2.17 Swing Line....................................................................30
ARTICLE III
Letters of Credit
3.01 Letters of Credit.............................................................32
3.02 Reimbursement.................................................................32
3.03 Letter of Credit Fee..........................................................35
3.04 Administrative Fees...........................................................35
</TABLE>
i
<PAGE> 3
ARTICLE IV
Change in Circumstances
<TABLE>
<CAPTION>
<S> <C> <C>
4.01 Increased Cost and Reduced Return.............................................37
4.02 Limitation on Types of Loans..................................................38
4.03 Illegality....................................................................39
4.04 Treatment of Affected Loans...................................................39
4.05 Compensation..................................................................39
4.06 Taxes.........................................................................40
4.07 Replacement Banks.............................................................42
ARTICLE V
Conditions to Making Loans and Issuing Letters of Credit
5.01 Conditions of Initial Advance and Issuance of Letters of Credit...............43
5.02 Conditions of Loans...........................................................45
ARTICLE VI
Representations and Warranties
6.01 Subsidiaries..................................................................46
6.02 Corporate Organization and Authority..........................................46
6.03 Financial Statements..........................................................46
6.04 Indebtedness..................................................................47
6.05 Full Disclosure...............................................................47
6.06 Pending Litigation............................................................47
6.07 Title to Properties...........................................................47
6.08 Patents and Trademarks........................................................47
6.09 Issuance is Legal and Authorized..............................................47
6.10 No Defaults...................................................................48
6.11 Governmental Consent..........................................................48
6.12 Taxes.........................................................................48
6.13 Use of Proceeds...............................................................49
6.14 ERISA.........................................................................49
6.15 Compliance with Law...........................................................49
6.16 Investment Company............................................................50
6.17 Hazardous Materials...........................................................50
</TABLE>
ii
<PAGE> 4
ARTICLE VII
Borrower Covenants
<TABLE>
<CAPTION>
<S> <C> <C>
7.01 Corporate Existence, Etc......................................................51
7.02 Insurance.....................................................................51
7.03 Taxes, Claims for Labor and Materials, Compliance with Laws...................52
7.04 Maintenance, Etc..............................................................52
7.05 Nature of Business............................................................52
7.06 Consolidated Net Worth........................................................52
7.07 Limitations on Total Debt.....................................................53
7.08 Fixed Charges Coverage Ratio..................................................53
7.09 Negative Pledge Clauses.......................................................53
7.10 Limitation on Liens...........................................................54
7.11 Restricted Payments: Joint Venture Investments...............................55
7.12 Limitation on Sale and Leasebacks.............................................56
7.13 Mergers, Consolidations and Sales of Assets...................................57
7.14 Guaranties....................................................................58
7.15 Transactions with Affiliates..................................................59
7.16 ERISA Compliance..............................................................59
7.17 Reports and Rights of Inspection..............................................59
7.18 Acquisitions..................................................................63
7.19 Additional Guaranties.........................................................63
7.20 Advances to WCC...............................................................63
7.21 Officer's Knowledge of Default................................................64
7.22 Suits or Other Proceedings....................................................64
7.23 Notice of Discharge of Environmental Complaint or Condition...................64
ARTICLE VIII
Events of Default and Remedies Therefor
8.01 Events of Default.............................................................65
8.02 Notice to Holders.............................................................66
8.03 Acceleration..................................................................66
8.04 Agent to Act..................................................................67
8.05 Cumulative Rights.............................................................67
8.06 Allocation of Proceeds........................................................67
ARTICLE IX
The Agent
9.01 Appointment, Powers, and Immunities...........................................69
9.02 Reliance by Agent.............................................................69
9.03 Defaults......................................................................70
9.04 Rights as Lender..............................................................70
9.05 Indemnification...............................................................70
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C> <C>
9.06 Non-Reliance on Agent and Other Lenders.......................................71
9.07 Resignation of Agent..........................................................71
9.08 Fees..........................................................................71
ARTICLE X
Miscellaneous
10.01 Assignments and Participation................................................72
10.02 Notices......................................................................73
10.03 No Waiver....................................................................74
10.04 Right of Setoff..............................................................75
10.05 Survival.....................................................................75
10.06 Expenses.....................................................................76
10.07 Amendments and Waivers.......................................................76
10.08 Counterparts.................................................................77
10.09 Waivers by the Borrower......................................................77
10.10 Termination..................................................................77
10.11 Governing Law................................................................78
10.12 Indemnification..............................................................78
10.13 Agreement Controls...........................................................79
EXHIBIT A APPLICABLE COMMITMENT PERCENTAGES..................................... A-1
EXHIBIT B ASSIGNMENT AND ACCEPTANCE..............................................B-1
EXHIBIT C NOTICE OF APPOINTMENT (OR REVOCATION) OF AUTHORIZED
OFFICER................................................................C-1
EXHIBIT D-1 BORROWING NOTICE (LOAN)..............................................D-1-1
EXHIBIT D-2 FORM OF BORROWING NOTICE--SWING LINE LOANS...........................D-2-1
EXHIBIT E FORM OF NOTE...........................................................E-1
EXHIBIT F [Reserved].............................................................F-1
EXHIBIT G-1 OPINION OF VICE PRESIDENT AND LEGAL COUNSEL..........................G-1-1
EXHIBIT G-2 OPINION OF COUNSEL TO THE GUARANTORS.................................G-2-1
EXHIBIT H FORM OF GUARANTY AGREEMENT.............................................H-1
EXHIBIT I COVENANT COMPLIANCE CERTIFICATE........................................I-1
SCHEDULE 1.01 EXISTING LCs.........................................................S-1
SCHEDULE 6.01 SUBSIDIARIES OF THE BORROWER.........................................S-2
SCHEDULE 6.04 DESCRIPTION OF INDEBTEDNESS AND LEASES...............................S-3
SCHEDULE 6.06 LITIGATION...........................................................S-5
SCHEDULE 7.10 EXISTING LIENS.......................................................S-6
</TABLE>
iv
<PAGE> 6
AMENDED AND RESTATED REVOLVING CREDIT
AND REIMBURSEMENT AGREEMENT
THIS AMENDED AND RESTATED REVOLVING CREDIT AND REIMBURSEMENT AGREEMENT,
dated December 30, 1997 (the "Agreement"), is made by and among:
THE WACKENHUT CORPORATION, a corporation organized and existing under
the laws of the State of Florida and having its principal place of business
located in Palm Beach Gardens, Florida (the "Borrower"); and
NATIONSBANK, NATIONAL ASSOCIATION, a national banking association
organized and existing under the laws of the United States, in its capacity as a
Lender ("NationsBank"), and each other financial institution which may hereafter
execute and deliver an instrument of assignment with respect to this Agreement
pursuant to SECTION 10.01 (hereinafter such financial institutions may be
referred to individually as a "Lender" or collectively as the "Lenders"); and
NATIONSBANK, NATIONAL ASSOCIATION, a national banking association
organized and existing under the laws of the United States of America and having
a principal place of business in Charlotte, North Carolina in its capacity as
agent for the Lenders (in such capacity, and together with any successor agent
appointed in accordance with the terms of SECTION 9.7, the "Agent").
W I T N E S S E T H:
WHEREAS, the Borrower, the Agent and the lenders signatory thereto (the
"Prior Lenders") have heretofore entered into a Revolving Credit and
Reimbursement Agreement dated January 5, 1995 (the "Prior Agreement") pursuant
to which the Prior Lenders under the Prior Agreement made available to the
Borrower a revolving credit facility of up to $60,000,000 and a letter of credit
facility which is available under the Revolving Credit Facility of up to
$60,000,000; and
WHEREAS, the Borrower has requested that the Lenders amend and restate
the Prior Agreement and the other Loan Documents in their entirety in order to
provide a revolving credit facility of up to $40,000,000 which shall include a
letter of credit facility of up to $40,000,000 and a swingline facility of up to
$15,000,000 the proceeds of which revolving credit facility are to be used as
provided in SECTION 2.15; and
WHEREAS, the Lenders are willing to make such credit facilities
available to the Borrower upon the terms and conditions set forth herein;
NOW, THEREFORE, the Borrower, the Lenders and the Agent hereby agree as
follows:
1
<PAGE> 7
ARTICLE I
DEFINITIONS AND TERMS
1.01 AMENDMENT AND RESTATEMENT. The Borrower, the Agent, and the
Lenders hereby agree that upon the effectiveness of this Agreement, the terms
and provisions of the Prior Agreement shall be and hereby are amended and
restated in their entirety by the terms and conditions of this Agreement and the
terms and provisions of the Prior Agreement, except as otherwise provided
herein, shall be superseded by this Agreement.
Notwithstanding the amendment and restatement of the Prior Agreement by
this Agreement, the Borrower shall continue to be liable to the Agent and the
Prior Lenders with respect to (and to the extent of) agreements on the part of
the Borrower under the Prior Agreement to indemnify and hold harmless the Agent
and the Prior Lenders from and against all claims, demand, liabilities, damages,
losses, costs, charges and expenses to which the Agent and the Prior Lenders may
be subject arising in connection with the Prior Agreement. This Agreement is
given as a substitution of, and not as a payment of, the obligations of the
Borrower under the Prior Agreement and is not intended to constitute a novation
of the Prior Agreement. Except as otherwise selected by the Borrower by delivery
of a Borrowing Notice prior to the Closing Date in accordance with the terms
hereof, upon the effectiveness of this Agreement all amounts outstanding and
owing by Borrower under the Prior Agreement as of the Closing Date, as
determined by the Lenders, shall constitute Advances hereunder accruing interest
with respect to Base Rate Loans under the Prior Agreement, at the Base Rate
hereunder. The parties hereto agree that the Interest Periods for all Eurodollar
Rate Loans outstanding under the Prior Agreement on the Closing Date shall be
terminated, the Borrower shall make any payments required under SECTION 4.05
hereof to the Lenders. The Borrower shall furnish to the Agent Borrowing Notices
for additional Loans as may be required in connection with the allocation of
Loans among Lenders in accordance with their Applicable Commitment Percentages.
Except as otherwise provided for by the Borrower by delivery to NationsBank of
an Application and Agreement for Letters of Credit prior to the Closing Date in
accordance with the terms hereof, upon effectiveness of this Agreement, all
Letters of Credit issued for the account of the Borrower under the Prior
Agreement as of the Closing Date shall constitute Letters of Credit hereunder.
1.02 DEFINITIONS. Unless the context otherwise requires, the terms
hereinafter set forth when used herein shall have the following meanings and the
following definitions shall be equally applicable to both the singular and
plural forms of any of the terms herein defined:
"Advance" means a borrowing under the Revolving Credit
Facility consisting of the aggregate principal amount of a Floating
Rate Loan or Fixed Rate Loan, as the case may be.
"Affiliate" shall mean any Person (other than a Subsidiary)
(i) which directly or indirectly through one or more intermediaries
controls, or is controlled by or is under common control with, the
Borrower, (ii) which beneficially owns or holds 5% or more of
2
<PAGE> 8
any class of the Voting Stock of the Borrower or (iii) 5% or more of
the Voting Stock (or in the case of a Person which is not a
corporation, 5% or more of the equity interest) of which is
beneficially owned or held by the Borrower or a Subsidiary. The term
"control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a
person, whether through the ownership of Voting Stock, by contract or
otherwise.
"Applicable CD Rate" means, for any CD Rate Loan for any
Interest Period therefor, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) determined by the Agent to be
the average of the bid rates quoted to the Agent at approximately 10:00
a.m. (or as soon thereafter as practicable) by two (2) or more
certificate of deposit dealers of recognized national standing selected
by the Agent for the purchase at face value of certificates of deposit
of the Agent having a term (i) in the case of Fixed CD Rate Loans,
comparable to such Interest Period and (ii) in the case of Floating CD
Rate Loans, of ninety (90) days, and in each case, in an amount equal
to the principal amount of such CD Loan to be made.
"Applicable Commitment Percentage" means, for each Lender that
portion of the Total Revolving Credit Commitment (including its
Participations and its obligations hereunder to the Issuing Bank to
acquire Participations) allocable to such Lender (i) with respect to
Lenders as of the Closing Date, as set forth in EXHIBIT A attached
hereto and (ii) with respect to any Person who becomes a Lender
hereunder, as reflected in each Assignment and Acceptance to which such
Lender is a party Assignee; provided that the Applicable Commitment
Percentage of each Lender shall be increased or decreased to reflect
any assignments to or by such Lender effected in accordance with
SECTION 10.01.
"Applicable Lending Office" means, for each Lender and for
each Type of Loan, the "Lending Office" of such Lender (or of an
affiliate of such Lender) designated for such Type of Loan on the
signature pages hereof or such other office of such Lender (or an
affiliate of such Lender) as such Lender may from time to time specify
to the Agent and the Borrower by written notice in accordance with the
terms hereof as the office by which its Loans of such Type are to be
made and maintained.
"Applicable Margin" means for each Eurodollar Rate Loan or CD
Rate Loan, and with respect to the Unused Fee, that percent per annum
set forth below, which shall be based upon the Fixed Charges Coverage
Ratio for the Four-Quarter Period most recently ended as specified
below:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Tier Fixed Charges Coverage Ratio Applicable Margin Applicable Unused Fee
---- ---------------------------- ----------------- ---------------------
I Equal to or greater than 2.00 to 1.00 0.425% 0.150%
II Equal to or greater than 1.75 to 1.00 0.500% 0.175%
and less than 2.00 to 1.00
III Equal to or greater than 1.50 to 1.00 0.650% 0.200%
and less than 1.75 to 1.00
</TABLE>
3
<PAGE> 9
The Applicable Margin and Applicable Unused Fee shall be established at
the end of each fiscal quarter of the Borrower (each, a "Determination
Date"). Any change in the Applicable Margin and Applicable Unused Fee
following each Determination Date shall be determined based upon the
computations set forth in the certificate furnished to the Agent
pursuant to SECTION 7.17(F), subject to review and approval of such
computations by the Agent, and shall be effective commencing on the
date following the date such certificate is received (or, if earlier,
the date such certificate was required to be delivered) until the date
following the date on which a new certificate is delivered or is
required to be delivered, whichever shall first occur; PROVIDED
HOWEVER, if the Borrower shall fail to deliver any such certificate
within five (5) days after the time period required by SECTION 7.17,
then the Applicable Margin and Applicable Unused Fee shall be Tier III
from the date such certificate was required to be delivered until the
appropriate certificate is so delivered. From the Closing Date to the
date following the date on which the compliance certificate required by
SECTION 7.17(F) is delivered, the Applicable Margin and Applicable
Unused Fee shall be Tier II.
"Applicable Reserve Requirement" means, at any time, the
maximum rate at which reserves (including, without limitation, any
marginal, special, supplemental, or emergency reserves) are required to
be maintained under regulations issued from time to time by the Board
of Governors of the Federal Reserve System (or any successor) by member
banks of the Federal Reserve System against (a) in the case of
Eurodollar Rate Loans, "Eurocurrency liabilities" (as such term is used
in Regulation D) or (b) in the case of CD Rate Loans, non-personal
Dollar time deposits in an amount of $100,000 or more. Without limiting
the effect of the foregoing, the Reserve Requirement shall reflect any
other reserves required to be maintained by such member banks with
respect to (i) any category of liabilities which includes deposits by
reference to which the Eurodollar Rate or CD Rate (as the case may be)
is to be determined, or (ii) any category of extensions of credit or
other assets which include Eurodollar Rate Loans or CD Rate Loans. The
Eurodollar Rate and the CD Rate shall be adjusted automatically on and
as of the effective date of any change in the Reserve Requirement.
"Applicable Unused Fee" means that percent per annum set forth
in the table in the definition of Applicable Margin, which shall be
based upon the Fixed Charges Coverage Ratio for the Four-Quarter Period
most recently ended and shall be effective on the date set forth in the
definition of Applicable Margin. The Applicable Unused Fee shall be
established as set forth in the definition of Applicable Margin.
"Asset Securitization Facility" means the asset backed
commercial paper funded receivables securitization facility among
Wackenhut Funding, the Borrower, as Servicer, and NationsBank as
Managing Agent, providing for the sale by Wackenhut Funding of
fractional undivided interests in trade receivables originated by the
Borrower and certain of its Subsidiaries, provided that at no time
shall the aggregate face amount of outstanding trade receivables of the
Borrower and its Subsidiaries sold or otherwise transferred (in whole
or in part) through such program exceed $75,000,000.
4
<PAGE> 10
"Assessment Rate" means, for any day, the annual assessment
rate (rounded upwards, if necessary, to the nearest 1/100 of 1%) which
is payable by the Agent (in its individual capacity) to the Federal
Deposit Insurance Corporation (or any successor) for deposit insurance
for Dollar time deposits with the Agent (in its individual capacity) at
its Principal Office as determined by the Agent. The CD Rate shall be
adjusted automatically as of the effective date of each change in the
Assessment Rate.
"Assignment and Acceptance" means an Assignment and Acceptance
in the form of EXHIBIT B (with blanks appropriately filled in)
delivered to the Agent in connection with an assignment of a Lender's
interest under this Agreement pursuant to SECTION 10.01.
"Authorized Officer" means any of the Chairman, President,
Senior Vice Presidents or Vice Presidents of the Borrower or, with
respect to financial matters, the Treasurer or Chief Financial Officer
of the Borrower or any other person expressly designated by the Board
of Directors (or the appropriate committee thereof) of the Borrower as
an Authorized Representative for purposes of this Agreement, as set
forth from time to time in a certificate in the form attached hereto as
EXHIBIT C;
"Base Rate Loan" means all of the Loans for which the rate of
interest is determined by reference to the Base Rate.
"Base Rate" means, for any day, the rate per annum equal to
the higher of (a) the Federal Funds Rate for such day plus one-half of
one percent (.5%) and (b) the Prime Rate for such day. Any change in
the Base Rate due to a change in the Prime Rate or the Federal Funds
Rate shall be effective on the effective date of such change in the
Prime Rate or Federal Funds Rate.
"Board" means the Board of Governors of the Federal Reserve
System (or any successor body).
"Borrower's Account" means a demand deposit account number
3601603454, or any successor account with the Agent, which may be
maintained at one or more offices of the Agent, or an agent for the
Agent.
"Borrowing Notice" means the telephonic request of the
Authorized Representative to obtain an Advance or a Swing Line Loan
Advance or to elect a subsequent Interest Period for or Convert a Loan
or Loans of any Type hereunder, as the obtaining of such Advance, such
election or Conversion of such Loan or Loans shall be otherwise
permitted herein. Any Borrowing Notice shall be binding on and
irrevocable by the Borrower, and shall be confirmed in writing within
three (3) Business Days by an Authorized Representative in the form
attached hereto as EXHIBIT D-1 or D-2, as applicable.
"Business Day" means (i) with respect to any Type of Loan
other than a Eurodollar Rate Loan, any day which is not a Saturday,
Sunday or a day on which banks in the States of New York and North
Carolina are authorized or obligated by law, executive order or
5
<PAGE> 11
government decree to be closed, and (ii) with respect to any Eurodollar
Rate Loan, any day which is a Business Day as described above, and on
which the relevant international financial markets are open for the
transaction of business contemplated by this Agreement in London,
England, New York, New York, and Charlotte, North Carolina.
"Capitalized Lease" means any lease the obligation for Rentals
with respect to which is required to be capitalized on a consolidated
balance sheet of the lessee and its subsidiaries in accordance with
GAAP.
"Capitalized Rentals" of any Person and as of the date of any
determination thereof means the amount at which the aggregate Rentals
due and to become due under all Capitalized Leases under which such
Person is lessee would be reflected as a liability on a consolidated
balance sheet of such Person.
"CD Rate Loan" means all of the Loans for which the rate of
interest is determined by reference to the CD Rate.
"CD Rate" means, for any CD Rate Loan, the rate of interest
per annum determined pursuant to the following formula:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CD = Applicable CD Rate + Assessment + Applicable
Rate --------------------------------- Rate Margin
1 - Applicable Reserve Requirement
</TABLE>
"Closing Date" means the date as of which this Agreement is
executed by the Borrower, the Lenders and the Agent and on which the
conditions set forth in SECTION 5.01 hereof have been satisfied.
"Consolidated Current Assets" and "Consolidated Current
Liabilities" means as of the date of any determination thereof such
assets and liabilities of the Borrower and its Subsidiaries on
consolidated basis as shall be determined in accordance with GAAP to
constitute current assets and current liabilities, respectively.
"Consolidated Funded Debt" means all Funded Debt of the
Borrower and its Subsidiaries, determined on a consolidated basis
eliminating intercompany items.
6
<PAGE> 12
"Consolidated Net Income" for any period means the gross
revenues of the Borrower and its Subsidiaries for such period LESS all
expenses and other proper charges (including taxes on income and
Interest Charges), determined on a consolidated basis after eliminating
earnings or losses attributable to outstanding Minority Interests, but
excluding in any event:
(a) any gains on the sale or other disposition of
Investments or fixed or capital assets, and any taxes on such
excluded gains and any tax deductions or credits on account of
any such excluded losses;
(b) the proceeds of any life insurance policy except
for proceeds received during such period with respect to
deferred compensation plans to the extent that the Borrower or
any Subsidiary recognized any expenses during such period with
respect to such plans;
(c) net earnings and losses of any Subsidiary accrued
prior to the date it became a Subsidiary;
(d) net earnings and losses of any corporation (other
than a Subsidiary), substantially all the assets of which have
been acquired in any manner by the Borrower or any Subsidiary,
realized by such corporation prior to the date of such
acquisition;
(e) net earnings and losses of any corporation (other
than a Subsidiary) with which the Borrower or a Subsidiary
shall have consolidated or which shall have merged into or
with the Borrower or a Subsidiary prior to the date of such
consolidation or merger;
(f) net earnings of any business entity (other than a
Subsidiary) in which the Borrower or any Subsidiary has an
ownership interest unless such net earnings shall have
actually been received by the Borrower or such Subsidiary in
the form of cash distributions;
(g) any portion of the net earnings of any Subsidiary
which for any reason is unavailable for payment of dividends
to the Borrower or any other Subsidiary;
(h) earnings resulting from any reappraisal,
revaluation or write-up of assets;
(i) any deferred or other credit representing any
excess of the equity in any Subsidiary at the date of
acquisition thereof over the amount invested in such
Subsidiary;
7
<PAGE> 13
(j) any gain arising from the acquisition of any
Securities of the Borrower or any Subsidiary; and
(k) any reversal of any contingency reserve, except
to the extent that provision for such contingency reserve
shall have been made from income arising during such period.
"Consolidated Net Assets" means as of the date of any
determination thereof, the amount of all Total Assets of the Borrower
and its Subsidiaries after deducting all Restricted Investments and all
items which in accordance with GAAP would be included on the liability
side of a consolidated balance sheet, except deferred income taxes,
deferred investment tax credits, capital stock of any class, surplus
and Funded Debt.
"Consolidated Net Worth" means at any time as of which the
amount thereof is to be determined, the sum of the following with
respect to the Borrower and its Subsidiaries (on a consolidated basis
and excluding intercompany items): (i) the amount of issued and
outstanding share capital, PLUS (ii) the amount of additional paid-in
capital and retained income (or, in the case of a deficit, minus the
amount of such deficit), MINUS (iii) the sum of the following (without
duplication of deductions in respect of items already deducted in
arriving at surplus and retained earnings): (A) all reserves, except
legal reserves and other contingency reserves (i.e., reserves not
allocated to specific purposes and not deducted from assets), which are
properly treated as appropriations of surplus or retained earnings; (B)
any treasury stock, capital stock subscribed and unissued and other
contra-equity accounts; and (C) the cumulative amount of any net
write-up of asset values after the date of the audit immediately
preceding the Closing Date, PLUS or MINUS, as the case may be (iv) the
cumulative effect of foreign exchange valuations.
"Consolidated Total Assets" means as of the date of any
determination thereof the total amount of all assets of the Borrower
and its Subsidiaries determined on a consolidated basis in accordance
with GAAP.
"Continue", "Continuation", and "Continued" shall refer to the
continuation pursuant to SECTION 2.11 hereof of a Fixed Rate Loan of
one Type as a Fixed Rate Loan of the same Type from one Interest Period
to the next Interest Period.
"Convert", "Conversion", and "Converted" shall refer to a
conversion pursuant to SECTION 2.11 hereof or ARTICLE IV of one Type of
Loan into another Type of Loan.
"Current Debt" of any Person as of the date of any
determination thereof means (i) all Indebtedness of such Person for
borrowed money other than Funded Debt of such Person and (ii)
Guaranties by such Person of Current Debt of others.
"Default" means any event or condition, the occurrence of
which would, with the lapse of time or the giving of notice, or both,
constitute an Event of Default.
8
<PAGE> 14
"Dollars" and the symbol "$" means dollars constituting legal
tender for the payment of public and private debts in the United States
of America.
"Eligible Assignee" means means (i) a Lender, (ii) an
affiliate of a Lender, and (iii) any other Person approved by the Agent
and, unless an Event of Default has occurred and is continuing at the
time any assignment is effected in accordance with SECTION 10.01, the
Borrower, such approval not to be unreasonably withheld or delayed by
the Borrower and such approval to be deemed given by the Borrower if no
objection is received by the assigning Lender and the Agent from the
Borrower within two Business Days after notice of such proposed
assignment has been provided by the assigning Lender to the Borrower;
PROVIDED, HOWEVER, that neither the Borrower nor an affiliate of the
Borrower shall qualify as an Eligible Assignee.
"Environmental Laws" means any federal, state or local
statute, law, ordinance, code, rule, regulation, order, decree, permit
or license regulating, relating to, or imposing liability or standards
of conduct concerning, any environmental matters or conditions,
environmental protection or conservation, including without limitation,
the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended; the Superfund Amendments and Reauthorization
Act of 1986, as amended; the Resource Conservation and Recovery Act, as
amended; the Toxic Substances Control Act, as amended; the Clean Air
Act, as amended; the Clean Water Act, as amended; together with all
regulations promulgated thereunder, and any other "Superfund" or
"Superlien" law.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute of similar import, together
with the regulations thereunder, in each case as in effect from time to
time. References to sections of ERISA shall be construed to also refer
to any successor sections;
"ERISA Affiliate" means any corporation, trade or business
that is, along with the Borrower, a member of a controlled group of
corporations or controlled group of trades or businesses, as described
in section 414(b) and 414(c), respectively, of the Code of Section 4001
of ERISA.
"Eurodollar Rate" means the interest rate per annum calculated
according to the following formula:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Eurodollar = Interbank Offered Rate + Applicable
Rate --------------------------------- Margin
1 - Applicable Reserve Requirement
</TABLE>
"Eurodollar Rate Loan" means Loans that bear interest at rates
based upon the Eurodollar Rate.
"Event of Default" shall have the meaning set forth in SECTION
8.01.
"Existing LCs" means the letters of credit issued by
NationsBank prior to the Closing Date and remaining outstanding as of
the Closing Date, all as more particularly
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described on SCHEDULE 1.01 attached hereto;
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to
the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by
Federal funds brokers on such day, as published by the Federal Reserve
Bank of New York on the Business Day next succeeding such day; PROVIDED
that (a) if such day is not a Business Day, the Federal Funds Rate for
such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day, and
(b) if no such rate is so published on such next succeeding Business
Day, the Federal Funds Rate for such day shall be the average rate
charged to the Agent (in its individual capacity) on such day on such
transactions as determined by the Agent.
"Fixed CD Rate Loan" means a CD Rate Loan for which the
Borrower elects an Interest Period of 30, 60, 90 or 180 days pursuant
to SECTION 2.03 hereof.
"Fixed Charges" for any period means on a consolidated basis
the sum of (i) 100% of all Rentals (other than Rentals on Capitalized
Leases) payable during such period by the Borrower and its Subsidiaries
(other than WCC), and (ii) all Interest Charges on all Indebtedness
(including the interest component of Rentals on Capitalized Leases and
the discount factor or other economic equivalent of interest under the
Asset Securitization Facility) of the Borrower and its Subsidiaries
(other than WCC) payable during said period by the Borrower and its
Subsidiaries (other than WCC).
"Fixed Charges Coverage Ratio" means the ratio of Net Income
Available for Fixed Charges to Fixed Charges.
"Fixed Rate Loan" means a Loan which is either a Fixed CD Rate
Loan or a Eurodollar Rate Loan.
"Floating CD Rate Loan" means a CD Rate Loan other than a
Fixed CD Rate Loan.
"Floating Rate Loan" means a Loan which is either a Base Rate
Loan or a Floating CD Rate Loan.
"Four-Quarter Period" means a period of four full consecutive
quarter annual periods, taken together as one accounting period.
"Funded Debt" of any Person shall mean (i) all Indebtedness of
such Person for borrowed money or which has been incurred in connection
with the acquisition of assets, including all payments in respect
thereof that are required to be made within one year from the date of
any determination of Funded Debt, whether or not the obligation to make
such payments shall constitute a current liability of the obligor under
GAAP, (ii) all Capitalized Rentals of such Person, (iii) all Guaranties
by such Person of Funded Debt of
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others, (iv) with respect to Funded Debt of the Borrower, the product
of (x) the aggregate amounts available for drawing under all
outstanding Letters of Credit and (y).50; and (v) to the extent not
otherwise included in clauses (i) through (iv) above, outstanding
amounts (together with interest paid thereon) received by the Borrower
or any Subsidiary in exchange for the transfer of interests in trade
receivables under the Asset Securitization Facility.
"GAAP" or "Generally Accepted Accounting Principles" means
generally accepted accounting principles, being those principles of
accounting set forth in pronouncements of the Financial Accounting
Standards Board, the American Institute of Certified Public Accountants
or which have other substantial authoritative support and are
applicable in the circumstances as of the date of a report.
"Gross Revenues" for any period means the gross revenues,
determined in accordance with GAAP, of the Borrower and its
Subsidiaries for such period, determined on a consolidated basis after
eliminating revenues attributable to outstanding Minority Interests.
"Guaranties" by any Person means all obligations (other than
endorsements in the ordinary course of business of negotiable
instruments for deposit or collection) of such Person guaranteeing or
in effect, guaranteeing any Indebtedness, dividend or other obligation,
of any other Person (the "primary obligor") in any manner, whether
directly or indirectly, including, without limitation, all obligations
incurred through an agreement, contingent or otherwise, by such Person:
(i) to purchase such Indebtedness or obligation or any property or
assets constituting security therefor, (ii) to advance or supply funds
(x) for the purchase or payment of such Indebtedness or obligation, (y)
to maintain working capital or other balance sheet condition or
otherwise to advance or make available funds for the purchase or
payment of such Indebtedness or obligation, or (iii) to lease property
or to purchase Securities or other Property or services primarily for
the purpose of assuring the owner of such Indebtedness or obligation of
the ability of the primary obligor to make payment of the Indebtedness
of obligation, or (iv) otherwise to assure the owner of the
Indebtedness or obligation of the primary obligor against loss in
respect thereof. For the purposes of all computations made under this
Agreement, a Guaranty in respect of any Indebtedness for borrowed money
shall be deemed to be Indebtedness equal to the principal amount of
such Indebtedness for borrowed money which has been guaranteed, and a
Guaranty in respect of any other obligation or liability or any
dividend shall be deemed to be Indebtedness equal to the maximum
aggregate amount of such obligation, liability or dividend.
"Guaranty Agreements" means, collectively, (i) the Amended and
Restated Guaranty and Suretyship Agreement executed and delivered by
each wholly-owned Subsidiary of the Borrower as of the Closing Date and
(ii) each Guaranty and Suretyship Agreement delivered pursuant to
SECTION 7.19, substantially in the form of EXHIBIT H, as the same may
be amended, modified or restated from time to time.
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"Guarantors" means, collectively, (i) as of the date hereof,
each wholly-owned domestic Subsidiary of the Borrower as listed on
SCHEDULE 6.01 hereof, and (ii) thereafter, each Person who is required
to execute and deliver a Guaranty Agreement pursuant to SECTION 7.19
hereof.
"Hazardous Material" means and includes any pollutant,
contaminant, or hazardous, toxic or dangerous waste, substance or
material (including without limitation petroleum products,
asbestos-containing materials and lead), the generation, handling,
storage, transportation, disposal, treatment, release, discharge or
emission of which is subject to any Environmental Law.
"Indebtedness" of any Person means and include all obligations
of such Person which in accordance with GAAP shall be classified upon a
balance sheet of such Person as liabilities of such Person, and in any
event shall include all (i) obligations of such Person for borrowed
money or which has been incurred in connection with the acquisition of
property or assets, (ii) obligations secured by any Lien upon property
or assets owned by such Person, even though such Person has not assumed
or become liable for the payment of such obligations, (iii) obligations
created or arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person,
notwithstanding the fact that the rights and remedies of the seller,
lender or lessor under such agreement in the event of default are
limited to repossession or sale of property, (iv) Capitalized Rentals
under any Capitalized Lease, (v) Guaranties of Indebtedness of others,
(vi) the Reimbursement Obligations, and (vii) outstanding amounts
received by the Borrower or any Subsidiary in exchange for the transfer
of interests in trade receivables under the Asset Securitization
Facility in excess of the amounts repaid to the purchasers in respect
of such purchase price from collections on such trade receivables.
"Interbank Offered Rate" means, for any Eurodollar Rate Loan
for any Interest Period therefor, the rate per annum (rounded upwards,
if necessary, to the nearest 1/100 of 1%) appearing on Telerate Page
3750 (or any successor page) as the London interbank offered rate for
deposits in Dollars at approximately 11:00 a.m. (London time) two
Business Days prior to the first day of such Interest Period for a term
comparable to such Interest Period. If for any reason such rate is not
available, the term "Eurodollar Rate" shall mean, for any Eurodollar
Rate Loan for any Interest Period therefor, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters
Screen LIBO Page as the London interbank offered rate for deposits in
Dollars at approximately 11:00 a.m. (London time) two Business Days
prior to the first day of such Interest Period for a term comparable to
such Interest Period; PROVIDED, HOWEVER, if more than one rate is
specified on Reuters Screen LIBO Page, the applicable rate shall be the
arithmetic mean of all such rates (rounded upwards, if necessary, to
the nearest 1/100 of 1%).
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"Interest Charges" for any period means all interest and all
amortization of debt discount and expense on any particular
Indebtedness for which such calculations are being made, and shall
include without limitation the discount factor or other economic
equivalent of interest arising under the Asset Securitization Facility.
Computations of Interest Charges on a pro forma basis for Indebtedness
having a variable interest rate shall be calculated at the rate in
effect on the date of any determination.
"Interest Period" for each Fixed Rate Loan means a period
commencing on the date such Fixed Rate Loan is made or Converted and
each subsequent period commencing on the last day of the immediately
preceding Interest Period for such Fixed Rate Loan and ending, at the
Borrower's option, (A) for any Fixed CD Rate Loan on the date 30, 60,
90 or 180 days thereafter as notified to the Agent by an Authorized
Representative two (2) Business Days prior to the beginning of such
Interest Period and (B) for any Eurodollar Rate Loan, on the date one,
two, three or six months thereafter as notified to the Agent by the
Authorized Representative three (3) Business Days prior to the
beginning of such Interest Period; PROVIDED, that,
(i) if an Authorized Representative fails to notify
the Agent of the length of an Interest Period for any Fixed CD
Rate Loan two (2) Business Days or for any Eurodollar Rate
Loan three (3) Business Days, as the case may be, prior to the
first day of such Interest Period, the Loan for which such
Interest Period was to be deter mined shall be deemed to be a
Base Rate Loan as of the first day thereof for an Interest
Period ending on the following Business Day;
(ii) if an Interest Period for a Fixed Rate Loan
would end on a day which is not a Business Day, such Interest
Period shall be extended to the next Business Day (unless in
the case of any Eurodollar Rate Loan, such extension would
cause the applicable Interest Period to end in the succeeding
calendar month, in which case such Interest Period shall end
on the next preceding Business Day); and
(iii) there shall not be more than six (6) Interest
Periods in effect on any day, provided that all Floating Rate
Loans shall be treated as having the same Interest Period.
"Investments" means all investments, in cash or by delivery of
Property made, directly or indirectly in any Person, whether by
acquisition of shares of capital stock, indebtedness or other
obligations or Security or by loan, advance, capital contribution or
otherwise; PROVIDED, HOWEVER, that "Investments" shall not mean or
include routine investments in Property to be used or consumed in the
ordinary course of business or investments in accounts receivable or
notes receivable arising in the ordinary course of business.
"Issuing Bank" means initially NationsBank and thereafter any
Lender which is successor to NationsBank as issuer of Letters of Credit
under ARTICLE III.
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"Joint Venture Investment" means any Investment in an amount
not to exceed $500,000 in any Person by the Borrower with any other
Person or Persons which Investment is made in order to permit the
Borrower to make bids with respect to government contracts for the
providing of services by the Borrower of the type provided by the
Borrower and its Subsidiaries on the date of this Agreement.
"Letter of Credit" or "Letters of Credit" means a letter of
credit issued by the Issuing Bank for the account of the Borrower or
the Borrower and Titania in favor of a Person advancing credit,
providing insurance or securing obligations on behalf of the Borrower
or the Borrower and Titania, and shall include without limitation all
Existing LCs.
"Letter of Credit Account Agreement" means that Letter of
Credit Account Agreement of even date herewith by and between the
Borrower and the Agent, as amended and modified from time to time,
providing for deposit of amounts of cash with the Agent.
"Letter of Credit Facility" means the facility described in
ARTICLE III hereof providing for the issuance by the Issuing Banks for
the account of the Borrower or the Borrower and Titania of Letters of
Credit in an aggregate stated amount at any time outstanding not
exceeding the Total Letter of Credit Commitment.
"Letter of Credit Outstandings" means, as of any date of
determination, the aggregate amount remaining undrawn under all Letters
of Credit plus Reimbursement Obligations then outstanding.
"Lien" means any interest in Property securing an obligation
owed to, or a claim by, a Person other than the owner of the Property,
whether such interest is based on the common law, statute or contract,
and including but not limited to the security interest lien arising
from a mortgage, encumbrance, pledge, conditional sale or trust receipt
or a lease, consignment or bailment for security purposes. The term
"Lien" shall include reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases
and other title exceptions and encumbrances (including, with respect to
stock, stockholder agreements, voting trust agreements, buy-back
agreements and all similar arrangements) affecting Property. For the
purposes of this Agreement, the Borrower or a Subsidiary shall be
deemed to be the owner of any Property which it has acquired or holds
subject to a conditional sale agreement, Capitalized Lease or other
arrangement pursuant to which title to the Property has been retained
by or vested in some other Person for security purposes and such
retention or vesting shall constitute a Lien.
"Loan" or "Loans" means any of the Fixed Rate Loans or
Floating Rate Loans, as the context may require.
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"Loan Documents" means this Agreement, the Letter of Credit
Account Agreement, the Notes, the Guaranty Agreements, any applications
for issuance of Letters of Credit and all other instruments and
documents executed or delivered to and in favor of any Lender or the
Agent in connection with the Loans or the Letters of Credit as the same
may be amended, modified or supplemented from time to time.
"Minority Interests" means any shares of stock of any class of
a Subsidiary (other than directors' qualifying shares as required by
law) that are not owned by the Borrower and/or one or more of its
Subsidiaries. Minority Interests shall be valued by valuing Minority
Interests constituting preferred stock at the voluntary or involuntary
liquidating value of such preferred stock, whichever is greater, and by
valuing Minority Interests constituting common stock at the book value
of capital and surplus applicable thereto adjusted, if necessary, to
reflect any changes from the book value of such common stock required
by the foregoing method of valuing Minority Interests in preferred
stock.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" shall have the same meaning as in ERISA.
"NationsBank" means NationsBank, National Association, and its
successors.
"Net Income Available for Fixed Charges" for any period means
the sum of (i) Consolidated Net Income during such period (excluding,
for the purpose of determining Net Income Available for Fixed Charges,
revenues, expenses and other appropriate charges or adjustments
attributable to WCC) PLUS (to the extent deducted in determining
Consolidated Net Income), (ii) all provisions for any Federal, state or
other income taxes made by the Borrower and its Subsidiaries (other
than WCC) during such period, and (iii) Fixed Charges of the Borrower
and its Subsidiaries (other than WCC) during such period.
"Net Tangible Assets" means as of the date of determination
thereof, the total amount of all Tangible Assets of the Borrower
(excluding Subsidiaries) after deducting all Restricted Investments of
the Borrower and all items which in accordance with GAAP would be
included on the liability side of a balance sheet, except deferred
income taxes, deferred investment tax credits, capital stock of any
class, surplus and Funded Debt.
"NMSI" means NationsBanc Montgomery Securities, Inc. and its
successors.
"Notes" means, collectively, the promissory notes of the
Borrower executed and delivered to the Lenders as provided in SECTION
2.08 hereof in substantially the form attached hereto as EXHIBIT E,
with appropriate insertions as to amounts, dates and names of Lenders.
"Obligations" means the obligations, liabilities and
Indebtedness of the Borrower with respect to (i) the principal and
interest on the Loans as evidenced by the Notes,
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(ii) the Reimbursement Obligations, and (iii) the payment and
performance of all other obligations, liabilities and Indebtedness of
the Borrower to the Lenders or the Agent hereunder, under any one or
more of the other Loan Documents or with respect to the Loans.
"Participation" means, with respect to any Lender and either a
Letter of Credit or a Swing Line Loan, as the case may be, the
extension of credit represented by the participation of such Lender
hereunder in the Issuing Bank's liability in respect of a Letter of
Credit issued by the Issuing Bank in accordance with the terms hereof,
or in NationsBank's liability in respect of a Swing Line Loan made in
accordance with the terms hereof.
"PBGC" means the Pension Benefit Guaranty Corporation and any
entity succeeding to any or all of its functions under ERISA.
"Person" means an individual, partnership, corporation, trust
or unincorporated organization, and a government or agency or political
subdivision thereof.
"Plan" means a "pension plan," as such term is defined in
ERISA, established or maintained by the Borrower or any ERISA Affiliate
or as to which the Borrower or any ERISA Affiliate contributed or is a
member or otherwise may have any liability.
"Property" means any interest in any kind of property or
asset, whether real, personal or mixed, and whether tangible or
intangible.
"Prime Rate" means the per annum rate of interest established
from time to time by NationsBank as its prime rate, which rate may not
be the lowest rate of interest charged by NationsBank to its customers.
"Principal Office" means the principal office of NationsBank,
presently located at Independence Center, 15th Floor, NC1-001-15-04,
Charlotte, North Carolina 28255, Attention: Agency Services.
"Reimbursement Obligation" means at any time, the obligation
of the Borrower with respect to any Letter of Credit to reimburse the
Issuing Bank and the Lenders to the extent of their respective
Participation (including by the receipt of proceeds of Revolving Loans
pursuant to SECTION 3.02) for amounts theretofore paid by the Issuing
Bank pursuant to a drawing under such Letter of Credit.
"Rentals" means and include as of the date of any
determination thereof, all fixed payments (including as such all
payments which the lessee is obligated to make to the lessor on
termination of the lease or surrender of the Property) payable by the
Borrower or a Subsidiary, as lessee or sublessee under a lease of real
or personal property, but shall be exclusive of any amounts required to
be paid by the Borrower or a Subsidiary (whether or not designated as
rents or additional rents) on account of maintenance,
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repairs, insurance, taxes and similar charges. Fixed rents under any
so-called "percentage leases" shall be computed solely on the basis of
the minimum rents, if any, required to be paid by the lessee regardless
of sales volume or gross revenues.
"Regulation D" means Regulation D of the Board as the same may
be amended or supplemented from time to time.
"Reportable Event" shall have the same meaning as in ERISA.
"Required Lenders" means, as of any date, Lenders on such date
having Credit Exposures (as defined below) aggregating at least 66-2/3%
of the aggregate Credit Exposures of all the Lenders on such date;
PROVIDED, that if any single Lender holds 66-2/3% or more (but less
than 100%) of the aggregate Credit Exposure, then the term "Required
Lenders" shall also mean at least two (2) Lenders. For purposes of the
preceding sentence, the amount of the "CREDIT EXPOSURE" of each Lender
shall be equal to the aggregate principal amount of the Loans owing to
such Lender plus the aggregate unutilized amounts of such Lender's
Revolving Credit Commitment (without regard to any outstanding Swing
Line Loans) plus the amount of such Lender's Applicable Commitment
Percentage of the aggregate undrawn stated amount of outstanding
Letters of Credit and of the Reimbursement Obligations; PROVIDED that
if any Lender shall have failed to pay to the Issuing Bank its
Applicable Commitment Percentage of any drawing under any Letter of
Credit resulting in an outstanding Reimbursement Obligation, such
Lender's Credit Exposure attributable to Letters of Credit and
Reimbursement Obligations with respect to all Letters of Credit shall
be deemed to be held by the Issuing Bank of such Letters of Credit and,
if the Lender who fails to so pay is any Lender other than NationsBank,
such Lender's Credit Exposure attributable to Swing Line Loans shall be
deemed held by NationsBank for purposes of this definition.
"Restricted Investments" means all Investments in any Person,
other than:
(a) Investments by the Borrower and its Subsidiaries
in and to Subsidiaries, including any investment in a
corporation which, after giving effect to such investment,
will become a Subsidiary;
(b) Investments in (i) Commercial paper maturing in
270 days or less from the date of issuance and which, at the
time of acquisition by the Borrower or any Subsidiary, is
accorded one of the two highest ratings by S&P or Moody's.;
(ii) Variable Rate Demand Notes of issuers whose commercial
paper, at the time of acquisition, is accorded one of the two
highest ratings by S&P or Moody's; or (iii) Direct obligations
of any State of the United States of America or of any
political subdivision thereof located in the United States of
America and which, at the time of acquisition, is accorded one
of the two highest ratings by S&P or Moody's, maturing in
twelve months or less from the date of acquisition;
(c) Investments in direct obligations of the United
States of America, or investments in any Person, which
Investments are guaranteed by the full faith
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and credit of the United States of America, in either case
maturing in twelve months or less from the date of acquisition
thereof by the Borrower or any Subsidiary;
(d) Investments in certificates of deposit maturing
within one year from the date of issuance thereof, issued by a
bank or trust company organized under the laws of the United
States or any state thereof, having capital, surplus and
undivided profits aggregating at least $100,000,000 and whose
long-term certificates of deposit are, at the time of
acquisition thereof by the Borrower or Subsidiary, rated A by
S&P or Moody's;
(e) loans or advances in the usual and ordinary
course of business to officers, directors and employees for
expenses (including moving expenses related to a transfer)
incidental to carrying on the business of the Borrower or any
Subsidiary; PROVIDED, HOWEVER that the Borrower may make up to
an aggregate at any one time outstanding of up to $300,000 of
such loans or advances which are not incidental to carrying on
the business of the Borrower or any Subsidiary; and
(f) receivables arising from the sale of goods and
services in the ordinary course of business of the Borrower
and its Subsidiaries; and
(g) provided, however, that with respect to
investments made by or on behalf of Titania, the following
shall not be Restricted Investments:
(1) Certificates of deposit, time deposits and
banker's acceptances maturing within one
year from the date of acquisition, issued by
a bank or trust company organized under the
laws of the United States or any state
thereof, or any foreign bank whose branch is
organized under the laws of the United
States or any state thereof, having capital,
surplus and undivided profits aggregating at
least $100,000,000 and whose long-term
certificates of deposit are, at the time of
acquisition, rated at least A by S&P or
Moody's;
(2) Repurchase Agreements with any domestic bank
with debt rated "AA" or better by S&P, or
any foreign bank rated at least "AA" by S&P
and "Aa" by Moody's; or repurchase
agreements with such other Persons on such
terms as the Borrower and the Agent shall
agree in writing; provided the term of all
such repurchase agreements is for one year
or less;
(3) Direct obligations of the United States of
America, or Investments in any Person, which
Investments are guaranteed by the full faith
and credit of the United States of America;
(4) Mortgage-backed securities issued by the
United States Government or an agency or
instrumentality thereof, having at the time
of acquisition, a credit rating of at least
AA by a nationally recognized rating
service;
(5) Bonds, notes and other direct obligations
(other than those referred
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to in clause (b), above) of any corporation
domiciled in the United States of America,
of a State of the United States of America,
or of any sovereign or supranational
institution whose obligations are
denominated in United States dollars, at the
time of acquisition rated at least A by a
nationally recognized rating service.
Obligations of sovereign or supranational
institutions at the time of acquisition,
shall be rated at least AA by a nationally
recognized rating service;
(6) Preferred stock obligations of any
corporation domiciled in the United States
of America, whose obligations at the time of
acquisition are rated at least A by a
nationally recognized rating service;
(7) Shares in mutual funds that invest solely in
investments of the types described in clause
b(i), clause (b)(iii), clause (3), clause
(4), clause (5) and/or clause (6) above and
have assets in excess of One Hundred Million
Dollars ($100,000,000);
(8) Any Investments (other than the Investments
set forth in clause (b) and clause (1)
through clause (7) inclusive, above),
provided that the aggregate fair value for
all such investments shall not, at any time,
exceed five percent (5%) of the aggregate
fair value of all Investments set forth in
clause (1) through clause (8) inclusive,
above. For the purposes of this subsection
(8) only, fair value shall mean the greater
of book value or fair market value.
In valuing any investments for the purpose of applying the
limitations set forth in this Agreement, such investments, loans and
advances shall be taken at the original cost thereof, without allowance
for any subsequent write-offs or appreciation or depreciation therein,
but less any amount repaid or recovered on account of capital or
principal.
For purposes of this Agreement, at any time when a corporation
becomes a Subsidiary, all Investments of such corporation at such time
shall be deemed to have been made by such corporation, as a Subsidiary,
at such time.
"Revolving Credit Commitment" means with respect to each
Lender, the obligation of such Lender to make Loans to the Borrower up
to an aggregate principal amount at any one time outstanding equal to
such Lender's Applicable Commitment Percentage of the Total Revolving
Credit Commitment as the same may be increased or decreased from time
to time pursuant to this Agreement.
"Revolving Credit Facility" means the facility described in
ARTICLE II hereof providing for Loans to the Borrower by the Lenders in
the aggregate principal amount of the Total Revolving Credit Commitment
less the aggregate amount of outstanding Swing Line Loans and
outstanding Letters of Credit and Reimbursement Obligations.
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"Revolving Credit Termination Date" means the earlier of (i)
December 29, 2000 or such later date to which the Revolving Credit
Termination Date may be extended pursuant to SECTION 2.16, or (ii) such
date as the Borrower may voluntarily terminate the Revolving Credit
Facility by payment in full of all Obligations pursuant to SECTION
2.10(A) hereof.
"Revolving Credit Outstandings" means, as of any date of
determination, the aggregate principal amount of all Revolving Loans
made pursuant to SECTION 2.01 then outstanding.
"Revolving Loan" means Loans made by the Lenders to the
Borrower pursuant to SECTION 2.01 hereof.
"S&P" means Standard & Poor's Ratings Group, a division of The
McGraw-Hill Companies, Inc.
"Security" shall have the same meaning as in Section 2(1) of
the Securities Act of 1933, as amended.
"Subordinated Funded Debt" means all unsecured Funded Debt of
the Borrower which shall contain or have applicable thereto
subordination provisions in form and substance acceptable to the Agent
and the Required Lenders.
The term "subsidiary" means, as to any particular parent
corporation, any corporation of which more than 50% (by number of
votes) of the Voting Stock shall be owned by such parent corporation
and/or one or more corporations which are themselves subsidiaries of
such parent corporation. The term "Subsidiary" shall mean a subsidiary
of the Borrower (other than Wackenhut Funding).
"Swing Line" means the revolving line of credit established by
NationsBank in favor of the Borrower pursuant to SECTION 2.17.
"Swing Line Loans" means Loans made by NationsBank to the
Borrower pursuant to SECTION 2.17.
"Swing Line Outstandings" means, as of any date of
determination, the aggregate principal Indebtedness of the Borrower on
all Swing Line Loans then outstanding.
"Titania" means Titania Insurance Company of America, a
corporation organized under the laws of Vermont and a wholly-owned
Subsidiary of the Borrower.
"Total Assets" means, as of the date of any determination
thereof, the total amount of all assets of the Borrower and its
Subsidiaries (less depreciation, depletion and other properly
deductible valuation reserves);.
"Total Capitalization" means the sum of (i) Consolidated
Funded Debt PLUS (ii) Consolidated Net Worth.
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"Total Letter of Credit Commitment" means an amount not to
exceed the Total Revolving Credit Commitment.
"Total Revolving Credit Commitment" means $40,000,000, as
reduced pursuant to SECTION 2.10 hereof.
"TROL Leases" means all tax retention operating lease
agreements between WCC or any subsidiary of WCC, as Lessee, and First
Security Bank, N.A., as Lessor, as amended, supplemented or modified
from time to time.
"Type" means any type of Loan (i.e. a Base Rate Loan, CD Rate
Loan, or Eurodollar Rate Loan).
"Voting Stock" means Securities of any class or classes, the
holders of which are ordinarily, in the absence of contingencies,
entitled to elect a majority of the corporate directors (or Persons
performing similar functions).
"Wackenhut Family Group" means (i) George R. Wackenhut, Ruth
J. Wackenhut, Richard R. Wackenhut and other lineal descendants of
George R. Wackenhut, the founder of the Borrower; (ii) the spouses and
lineal descendants of the persons named in clause (i); and (iii) the
estates or legal representatives of the persons named in clause (i).
"Wackenhut Funding" means Wackenhut Funding Corporation, a
Delaware corporation.
"WCC" means Wackenhut Corrections Corporation, a Florida
corporation and a Subsidiary of the Borrower as of the Closing Date.
"Wholly-owned" when used in connection with any Subsidiary
means a Subsidiary of which all of the issued and outstanding shares of
stock (except shares required as directors' qualifying shares) and all
Funded Debt and Current Debt shall be owned by the Borrower and/or one
or more of its Wholly-owned Subsidiaries.
1.03 RULES OF INTERPRETATION.
(a) All accounting terms not specifically defined herein shall
have the meanings assigned to such terms and shall be interpreted in
accordance with GAAP. Where the character or amount of any asset or
liability or item of income or expense is required to be determined or
any consolidation or other accounting computation is required to be
made for the purposes of this Agreement, the same shall be done in
accordance with GAAP, to the extent applicable, except where such
principles are inconsistent with the requirements of this Agreement.
(b) Each term defined in Article 1 or 9 of the Florida Uniform
Commercial Code shall have the meaning given therein unless otherwise
defined herein, except to the
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extent that the Uniform Commercial Code of another jurisdiction is
controlling, in which case such terms shall have the meaning given in
the Uniform Commercial Code of the applicable jurisdiction.
(c) The headings, subheadings and table of contents used
herein or in any other Loan Document are solely for convenience of
reference and shall not constitute a part of any such document or
affect the meaning, construction or effect of any provision thereof.
(d) Except as otherwise expressly provided, references herein
to articles, sections, paragraphs, clauses, annexes, appendices,
exhibits and schedules are references to articles, sections,
paragraphs, clauses, annexes, appendices, exhibits and schedules in or
to this Agreement.
(e) All definitions set forth herein or in any other Loan
Document shall apply to the singular as well as the plural form of such
defined term, and all references to the masculine gender shall include
reference to the feminine or neuter gender, and VICE VERSA, as the
context may require.
(f) used herein or in any other Loan Document, words such as
"hereunder", "hereto", "hereof" and "herein" and other words of like
import shall, unless the context clearly indicates to the contrary,
refer to the whole of the applicable document and not to any particular
article, section, subsection, paragraph or clause thereof.
(g) References to "including" means including without limiting
the generality of any description preceding such term, and for purposes
hereof the rule of EJUSDEM GENERIS shall not be applicable to limit a
general statement, followed by or referable to an enumeration of
specific matters, to matters similar to those specifically mentioned.
(h) All dates and times of day specified herein shall refer to
such dates and times at Charlotte, North Carolina.
(i) Each of the parties to the Loan Documents and their
counsel have reviewed and revised, or requested (or had the opportunity
to request) revisions to, the Loan Documents, and any rule of
construction that ambiguities are to be resolved against the drafting
party shall be inapplicable in the construing and interpretation of the
Loan Documents and all exhibits, schedules and appendices thereto.
(j) Any reference to an officer of the Borrower or any other
Person by reference to the title of such officer shall be deemed to
refer to each other officer of such Person, however titled, exercising
the same or substantially similar functions.
(k) All references to any agreement or document as amended,
modified or supplemented, or words of similar effect, shall mean such
document or agreement, as the
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case may be, as amended, modified or supplemented from time to time
only as and to the extent permitted therein and in the Loan Documents.
(l) Where any provision in this Agreement refers to action to
be taken by any Person, or which such Person is prohibited from taking,
such provision shall be applicable whether the action in question is
taken directly or indirectly by such Person.
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ARTICLE II
REVOLVING CREDIT FACILITY
2.01 COMMITMENT. Subject to the terms and conditions of this Agreement,
each Lender severally agrees to make Advances to the Borrower from time to time
from the Closing Date until the Revolving Credit Termination Date on a pro rata
basis as to the total borrowing requested by the Borrower on any day determined
by its Applicable Commitment Percentage up to but not exceeding the Revolving
Credit Commitment of such Lender, PROVIDED, however, that the Lenders will not
be required and shall have no obligation to make any Advance (i) so long as a
Default or an Event of Default has occurred and is continuing or (ii) if the
Agent has accelerated the maturity of the Notes; PROVIDED further, however, that
immediately after giving effect to each Advance, the sum of the principal amount
of Revolving Credit Outstandings plus Swing Line Outstandings plus Letter of
Credit Outstandings shall not exceed the Total Revolving Credit Commitment.
Within such limits, the Borrower may borrow, repay and reborrow hereunder, on a
Business Day from the Closing Date until, but (as to borrowings and
reborrowings) not including, the Revolving Credit Termination Date; PROVIDED,
however, that (x) no Fixed CD Rate Loan shall be made less than thirty (30) days
before the Revolving Credit Termination Date and no Eurodollar Rate Loan shall
be made less than one month before the Revolving Credit Termination Date and (y)
each Fixed Rate Loan may, subject to the provisions of SECTION 2.06, be repaid
only on the last day of the Interest Period with respect thereto.
2.02 AMOUNTS. Except as otherwise permitted by the Lenders the
aggregate unpaid principal amount of the Revolving Loans and Swing Line Loans
from time to time outstanding, plus Letter of Credit Outstandings shall not
exceed at any time, an amount equal to the Total Revolving Credit Commitment.
Each Advance hereunder (i) for a Base Rate Loan shall be in an amount of at
least $300,000, and (ii) for a Fixed Rate Loan shall be in an amount of
$300,000, or an integral multiple thereof.
2.03 INTEREST PERIODS. Each Revolving Loan shall be, at the option of
the Borrower specified in the Borrowing Notice furnished to the Agent pursuant
to SUBSECTION 2.04 hereof, either a Base Rate Loan or a Fixed Rate Loan, which
shall in each case be made or maintained by each Lender at its Applicable
Lending Office. Base Rate Loans and Fixed Rate Loans may be outstanding at the
same time, PROVIDED, however, there shall not be outstanding at any one time
Revolving Loans having more than six (6) different Interest Periods; PROVIDED
that all Base Rate Loans shall be treated as having the same Interest Period. No
Revolving Loan may bear interest at the Floating CD Rate.
2.04 ADVANCES. (a) An Authorized Representative shall give the Agent
(i) at least two (2) Business Days' irrevocable telephonic notice of each Fixed
CD Rate Loan (whether representing an additional borrowing hereunder or the
Conversion of borrowings hereunder from Base Rate Loans or other Fixed Rate
Loans to Fixed CD Rate Loans) prior to 10:30 A.M.; (ii) at least three (3)
Business Days' irrevocable telephonic notice of each Eurodollar Rate Loan
(whether representing an additional borrowing hereunder or the Conversion of
borrowing
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hereunder from Base Rate Loans or other Fixed Rate Loans to Eurodollar Rate
Loans) prior to 12:30 P.M.; and (iii) irrevocable telephonic notice of each Base
Rate Loan representing an additional borrowing hereunder prior to 12:30 P.M. on
the day of such proposed Base Rate Loan. Each such Borrowing Notice, which shall
be effective upon receipt by the Agent, shall specify the amount of the
borrowing, the Type of Revolving Loan, the date of borrowing and, if a Fixed
Rate Loan the Interest Period to be used in the computation of interest. The
Authorized Representative shall provide the Agent written confirmation of each
such telephonic notice in the form attached hereto as EXHIBIT D-1 with
appropriate insertions but failure to provide such confirmation shall not affect
the validity of such telephonic notice. Notice of receipt of such Borrowing
Notice shall be provided by the Agent to each Lender by telephone with
reasonable promptness, but not later than 1:30 P.M. on the same day as the
Agent's receipt of such notice. The Agent shall provide each Lender written
confirmation of such telephonic confirmation but failure to provide such notice
shall not affect the validity of such telephonic notice.
(b) Not later than 3:00 P.M. on the date specified for each borrowing
hereunder, each Lender shall, pursuant to the terms and subject to the
conditions of this Agreement, make the amount of the Revolving Loan or Loans to
be made by it on such day available to the Agent, by depositing or transferring
the proceeds thereof in immediately available funds at the Principal Office. The
amount so received by the Agent shall, subject to the terms and conditions of
this Agreement, be made available to the Borrower by depositing the proceeds
thereof in immediately available funds, in the Borrower's Account.
(c) Notwithstanding the foregoing, if the Agent receives telephonic or
written notice from the Issuing Bank that a drawing has been made under any
Letter of Credit prior to the Revolving Credit Termination Date, the drawing
shall be paid by the Agent without the requirement of notice from the Borrower
from immediately available funds which shall be advanced by the Lenders under
the Revolving Credit Facility. If a drawing is presented under any Letter of
Credit in accordance with the terms thereof notice of such drawing shall be
provided promptly by the Issuing Bank to the Agent and the Agent shall provide
notice to each other Lender by telephone. If notice to the Lenders of a drawing
under any Letter of Credit is given by the Agent at or before 12:00 noon on any
Business Day, each other Lender shall, pursuant to the conditions of this
Agreement, make a Base Rate Loan in the amount of such Lender's Applicable
Commitment Percentage of such drawing and shall pay such amount to the Agent for
the account of the Issuing Bank at the Principal Office in Dollars and in
immediately available funds before 2:30 P.M. on the same Business Day. If notice
to the Lenders of a drawing under a Letter of Credit is given by the Agent after
12:00 noon on any Business Day, each Lender shall, pursuant to the terms and
subject to the conditions of this Agreement, make a Base Rate Loan in the amount
of such Lender's Applicable Commitment Percentage of such drawing and shall pay
such amount to the Agent for the account of the Issuing Bank at the Principal
Office in Dollars and in immediately available funds before 12:00 noon on the
next following Business Day. Such Base Rate Loan shall be deemed made for a
period ending on the following Business Day, which shall be extended
automatically to the next succeeding Business Day unless and until the Borrower
Converts such Base Rate Loan in accordance with the terms of SECTION 2.11
hereof.
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2.05 PAYMENT OF INTEREST. (a) The Borrower shall pay interest to the
Agent for the account of each Lender on the outstanding and unpaid principal
amount of each Revolving Loan made by such Lender for the period commencing on
the date of such Revolving Loan until such Revolving Loan shall be due at the
then applicable Base Rate for Base Rate Loans, CD Rate for Fixed CD Rate Loans
or Eurodollar Rate for Eurodollar Rate Loans, as designated by the Authorized
Representative pursuant to SECTION 2.04 hereof or as otherwise provided herein;
PROVIDED, however, that if any amount shall not be paid when due (at maturity,
by acceleration or otherwise), such amount shall bear interest thereafter until
paid (i) in the case of a Fixed Rate Loan, until the end of the Interest Period
with respect to such Loan, at a rate of two percent (2%) above the then Fixed
Rate for such Loan, and (ii) thereafter, and with respect to Base Rate Loans, at
a rate of interest per annum which shall be two percent (2%) above the Base Rate
or the maximum rate permitted by applicable law, whichever is lower, from the
date such amount was due and payable until the date such amount is paid in full.
(b) Interest on each Revolving Loan shall be computed on the basis of a
year of 360 days and calculated for the actual number of days elapsed. Interest
on each Revolving Loan shall be paid (a) quarterly in arrears on the last
Business Day of each December, March, June and September beginning March 31,
1998 for each Base Rate Loan and Floating CD Rate, (b) on the last day of the
applicable Interest Period for each Fixed Rate Loan and if such Interest Period
extends for more than three months or 90 days, respectively, at intervals of
three months or 90 days, as appropriate, after the first day of such Interest
Period, and (c) upon payment in full of the principal amount of such Loan.
2.06 PAYMENT OF PRINCIPAL. (a) The principal amount of each Revolving
Loan shall be due and payable in full on the Revolving Credit Termination Date.
The duration of the initial Interest Period for each Revolving Loan shall be as
specified in the Borrowing Notice. The Borrower shall have the option to elect
the duration of subsequent Interest Periods and to Convert Revolving Loans in
accordance with SECTION 2.11 hereof. If the Agent does not receive a notice of
election of duration of an Interest Period or to Convert by the time prescribed
by SECTION 2.11 hereof, the Borrower shall be deemed to have elected to Convert
such Revolving Loan to (or Continue such Loan as) a Base Rate Loan for a period
extending to the next succeeding Business Day until the Borrower notifies the
Agent in accordance with SECTION 2.11.
(b) Each payment of principal (including any prepayment) and payment of
interest shall be made to the Agent at the Principal Office, for the account of
each Lender's Applicable Lending Office, in Dollars and in immediately available
funds before 12:30 P.M. on the date such payment is due. The Agent may, but
shall not be obligated to, debit the amount of any such payment which is not
made by such time to the Borrower's Account or any ordinary deposit account of
the Borrower with the Agent.
(c) The Agent shall deem any payment by or on behalf of the Borrower
hereunder that is not made both (a) in Dollars and in immediately available
funds and (b) prior to 12:30 P.M. (other than if such payment is made by a debit
by the Agent to the Borrower's Account) to
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be a non-conforming payment. Any such payment shall not be deemed to be received
by the Agent until the time such funds become available funds. Any
non-conforming payment may constitute or become a Default or Event of Default.
The Agent shall give prompt telephonic notice to the Borrower and each of the
Lenders (confirmed in writing) if any payment is non-conforming. Interest shall
continue to accrue on any principal as to which a non-conforming payment is made
until such funds become available funds (but in no event less than the period
from the date of such payment to the next succeeding Business Day) at a rate of
interest per annum which shall be two percent (2%) above the rate at which
interest was payable on such Revolving Loan on the day immediately preceding the
due date or the maximum rate permitted by applicable law, whichever is lower,
from such due date until the funds become available.
(d) In the event that any payment hereunder or under the Notes becomes
due and payable on a day other than a Business Day, then such due date shall be
extended to the next succeeding Business Day; provided that interest shall
continue to accrue during the period of any such extension.
2.07 BORROWER'S ACCOUNT. The Agent shall render to the Borrower each
month a Loan ledger statement and a copy of the statement of the Borrower's
Account. The Borrower shall give the Agent written notice of its exceptions to
any such statement within 45 days after such statement has been rendered to the
Borrower.
2.08 NOTES. Loans made by each Lender shall be evidenced by, and be
repayable with interest in accordance with the terms of, a promissory note
payable to the order of such Lender in the amount of its Applicable Commitment
Percentage of the Total Revolving Credit Commitment, which Note shall be dated
the Closing Date or such later date pursuant to an Assignment and Acceptance and
shall be duly completed, executed and delivered by the Borrower.
2.09 PRO RATA PAYMENTS. Except as otherwise provided herein, (a) each
payment on account of the principal of and interest on the Revolving Loans, and
fees (other than (i) payments on Swing Line Loans, which shall be retained by
NationsBank, (ii) the Agent's fees payable under SECTION 9.11 hereof, which
shall be retained by the Agent, and (iii) Letter of Credit fronting and
administrative fees payable under SECTIONS 3.03 and 3.04 hereof, which shall be
paid in respect of each Letter of Credit to the Issuing Bank) described in this
Agreement shall be made to the Agent for the account of the Lenders pro rata
based on their Applicable Commitment Percentages, (b) all payments to be made by
the Borrower for the account of each of the Lenders on account of principal,
interest and fees, shall be made without set-off or counterclaim, and (c) the
Agent will promptly distribute payments received to the Lenders.
2.10 REDUCTION IN COMMITMENT. (a) The Borrower shall have the right
from time to time (but not more frequently than once during each quarterly
period), upon not less than ten (10) Business Days written notice to the Agent
to reduce the Total Revolving Credit Commitment. The Agent shall give each
Lender, within one (1) Business Day, telephonic notice (confirmed in writing) of
such reduction. Each such reduction shall be in the aggregate amount of
$5,000,000
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or such greater amount which is in an integral multiple of $1,000,000, and shall
permanently reduce the Revolving Credit Commitment of the Lenders pro rata. No
such reduction shall result in the payment of any Fixed Rate Loan other than on
the last day of the Interest Period of such Loan, unless amounts due, if any,
under SECTION 4.05 are paid upon demand by the Agent. Each reduction of the
Total Revolving Credit Commitment shall be accompanied by payment of the Notes
to the extent that the sum of Revolving Credit Outstandings, Swing Line
Outstandings, and Letter of Credit Outstandings exceeds the Total Revolving
Credit Commitment, after giving effect to such reduction, together with accrued
and unpaid interest on the amounts prepaid.
(b) The amount of the Total Revolving Credit Commitment which shall be
available to the Borrower shall be increased and decreased, from time to time by
the stated amount of all Swing Line Outstandings and Letter of Credit
Outstandings; PROVIDED, that the sum of the Revolving Credit Outstandings, Swing
Line Outstandings and Letter of Credit Outstandings shall at no time exceed the
Total Revolving Credit Commitment.
2.11 CONVERSIONS AND ELECTIONS OF SUBSEQUENT INTEREST PERIODS. Provided
that no Default or Event of Default shall have occurred and be continuing and
subject to the limitations set forth below and in ARTICLE IV hereof, the
Borrower may with respect to Revolving Loans:
(a) on two (2) Business Days' notice to the Agent on or before
10:30 A.M.:
(i) elect a subsequent Interest Period for all Fixed
CD Rate Loans having the same Interest Period to begin on the
last day of the Interest Period for such Fixed CD Rate Loans;
(ii) Convert Base Rate Loans to Fixed CD Rate Loans
on any date; and
(iii) Convert all Eurodollar Rate Loans having the
same Interest Period to Fixed CD Rate Loans on the last day of
the Interest Period for such Eurodollar Rate Loans.
(b) on three (3) Business Days' notice to the Agent on or
before 1:00 P.M.:
(i) elect a subsequent Interest Period for all
Eurodollar Rate Loans having the same Interest Period to begin
on the last day of the Interest Period for such Eurodollar
Rate Loans;
(ii) Convert all Fixed CD Rate Loans having the same
Interest Period to Eurodollar Rate Loans on the last day of
the Interest Period for such Fixed CD Rate Loans; and
(iii) Convert all Base Rate Loans to Eurodollar Rate
Loans on any date.
Notice of any such elections or Conversions shall specify the effective
date of such
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election or Conversion and the Interest Period to be applicable to the Revolving
Loan as Continued or Converted. Each election and Conversion pursuant to this
SECTION 2.11 shall be subject to the limitations on Fixed CD Rate Loans and
Eurodollar Rate Loans set forth in the definition of "Interest Period" herein
and in SECTIONS 2.01, 2.02 and 2.03 hereof. All such Continuations or
Conversions of Revolving Loans shall be effected pro rata based on the
Applicable Commitment Percentages of the Lenders.
2.12 FEES. (a) For the period beginning on the Closing Date and ending
on the Revolving Credit Termination Date (or such earlier date on which the
Revolving Credit Facility has terminated), the Borrower agrees to pay to the
Agent, for the pro rata benefit of the Lenders based on their Applicable
Commitment Percentages, an unused fee equal to the Applicable Unused Fee
multiplied by the average daily amount by which the Total Revolving Credit
Commitment exceeds the Revolving Credit Outstandings without giving effect to
Swing Line Outstandings plus Letter of Credit Outstandings. Such payments of
fees provided for in this SECTION 2.12 shall be due in arrears on the last day
of each December, March, June and September beginning March 31, 1998 to and on
the Revolving Credit Termination Date (or such earlier date on which the
Revolving Credit Facility has terminated). Notwithstanding the foregoing, so
long as any Lender fails to make available any portion of its Revolving Credit
Commitment when requested, such Lender shall not be entitled to receive payment
of its pro rata share of such fee until such Lender shall make available such
portion. Such fee shall be calculated on the basis of a year of 360 days and
computed for actual days elapsed.
2.13 DEFICIENCY ADVANCES. No Lender shall be responsible for any
default of any other Lender in respect to such other Lender's obligation to make
any Revolving Loan hereunder nor shall the Revolving Credit Commitment of any
Lender hereunder be increased as a result of such default of any other Lender.
Without limiting the generality of the foregoing, in the event any Lender shall
fail to advance funds to the Borrower as herein provided, the Agent may in its
discretion, but shall not be obligated to, advance under the Note in its favor
as a Lender all or any portion of such amount (the "deficiency advance") and
shall thereafter be entitled to payments of principal of and interest on such
deficiency advance in the same manner and at the same interest rate or rates to
which such other Lender would have been entitled had it made such advance under
its Note; PROVIDED that, upon payment to the Agent from such other Lender of the
entire outstanding amount of such deficiency advance, together with interest
thereon, from the most recent date or dates interest was paid to the Agent by
the Borrower on each Revolving Loan comprising the deficiency advance at the
interest rate per annum for overnight borrowing by the Agent from the Federal
Reserve Bank, then such payment shall be credited against the Note of the Agent
in full payment of such deficiency advance and the Borrower shall be deemed to
have borrowed the amount of such deficiency advance from such other Lender as of
the most recent date or dates, as the case may be, upon which any payments of
interest were made by the Borrower thereon.
2.14 ADJUSTMENTS BY AGENT. Notwithstanding the construction of "pro
rata" to mean based on the Applicable Commitment Percentages and any provisions
contained herein for the advancement of funds or distribution of payments on a
pro rata basis, the Agent may, in its
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discretion, but shall not be obligated to, adjust downward or upward (but not in
excess of any applicable Revolving Credit Commitment) the principal amount of
any Revolving Loan to be made by any Lender to the nearest amount which is
evenly divisible by $100, and make appropriate related adjustment in the
distribution of payments of principal and interest on the Revolving Loans.
2.15 USE OF PROCEEDS. The proceeds of the Loans made pursuant to the
Revolving Credit Facility hereunder shall be used by the Borrower to provide for
working capital needs of the Borrower, to provide Letters of Credit to the
Borrower and Titania, and to fund other general corporate needs.
2.16. EXTENSION OF REVOLVING CREDIT TERMINATION DATE. At the request of
the Borrower the Lenders may, in their sole discretion, elect to extend the
Revolving Credit Termination Date then in effect for two successive periods of
one year each. The Borrower shall notify the Lenders of its request for each
such extension by delivering to the Agent and the Lenders notice of such request
signed by an Authorized Representative not more than sixty (60) days nor less
than thirty (30) days prior to the first (as to the first such extension period)
or second (as to the second such extension period and provided that the Lenders
shall theretofore have previously granted a one year extension) anniversary of
the Closing Date. Approval of each such extension is at the sole discretion of
the Lenders and is subject to approval by all of the Lenders. If the Lenders
shall elect to so extend, the Agent shall notify the Borrower in writing within
ninety (90) days of its receipt of such request for extension of the decision of
the Lenders of whether to extend the Revolving Credit Termination Date. Failure
by the Agent to give such notice shall constitute refusal by the Lenders to
extend the Revolving Credit Termination Date.
2.17 SWING LINE. Notwithstanding any other provision of this Agreement
to the contrary, in order to administer the Revolving Credit Facility in an
efficient manner and to minimize the transfer of funds between the Agent and the
Lenders, NationsBank shall make available Swing Line Loans to the Borrower prior
to the Revolving Credit Termination Date. NationsBank shall not make any Swing
Line Loan pursuant hereto (i) if to the actual knowledge of NationsBank the
Borrower is not in compliance with all the conditions to the making of Revolving
Loans set forth in this Agreement, (ii) if after giving effect to such Swing
Line Loan, the Swing Line Outstandings exceed $15,000,000, or (iii) if after
giving effect to such Swing Line Loan, the sum of the Swing Line Outstandings,
Revolving Credit Outstandings and Letter of Credit Outstandings exceeds the
Total Revolving Credit Commitment. Loans made pursuant to this SECTION 2.17
shall be limited to Floating CD Rate Loans. The Borrower may borrow, repay and
reborrow under this SECTION 2.17. Unless notified to the contrary by
NationsBank, borrowings under the Swing Line may be made in amounts which are
integral multiples of $50,000 upon telephonic request by an Authorized
Representative of the Borrower made to NationsBank not later than 12:30 a.m. on
the Business Day of the requested borrowing. Each such Borrowing Notice, which
shall be effective upon receipt by NationsBank, shall specify the amount of the
borrowing, and the date of borrowing. An Authorized Representative shall provide
NationsBank written confirmation of each such telephonic notice on the same day
by telefacsimile transmission in the form attached hereto as EXHIBIT D-2, with
appropriate insertions
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<PAGE> 36
but failure to provide such confirmation shall not affect the validity of such
telephonic notice. Unless notified to the contrary by NationsBank, each
repayment of a Swing Line Loan shall be in an amount which is an integral
multiple of $50,000. If the Borrower instructs NationsBank to debit any demand
deposit account of the Borrower in the amount of any payment with respect to a
Swing Line Loan, or NationsBank otherwise receives repayment after 12:30 p.m. on
a Business Day such payment shall be deemed received on the next Business Day.
Swing Line Loans shall bear interest at the Floating CD Rate, and the
interest payable on Swing Line Loans is solely for the account of NationsBank.
Interest on Swing Line Loans shall be paid quarterly in arrears on the last
Business Day of each December, March, June and September beginning March 31,
1998. The Swing Line Outstandings shall be evidenced by the Note delivered to
NationsBank pursuant to SECTION 2.08 hereof.
Upon the making of a Swing Line Loan, each Lender shall be deemed to
have purchased from NationsBank a Participation therein in an amount equal to
that Lender's Applicable Commitment Percentage of such Swing Line Loan. Upon
demand made by NationsBank, each Lender shall, according to its Lender's
Applicable Commitment Percentage of such Swing Line Loan, promptly provide to
NationsBank its purchase price therefor in an amount equal to its Participation
therein. Any Advance made by a Lender pursuant to demand of NationsBank of the
purchase price of its Participation shall be deemed a Base Rate Loan until the
Borrower Converts such Base Rate Loan in accordance with the terms of SECTION
2.11 hereof. The obligation of each Lender to so provide its purchase price to
NationsBank shall be absolute and unconditional and shall not be affected by the
occurrence of an Event of Default or any other occurrence or event.
The Borrower at its option may request a Revolving Loan pursuant to
SECTION 2.01 in an amount sufficient to repay the Swing Line Loan on any date
and the Agent shall provide the proceeds of such Revolving Loan to NationsBank
in the amount necessary to repay such Swing Line Out standings (which
NationsBank shall then apply to such repayment) and credit any balance of the
Revolving Loan in immediately available funds in the manner directed by the
Borrower pursuant to SECTION 2.04(B) hereof. The proceeds of such Advances shall
be paid to NationsBank for application to the Swing Line Outstandings and the
Lenders shall then be deemed to have made Revolving Loans in the amount of such
Advances. The Swing Line shall continue in effect until the earlier of (i) the
occurrence of a Default, or (ii) the Revolving Credit Termination Date.
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ARTICLE III
LETTERS OF CREDIT
3.01 LETTERS OF CREDIT. The Issuing Bank agrees, subject to the terms
and conditions of this Agreement, upon request of the Borrower to issue from
time to time for the account of the Borrower or Titania Letters of Credit;
PROVIDED, that (i) the Letters of Credit Outstandings shall not exceed the Total
Letter of Credit Commitment and (ii) to the extent required by the Issuing Bank
such request shall be accompanied by an application for letter of credit in form
and content acceptable to the Issuing Bank. No Letter of Credit shall be issued
by the Issuing Bank with an expiry date occurring subsequent to the Revolving
Credit Termination Date. The Issuing Bank shall not issue any Letter of Credit
if, after giving effect thereto, Letter of Credit Outstandings plus Swing Line
Outstandings plus Revolving Credit Outstandings exceeds the Total Revolving
Credit Commitment, without regard to any increase or decrease pursuant to
SECTION 2.10(B).
3.02 REIMBURSEMENT.
(a) The Borrower hereby unconditionally agrees to pay to the Issuing
Bank on demand at its Applicable Lending Office (i) all amounts required to pay
all drafts drawn or purporting to be drawn under the Letters of Credit issued by
it and (ii) the face amount of each draft accepted by the Issuing Bank on the
maturity date of such draft, or in the event of a Default or Event of Default,
and any and all expenses of every kind incurred by the Issuing Bank in
connection with the Letters of Credit and in any event and without demand to
place in possession of the Issuing Bank (which shall include Advances under the
Revolving Credit Facility if permitted by SECTION 2.04(C) hereof) sufficient
funds to pay all debts and liabilities arising under any Letter of Credit. The
Borrower's obligations to pay each Issuing Bank under this SECTION 3.02, and the
Issuing Bank's right to receive the same, shall be absolute and unconditional
and shall not be affected by any circumstance whatsoever. The Issuing Bank may
charge any account, including the Borrower's Account, the Borrower may have with
it for any and all amounts the Issuing Bank pays under a Letter of Credit, plus
commissions, charges and expenses as from time to time agreed to by the Issuing
Bank and the Borrower; PROVIDED that to the extent permitted by SECTION 2.04(C),
amounts shall be paid pursuant to Advances under the Revolving Credit Facility.
The Borrower agrees that the Issuing Bank may, in its sole discretion, accept or
pay, as complying with the terms of any Letter of Credit issued by it, any
drafts or other documents otherwise in order which may be signed or issued by an
administrator, executor, trustee in bankruptcy, debtor in possession, assignee
for the benefit of creditors, liquidator, receiver, attorney in fact or other
legal representative of a party who is authorized under such Letter of Credit to
draw or issue any drafts or other documents. The Borrower agrees to pay the
Issuing Bank interest on any amounts not paid when due hereunder at the Base
Rate plus two percent (2%), or such lower rate as may be required by law.
(b) In accordance with the provisions of SECTION 2.04(C) hereof, the
Issuing Bank shall notify the Agent (and shall also notify the Borrower) of any
drawing under any Letter of Credit issued for account of the Borrower or the
Borrower and Titania as promptly as practicable
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following the receipt by the Issuing Bank of such drawing. In addition, each
Issuing Bank shall notify the Agent of (i) any proposed issuance of a Letter of
Credit, including the proposed stated amount thereof, (ii) any reduction or
increase in the stated amount of any previously issued Letter of Credit, and
(iii) any surrender, cancellation or expiration of any Letter of Credit.
(c) Each Lender (other than the Issuing Bank) shall automatically
acquire on the date of issuance thereof, or with respect to Existing LCs on the
Closing Date, a Participation in the Issuing Bank's liability in respect of each
Letter of Credit in an amount equal to such Lender's Applicable Commitment
Percentage of such liability, and to the extent that the Borrower is obligated
to pay the Issuing Bank under SECTION 3.02(A), each Lender (other than the
Issuing Bank) thereby shall absolutely, unconditionally and irrevocably assume,
and shall be unconditionally obligated to pay to the Issuing Bank as hereinafter
described, its Applicable Commitment Percentage of the Issuing Bank's liability
under such Letter of Credit. Prior to the Revolving Credit Termination Date,
each Lender (including the Issuing Bank in its capacity as a Lender) shall,
subject to the terms and conditions of ARTICLE II, make a Base Rate Loan to the
Borrower by paying to the Agent for the account of the Issuing Bank at the
Principal Office in Dollars and in immediately available funds, an amount equal
to its Applicable Commitment Percentage of any drawing under a Letter of Credit,
all as described and pursuant to SECTION 2.04(C). With respect to drawings under
any of the Letters of Credit, each Lender, upon receipt from the Agent of notice
of a drawing in the manner described in SECTION 2.04(C), shall promptly pay to
the Agent for the account of the Issuing Bank, prior to the applicable time set
forth in SECTION 2.04(C), its Applicable Commitment Percentage of such drawing.
Simultaneously with the making of each such payment by a Lender to the Issuing
Bank, such Lender shall, automatically and without any further action on the
part of the Issuing Bank or such Lender, acquire a Participation in an amount
equal to such payment (excluding the portion thereof constituting interest) in
the related Reimbursement Obligation of the Borrower. The Reimbursement
Obligations of the Borrower shall be immediately due and payable whether by
Advances made in accordance with SECTION 2.04(C) or otherwise. Each Lender's
obligation to make payment to the Agent for the account of the Issuing Bank
pursuant to this SECTION 3.02(C), and the Issuing Bank's right to receive the
same, shall be absolute and unconditional, shall not be affected by any
circumstance whatsoever and shall be made without any offset, abatement,
withholding or reduction whatsoever. If any Lender is obligated to pay but does
not pay amounts to the Agent for the account of the Issuing Bank in full upon
such request as required by this SECTION 3.02(C), such Lender shall, on demand,
pay to the Agent for the account of the Issuing Bank interest on the unpaid
amount for each day during the period commencing on the date of notice given to
such Lender pursuant to SECTION 2.04(C) until such Lender pays such amount to
the Agent for the account of the Issuing Bank in full at the interest rate per
annum for overnight borrowing by the Issuing Bank from the Federal Reserve Bank.
(d) Promptly following the end of each calendar month, each Issuing
Bank shall deliver to the Agent, and the Agent shall deliver to each Lender, a
notice describing the aggregate undrawn amount of all Letters of Credit
outstanding at the end of such month. Upon the request of any Lender from time
to time, the Issuing Bank shall deliver to the Agent, and the Agent shall
deliver to such Lender, any other information reasonably requested by such
Lender
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with respect to each Letter of Credit then outstanding.
(e) The issuance by the Issuing Bank of each Letter of Credit shall, in
addition to the conditions precedent set forth in SECTION 5.01 hereof, be
subject to the conditions that such Letter of Credit be in such form, contain
such terms and support such transactions or obligations as shall be reasonably
satisfactory to the Issuing Bank consistent with the Issuing Bank's then current
practices and procedures with respect to similar letters of credit. All Letters
of Credit (other than Existing LCs) shall be issued pursuant to and subject to
the Uniform Customs and Practice for Documentary Credits, 1993 revision,
International Chamber of Commerce Publication No. 500 and all subsequent
amendments and revisions thereto. The Borrower shall have executed and delivered
such other instruments and agreements relating to such Letter of Credit as the
Issuing Bank shall have reasonably requested consistent with such practices and
procedures.
(f) Without duplication of SECTION 9.07 hereof, the Borrower hereby
indemnifies and holds harmless the Issuing Bank, each other Lender and the Agent
from and against any and all claims and damages, losses, liabilities, costs or
expenses which the Issuing Bank, such other Lender or the Agent may incur (or
which may be claimed against the Issuing Bank, such other Lender or the Agent)
by any Person by reason of or in connection with the issuance or transfer of or
payment or failure to pay under any Letter of Credit; PROVIDED that the Borrower
shall not be required to indemnify the Issuing Bank, any other Lender or the
Agent for any claims, damages, losses, liabilities, costs or expenses to the
extent, but only to the extent, (i) caused by the willful misconduct or gross
negligence of the party to be indemnified, (ii) caused by the Issuing Bank's
failure to pay under any Letter of Credit after the presentation to it of a
request strictly complying with the terms and conditions of such Letter of
Credit, unless such payment is prohibited by any law, regulation, court order or
decree, or (iii) paid or payable by any Lender under SECTIONS 2.14 or 9.10
hereof.
(g) Without limiting the Borrower's rights as set forth in SECTION
3.02(F) above, the obligation of the Borrower to reimburse the Issuing Banks
immediately for drawings made under Letters of Credit shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement and such Letters of Credit, under all
circumstances whatsoever, including, without limitation, the following
circumstances:
(i) any lack of validity or enforceability of the
Letter of Credit, the obligation supported by the Letter of
Credit or any other agreement or instrument relating thereto
(collectively, the "Related Documents");
(ii) any amendment or waiver of or any consent to or
departure from all or any of the Related Documents;
(iii) the existence of any claim, setoff, defense or
other rights which the Borrower may have at any time against
any beneficiary or any transferee of a Letter of Credit (or
any persons or entities for whom any such beneficiary or any
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such transferee may be acting), Agent, Lenders or any other
person or entity, whether in connection with the Loan
Documents, the Related Documents or any unrelated transaction;
(iv) any breach of contract or other dispute between
the Borrower and any beneficiary or any transferee of a Letter
of Credit (or any persons or entities for whom such
beneficiary or any such transferee may be acting), Agent,
Lenders or any other person or entity;
(v) any draft, statement or any other document
presented under the Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect
whatsoever;
(vi) payment by the Issuing Bank under the Letter of
Credit against presentation of a sight draft or certificate
which does not comply with the terms of the Letter of Credit;
(vii) any delay, extension of time, renewal,
compromise or other indulgence or modification granted or
agreed to by Agent, with or without notice to or approval by
the Borrower in respect of any of the Borrower's indebtedness
under this Agreement; or
(viii) any other circumstance or happening
whatsoever, whether or not similar to any of the foregoing.
3.03 LETTER OF CREDIT FEE. For the period beginning on the Closing Date
and ending on the Revolving Credit Termination Date, the Borrower agrees to pay
to the Agent, for the pro rata benefit of the Lenders based on their Applicable
Commitment Percentages, a fee equal to the Applicable Margin for Eurodollar Rate
Loans from time to time in effect times the stated amount of outstanding Letters
of Credit. Such fees provided in this SECTION 3.03 shall be paid quarterly in
arrears on the last Business Day of each December, March, June and September
beginning March 31, 1998 and shall be calculated on the basis of a year of 360
days and computed for actual days elapsed. In the event that the risk based
capital required to be maintained by the Issuing Bank for Letters of Credit
securing performance by the Borrower or Titania shall be reduced below that
required for Letters of Credit providing credit support, the Borrower, the
Agent, the Issuing Banks and the Lenders may agree in writing without further
amendment to this Agreement to an adjustment in the amount of the letter of
credit fee payable with respect to such Letters of Credit securing performance.
3.04 ADMINISTRATIVE FEES. The Borrower shall pay to the Issuing Bank a
fronting fee of 0.05% (5 basis points) per annum of the stated amount of all
Letters of Credit issued by such Issuing Bank, such fee to be paid quarterly in
arrears on the last Business Day of each December, March, June and September
beginning March 31, 1998. The fronting fee shall be calculated on the basis of a
year of 360 days and computed for actual days elapsed. The Borrower shall also
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pay to each Issuing Bank administrative and other fees, if any, in connection
with the Letters of Credit in such amounts and at such times as the Issuing
Banks and the Borrower shall agree from time to time.
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ARTICLE IV
CHANGE IN CIRCUMSTANCES
4.01 INCREASED COST AND REDUCED RETURN. (a) If, after the date hereof,
the adoption of any applicable law, rule, or regulation, or any change in any
applicable law, rule, or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank, or
comparable agency charged with the interpretation or administration thereof, or
compliance by any Lender (or its Applicable Lending Office) with any request or
directive (whether or not having the force of law) of any such governmental
authority, central bank, or comparable agency:
(i) shall subject such Lender (or its Applicable
Lending Office) to any tax, duty, or other charge with respect to any
Fixed Rate Loans, its Note, or its obligation to make Fixed Rate Loans,
or change the basis of taxation of any amounts payable to such Lender
(or its Applicable Lending Office) under this Agreement or its Note in
respect of any Fixed Rate Loans (other than taxes imposed on the
overall net income of such Lender by the jurisdiction in which such
Lender has its principal office or such Applicable Lending Office and
franchise taxes);
(ii) shall impose, modify, or deem applicable any
reserve, special deposit, assessment, or similar requirement (other
than the Applicable Reserve Requirement utilized in the determination
of the Eurodollar Rate and the CD Rate) relating to any extensions of
credit or other assets of, or any deposits with or other liabilities or
commitments of, such Lender (or its Applicable Lending Office),
including the Revolving Credit Commitment of such Lender hereunder; or
(iii) shall impose on such Lender (or its Applicable
Lending Office) or on the United States market for certificates of
deposit or the London interbank market any other condition affecting
this Agreement or its Note or any of such extensions of credit or
liabilities or commitments;
and the result of any of the foregoing is to increase the cost to such Lender
(or its Applicable Lending Office) of making, Converting into, Continuing, or
maintaining any Fixed Rate Loans or to reduce any sum received or receivable by
such Lender (or its Applicable Lending Office) under this Agreement or its Note
with respect to any Fixed Rate Loans, then the Borrower shall pay to such Lender
on demand such amount or amounts as will compensate such Lender for such
increased cost or reduction. If any Lender requests compensation by the Borrower
under this SECTION 4.01(A), the Borrower may, by notice to such Lender (with a
copy to the Agent), suspend the obligation of such Lender to make or Continue
Loans of the Type with respect to which such compensation is requested, or to
Convert Loans of any other Type into Loans of such Type, until the event or
condition giving rise to such request ceases to be in effect (in which case the
provisions of SECTION 4.04 shall be applicable); PROVIDED that such suspension
shall not affect the right of such Lender to receive the compensation so
requested.
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(b) If, after the date hereof, any Lender shall have determined that
the adoption of any applicable law, rule, or regulation regarding capital
adequacy or any change therein or in the interpretation or administration
thereof by any governmental authority, central bank, or comparable agency
charged with the interpretation or administration thereof, or any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such governmental authority, central bank, or comparable agency, has or
would have the effect of reducing the rate of return on the capital of such
Lender or any corporation controlling such Lender as a consequence of such
Lender's obligations hereunder to a level below that which such Lender or such
corporation could have achieved but for such adoption, change, request, or
directive (taking into consideration its policies with respect to capital
adequacy), then from time to time upon demand the Borrower shall pay to such
Lender such additional amount or amounts as will compensate such Lender for such
reduction.
(c) Each Lender shall promptly notify the Borrower and the Agent of any
event of which it has knowledge, occurring after the date hereof, which will
entitle such Lender to compensation pursuant to this Section and will designate
a different Applicable Lending Office if such designation will avoid the need
for, or reduce the amount of, such compensation and will not, in the reasonable
judgment of such Lender, be otherwise disadvantageous to it. Any Lender claiming
compensation under this Section shall furnish to the Borrower and the Agent a
statement setting forth the additional amount or amounts to be paid to it
hereunder which shall be conclusive in the absence of manifest error. In
determining such amount, such Lender may use any reasonable averaging and
attribution methods.
4.02 LIMITATION ON TYPES OF LOANS. If on or prior to the first day of
any Interest Period for any Fixed Rate Loan:
(a) the Agent determines (which determination shall be
conclusive) that by reason of circumstances affecting the relevant
market, adequate and reasonable means do not exist for ascertaining the
Eurodollar Rate or CD Rate, as the case may be, for such Interest
Period; or
(b) the Required Lenders determine (which determination shall
be conclusive) and notify the Agent that the Eurodollar Rate or the CD
Rate will not adequately and fairly reflect the cost to the Lenders of
funding Eurodollar Rate Loans or CD Rate Loans, as the case may be, for
such Interest Period;
then the Agent shall give the Borrower prompt notice thereof specifying the
relevant Type of Loans and the relevant amounts or periods, and so long as such
condition remains in effect, the Lenders shall be under no obligation to make
additional Loans of such Type, Continue Loans of such Type, or to Convert Loans
of any other Type into Loans of such Type and the Borrower shall, on the last
day(s) of the then current Interest Period(s) for the outstanding Loans of the
affected Type, either prepay such Loans or Convert such Loans into another Type
of Loan in accordance with the terms of this Agreement.
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4.03 ILLEGALITY. Notwithstanding any other provision of this Agreement,
in the event that it becomes unlawful for any Lender or its Applicable Lending
Office to make, maintain, or fund Eurodollar Rate Loans hereunder, then such
Lender shall promptly notify the Borrower thereof and such Lender's obligation
to make or Continue Eurodollar Rate Loans and to Convert other Types of Loans
into Eurodollar Rate Loans shall be suspended until such time as such Lender may
again make, maintain, and fund Eurodollar Rate Loans (in which case the
provisions of SECTION 4.04 shall be applicable).
4.04 TREATMENT OF AFFECTED LOANS. If the obligation of any Lender to
make a particular Type of Fixed Rate Loan or to Continue, or to Convert Loans of
any other Type into, Loans of a particular Type shall be suspended pursuant to
SECTION 4.01 OR 4.03 hereof (Loans of such Type being herein called "AFFECTED
LOANS" and such Type being herein called the "AFFECTED TYPE"), such Lender's
Affected Loans shall be automatically Converted into Base Rate Loans on the last
day(s) of the then current Interest Period(s) for Affected Loans (or, in the
case of a Conversion required by SECTION 4.03 hereof, on such earlier date as
such Lender may specify to the Borrower with a copy to the Agent) and, unless
and until such Lender gives notice as provided below that the circumstances
specified in SECTION 4.01 OR 4.03 hereof that gave rise to such Conversion no
longer exist:
(a) to the extent that such Lender's Affected Loans have been
so Converted, all payments and prepayments of principal that would
otherwise be applied to such Lender's Affected Loans shall be applied
instead to its Base Rate Loans; and
(b) all Loans that would otherwise be made or Continued by
such Lender as Loans of the Affected Type shall be made or Continued
instead as Base Rate Loans, and all Loans of such Lender that would
otherwise be Converted into Loans of the Affected Type shall be
Converted instead into (or shall remain as) Base Rate Loans.
If such Lender gives notice to the Borrower (with a copy to the Agent) that the
circumstances specified in SECTION 4.01 OR 4.03 hereof that gave rise to the
Conversion of such Lender's Affected Loans pursuant to this SECTION 4.04 no
longer exist (which such Lender agrees to do promptly upon such circumstances
ceasing to exist) at a time when Loans of the Affected Type made by other
Lenders are outstanding, such Lender's Base Rate Loans shall be automatically
Converted, on the first day(s) of the next succeeding Interest Period(s) for
such outstanding Loans of the Affected Type, to the extent necessary so that,
after giving effect thereto, all Loans held by the Lenders holding Loans of the
Affected Type and by such Lender are held pro rata (as to principal amounts,
Types, and Interest Periods) in accordance with their respective Revolving
Credit Commitments.
4.05 COMPENSATION. Upon the request of any Lender, the Borrower shall
pay to such Lender such amount or amounts as shall be sufficient (in the
reasonable opinion of such Lender) to compensate it for any loss, cost, or
expense (including loss of anticipated profits) incurred by it as a result of:
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(a) any payment, prepayment, or Conversion of a Fixed Rate
Loan for any reason (including, without limitation, the acceleration of
the Loans pursuant to SECTION 8.01) on a date other than the last day
of the Interest Period for such Loan; or
(b) any failure by the Borrower for any reason (including,
without limitation, the failure of any condition precedent specified in
ARTICLE V to be satisfied) to borrow (other than by reason of the
failure of a Lender or Lenders to make funds available without cause),
Convert, Continue, or prepay a Fixed Rate Loan on the date for such
borrowing, Conversion, Continuation, or prepayment specified in the
relevant notice of borrowing, prepayment, Continuation, or Conversion
under this Agreement.
Any Lender claiming compensation under this SECTION 4.05 shall furnish
the Borrower and the Agent a statement setting forth in reasonable detail the
amounts to be paid to it hereunder and the determination thereof shall be
conclusive absent manifest error.
4.06 TAXES. (a) Any and all payments by the Borrower to or for the
account of any Lender or the Agent hereunder or under any other Loan Document
shall be made free and clear of and without deduction for any and all present or
future taxes, duties, levies, imposts, deductions, charges or withholdings, and
all liabilities with respect thereto, EXCLUDING, in the case of each Lender and
the Agent, taxes imposed on its income, and franchise taxes imposed on it, by
the jurisdiction under the laws of which such Lender (or its Applicable Lending
Office) or the Agent (as the case may be) is organized or any political
subdivision thereof (all such non-excluded taxes, duties, levies, imposts,
deductions, charges, withholdings, and liabilities being hereinafter referred to
as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from
or in respect of any sum payable under this Agreement or any other Loan Document
to any Lender or the Agent, (i) the sum payable shall be increased as necessary
so that after making all required deductions (including deductions applicable to
additional sums payable under this SECTION 4.06) such Lender or the Agent
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions, (iii) the
Borrower shall pay the full amount deducted to the relevant taxation authority
or other authority in accordance with applicable law, and (iv) the Borrower
shall furnish to the Agent, at its address referred to in SECTION 10.2, the
original or a certified copy of a receipt evidencing payment thereof.
(b) In addition, the Borrower agrees to pay any and all present or
future stamp or documentary taxes and any other excise or property taxes or
charges or similar levies which arise from any payment made under this Agreement
or any other Loan Document or from the execution or delivery of, or otherwise
with respect to, this Agreement or any other Loan Document (hereinafter referred
to as "Other Taxes").
(c) The Borrower agrees to indemnify each Lender and the Agent for the
full amount of Taxes and Other Taxes (including, without limitation, any Taxes
or Other Taxes imposed or asserted by any jurisdiction on amounts payable under
this SECTION 4.06) paid by such Lender or
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the Agent (as the case may be) and any liability (including penalties, interest,
and expenses) arising therefrom or with respect thereto.
(d) Each Lender organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Lender listed on the signature pages hereof and on
or prior to the date on which it becomes a Lender in the case of each other
Lender, and from time to time thereafter if requested in writing by the Borrower
or the Agent (but only so long as such Lender remains lawfully able to do so),
shall provide the Borrower and the Agent with (i) Internal Revenue Service Form
1001 or 4224, as appropriate, or any successor form prescribed by the Internal
Revenue Service, certifying that such Lender is entitled to benefits under an
income tax treaty to which the United States is a party which reduces the rate
of withholding tax on payments of interest or certifying that the income
receivable pursuant to this Agreement is effectively connected with the conduct
of a trade or business in the United States, (ii) Internal Revenue Service Form
W-8 or W-9, as appropriate, or any successor form prescribed by the Internal
Revenue Service, and (iii) any other form or certificate required by any taxing
authority (including any certificate required by Sections 871(h) and 881(c) of
the Internal Revenue Code), certifying that such Lender is entitled to an
exemption from or a reduced rate of tax on payments pursuant to this Agreement
or any of the other Loan Documents.
(e) For any period with respect to which a Lender has failed to provide
the Borrower and the Agent with the appropriate form pursuant to SECTION 4.06(D)
(unless such failure is due to a change in treaty, law, or regulation occurring
subsequent to the date on which a form originally was required to be provided),
such Lender shall not be entitled to indemnification under SECTION 4.06(A) OR
4.06(B) with respect to Taxes imposed by the United States; PROVIDED, HOWEVER,
that should a Lender, which is otherwise exempt from or subject to a reduced
rate of withholding tax, become subject to Taxes because of its failure to
deliver a form required hereunder, the Borrower shall take such steps as such
Lender shall reasonably request to assist such Lender to recover such Taxes at
such Lender's expense.
(f) If the Borrower is required to pay additional amounts to or for the
account of any Lender pursuant to this SECTION 4.06, then such Lender will agree
to use reasonable efforts to change the jurisdiction of its Applicable Lending
Office so as to eliminate or reduce any such additional payment which may
thereafter accrue if such change, in the judgment of such Lender, is not
otherwise disadvantageous to such Lender.
(g) Within thirty (30) days after the date of any payment of Taxes, the
Borrower shall furnish to the Agent evidence of such payment.
(h) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this SECTION 4.06 shall survive the termination of the Revolving Credit
Commitments and the payment in full of the Notes.
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4.07 REPLACEMENT BANKS. The Borrower may, in its sole discretion, on
ten (10) Business Days' prior written notice to the Agent and a Lender, cause a
Lender who has either (a) incurred increased costs or is unable to make Fixed
Rate Loans, (b) failed to fund any requested Advance, or (c) made any claim for
taxes under SECTION 4.06, to (and such Lender shall) assign, pursuant to SECTION
10.01, all of its rights and obligations under this Agreement to an Eligible
Assignee designated by the Borrower which is willing to become a Lender for a
purchase price equal to the outstanding principal amount of the Loans payable to
such Lender plus any accrued but unpaid interest on such Loans, any accrued but
unpaid fees with respect to such Lender's Revolving Credit Commitment and any
other amount payable to such Lender under this Agreement; PROVIDED, HOWEVER,
that any expenses or other amounts which would be owing to such Lender pursuant
to any indemnification provision hereof (including, if applicable, SECTION 4.05)
shall be payable by the Borrower as if the Borrower had prepaid the Loans of
such Lender rather than such Lender having assigned its interest hereunder. The
Borrower or the assignee shall pay the applicable processing fee under SECTION
10.1.
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ARTICLE V
CONDITIONS TO MAKING LOANS AND ISSUING LETTERS OF CREDIT
5.01 CONDITIONS OF INITIAL ADVANCE AND ISSUANCE OF LETTERS OF CREDIT.
The obligation of the Lenders to make the initial Advance and of the Issuing
Bank to issue the Letters of Credit is subject to the conditions precedent that
the Agent shall have received, prior to the Initial Advance or the issuance of
Letters of Credit (other than Existing LCs) in form and substance satisfactory
to the Agent the following:
(a) executed originals of each of the Loan Documents, together
with all schedules and exhibits thereto in form and substance
satisfactory to the Agent, NMSI, and the Lenders;
(b) favorable written opinions of counsel to the Borrower
dated the Closing Date, addressed to the Agent and the Lenders and
satisfactory to Smith Helms Mulliss & Moore, special counsel to the
Agent, substantially in the form of EXHIBIT G-1 attached hereto;
(c) resolutions of the board of directors (or of the
appropriate committee thereof) of the Borrower certified by its
secretary or assistant secretary as of the Closing Date, appointing the
initial Authorized Representative(s) and approving and adopting the
Loan Documents, and authorizing the execution and delivery thereof;
specimen signatures of officers of the Borrower executing the Loan
Documents to which it is a party, certified by the Secretary or
Assistant Secretary of the Borrower;
(d) the charter documents of the Borrower certified as of a
recent date by the Secretary of State of its state of incorporation;
(e) the by-laws of the Borrower certified as of the Closing
Date as true and correct by the secretary or assistant secretary of the
Borrower;
(f) certificates issued as of a recent date by the Secretary
of State of the state of the incorporation of the Borrower as to the
corporate good standing of the Borrower therein;
(g) appropriate certificates of qualification to do business
and of corporate good standing issued as of a recent date by the
Secretary of State of each jurisdiction in which the failure to be
qualified to do business could materially adversely affect the
business, operations or conditions, financial or otherwise, of the
Borrower;
(h) favorable written opinions of counsel to the Guarantors
dated the Closing Date, addressed to the Agent and the Lenders and
satisfactory to Smith Helms Mulliss & Moore, special counsel to the
Agent, substantially in the form of
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EXHIBIT G-2 attached hereto;
(i) resolutions of the board of directors (or of the
appropriate committee thereof) of each Guarantor certified by its
secretary or assistant secretary as of the Closing Date, approving and
adopting the Loan Documents to be executed by such Guarantor, and
authorizing the execution and delivery thereof; specimen signatures of
officers of the Guarantor executing the Loan Documents, certified by
the Secretary or Assistant Secretary of such Guarantor;
(j) the charter documents of each Guarantor certified as of a
recent date by the Secretary of State of its state of formation;
(k) the by-laws of each Guarantor certified as of the Closing
Date as true and correct by the respective secretary or assistant
secretary of such Guarantor;
(l) certificates issued as of a recent date by the Secretary
of State of the state of the incorporation of each Guarantor as to the
corporate good standing of the Guarantor therein;
(m) appropriate certificates of qualification to do business
and of corporate good standing issued as of a recent date by the
Secretary of State of each jurisdiction in which the failure to be
qualified to do business could materially adversely affect the
business, operations or conditions, financial or otherwise, of each
Guarantor;
(n) closing statement;
(o) notice of appointment of the Authorized Representative(s);
(p) evidence of insurance complying with the requirements of
SECTION 7.02 of this Agreement;
(q) all fees payable by the Borrower on the Closing Date to
the Agent and the Lenders; and
(r) such other documents, instruments, certificates and
opinions as the Agent or any Lender may reasonably request on or prior
to the Closing Date in connection with the consummation of the
transactions contemplated hereby.
The obligation of the Lenders to make the initial Advance and of the
Issuing Bank to issue the Letters of Credit is further subject to the condition
precedent that in the good faith judgment of the Agent there shall not have
occurred a material adverse change since December 31, 1996 in the business,
assets, operations, condition (financial or otherwise) or prospects of the
Borrower and its Subsidiaries, or in the facts and information regarding such
entities as represented to date.
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5.02 CONDITIONS OF LOANS. The obligations of the Lenders to make any
Advance, and the Issuing Banks to issue Letters of Credit, hereunder subsequent
to the Closing Date are subject to the satisfaction of the following conditions:
(a) the Agent or, in the case of Swing Line Loans,
NationsBank, shall have received a notice of such borrowing or request
if required by SECTION 2.04 or 2.17 hereof;
(b) the representations and warranties of the Borrower set
forth in ARTICLE VI hereof and in each of the other Loan Documents
shall be true and correct on and as of the date of such Advance or
Swing Line Loan or issuance of such Letters of Credit, as the case may
be, with the same effect as though such representations and warranties
had been made on and as of such date, except to the extent that such
representations and warranties expressly relate to an earlier date and
except that the financial statements referred to in SECTION 6.03 shall
be deemed to be those financial statements most recently delivered to
the Agent and the Lenders pursuant to SECTION 7.17 hereof;
(c) in the case of the issuance of a Letter of Credit, the
Borrower shall have, upon request of the Issuing Bank, executed and
delivered to the Issuing Bank an application and agreement for Letter
of Credit in form and content acceptable to the Issuing Bank with such
other instruments and documents as it shall request;
(d) at the time of such Advance, Swing Line Loan or issuance
of each Letter of Credit, no Default or Event of Default specified in
ARTICLE VIII hereof, shall have occurred and be continuing;
(e) immediately after giving effect to a Loan or Letter of
Credit (i) the aggregate principal balance of all outstanding Loans and
Participations for each Lender shall not exceed such Lender's
Applicable Commitment Percentage of the Total Revolving Credit
Commitment, and (ii) the aggregate principal balance of the sum of
Revolving Credit Outstandings, Swing Line Outstandings and Letter of
Credit Outstandings shall not exceed the Total Revolving Credit
Commitment; and
(f) immediately after giving effect to a Swing Line Loan the
aggregate Swing Line Outstandings shall not exceed $15,000,000.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lenders with respect to
itself and to its Subsidiaries, to the extent indicated, that:
6.01 SUBSIDIARIES. SCHEDULE 6.01 attached hereto states the name of
each of the Borrower's Subsidiaries, its jurisdiction of incorporation and the
percentage of its Voting Stock owned by the Borrower and/or its Subsidiaries.
Those Subsidiaries listed in Section 1 of said SCHEDULE 6.01 constitute
Subsidiaries. The Borrower and each Subsidiary has good and marketable title to
all of the shares it purports to own of the stock of each Subsidiary, free and
clear in each case of any Lien. All such shares have been duly issued and are
fully paid and non-assessable.
6.02 CORPORATE ORGANIZATION AND AUTHORITY. The Borrower, and each
Subsidiary,
(a) is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation;
(b) has all requisite power and authority and all necessary
licensees and permits to own and operate its Properties and to carry on
its business as now conducted and as presently proposed to be
conducted; and
(c) is duly licensed or qualified and is in good standing as a
foreign corporation in each jurisdiction wherein the nature of the
business transacted by it or the nature of the property owned or leased
by it makes such licensing or qualification necessary.
6.03 FINANCIAL STATEMENTS. (a) The consolidated balance sheets of the
Borrower and its consolidated Subsidiaries as of the Sunday closest to December
31 in each of the years 1995 to 1996, both inclusive, and the statements of
income and retained earnings and changes in cash flows for the fiscal years
ended on said dates accompanied by a report thereon containing an opinion
unqualified as to scope limitations imposed by the Borrower and otherwise
without qualification except as therein noted, by Arthur Andersen, LLP, have
been prepared in accordance with GAAP consistently applied except as therein
noted, are correct and complete and present fairly the financial position of the
Borrower and its consolidated Subsidiaries as of such dates and the results of
their operations and changes in their cash flows for such periods. The unaudited
consolidated balance sheets of the Borrower and its consolidated Subsidiaries as
of September 30, 1997, and the unaudited statements of income and retained
earnings and changes in financial position for the nine-month period ended on
said date prepared by the Borrower have been prepared in accordance with
generally accepted accounting principles consistently applied, are correct and
complete and present fairly the financial position of the Borrower and its
consolidated Subsidiaries as of
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said date and the results of their operations and changes in their cash flows
for such period.
(b) Since September 30, 1997, there has been no change in the
condition, financial or otherwise, of the Borrower and its consolidated
Subsidiaries as shown on the consolidated balance sheet as of such date except
changes in the ordinary course of business, none of which individually or in the
aggregate has been materially adverse.
6.04 INDEBTEDNESS. SCHEDULE 6.04 attached hereto correctly describes
all Current Debt, Funded Debt and Capitalized Leases of the Borrower and its
Subsidiaries outstanding on the Closing Date.
6.05 FULL DISCLOSURE. The financial statements referred to in SECTION
6.03 hereof do not, nor does this Agreement or any other written statement
furnished by the Borrower to you in connection with the issuance of the Notes,
contain any untrue statement of a material fact or omit a material fact
necessary to make the statements contained therein or herein not misleading.
There is no fact peculiar to the Borrower or its Subsidiaries which the Borrower
has not disclosed to you in writing which materially affects adversely nor, so
far as the Borrower can now foresee, will materially affect adversely the
Properties, business, prospects, profits or condition (financial or otherwise)
of the Borrower and its Subsidiaries, taken as a whole.
6.06 PENDING LITIGATION. Except as set forth in SCHEDULE 6.06, there
are no proceedings pending or, to the knowledge of the Borrower threatened,
against or affecting the Borrower or any Subsidiary in any court or before any
governmental authority or arbitration board or tribunal which reasonably may
result in a judgment in excess of $1,000,000 which judgment is either (i) not
covered by insurance or insurance is contested, or (ii) not covered by reserves
set aside by the Borrower in an amount equal to such judgment.
6.07 TITLE TO PROPERTIES. The Borrower and each Subsidiary has good
and marketable title in fee simple (or its equivalent under applicable law) to
all material parcels of real property and has good title to all the other
material items of Property it purports to own, including that reflected in the
most recent balance sheet referred to in SECTION 6.03 hereof except as sold or
otherwise disposed of in the ordinary course of business and except for Liens
permitted by this Agreement.
6.08 PATENTS AND TRADEMARKS. The Borrower and each Subsidiary owns or
possesses all the patents, trademarks, trade names, service marks, copyright,
licenses and rights with respect to the foregoing necessary for the present and
planned future conduct of its business, without any known conflict with the
rights of others.
6.09 ISSUANCE IS LEGAL AND AUTHORIZED. The issuance of the Notes and
compliance by the Borrower and the Guarantors with all of the provisions of this
Agreement, the Notes, the Guaranty Agreements and the Letter of Credit Account
Agreement to which it is signatory--
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(a) are within the corporate powers of the Borrower or
Guarantor a party thereto;
(b) will not violate any provisions of any law or any order of
any court or governmental authority or agency and will not conflict
with or result in any breach of any of the terms, conditions or
provisions of, or constitute a default under the Articles of
Incorporation or By-laws of the Borrower or any Guarantor or any
indenture or other agreement or instrument to which the Borrower or any
Guarantor is a party or by which it may be bound or result in the
imposition of any Liens or encumbrances on any Property of the Borrower
or any Guarantor; and
(c) have been duly authorized by proper corporate action on
the part of the Borrower and each Guarantor (no action by the
stockholders of the Borrower or any Guarantor being required by law, by
the Articles of Incorporation or By-laws of the Borrower or any
Guarantor or otherwise), executed and delivered by the Borrower and
each Guarantor signatory thereto, and this Agreement, the Letter of
Credit Account Agreement, the Notes and the Guaranty Agreements
constitute the legal, valid and binding obligations, contracts and
agreements of the Borrower and each Guarantor signatory thereto
enforceable in accordance with their respective terms.
6.10 NO DEFAULTS. No Default or Event of Default has occurred and is
continuing. Neither the Borrower nor any Subsidiary is in default in the payment
of principal or interest on any Funded Debt or Current Debt and is not in
default under any instrument or instruments or agreements under and subject to
which any Funded Debt or Current Debt has been issued and no event has occurred
and is continuing under the provisions of any such instrument or agreement which
with the lapse of time or the giving of notice, or both, would constitute an
event of default thereunder.
6.11 GOVERNMENTAL CONSENT. No approval, consent or withholding of
objection on the part of any regulatory body, state, Federal, or local, is
necessary in connection with the execution and delivery by the Borrower or any
Guarantor of the Agreement, the Letter of Credit Account Agreement, the Notes or
any Guaranty Agreement, or compliance by the Borrower and the Guarantors with
any of the provisions of this Agreement, the Letter of Credit Account Agreement,
the Notes or the Guaranty Agreements.
6.12 TAXES. All tax returns required to be filed by the Borrower or
any Subsidiary in any jurisdiction have, in fact, been filed, and all taxes,
assessments, fees and other governmental charges upon the Borrower or any
Subsidiary or upon any of their respective properties, income or franchises,
which are shown to be due and payable in such returns have been paid. For all
taxable years ending on or before January 1, 1996, the Federal income tax
liability of the Borrower and its Subsidiaries has been satisfied and either the
period of limitations on assessment of additional Federal Income tax has expired
or the Borrower and its Subsidiaries have entered into an agreement with the
Internal Revenue Service closing conclusively the total tax liability for the
taxable year. The Borrower does not know of any
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proposed additional tax assessment against it for which adequate provision has
not been made on its accounts, and no material controversy in respect of
additional Federal or state income taxes due since said date is pending or to
the knowledge of the Borrower threatened. The provisions for taxes on the books
of the Borrower and each Subsidiary are adequate for all open years, and for its
current fiscal period.
6.13 USE OF PROCEEDS. The net proceeds of the Loans will be used as
set forth in SECTION 2.15. None of the transactions contemplated in this
Agreement (including, without limitation thereof, the use of proceeds from the
Loans), will violate or result in a violation of Section 7 of the Securities
Exchange Act of 1934, as amended, or any regulation issued pursuant thereto,
including, without limitation, Regulations G, T, U, and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R., Chapter II. Neither the
Borrower nor any Subsidiary owns or intends to carry or purchase any "margin
stock" within the meaning of said Regulation U. None of the proceeds from the
Loans will be used to purchase, or refinance any borrowing, the proceeds of
which were used to purchase any "security" within the meaning of the Securities
Exchange Act of 1934, as amended.
6.14 ERISA. The consummation of the transactions provided for in this
Agreement and compliance by the Borrower and the Guarantors with the provisions
hereof, the Notes issued hereunder and the Guaranty Agreements will not involve
any prohibited transaction within the meaning of ERISA or Section 4975 of the
Internal Revenue Code. Each Plan complies in all material respects with all
applicable statutes and governmental rules and regulations, and (a) no
Reportable Event has occurred and is continuing with respect to any Plan, (b)
neither the Borrower nor any ERISA Affiliate has withdrawn from any Plan or
Multiemployer Plan or instituted steps to do so, and (c) no steps have been
instituted to terminate any Plan. No condition exists or event or transaction
has occurred in connection with any Plan which could result in the incurrence by
the Borrower or any ERISA Affiliate of any material liability, fine or penalty.
No Plan maintained by the Borrower or any ERISA Affiliate, nor any trusts
created thereunder, have incurred any "accumulated funding deficiency" as
defined in Section 302 of ERISA nor does the present value of all benefits
vested under all Plans exceed, as of the last annual valuation date, the value
of the assets of the Plans allocable to such vested benefits by an amount
greater than $1,000,000 in the aggregate. Neither the Borrower nor any ERISA
Affiliate is a member of or contributes to any multiple employer plan as defined
in ERISA. Neither the Borrower nor any ERISA Affiliate is a participant in or is
obligated to make any payment to a Multiemployer Plan. Neither the Borrower or
any ERISA Affiliate has any contingent liability with respect to any
post-retirement "welfare benefit plan" (as such term is defined in ERISA).
6.15 COMPLIANCE WITH LAW. Neither the Borrower nor any Subsidiary (a)
is in violation of any law, ordinance, franchise, governmental rule or
regulation to which it is subject; or (b) has failed to obtain any license,
permit, franchise or other governmental authorization necessary to the ownership
of its property or to the conduct of its business, which violation or failure to
obtain would materially adversely affect the business, prospects, profits,
properties or condition (financial or otherwise) of the Borrower and its
Subsidiaries, taken as a whole, or impair the ability of the Borrower or any
Guarantor to perform its
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obligations contained in this Agreement, the Letter of Credit Account Agreement,
the Notes or any Guaranty Agreement. Neither the Borrower nor any Subsidiary is
in default with respect to any order of any court or governmental authority or
arbitration board of tribunal.
6.16 INVESTMENT COMPANY. Neither the Borrower nor any Subsidiary is an
"investment company," or an "affiliated person" of, or "promoter" or "principal
underwriter" for, an "investment company", as such terms are defined in the
Investment Company Act of 1940, as amended (15 U.S.C. ss. 80a-1, et seq.). The
application of the proceeds of the Loans and repayment thereof by the Borrower
and the performance by the Borrower and the Guarantors of the transactions
contemplated by the Loan Documents will not violate any provision of said Act,
or any rule, regulation or order issued by the Securities and Exchange
Commission thereunder, in each case as in effect on the date hereof.
6.17 HAZARDOUS MATERIALS. The Borrower and each Subsidiary is in
compliance with all applicable Environmental Laws in all material respects.
Neither the Borrower nor any Subsidiary has been notified of any action, suit,
proceeding or investigation which, and neither the Borrower nor any Subsidiary
is aware of any facts which, (i) calls into question, or could reasonably be
expected to call into question, compliance by the Borrower or any Subsidiary
with any Environmental Laws, (ii) which seeks, or could reasonably be expected
to form the basis of a meritorious proceeding, to suspend, revoke or terminate
any license, permit or approval necessary for the generation, handling, storage,
treatment or disposal of any Hazardous Material, or (iii) seeks to cause, or
could reasonably be expected to form the basis of a meritorious proceeding to
cause, any property of the Borrower or any Subsidiary to be subject to any
restrictions on ownership, use, occupancy or transferability under any
Environmental Law.
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ARTICLE VII
BORROWER COVENANTS
From and after the Closing Date and continuing until the Obligations
have been paid and satisfied in full and this Agreement has been terminated in
accordance with the terms hereof unless the Required Lenders shall otherwise
consent in writing:
7.01 CORPORATE EXISTENCE, ETC. The Borrower will preserve and keep in
full force and effect, and will cause each Subsidiary to preserve and keep in
full force and effect, its corporate existence and all licenses and permits
necessary to the proper conduct of its business, PROVIDED that the foregoing
shall not prevent any transaction permitted by SECTION 7.15.
7.02 INSURANCE. The Borrower will maintain, and will cause each
domestic Subsidiary to maintain, insurance coverage by financially sound and
reputable insurers accorded a rating by A.M. Best Company, Inc. of A-XII or
better at the time of the issuance of any such policy and in such forms and
amounts and against such risks as are customary for corporations of established
reputation engaged in the same or a similar business and owning and operating
similar properties; PROVIDED, HOWEVER, that (i) if, during the term of any such
insurance policy, the rating accorded the insurer shall be less than A-XII, the
Borrower will, on the date of renewal of any such policy (or, if such change in
rating shall occur within 90 days prior to such renewal date, within 90 days of
the date of such change in rating), obtain such insurance policy from an insurer
accorded such rating and (ii) notwithstanding the requirements of this SECTION
7.02, the Borrower or any such Subsidiary may (a) maintain self-insurance
programs with respect to employee benefits such as medical and disability
coverage and casualty risks on its Property; PROVIDED that any such programs are
customary for corporations of established reputation engaged in the same or a
similar business and owning and operating similar properties and the Borrower or
the Subsidiary concerned shall maintain adequate and actuarially determined
reserves for losses in an amount and manner approved by nationally recognized
and reputable independent insurance consultants retained by the Borrower and (b)
maintain any insurance policy or program as in effect on the Closing Date with
Titania Insurance Co. of America, PROVIDED that such policies or programs are
customary for corporations of established reputation engaged in the same or a
similar business and owning and operating similar properties. The Borrower will
cause each Subsidiary which is not organized under the laws of the Unites States
or any state thereof to maintain in accordance with sound business practice,
insurance coverage with financially sound reputable insurers in such forms and
amounts and against such risks as are customary for corporations of established
reputation engaged in the same or a similar business and owning and operating
similar properties. The Borrower will not permit Titania Insurance Co. of
America to enter into insurance or reinsurance relationships with any Person
other than the Borrower or any Subsidiary, PROVIDED, that, notwithstanding the
foregoing, the Borrower may permit Titania to maintain such relationships at
such levels and in such amounts as are in effect on the Closing Date.
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7.03 TAXES, CLAIMS FOR LABOR AND MATERIALS, COMPLIANCE WITH LAWS. The
Borrower will promptly pay and discharge, and will cause each Subsidiary
promptly to pay and discharge, all lawful taxes, assessments and governmental
charges or levies imposed upon the Borrower or such Subsidiary, respectively, or
upon or in respect of all or any part of the Property or business of the
Borrower or such Subsidiary, respectively, all trade accounts payable in
accordance with usual and customary business terms, and all claims for work,
labor or materials, which if unpaid might become a Lien upon any Property of the
Borrower or such Subsidiary; PROVIDED the Borrower or such Subsidiary shall not
be required to pay any such tax, assessment, charge, levy, account payable or
claim if (i) the validity, applicability or amount thereof is being contested in
good faith by appropriate actions or proceedings which will prevent the
forfeiture or sale of any Property of the Borrower or such Subsidiary or any
material interference with the use thereof by the Borrower or such Subsidiary,
and (ii) the Borrower or such Subsidiary shall set aside on its books, reserves
deemed by it to be adequate with respect thereto. The Borrower will promptly
comply and will cause each Subsidiary to comply with all laws, ordinances or
governmental rules and regulations to which it is subject including, without
limitation, the Occupational Safety and Health Act of 1970, the Employee
Retirement Income Security Act of 1974 and all laws, ordinances, governmental
rules and regulations relating to environmental protection in all applicable
jurisdictions, the violation of which would materially and adversely affect the
properties, business, prospects, profits or condition of the Borrower and its
Subsidiaries or would result in any Lien not permitted under SECTION 7.13.
7.04 MAINTENANCE, ETC. The Borrower will maintain, preserve and keep,
and will cause each Subsidiary to maintain, preserve and keep, its properties
which are used or useful in the conduct of its business (whether owned in fee or
a leasehold interest) in good repair and working order and from time to time
will make all necessary repairs, replacements, renewals and additions so that at
all times the efficiency thereof shall be maintained.
7.05 NATURE OF BUSINESS. Neither the Borrower nor any Subsidiary will
engage in any business if, as a result, the general nature of the business,
taken on a consolidated basis, which would then be engaged in by the Borrower
and its Subsidiaries would be substantially changed from the general nature of
the business engaged in by the Borrower and its Subsidiaries on the date of this
Agreement.
7.06 CONSOLIDATED NET WORTH. The Borrower will at all times keep and
maintain Consolidated Net Worth at an amount not less than (i) 90% of Borrower
and Subsidiaries Consolidated Net Worth at September 30, 1997 and (ii) as at the
last day of each succeeding fiscal quarter of the Borrower and until (but
excluding) the last day of the next following fiscal quarter of the Borrower,
the sum of (A) the amount of Consolidated Net Worth required to be maintained
pursuant to this SECTION 7.06 as at the end of the immediately preceding fiscal
quarter, plus, (B) 50% of Consolidated Net Income (with no reduction for net
losses for any period) for the fiscal quarter of the Borrower ending on such
day, plus (C)
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75% of the net proceeds to the Borrower from the sale of shares of the
Borrower's capital stock. The calculation of this covenant shall be based upon
the consolidated financial statements of the Borrower and its Subsidiaries,
including WCC.
7.07 LIMITATIONS ON TOTAL DEBT.
(a) The Borrower will at all times keep and maintain
Consolidated Funded Debt (excluding Funded Debt of WCC from
Consolidated Funded Debt) in an amount not to exceed 40% of Total
Capitalization.
(b) The Borrower and its Subsidiaries (other than WCC) will
not, at any time, issue, incur, assume, be or become liable in respect
of any Indebtedness other than (i) Indebtedness arising under this
Agreement, (ii) the purchase of products, merchandise and services in
the ordinary course of business, (iii) Indebtedness outstanding on the
Closing Date, (iv) Indebtedness of a Guarantor to the Borrower or to
another Guarantor, (v) Indebtedness representing amounts received by
the Borrower or any Subsidiary in exchange for the transfer of
interests in trade receivables under the Asset Securitization Facility
in excess of the amounts repaid to the purchasers in respect of such
purchase price from collections on such trade receivables, which shall
at no time exceed $75,000,000 in aggregate amount outstanding, and (vi)
additional Indebtedness not covered under clauses (i) through (v) in an
aggregate amount for the Borrower and all Subsidiaries (other than WCC)
taken as a whole not greater than $15,000,000.
(c) Any corporation which becomes a Subsidiary after the date
hereof shall for all purposes of this SECTION 7.07 be deemed to have
created, assumed or incurred at the time it becomes a Subsidiary all
Indebtedness of such corporation existing immediately after it becomes
a Subsidiary.
7.08 FIXED CHARGES COVERAGE RATIO. The Borrower will at all times keep
and maintain the ratio of Net Income Available for Fixed Charges, determined as
of the last day of each fiscal quarter for the immediately preceding
Four-Quarter Period, to Fixed Charges for such Four- Quarter Period, at not less
than 1.50:1.00.
7.09 NEGATIVE PLEDGE CLAUSES. The Borrower will not, nor will it permit
any Subsidiary to, enter into or cause, suffer or permit to exist any agreement
with any Person other than the Agent and the Lenders pursuant to this Agreement
or any other Loan Documents which prohibits or limits the ability of any of the
Borrower or any Subsidiary to create, incur, assume or suffer to exist any Lien
upon any of its property, assets or revenues, whether now owned or hereafter
acquired, PROVIDED that the Borrower and any Subsidiary may enter into such an
agreement in connection with (a) property acquired with the proceeds of purchase
money Indebtedness permitted hereunder, (b) the Asset Securitization Facility,
and (c) Indebtedness incurred under WCC's Amended and Restated Credit Agreement
dated December 18, 1997.
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7.10 LIMITATION ON LIENS. The Borrower will not, and will not permit
any Subsidiary to, create or incur, or suffer to be incurred or to exist, any
Lien on its or their Property, whether now owned or hereafter acquired, or upon
any income or profits therefrom, or transfer any property for the purpose of
subjecting the same to the payment of obligations in priority to the payment of
its or their general creditors, or acquire or agree to acquire, or permit any
Subsidiary to acquire, any property or assets upon conditional sales agreements
or other title retention, devices, except;
(a) Liens for property taxes and assessments or governmental
charges or levies and Liens securing claims or demands of mechanics and
materialmen, PROVIDED that payment thereof is not at the time required
by SECTION 7.03;
(b) Liens of or resulting from any judgment or award, the time
for the appeal or petition for rehearing of which shall not have
expired, or in respect of which the Borrower or a Subsidiary shall at
any time in good faith be prosecuting an appeal or proceeding for a
review and in respect of which a stay of execution pending such appeal
or proceeding for review shall have been secured;
(c) Liens incidental to the conduct of business or the
ownership of properties and assets (including warehousemen's and
attorneys' liens and statutory landlords' liens) and Liens to secure
the performance of bids, tenders or trade contracts, or to secure
statutory obligations, surety or appeal bonds or other liens of like
general nature incurred in the ordinary course of business and not in
connection with the borrowing of money, PROVIDED in each case, the
obligation secured is not overdue or, if overdue, is being contested in
good faith by appropriate actions or proceedings;
(d) minor survey exceptions or minor encumbrances, easements
or reservations, or rights of others for rights-of-way, utilities and
other similar purposes, or zoning or other restrictions as to the use
of real properties, which are necessary for the conduct of the
activities of the Borrower and its Subsidiaries or which customarily
exist on properties of corporations engaged in similar activities and
similarly situated and which do not in any event materially impair
their use in the operation of the business of the Borrower and its
Subsidiaries;
(e) Liens existing as of the Closing Date and reflected in
SCHEDULE 7.10 hereto, securing Funded Debt of the Borrower or any
Subsidiary outstanding on such date;
(f) [reserved];
(g) Liens securing Indebtedness of a Guarantor to the Borrower
or to another Guarantor;
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(h) the interests in trade receivables of the purchasers
thereof created pursuant to the Asset Securitization Facility, to the
extent the same may constitute Liens; and
(i) Liens incurred after the Closing Date given to secure the
payment of the purchase price incurred in connection with the
acquisition of fixed assets useful and in tended to be used in carrying
on the business of the Borrower or a Subsidiary, including Liens
existing on such fixed assets at the time of acquisition thereof or at
the time of acquisition by the Borrower or a Subsidiary of any business
entity then owning such fixed assets, whether or not such existing
Liens were given to secure the payment of the purchase price of the
fixed assets to which they attach so long as they were not incurred,
extended or renewed in contemplation of such acquisition, PROVIDED that
(i) the Lien shall attach solely to the fixed assets acquired or
purchased, (ii) at the time of acquisition of such fixed assets, the
aggregate amount remaining unpaid on all Indebtedness secured by Liens
on such fixed assets whether or not assumed by the Borrower or a
Subsidiary shall not exceed an amount equal to 80% (or 100% in the case
of Capitalized Leases) of the lesser of the total purchase price or
fair market value at the time of acquisition of such fixed assets (as
determined in good faith by the Board of Directors of the Borrower),
and (iii) all such Indebtedness shall have been incurred within the
applicable limitations provided in SECTION 7.07.
7.11 RESTRICTED PAYMENTS: JOINT VENTURE INVESTMENTS.
(a) The Borrower will not except as hereinafter provided:
(i) Declare or pay any dividends, either in cash or
Property, on any shares of its capital stock of any class
(except dividends or other distributions payable solely in
shares of capital stock of the Borrower);
(ii) Directly or indirectly, or through any
Subsidiary, purchase, redeem or retire any shares of its
capital stock of any class or any warrants, rights or options
to purchase or acquire any shares of its capital stock (other
than (x) in exchange for or out of the net cash proceeds to
the Borrower from the substantially concurrent issue or sale
of other shares of capital stock of the Borrower or warrants,
rights or options to purchase or acquire any shares of its
capital stock, (y) purchases or acquisitions of shares of
Voting Stock of the Borrower which were issued pursuant to an
employee stock plan, PROVIDED that the aggregate amount
expended therefor does not exceed $250,000 in any one fiscal
year of the Borrower, and (z) purchases or acquisitions of
shares of Voting Stock of the Borrower after October 1, 1996
in the open market for an aggregate purchase of not to exceed
$5,000,000, PROVIDED further, that such amounts expended shall
not exceed that amount necessary in order to maintain
beneficial ownership or control, directly or indirectly, of
50.1% (by number of votes) of the Voting Stock of the Borrower
by the Wackenhut Family Group);
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(iii) Make any other payment or distribution, either
directly or indirectly or through any Subsidiary, in respect
of its capital stock;
(iv) Make any payment or distribution, either
directly or indirectly or through any Subsidiary, of principal
of any Subordinated Funded Debt prior to the date such payment
shall be due; or
(v) Make any Restricted Investments other than any
Joint Venture Investments;
(such declarations or payments of dividends, purchases, redemptions or
retirements of capital stock and warrants, rights or options,
Restricted Investments and all such other distributions being herein
collectively called "Restricted Payments"), if after giving effect
thereto the aggregate amount of Restricted Payments made during the
period from and after December 30, 1997 to and including the date of
the making of the Restricted Payment in question, would exceed the sum
of (i) $5,000,000 plus (ii) 50% of Consolidated Net Income for such
period, computed on a cumulative basis for said entire period (or if
such Consolidated Net Income is a deficit figure, then minus 100% of
such deficit).
The Borrower will not declare any dividend which constitutes a
Restricted Payment payable more than 90 days after the date of
declaration thereof.
For the purposes of this SECTION 7.11(A) the amount of any
Restricted Payment declared, paid or distributed in Property shall be
deemed to be the greater of the book value or fair market value (as
determined in good faith by the Board of Directors of the Borrower) of
such property at the time of the making of the Restricted Payment in
question.
(b) The Borrower will not make any Joint Venture Investment if
after giving effect thereto the aggregate value of all Joint Venture
Investments of the Borrower would exceed 10% of Consolidated Net Worth
of the Borrower as of the date of the making of such Joint Venture
Investment.
7.12 LIMITATION ON SALE AND LEASEBACKS.
The Borrower will not, and will not permit any Subsidiary to, enter
into any arrangement whereby the Borrower or any Subsidiary shall sell or
transfer any property currently owned by the Borrower or any Subsidiary to any
Person other than the Borrower or a Subsidiary and thereupon the Borrower or any
Subsidiary shall lease or intend to lease, as lessee, the same property,
PROVIDED, that the Borrower may sell and leaseback pursuant to TROL Leases.
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7.13 MERGERS, CONSOLIDATIONS AND SALES OF ASSETS.
(a) The Borrower will not, and will not permit any Subsidiary
to, (i) consolidate with or be a party to a merger with any other
corporation or (ii) sell, lease or otherwise dispose of all or any
substantial part (as defined in paragraph (d) of this SECTION 7.13) of
the assets of the Borrower and its Subsidiaries, PROVIDED, HOWEVER,
that:
(1) any Subsidiary may merge or consolidate with or
into the Borrower or any Wholly-owned Subsidiary so long as in
any merger or consolidation involving the Borrower, the
Borrower shall be the surviving or continuing corporation;
(2) The Borrower may consolidate or merge with any
other corporation if (i) either (x) the Borrower shall be the
surviving or continuing corporation or (y) the surviving
corporation is organized and existing under the laws of the
United States of America or any state thereof or the District
of Columbia and such continuing or surviving corporation
expressly assumes in writing, in form and substance
satisfactory to the Required Lenders, all obligations of the
Borrower under this Agreement, (ii) at the time of such
consolidation or merger and after giving effect thereto no
Default or Event of Default shall have occurred and be
continuing, (iii) after giving effect to such consolidation or
merger the Borrower or such surviving corporation, as the case
may be, would be permitted to incur at least $1.00 of
additional Consolidated Indebtedness under the provisions of
SECTION 7.07(A);
(3) any Subsidiary may sell, lease or otherwise
dispose of all or any substantial part of its assets to the
Borrower or any Wholly-owned Subsidiary;
(4) the Borrower and its Subsidiaries may sell trade
receivables or fractional undivided interests therein pursuant
to and in accordance with the terms of the Asset
Securitization Facility; and
(5) WCC may enter into TROL Leases.
(b) The Borrower will not permit any Subsidiary to issue or
sell any shares of stock of any class (including as "stock" for the
purposes of this SECTION 7.13, any warrants, rights or options to
purchase or otherwise acquire stock or other Securities exchangeable
for or convertible into stock) of such Subsidiary to any Person other
than the Borrower or a Wholly-owned Subsidiary, except for the purpose
of qualifying directors, or except in satisfaction of the validly
pre-existing preemptive rights of minority shareholders in connection
with the simultaneous issuance of stock
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to the Borrower and/or a Subsidiary whereby the Borrower and/or such
Subsidiary maintain their same proportionate interest in such
Subsidiary.
(c) The Borrower will not sell, transfer or otherwise dispose
of any shares of stock of any Subsidiary (except (i) the minimal amount
necessary to qualify directors and (ii) shares of stock of WCC provided
that, after giving effect to any such sale of WCC stock, the Borrower
shall own not less than 69% of the stock of every class issued by WCC)
or any Indebtedness of any Subsidiary, and will not permit any
Subsidiary to sell, transfer or otherwise dispose of (except to the
Borrower or a Wholly-owned Subsidiary) any shares of stock or any
Indebtedness of any other Subsidiary, unless:
(1) simultaneously with such sale, transfer, or
disposition, all shares of stock and all Indebtedness of such
Subsidiary at the time owned by the Borrower and by every
other Subsidiary shall be sold, transferred or disposed of as
an entirety;
(2) the Board of Directors of the Borrower shall have
determined, as evidenced by a resolution thereof, that the
purposed sale, transfer or disposition of said shares of stock
and Indebtedness is in the best interests of the Borrower;
(3) said shares of stock and Indebtedness are sold,
transferred or otherwise disposed of to a Person, for a cash
consideration and on terms reasonably deemed by the Board of
Directors to be adequate and satisfactory;
(4) the Subsidiary being disposed of shall not have
any continuing investment in the Borrower or any other
Subsidiary not being simultaneously disposed of; and
(5) such sale or other disposition does not involve a
substantial part (as hereinafter defined) of the assets of the
Borrower and its Subsidiaries.
(d) As used in this SECTION 7.13, a sale, lease or other
disposition of assets shall be deemed to be a "substantial part" of the
assets of the Borrower and its Subsidiaries only if the book value of
such assets, when added to the book value of all other assets sold,
leased or otherwise disposed of by the Borrower and its Subsidiaries
(other than in the ordinary course of business) during the period from
and after the Closing Date to and including the date of the sale, lease
or disposition in question, computed on a cumulative basis for said
entire period, exceeds 10% of Consolidated Net Assets, determined as of
the end of the immediately preceding fiscal quarter.
7.14 GUARANTIES. The Borrower will not, and will not permit any
Subsidiary to, become or be liable in respect of any Guaranty except the
Guaranty Agreements.
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7.15 TRANSACTIONS WITH AFFILIATES. The Borrower will not, and will not
permit any Subsidiary to, enter into or be a party to any transaction or
arrangement with any Affiliate (including, without limitation, the purchase
from, sale to or exchange of property with, or the rendering of any service by
or for, any Affiliate), except in the ordinary course of and pursuant to the
reasonable requirements of the Borrower's or such Subsidiary's business and upon
fair and reasonable terms no less favorable to the Borrower or such Subsidiary
than would obtain in a comparable arm's-length transaction with a Person other
than an Affiliate.
7.16 ERISA COMPLIANCE.
(a) The Borrower will not, and will not permit any Subsidiary
to, permit any Plans at any time maintained by the Borrower or any
Subsidiary to have any Unfunded Vested Pension Liabilities. As used
herein "Unfunded Vested Pension Liability" shall mean an excess of the
actuarial present value of accumulated vested Plan benefits as at the
end of the immediately preceding Plan year of such Plans (or as of any
more recent valuation date) over the net assets allocated to such Plans
which are available for benefits, all as determined and disclosed in
the most recent actuarial valuation report for such Plans.
(b) All assumptions and methods used to determine the
actuarial valuation of vested employee benefits under all Plans at any
time maintained by the Borrower or any Subsidiary and the present value
of assets of such Plans shall be reasonable in the good faith judgment
of the Borrower and shall comply with all requirements of law.
(c) The Borrower will not, and will not permit any Subsidiary
to, cause any Plan which it maintains or in which it participates at
any time to:
(1) engage in any "prohibited transaction" (as such
term is defined in ERISA);
(2) incur any "accumulated funding deficiency" (as
such term is defined in ERISA), whether or not waived; or
(3) terminate any such Plan in a manner which could
result in the imposition of a lien on any Property of the
Borrower or any of its Subsidiaries pursuant to ERISA.
(d) The Borrower will not, and will not permit any Subsidiary
to, withdraw from any Multiemployer Plan if such withdrawal shall
subject the Borrower or any Subsidiary to withdrawal liability (as
described under Part 1 of Subtitle E of Title IV of ERISA).
7.17 REPORTS AND RIGHTS OF INSPECTION. The Borrower will keep, and will
cause each
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Subsidiary to keep, proper books of record and account in which full and correct
entries will be made of all dealings or transactions of or in relation to the
business and affairs of the Borrower or such Subsidiary, in accordance with GAAP
consistently applied (except for changes disclosed in the financial statements
furnished to the Lenders and the Agent pursuant to this SECTION 7.17 and
concurred in by the independent public accountants referred to in SECTION
7.17(B) hereof), and will furnish to the Agent and each Lender (in duplicate if
so specified below or otherwise requested):
(a) QUARTERLY STATEMENTS. As soon as available and in any
event within 45 days after the end of each quarterly fiscal period
(except the last) of each fiscal year, copies of:
(1) (i) consolidated balance sheets of the Borrower
and its Subsidiaries and (ii) consolidating balance sheet of
WCC as of the close of such quarterly fiscal period, setting
forth in comparative form as to the consolidated balance
sheets the consolidated figures for the fiscal year then most
recently ended,
(2) (i) consolidated statements of income of the
Borrower and its Subsidiaries and (ii) consolidating statement
of income of WCC for such quarterly fiscal period and for the
portion of the fiscal year ending with such period, in each
case setting forth in comparative form as to the consolidated
statements of income the consolidated figures for the
corresponding periods of the preceding fiscal year, and
(3) (i) consolidated statements of cash flows of the
Borrower and its Subsidiaries and (ii) consolidating statement
of cash flows of WCC for the portion of the fiscal year ending
with such quarterly fiscal period, setting forth in
comparative form as to the consolidated statements of cash
flows the consolidated figures for the corresponding period of
the preceding fiscal year,
all in reasonable detail and certified as complete and correct by an
authorized financial officer of the Borrower;
(b) ANNUAL STATEMENTS. As soon as available and in any event
within 90 days after the close of each fiscal year of the Borrower,
copies of:
(1) (i) consolidated and consolidating balance sheets
of the Borrower and its Subsidiaries and (ii) consolidated and
consolidating balance sheets of WCC and its Subsidiaries as of
the close of such fiscal year, and
(2) (i) consolidated and consolidating statements of
income and retained earnings and cash flows of the Borrower
and its Subsidiaries and (ii) consolidated and consolidating
statements of income and retained earnings and cash flows of
WCC and its Subsidiaries for such fiscal year,
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in each case setting forth in comparative form the consolidated figures
for the preceding fiscal year, all in reasonable detail and, in the
case of such consolidated statements, accompanied by a report thereon
of a firm of independent public accountants of recognized national
standing selected by the Borrower to the effect that the consolidated
financial statements have been prepared in conformity with GAAP and
present fairly, in all material respects, the financial condition of
the Borrower and its Subsidiaries and WCC and its Subsidiaries, as the
case may be, and that the examination of such accountants in connection
with such financial statements has been made in accordance with
generally accepted auditing standards;
(c) AUDIT REPORTS. Promptly upon receipt thereof, one copy of
each interim or special audit made by independent accountants of the
books of the Borrower or any Subsidiary and any management letter
received from such accountants;
(d) SEC AND OTHER REPORTS. Promptly upon their becoming
available, one copy of each financial statement, report, notice or
proxy statement sent by the Borrower or WCC to stockholders generally
and of each regular or periodic report, and any registration statement
or prospectus filed by the Borrower or any Subsidiary with any
securities exchange or the Securities and Exchange Commission or any
successor agency, and copies of any orders in any proceedings (other
than immaterial regulatory proceedings relating to obtaining or
maintaining licenses, permits or approvals by the Borrower or any
Subsidiary) to which the Borrower or any of its Subsidiaries is a
party, issued by any governmental agency, Federal or state, having
jurisdiction over the Borrower or any of its Subsidiaries;
(e) ERISA REPORTS. promptly upon the occurrence thereof,
written notice of (i) a Reportable Event with respect to any Plan; (ii)
the institution of any steps by the Borrower, any ERISA Affiliate, the
PBGC or any other person to terminate any Plan; (iii) the institution
of any steps by the Borrower or any ERISA Affiliate to withdraw from
any Plan; (iv) a prohibited transaction; within the meaning of Section
406 of ERISA in connection with any Plan; (v) any material increase in
the contingent liability of the Borrower or any restricted Subsidiary
with respect to any post-retirement welfare liability; or (vi) the
taking of any action by, or the threatening of the taking of any action
by, the Internal Revenue Service, the Department of Labor or the PBGC
with respect to any of the foregoing;
(f) OFFICERS' CERTIFICATES. Within the periods provided in
paragraphs (a) and (b) above, a certificate of an authorized financial
officer of the Borrower stating that such officer has reviewed the
provisions of this Agreement and setting forth: (i) the information and
computations (in sufficient detail) required in order to establish
whether the Borrower was in compliance with the requirements of SECTION
7.06 through SECTION 7.14, inclusive, and SECTION 7.20 at the end of
the period covered by the financial statements then being furnished,
and (ii) whether there
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existed as of the date of such financial statements and whether, to the
best of such officer's knowledge, there exists on the date of the
certificate or existed at any time during the period covered by such
financial statements any Default or Event of Default and, if any such
condition or event exists on the date of the certificate, specifying
the nature and period of existence thereof and the action the Borrower
is taking and proposes to take with respect thereto, which certificate
shall be in the form attached hereto as EXHIBIT I. The calculations
contained in such certificate shall be based upon the consolidated
financial results of the Borrower and its Subsidiaries, EXCLUDING the
financial results of WCC except as set forth in SECTIONS 7.06 and
7.07(A).
(g) ACCOUNTANT'S CERTIFICATES. Within the period provided in
paragraph (b) above, a certificate of the accountants who render an
opinion with respect to such financial statements, stating that they
have reviewed this Agreement and stating further whether, in making
their audit, such accountants have become aware of any Default or Event
of Default under any of the terms or provisions of this Agreement
insofar as any such terms or provisions pertain to or involve
accounting matters or determinations, and if any such condition or
event then exists, specifying the nature and period of existence
thereof;
(h) REQUESTED INFORMATION. With reasonable promptness, such
other data and information including, without limitation, quarterly
consolidating financial statements of the Borrower and its Subsidiaries
of the type described in foregoing paragraph (a), as any of the Lender
or Agent may reasonably request;
(i) QUARTERLY SCHEDULES. Within the period provided in
paragraph (a) above, a schedule of (i) outstanding Letters of Credit
issued for the account of the Borrower and Titania, jointly, and (ii)
investments held by Titania;
Without limiting the foregoing, the Borrower will permit the Agent and the
Lenders (or such persons as the Agent and the Lenders may designate), to visit
and inspect, under the Borrower's guidance, any of the properties of the
Borrower or any Subsidiary, to examine all of their books of account, records,
reports and other papers, to make copies and extracts therefrom and to discuss
their respective affairs, finances and accounts with their respective officers,
employees, and independent public accountants (and by this provision the
Borrower authorizes said accountants to discuss with the Agent and the Lenders
the finances and affairs of the Borrower and its Subsidiaries) all at such
reasonable times and as often as may be reasonably requested. The Borrower shall
not be required to pay or reimburse the Agent or the Lenders for expenses which
the Agent or the Lenders may incur in connection with any such visitation or
inspection, PROVIDED, that if such visitation or inspection is made during any
period when a Default or an Event of Default shall have occurred and be
continuing, the Borrower agrees to reimburse the Agent and Lenders for all such
expenses promptly upon demand.
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7.18 ACQUISITIONS. The Borrower will not, and will not permit any
Subsidiary, to enter into any agreement, contract or arrangement, providing for
the acquisition of any Person or the assets of any Person where the amount to be
paid exceeds $5,000,000 unless the Borrower shall have furnished to each Lender
a certificate of an authorized financial officer of the Borrower (i) certifying
that after giving effect to such acquisition there will be no Default or Event
of Default hereunder, and (ii) containing calculations based upon the historical
consolidated financial information of the Borrower and its Subsidiaries
excluding WCC, demonstrating that after giving effect to the proposed
acquisition the Borrower will not be in violation of any covenant contained in
SECTIONS 7.06 through 7.08 hereof.
7.19 ADDITIONAL GUARANTIES. Not later than each date (a "Delivery
Date") upon which the officer's certificate described in SECTION 7.17(F) is
required to be delivered by the Borrower, cause to be delivered to the Agent for
the benefit of the Lenders each of the following documents in respect of each
domestic wholly-owned Subsidiary of the Borrower created or acquired after the
Closing Date, as to whom such documents have not been delivered on a prior
Delivery Date (a "New Guarantor"):
(i) a Guaranty Agreement duly executed by such New Guarantor
substantially in the form attached hereto as EXHIBIT H;
(ii) an opinion of counsel to the New Guarantor (which opinion
may be rendered by in-house counsel to the Borrower unless the Agent
requests as to any particular New Guarantor that outside counsel be
engaged to furnish the opinion) dated as of the date of delivery of the
Guaranty Agreement provided in the foregoing clause (i) and addressed
to the Agent and the Lenders, in form and substance reasonably
acceptable to the Agent, which opinion shall include the opinions with
respect to the New Guarantor and its Guaranty Agreement as are provided
on the Closing Date with respect to Guarantors and Guaranty Agreements
on such date pursuant to SECTION 5.01(H) hereof, and may include
assumptions and qualifications of similar effect to those contained in
the opinions of counsel to the Guarantors delivered pursuant to SECTION
5.01(H) hereof); and
(iii) current copies of the charter documents, including
partnership agreements and certificate of limited partnership, if
applicable, and bylaws of such New Guarantor, minutes of duly called
and conducted meetings (or duly effected consent actions) of the Board
of Directors, partners, or appropriate committees thereof (and, if
required by such charter documents, bylaws or by applicable laws, of
the shareholders or partners) of such New Guarantor authorizing the
actions and the execution and delivery of documents described in clause
(i) of this SECTION 7.19 and evidence satisfactory to the Agent
(confirmation of the receipt of which will be provided by the Agent to
the Lenders) that such New Guarantor is solvent as of such date and
after giving effect to the Guaranty.
7.20 ADVANCES TO WCC. The Borrower will not, and will not permit any
Subsidiary, to make or maintain loans or advances to WCC, enter into Guaranties
for the
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benefit of WCC, make capital contributions to WCC or purchase securities from
WCC, if, after giving effect to any such transaction, the aggregate amount of
such outstanding loans and advances, Guarantied obligations, capital
contributions and securities purchases shall exceed $1,500,000 in the aggregate.
7.21 OFFICER'S KNOWLEDGE OF DEFAULT. The Borrower will, and will cause
each Subsidiary to, upon any officer of the Borrower obtaining knowledge of any
Default or Event of Default hereunder or under any other obligation of the
Borrower or any Subsidiary to any Lender, or any event, development or
occurrence which could reasonably be expected to have a material adverse effect,
cause such officer or an Authorized Representative to promptly notify the Agent
of the nature thereof, the period of existence thereof, and what action the
Borrower or such Subsidiary proposes to take with respect thereto.
7.22 SUITS OR OTHER PROCEEDINGS. The Borrower will, and will cause each
Subsidiary to, upon any officer of the Borrower obtaining knowledge of any
litigation or other proceedings being instituted against the Borrower or any
Subsidiary or any attachment, levy, execution or other process being instituted
against any assets of the Borrower or any Subsidiary making a claim or claims
which is likely to result in damages in an aggregate amount greater than
$1,000,000 not otherwise covered by insurance, promptly deliver to the Agent
written notice thereof stating the nature and status of such litigation,
dispute, proceeding, levy, execution or other process.
7.23 NOTICE OF DISCHARGE OF ENVIRONMENTAL COMPLAINT OR CONDITION. The
Borrower will, and will cause each Subsidiary to, promptly provide to the Agent
true, accurate and complete copies of any and all notices, complaints, orders,
directives, claims, or citations received by the Borrower or any Subsidiary
relating to any (a) violation or alleged violation by the Borrower or any
Subsidiary of any applicable Environmental Law; (b) release or threatened
release by the Borrower or any Subsidiary, or at any facility or property owned
or leased or operated by the Borrower or any Subsidiary, of any Hazardous
Material, except where occurring legally; or (c) liability or alleged liability
of the Borrower or any Subsidiary for the costs of cleaning up, removing,
remediating or responding to a release of Hazardous Materials.
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ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES THEREFOR
8.01 EVENTS OF DEFAULT. Any one or more of the following shall
constitute an "Event of Default" as such term is used herein:
(a) Default shall occur in the payment of interest on any Note
when the same shall have become due and such default shall continue for
more than five days; or
(b) Default shall occur in the making of any payment of the
principal of any Note at the expressed or any accelerated maturity
date; or
(c) Default shall be made in the payment when due (whether by
lapse of time, by declaration, by call for redemption or otherwise) of
the principal of or interest on any Funded Debt or Current Debt (other
than the Funded Debt evidenced by the Notes) aggregating $100,000 or
more of the Borrower or any Subsidiary and such default shall continue
beyond the period of grace, if any, allowed with respect thereto; or
(d) Default or the happening of any event shall occur under
any indenture, agreement or other instrument under which any Funded
Debt or Current Debt aggregating $100,000 or more of the Borrower or
any Subsidiary may be issued and such default or event shall continue
for a period of time sufficient to permit the acceleration of the matur
ity of any Funded Debt or Current Debt aggregating $100,000 or more of
the Borrower or any Subsidiary outstanding thereunder; or
(e) Default shall occur in the observance or performance of
any covenant or agreement contained in SECTION 7.06 through SECTION
7.16, or in SECTION 7.18 through SECTION 7.20; or
(f) Default shall occur in the observance or performance of
any other provision of this Agreement which is not remedied within 30
days after notice thereof to the Borrower by the holder of any Note; or
(g) Any representation or warranty made by the Borrower
herein, or made by the Borrower or any Guarantor in any other Loan
Document or in any statement or certificate furnished by the Borrower
or any Guarantor in connection with the consu mmation of the issuance
and delivery of the Notes or furnished by the Borrower or any Guarantor
pursuant hereto or pursuant to any other Loan Document, is untrue in
any material respect as of the date of the issuance or making thereof;
or
(h) Final judgment or judgments for the payment of money
aggregating in
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excess of $100,000 is or are outstanding against the Borrower or any
Subsidiary or against any property or assets of either and any one such
judgments has remained unpaid, unvacated, unbonded or unstayed by
appeal or otherwise for a period of 30 days from the date of its entry;
or
(i) A custodian, liquidator, trustee or receiver is appointed
for the Borrower or any Subsidiary or for the major part of the
property of either and is not discharged within 30 days after such
appointment; or
(j) The Borrower or any Subsidiary becomes insolvent or
bankrupt, is generally not paying its debts as they become due or makes
an assignment for the benefit of creditors, or the Borrower or any
Subsidiary causes or suffers an order for relief to be entered with
respect to it under applicable Federal bankruptcy law or applies for or
consents to the appointment of a custodian, liquidator, trustee or
receiver for the Borrower or such Subsidiary or for the major part of
the property of either; or
(k) Bankruptcy, reorganization, arrangement or insolvency
proceedings, or other proceedings for relief under any bankruptcy or
similar law or laws for the relief of debtors, are instituted by or
against the Borrower or any Subsidiary and, if instituted against the
Borrower or any Subsidiary, are consented to or are not dismissed
within 60 days after the institution of such proceedings; or
(l) The Wackenhut Family Group shall own or control, directly
or indirectly, less than 33.33% of the Voting Stock of the Borrower; or
(m) any actual or asserted invalidity (other than by the Agent
or the Lenders) of the Loan Documents.
8.02 NOTICE TO HOLDERS. When an Event of Default described in the
foregoing SECTION 8.01 has occurred, or if the holder of any Note or of any
other evidence of Funded Debt or Current Debt of the Borrower gives any notice
or takes any other action with respect to a claimed default, the Borrower agrees
to give notice within three Business Days of such event to the Agent and all
Lenders; such notice to be in writing and sent by registered or certified mail
or by telegram.
8.03 ACCELERATION. Upon the happening of any Event of Default, if such
Event of Default or any other Event of Default shall then be continuing,
(A) either or both of the following actions may be taken: (i)
the Agent, with the consent of the Required Lenders, may, and at the
direction of the Required Lenders shall, declare any obligation of the
Lenders to make further Loans or issue Letters of Credit terminated,
whereupon the obligation of each Lender to make further Loans or issue
Letters of Credit hereunder shall terminate immediately, and (ii) the
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Agent shall at the direction of the Required Lenders, at their option,
declare by notice to the Borrower any or all of the Obligations to be
immediately due and payable, and the same, all interest accrued thereon
and all other obligations of the Borrower to the Lenders shall
forthwith become immediately due and payable without presentment,
demand, protest, notice or other formality of any kind, all of which
are hereby expressly waived, anything contained herein or in any
instrument evidencing the Obligations to the contrary notwithstanding;
PROVIDED, however, that notwithstanding the above, if there shall occur
an Event of Default under clause (j) or (k) above, then the obligation
of the Lenders to lend hereunder shall automatically terminate and any
and all of the Obligations shall be immediately due and payable without
the necessity of any action by the Agent or the Required Lenders or
notice to the Agent or the Lenders; and
(B) The Borrower shall, upon demand of Agent, deposit cash
with the Agent in an amount equal to the amount of any Letters of
Credit remaining undrawn, as collateral security for the repayment of
any future drawings under such Letters of Credit, and such amounts
shall be held by Agent pursuant to the terms of the Letter of Credit
Account Agreement.
8.04 AGENT TO ACT. In case any one or more Events of Default shall
occur and be continuing, the Agent may, and at the direction of the Required
Lenders shall, proceed to protect and enforce their rights or remedies either by
suit in equity or by action at law, or both, whether for the specific
performance of any covenant, agreement or other provision contained herein or in
any other Loan Document, or to enforce the payment of the Obligations or any
other legal or equitable right or remedy.
8.05 CUMULATIVE RIGHTS. No right or remedy herein conferred upon the
Lenders or the Agent is intended to be exclusive of any other rights or remedies
contained herein or in any other Loan Document, and every such right or remedy
shall be cumulative and shall be in addition to every other such right or remedy
contained herein and therein or now or hereafter existing at law or in equity or
by statute, or otherwise.
8.06 ALLOCATION OF PROCEEDS. If an Event of Default has occurred and is
continuing, and the maturity of the Notes has been accelerated pursuant to
ARTICLE VIII hereof, all payments received by the Agent hereunder in respect of
any principal of or interest on the Obligations or any other amounts payable by
the Borrower hereunder shall be applied by the Agent in the following order:
(a) amounts due to the Lenders pursuant to SECTIONS 2.12,
3.02(F), 3.03, 3.04, 10.06 and 10.12 hereof;
(b) amounts due to the Agent pursuant to SECTION 9.11 hereof;
(c) payments of interest, to be applied in accordance with
SECTION 2.09 hereof;
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(d) payments of principal, to be applied in accordance with
SECTION 2.09 hereof;
(e) payments of all other amounts due under this Agreement, if
any, to be applied in accordance with each Lender's pro rata share of
all principal due to the Lenders.
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ARTICLE IX
THE AGENT
9.01 APPOINTMENT, POWERS, AND IMMUNITIES. Each Lender hereby
irrevocably appoints and authorizes the Agent to act as its agent under this
Agreement and the other Loan Documents with such powers and discretion as are
specifically delegated to the Agent by the terms of this Agreement and the other
Loan Documents, together with such other powers as are reasonably incidental
thereto. The Agent (which term as used in this sentence and in SECTION 9.05 and
the first sentence of SECTION 9.06 hereof shall include its affiliates and its
own and its affiliates' officers, directors, employees, and agents):
(a) shall not have any duties or responsibilities except those
expressly set forth in this Agreement and shall not be a trustee or
fiduciary for any Lender;
(b) shall not be responsible to the Lenders for any recital,
statement, representation, or warranty (whether written or oral) made
in or in connection with any Loan Document or any certificate or other
document referred to or provided for in, or received by any of them
under, any Loan Document, or for the value, validity, effectiveness,
genuineness, enforceability, or sufficiency of any Loan Document, or
any other document referred to or provided for therein or for any
failure by the Borrower or any other Person to perform any of its
obligations thereunder;
(c) shall not be responsible for or have any duty to
ascertain, inquire into, or verify the performance or observance of any
covenants or agreements by the Borrower or the satisfaction of any
condition or to inspect the property (including the books and records)
of the Borrower or any of its Subsidiaries or affiliates;
(d) shall not be required to initiate or conduct any
litigation or collection proceedings under any Loan Document; and
(e) shall not be responsible for any action taken or omitted
to be taken by it under or in connection with any Loan Document, except
for its own gross negligence or willful misconduct.
The Agent may employ agents and attorneys-in-fact and shall not be responsible
for the negligence or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care.
9.02. RELIANCE BY AGENT. The Agent shall be entitled to rely upon any
certification, notice, instrument, writing, or other communication (including,
without limitation, any thereof by telephone or telefacsimile) believed by it to
be genuine and correct and to have been signed, sent or made by or on behalf of
the proper Person or Persons, and upon advice and statements of legal counsel
(including counsel for the Borrower), independent
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accountants, and other experts selected by the Agent. The Agent may deem and
treat the payee of any Note as the holder thereof for all purposes hereof unless
and until the Agent receives and accepts an Assignment and Acceptance executed
in accordance with SECTION 10.01 hereof. As to any matters not expressly
provided for by this Agreement, the Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from acting)
upon the instructions of the Required Lenders, and such instructions shall be
binding on all of the Lenders; PROVIDED, HOWEVER, that the Agent shall not be
required to take any action that exposes the Agent to personal liability or that
is contrary to any Loan Document or applicable law or unless it shall first be
indemnified to its satisfaction by the Lenders against any and all liability and
expense which may be incurred by it by reason of taking any such action.
9.03. DEFAULTS. The Agent shall not be deemed to have knowledge or
notice of the occurrence of a Default or Event of Default unless the Agent has
received written notice from a Lender or the Borrower specifying such Default or
Event of Default and stating that such notice is a "Notice of Default". In the
event that the Agent receives such a notice of the occurrence of a Default or
Event of Default, the Agent shall give prompt notice thereof to the Lenders. The
Agent shall (subject to SECTION 9.02 hereof) take such action with respect to
such Default or Event of Default as shall reasonably be directed by the Required
Lenders, PROVIDED THAT, unless and until the Agent shall have received such
directions, the Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interest of the Lenders.
9.04. RIGHTS AS LENDER. With respect to its Commitment and the Loans
made by it, NationsBank (and any successor acting as Agent) in its capacity as a
Lender hereunder shall have the same rights and powers hereunder as any other
Lender and may exercise the same as though it were not acting as the Agent, and
the term "Lender" or "Lenders" shall, unless the context otherwise indicates,
include the Agent in its individual capacity. NationsBank (and any successor
acting as Agent) and its affiliates may (without having to account therefor to
any Lender) accept deposits from, lend money to, make investments in, provide
services to, and generally engage in any kind of lending, trust, or other
business with the Borrower or any of its Subsidiaries or affiliates as if it
were not acting as Agent, and NationsBank (and any successor acting as Agent)
and its affiliates may accept fees and other consideration from the Borrower or
any of its Subsidiaries or affiliates for services in connection with this
Agreement or otherwise without having to account for the same to the Lenders.
9.05. INDEMNIFICATION. The Lenders agree to indemnify the Agent (to the
extent not reimbursed under SECTION 10.12 hereof, but without limiting the
obligations of the Borrower under such Section) ratably in accordance with their
respective Commitments, for any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses (including
attorneys' fees), or disbursements of any kind and nature whatsoever that may be
imposed on, incurred by or asserted against the Agent (including by any Lender)
in any way
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relating to or arising out of any Loan Document or the transactions contemplated
thereby or any action taken or omitted by the Agent under any Loan Document;
PROVIDED that no Lender shall be liable for any of the foregoing to the extent
they arise from the gross negligence or willful misconduct of the Person to be
indemnified. Without limitation of the foregoing, each Lender agrees to
reimburse the Agent promptly upon demand for its ratable share of any costs or
expenses payable by the Borrower under SECTION 10.06, to the extent that the
Agent is not promptly reimbursed for such costs and expenses by the Borrower.
The agreements contained in this Section shall survive payment in full of the
Loans and all other amounts payable under this Agreement.
9.06. NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender agrees that
it has, independently and without reliance on the Agent or any other Lender, and
based on such documents and information as it has deemed appropriate, made its
own credit analysis of the Borrower and its Subsidiaries and decision to enter
into this Agreement and that it will, independently and without reliance upon
the Agent or any other Lender, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own analysis and
decisions in taking or not taking action under the Loan Documents. Except for
notices, reports, and other documents and information expressly required to be
furnished to the Lenders by the Agent hereunder, the Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the affairs, financial condition, or business of the
Borrower or any of its Subsidiaries or affiliates that may come into the
possession of the Agent or any of its affiliates.
9.07. RESIGNATION OF AGENT. The Agent may resign at any time by giving
notice thereof to the Lenders and the Borrower. Upon any such resignation, the
Required Lenders shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed by the Required Lenders and shall
have accepted such appointment within thirty (30) days after the retiring
Agent's giving of notice of resignation, then the retiring Agent may, on behalf
of the Lenders, appoint a successor Agent which shall be a commercial bank
organized under the laws of the United States of America having combined capital
and surplus of at least $100,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor, such successor shall thereupon succeed to and
become vested with all the rights, powers, discretion, privileges, and duties of
the retiring Agent, and the retiring Agent shall be discharged from its duties
and obligations hereunder. After any retiring Agent's resignation hereunder as
Agent, the provisions of this ARTICLE IX shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as Agent.
9.08 FEES. The Borrower agrees to pay to the Agent, for its individual
account, an annual Agent's fee in such amount as shall be agreed to from time to
time, such fee to be paid in quarterly installments in advance on the last
Business Day of each December, March, June and September, the first such
installment to be paid on the first such date next following there being more
than one Lender party to this Agreement.
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ARTICLE X
MISCELLANEOUS
10.01 ASSIGNMENTS AND PARTICIPATION.
(a) Each Lender may assign to one or more Eligible Assignees all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Loans, its Note, and its Revolving Credit
Commitment); PROVIDED, HOWEVER, that
(i) each such assignment shall be to an Eligible Assignee;
(ii) except in the case of an assignment to another Lender or
an assignment of all of a Lender's rights and obligations under this Agreement,
any such partial assignment shall be in an amount at least equal to $5,000,000
or an integral multiple of $1,000,000 in excess thereof;
(iii) each such assignment by a Lender shall be of a constant,
and not varying, percentage of all of its rights and obligations under this
Agreement and the Note; and
(iv) the parties to such assignment shall execute and deliver
to the Agent for its acceptance an Assignment and Acceptance in the form of
EXHIBIT B hereto, together with any Note subject to such assignment and a
processing fee of $3,500.
Upon execution, delivery, and acceptance of such Assignment and Acceptance, the
assignee thereunder shall be a party hereto and, to the extent of such
assignment, have the obligations, rights, and benefits of a Lender hereunder and
the assigning Lender shall, to the extent of such assignment, relinquish its
rights and be released from its obligations under this Agreement. Upon the
consummation of any assignment pursuant to this Section, the assignor, the Agent
and the Borrower shall make appropriate arrangements so that, if required, new
Notes are issued to the assignor and the assignee. If the assignee is not
incorporated under the laws of the United States of America or a state thereof,
it shall deliver to the Borrower and the Agent certification as to exemption
from deduction or withholding of Taxes in accordance with SECTION 4.06.
(b) The Agent shall maintain at its address referred to in SECTION
10.02 a copy of each Assignment and Acceptance delivered to and accepted by it
and a register for the recordation of the names and addresses of the Lenders and
the Revolving Credit Commitment of, and principal amount of the Loans owing to,
each Lender from time to time (the "REGISTER"). The entries in the Register
shall be conclusive and binding for all purposes, absent manifest error, and the
Borrower, the Agent and the Lenders may treat each Person whose name is recorded
in the Register as a Lender hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
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(c) Upon its receipt of an Assignment and Acceptance executed by the
parties thereto, together with any Note subject to such assignment and payment
of the processing fee, the Agent shall, if such Assignment and Acceptance has
been completed and is in substantially the form of EXHIBIT B hereto, (i) accept
such Assignment and Acceptance, (ii) record the information contained therein in
the Register and (iii) give prompt notice thereof to the parties thereto.
(d) Each Lender may sell participations at its expense to one or more
Persons in all or a portion of its rights and obligations under this Agreement
(including all or a portion of its Revolving Credit Commitment and its Loans);
PROVIDED, HOWEVER, that (i) such Lender's obligations under this Agreement shall
remain unchanged, (ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, (iii) the Borrower shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement, and such Lender shall
retain the sole right to enforce the obligations of the Borrower relating to its
Loans and its Note and to approve any amendment, modification, or waiver of any
provision of this Agreement (other than amendments, modifications, or waivers
decreasing the amount of principal of or the rate at which interest is payable
on such Loans or Note, extending any scheduled principal payment date or date
fixed for the payment of interest on such Loans or Note, or extending its
Revolving Credit Commitment) and (iv) the sale of any such participation which
requires the Borrower to file a registration statement with federal or state
regulatory authorities shall not be permitted.
(e) Notwithstanding any other provision set forth in this Agreement,
any Lender may at any time assign and pledge all or any portion of its Loans and
its Note to any Federal Reserve Bank as collateral security pursuant to
Regulation A and any Operating Circular issued by such Federal Reserve Bank. No
such assignment shall release the assigning Lender from its obligations
hereunder.
(f) Any Lender may furnish any information concerning the Borrower or
any of its Subsidiaries in the possession of such Lender from time to time to
assignees and participants (including prospective assignees and participants).
10.02 NOTICES. Any notice shall be conclusively deemed to have been
received by any party hereto and be effective on the day on which delivered to
such party (against receipt therefor) at the address set forth below or such
other address as such party shall specify to the other parties in writing (or,
in the case of telephonic notice or notice by telefacsimile, telegram or telex
(where the receipt of such message is verified by return) expressly provided for
hereunder, when received at such telephone, telefacsimile or telex number as may
from time to time be specified in written or verbal notice to the other parties
hereto or otherwise received), or if sent prepaid by certified or registered
mail return receipt requested on the third Business Day after the day on which
mailed, addressed to such party at said address:
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(a) if to the Borrower:
The Wackenhut Corporation
4200 Wackenhut Drive, Suite 100
Palm Beach Gardens, Florida 33410
Attention: James P. Rowan
with a copy to Chief Financial Officer or Treasurer
at the same address.
(b) if to an Authorized Representative:
at the address set forth for receipt of notices in
the notice of appointment thereof.
(c) if to the Agent:
NationsBank, National Association
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Agency Services
Telephone: (704) 388-2374
Telefacsimile: (704) 386-9923
(d) if to NationsBank in its capacity as issuer of the
Letters of Credit:
NationsBank, National Association
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: International Letter of Credit Department
(e) if to the Lenders:
At the addresses set forth on the signature pages
hereof and on the signature page of each Assignment
and Acceptance.
10.03 NO WAIVER. No failure or delay on the part of the Agent or any
Lender in the exercise of any right, power or privilege hereunder shall operate
as a waiver of any such right, power or privilege nor shall any such failure or
delay preclude any other or further exercise thereof. The rights and remedies
herein provided are cumulative and not exclusive of any rights or remedies
provided by law.
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'
10.04 RIGHT OF SETOFF; ADJUSTMENTS. (a) Upon the occurrence and during
the continuance of any Event of Default, each Lender (and each of its
affiliates) is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by such Lender (or any of its affiliates)
to or for the credit or the account of the Borrower against any and all of the
obligations of the Borrower now or hereafter existing under this Agreement and
the Note held by such Lender, irrespective of whether such Lender shall have
made any demand under this Agreement or such Note and although such obligations
may be unmatured. Each Lender agrees promptly to notify the Borrower after any
such set-off and application made by such Lender; PROVIDED, HOWEVER, that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of each Lender under this Section are in addition to
other rights and remedies (including, without limitation, other rights of
set-off) that such Lender may have.
(b) If any Lender (a "benefitted Lender") shall at any time receive any
payment of all or part of the Loans owing to it, or interest thereon, or receive
any collateral in respect thereof (whether voluntarily or involuntarily, by
set-off, or otherwise), in a greater proportion than any such payment to or
collateral received by any other Lender, if any, in respect of such other
Lender's Loans owing to it, or interest thereon, such benefitted Lender shall
purchase for cash from the other Lenders a participating interest in such
portion of each such other Lender's Loans owing to it, or shall provide such
other Lenders with the benefits of any such collateral, or the proceeds thereof,
as shall be necessary to cause such benefitted Lender to share the excess
payment or benefits of such collateral or proceeds ratably with each of the
Lenders; PROVIDED, HOWEVER, that if all or any portion of such excess payment or
benefits is thereafter recovered from such benefitted Lender, such purchase
shall be rescinded, and the purchase price and benefits returned, to the extent
of such recovery, but without interest. The Borrower agrees that any Lender so
purchasing a participation from a Lender pursuant to this SECTION 10.04 may, to
the fullest extent permitted by law, exercise all of its rights of payment
(including the right of set-off) with respect to such participation as fully as
if such Person were the direct creditor of the Borrower in the amount of such
participation.
10.05 SURVIVAL. All covenants, agreements, representations and
warranties made herein shall survive the making by the Lenders of the Loans and
the expiration of the Letters of Credit and the execution and delivery to the
Lenders of this Agreement and the Notes and shall continue in full force and
effect so long as any of the Obligations remain outstanding or any Lender has
any commitment hereunder. Whenever in this Agreement, any of the parties hereto
is referred to, such reference shall be deemed to include the successors and
permitted assigns of such party and all covenants, provisions and agreements by
or on behalf of the Borrower which are contained in this Agreement and the Notes
shall inure to the benefit of the successors and permitted assigns of the
Lenders or any of them.
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10.06 EXPENSES. The Borrower agrees (a) to pay or reimburse the Agent
for all its reasonable and customary out-of-pocket costs and expenses incurred
in connection with the preparation, negotiation and execution of this Agreement
or any of the other Loan Documents, and the consummation of the transactions
contemplated hereby and thereby, including, without limitation, the reasonable
and customary fees and disbursements of counsel to the Agent, (b) to pay or
reimburse the Agent for all of its reasonable out-of-pocket costs and expenses
incurred in connection with any amendment, supplement or modification to, any of
the Loan Documents (including due diligence expenses and travel expenses), and
the consummation of the transactions contemplated thereby, including the
reasonable fees and disbursements of counsel to the Agent, (c) to pay or
reimburse the Agent and the Lenders for all their costs and expenses incurred in
connection with the enforcement or preservation of any rights under this
Agreement, the Notes, the Guaranty Agreements and the Letter of Credit Account
Agreement, including without limitation, the reasonable fees and disbursements
of their counsel (including allocated cost of in-house counsel), (d) to pay,
indemnify and hold the Agent and the Lenders harmless from any and all recording
and filing fees and any and all liabilities with respect to, or resulting from
any failure to pay or delay in paying, documentary, stamp, excise and other
similar taxes, if any, which may be payable or determined to be payable in
connection with the execution and delivery of, or consummation of any amendment,
supplement or modification of, or any waiver or consent under or in respect of,
this Agreement, and (e) to pay, indemnify, and hold the Agent and the Lenders
harmless from and against any and all other liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever with respect to the execution, delivery,
enforcement, performance and administration of this Agreement or in any respect
relating to the transactions contemplated hereby or thereby, (all the foregoing,
collectively, the "indemnified liabilities"); PROVIDED, HOWEVER, that the
Borrower shall have no obligation hereunder with respect to indemnified
liabilities arising from (i) the willful misconduct or gross negligence of the
party seeking indemnification, (ii) legal proceedings commenced against the
Agent or any Lender by any security holder or creditor thereof arising out of
and based upon rights afforded any such security holder or creditor solely in
its capacity as such, (iii) any taxes imposed upon the Agent or any Lender other
than the documentary, stamp, excise and similar taxes described in clause (c)
above or any tax resulting from any Regulatory Change, which tax would be
payable to Lenders by Borrower pursuant to ARTICLE IV hereof, (iv) taxes imposed
as a result of a transfer or assignment of any Note, participation or assignment
of a portion of its rights or (v) any taxes imposed upon any transferee of any
Note. The agreements in this subsection shall survive repayment of the Notes and
all other Obligations hereunder.
10.07 AMENDMENTS AND WAIVERS. Any provision of this Agreement or any
other Loan Document may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by the Borrower and the Required Lenders
(and, if ARTICLE IX or the rights or duties of the Agent are affected thereby,
by the Agent); PROVIDED that no such amendment or waiver shall, unless signed by
all the Lenders, (i) increase the Revolving Credit Commitments of the Lenders,
(ii) reduce the principal of or rate of interest on any Loan or any fees or
other amounts payable hereunder, (iii) postpone any date fixed for the
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payment of any scheduled installment of principal of or interest on any Loan or
any fees or other amounts payable hereunder or for termination of any Revolving
Credit Commitment, (iv) change the percentage of the Commitments or of the
unpaid principal amount of the Notes, or the number of Lenders, which shall be
required for the Lenders or any of them to take any action under this Section or
any other provision of this Agreement or (v) release any Guarantor.
10.08 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one such fully- executed counterpart.
10.09 WAIVERS BY THE BORROWER. In any litigation in any court with
respect to, in connection with, or arising out of this Agreement, the Guaranty
Agreements, the Loans, any of the Notes, any of the Letters of Credit, any of
the other Loan Documents, the Obligations, or any instrument or document
delivered pursuant to this Agreement, or the validity, protection, inter
pretation, collection or enforcement thereof, or any other claim or dispute
howsoever arising between the Borrower and the Lenders or the Agent, (i) the
Borrower hereby waives the right to interpose any setoff, recoupment,
counterclaim or cross-claim in connection with any such litigation, irrespective
of the nature of such setoff, recoupment, counter-claim or cross-claim unless
such setoff, recoupment, counter-claim or cross-claim could not, by reason of
any applicable federal or state procedural laws, be interposed, pleaded or
alleged in any other action and (ii) the Borrower and each Lender and the Agent
hereby waive, to the extent permitted by applicable law, trial by jury in
connection with any such litigation.
10.10 TERMINATION. This Agreement shall continue in full force and
effect until terminated pursuant to the terms hereof; however, the Lenders shall
have the right to terminate this Agreement immediately, at any time, during the
continuance of an Event of Default under ARTICLE VIII hereof as provided
therein. The termination of this Agreement shall not affect any rights of the
Borrower, the Lenders or the Agent or any obligation of the Borrower, the
Lenders or the Agent, arising prior to the effective date of such termination,
and the provisions hereof shall continue to be fully operative until all
transactions entered into or rights created or obligations incurred prior to
such termination have been fully disposed of, concluded or liquidated and the
Obligations arising prior to or after such termination have been irrevocably
paid in full. Upon the termination of this Agreement, all Obligations
(including, without limitation, the Loans and the Reimbursement Obligations)
shall be due and payable without notice or demand. The security interests, liens
and rights granted to the Agent for the benefit of the Lenders hereunder and
under the other Loan Documents shall continue in full force and effect,
notwithstanding the termination of this Agreement, until all of the Obligations
have been paid in full after the termination hereof or the Borrower has
furnished the Lenders and the Agent with an indemnification satisfactory to the
Agent and each Lender with respect thereto. All representations, warranties,
covenants, waivers and agreements contained herein shall survive termination
hereof until payment in
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full of the Obligations unless otherwise provided herein. Notwithstanding the
foregoing, if after receipt of any payment of all or any part of the
Obligations, any Lender is for any reason compelled to surrender such payment to
any Person because such payment is determined to be void or voidable as a
preference, impermissible setoff, a diversion of trust funds or for any other
reason, this Agreement shall continue in full force and the Borrower shall be
liable to, and shall indemnify and hold such Lender harmless for, the amount of
such payment surrendered until such Lender shall have been finally and
irrevocably paid in full. The provisions of the foregoing sentence shall be and
remain effective notwithstanding any contrary action which may have been taken
by the Lenders in reliance upon such payment, and any such contrary action so
taken shall be without prejudice to the Lenders' rights under this Agreement and
shall be deemed to have been conditioned upon such payment having become final
and irrevocable.
10.11 GOVERNING LAW. (A) ALL DOCUMENTS EXECUTED PURSUANT TO THE
TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING, WITHOUT LIMITATION, THIS AGREEMENT
AND EACH OF THE LOAN DOCUMENTS SHALL BE DEEMED TO BE CONTRACTS MADE UNDER, AND
FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS AND
JUDICIAL DECISIONS OF THE STATE OF FLORIDA. THE BORROWER HEREBY SUBMITS TO THE
JURISDICTION AND VENUE OF THE STATE AND FEDERAL COURTS OF FLORIDA FOR THE
PURPOSES OF RESOLVING DISPUTES HEREUNDER OR FOR THE PURPOSES OF COLLECTION.
(B) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR
REMEDIES UNDER OR RELATED TO ANY LOAN DOCUMENT OR ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN
CONNECTION THEREWITH, THE BORROWER, THE AGENT AND THE LENDERS HEREBY AGREE, TO
THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL
BE TRIED BEFORE A COURT AND NOT BEFORE A JURY AND HEREBY IRREVOCABLY WAIVE, TO
THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PERSON MAY HAVE TO TRIAL
BY JURY IN ANY SUCH ACTION OR PROCEEDING.
10.12 INDEMNIFICATION. In consideration of the execution and delivery
of this Agreement by the Agent and each Lender and the extension of the
Revolving Credit Commitments and Swing Line, the Borrower hereby indemnifies,
exonerates and holds the Agent and each Lender and each of their respective
officers, directors, employees and agents (collectively, the "Indemnified
Parties") free and harmless from and against any and all actions, causes of
action, suits, losses, costs, liabilities and damages, and expenses incurred in
connection therewith (irrespective of whether any such Indemnified Party is a
party to the action for which indemnification hereunder is sought), including
reasonable attorneys' fees and disbursements (collectively, the "Indemnified
Liabilities"), incurred by the Indemnified Parties or any of them as a result
of, or arising out of, or relating to
(a) any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of any Loan or
supported by any Letter of Credit;
(b) the entering into and performance of this Agreement and
any other Loan Document by any of the Indemnified Parties;
78
<PAGE> 84
(c) any investigation, litigation or proceeding related to any
environmental cleanup, audit, compliance or other matter relating to
the protection of the environment or the release by the Borrower or any
of its Subsidiaries of any Hazardous Material; or
(d) the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission, discharging or releases from, any real
property owned or operated by the Borrower or any Subsidiary thereof of
any Hazardous Material (including any losses, liabilities, damages,
injuries, costs, expenses or claims asserted or arising under any
Environmental Law), regardless of whether caused by, or within the
control of, the Borrower or such Subsidiary,
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's gross
negligence or willful misconduct, and if and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Borrower hereby agrees to
make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law.
10.13 AGREEMENT CONTROLS. In the event that any term of any of the Loan
Documents other than this Agreement conflicts with any term of this Agreement,
the terms and provisions of this Agreement shall control.
79
<PAGE> 85
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be made, executed and delivered by their duly authorized officers as of the day
and year first above written.
WITNESS: THE WACKENHUT CORPORATION
/s/ KIMBERLY B. SALTRICK
- ------------------------
/s/ EMILY A. SAMPLE By /s/ TERRY P. MAYOTTE
- ------------------------ -------------------------------
Name: Terry P. Mayotte
Title: Treasurer
Signature Page 1
<PAGE> 86
NATIONSBANK, NATIONAL ASSOCIATION,
as Agent for the Lenders
By /s/ JOHNS ELLINGTON
--------------------------------
Name: Johns Ellington
Title: Vice President
Signature Page 2
<PAGE> 87
NATIONSBANK, NATIONAL ASSOCIATION
By /s/ JOHNS ELLINGTON
--------------------------------
Name: Johns Ellington
Title: Vice President
Signature Page 3
<PAGE> 88
SCOTIABANC INC.
By: /s/ FRANK F. SANDER
-------------------
Name: FRANK F. SANDLER
-------------------------
Title: RELATIONSHIP MANAGER
-------------------------
Lending Office:
600 Peachtree Street, N.E.
Suite 2700
Atlanta, Georgia 30308
Wire Transfer Instructions:
The Bank of Nova Scotia
Liberty Plaza
New York, New York 10006
ABA #026002532
Attention: Further Credit # 0735639
ScotiaBanc Inc.
Reference: Houston/Atlanta Team Re Wackenhut
Signature Page 4
<PAGE> 89
EXHIBIT A
APPLICABLE COMMITMENT PERCENTAGES
<TABLE>
<CAPTION>
APPLICABLE
LENDER REVOLVING CREDIT COMMITMENT
- ------ COMMITMENT PERCENTAGE
---------------- ----------
<S> <C> <C>
NationsBank, National Association $25,000,000 62.5%
Scotiabanc Inc. $15,000,000 37.5%
----------- ----
$40,000,000 100%
=========== ====
</TABLE>
A-1
<PAGE> 90
EXHIBIT B
ASSIGNMENT AND ACCEPTANCE
DATED , 19
Reference is made to the Amended and Restated Revolving Credit and
Reimbursement Agreement dated as of December __ 1997 (the "Credit Agreement")
among Wackenhut Corporation, a Florida corporation (the "Borrower"), the Lenders
(as defined in the Credit Agreement) and NationsBank, National Association, as
agent for the Lenders (the "Agent"). Terms defined in the Credit Agreement are
used herein with the same meaning.
The "Assignor" and the "Assignee" referred to on Schedule 1 agree as
follows:
1. The Assignor hereby sells and assigns to the Assignee, without
recourse and without representation or warranty except as expressly set forth
herein, and the Assignee hereby purchases and assumes from the Assignor, an
interest in and to the Assignor's rights and obligations under the Credit
Agreement and the other Loan Documents as of the date hereof equal to the
percentage interest specified on Schedule 1 of all outstanding rights and
obligations under the Credit Agreement and the other Loan Documents. After
giving effect to such sale and assignment, the Assignee's Commitment and the
amount of the Loans owing to the Assignee will be as set forth on Schedule 1.
2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Loan Documents
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Loan Documents or any other instrument or document furnished
pursuant thereto; (iii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or the
performance or observance by the Borrower of any of its obligations under the
Loan Documents or any other instrument or document furnished pursuant thereto;
and (iv) attaches the Note held by the Assignor and requests that the Agent
exchange such Note for new Notes payable to the order of the Assignee in an
amount equal to the Commitment assumed by the Assignee pursuant hereto and to
the Assignor in an amount equal to the Commitment retained by the Assignor, if
any, as specified on Schedule 1.
B-1
<PAGE> 91
3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
SECTION 7.17 thereof and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Acceptance; (ii) agrees that it will, independently and without
reliance upon the Agent, the Assignor or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Credit
Agreement; (iii) confirms that it is an Eligible Assignee; (iv) appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers and discretion under the Credit Agreement as are delegated to the
Agent by the terms thereof, together with such powers and discretion as are
reasonably incidental thereto; (v) agrees that it will perform in accordance
with their terms all of the obligations that by the terms of the Credit
Agreement are required to be performed by it as a Lender; and (vi) attaches any
U.S. Internal Revenue Service or other forms required under SECTION 4.06.
4. Following the execution of this Assignment and Acceptance, it will
be delivered to the Agent for acceptance and recording by the Agent. The
effective date for this Assignment and Acceptance (the "Effective Date") shall
be the date of acceptance hereof by the Agent, unless otherwise specified on
Schedule 1.
5. Upon such acceptance and recording by the Agent, as of the Effective
Date, (i) the Assignee shall be a party to the Credit Agreement and, to the
extent provided in this Assignment and Acceptance, have the rights and
obligations of a Lender thereunder and (ii) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording by the Agent, from and after the
Effective Date, the Agent shall make all payments under the Credit Agreement and
the Notes in respect of the interest assigned hereby (including, without
limitation, all payments of principal, interest and commitment fees with respect
thereto) to the Assignee. The Assignor and Assignee shall make all appropriate
adjustments in payments under the Credit Agreement and the Notes for periods
prior to the Effective Date directly between themselves.
B-2
<PAGE> 92
7. This Assignment and Acceptance shall be governed by, and construed
in accordance with, the laws of the State of Florida.
8. This Assignment and Acceptance may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of Schedule 1 to this Assignment and Acceptance by telecopier shall
be effective as delivery of a manually executed counterpart of this Assignment
and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule
1 to this Assignment and Acceptance to be executed by their officers thereunto
duly authorized as of the date specified thereon.
B-3
<PAGE> 93
SCHEDULE 1
to
ASSIGNMENT AND ACCEPTANCE
Percentage interest assigned: ________%
Assignee's Commitment: $_______
Aggregate outstanding principal amount
of Loans assigned: $_______
Principal amount of Note payable to Assignee: $_______
Principal amount of Note payable to Assignor: $_______
Effective Date (if other than date
of acceptance by Agent): *_______, 19__
[NAME OF ASSIGNOR], as Assignor
By:
Title:
Dated: , 19 _
[NAME OF ASSIGNEE], as Assignee
By:
Title:
Lending Office:
* This date should be no earlier than five Business Days after the
delivery of this Assignment and Acceptance to the Agent.
B-4
<PAGE> 94
Accepted [and Approved] **
this ___ day of ___________, 19 _
NATIONSBANK, NATIONAL ASSOCIATION.
By:
Title:
[Approved this ____ day
of ____________, 19__
[WACKENHUT CORPORATION]
By: ]**
Title:
** Required if the Assignee is an Eligible Assignee solely by reason of
clause (iii) of the definition of "Eligible Assignee".
B-5
<PAGE> 95
EXHIBIT C
NOTICE OF APPOINTMENT (OR REVOCATION) OF AUTHORIZED
OFFICER
Reference is hereby made to the Amended and Restated Revolving
Credit and Reimbursement Agreement, dated as of December __, 1997 (the
"Agreement") among NATIONSBANK, NATIONAL ASSOCIATION, as Agent for certain
Lenders signatory thereto, such Lenders, and THE WACKENHUT CORPORATION (the
"Borrower"). Capitalized terms used but not defined herein shall have the
respective meanings therefor set forth in the Agreement.
The Borrower hereby nominates, constitutes and appoints each
individual named below as an Authorized Representative under the Loan Documents,
and hereby represents and warrants that (i) set forth opposite each such
individual's name is a true and correct statement of such individual's corporate
office (to which such individual has been duly elected or appointed), a genuine
specimen signature of such individual and an address for the giving of notice,
and (ii) each such individual has been duly authorized by the Borrower to act as
Authorized Representative thereunder:
Name and Address Corporate Office Specimen Signature
- ------------------ ------------------- -------------------
- ------------------ ------------------- -------------------
- ------------------ ------------------- -------------------
- ------------------ ------------------- -------------------
- ------------------ ------------------- -------------------
Borrower hereby revokes (effective upon receipt hereof by the Agent) the prior
appointment of ________________ as an Authorized Representative.
This the ___ day of __________________, 19__.
WITNESS: THE WACKENHUT CORPORATION
_________________________ By_______________________________
_________________________ Title______________________________
C-1
<PAGE> 96
EXHIBIT D-1
BORROWING NOTICE (LOAN)
(SECTION 2.04)
To: NationsBank, National Association, as Agent
150 S.E. Third Avenue
Miami, Florida 33131
Reference is hereby made to the Amended and Restated Revolving Credit
and Reimbursement Agreement, dated as of December __, 1997, (the "Agreement")
among NATIONSBANK, NATIONAL ASSOCIATION, as Agent for certain Lenders signatory
thereto, such Lenders and THE WACKENHUT CORPORATION. Capitalized terms used but
not defined herein shall have the respective meanings therefor set forth in the
Agreement.
The Borrower through its Authorized Representative hereby confirms its
prior notice of borrowing given to the Agent by telephone on ____________, 19__
to the effect that Revolving Loans or Conversions of Revolving Loans of the type
and amount set forth below be made on the date indicated by deposit of such
amount to the Borrower's Account:
<TABLE>
<CAPTION>
Type of Loan Interest Aggregate
(check one) Period(1) Amount(2) Date of Loan(3)
- ------------ --------- --------- ---------------
<S> <C> <C> <C>
Base
Loan _____
Fixed CD
Loan _____
Eurodollar Rate Loan _____
</TABLE>
- -----------------------
(1) For any Fixed CD Rate Loan 30, 60, 90 or 180 days and for any
Eurodollar Rate Loan, one, two, three or six months.
(2) (i) If a Base Rate Loan, in an amount equal to $300,000 or any integral
multiple thereof, (ii) if a Fixed CD Rate Loan or Eurodollar Rate Loan,
in a minimum amount of $300,000 or, if greater, in additional amounts
which are integral multiples of $300,000 in excess thereof.
(3) At least two (2) Business Days after date of telephonic notice if a
Fixed CD Rate Loan and three (3) Business Days if a Eurodollar Rate
Loan; may be same Business Day in the case of Base Rate Loans.
D-1-1
<PAGE> 97
The undersigned hereby certifies that:
1. No Default or Event of Default exists either now or after giving
effect to the borrowing described herein; and
2. All the representations and warranties set forth in the Agreement
(other than those expressly stated to refer to a particular date) are true and
correct as of the date hereof except that the reference to the financial
statements in SECTION 6.03 thereof are to those financial statements most
recently delivered to you pursuant to SECTION 7.17 of the Agreement (it being
understood that any financial statements delivered pursuant to SECTION 7.17(A)
have not been certified by independent public accountants).
This the ___ day of ____________, 19__.
THE WACKENHUT CORPORATION
By: _______________________________
Authorized Representative
D-1-2
<PAGE> 98
EXHIBIT D-2
FORM OF BORROWING NOTICE--SWING LINE LOANS
To: NationsBank, National Association
150 S.E. Third Avenue
Miami, Florida 33131
Telefacsimile: 305-___-____
Attention: Corporate Banking Department
Reference is hereby made to the Amended and Restated Revolving Credit
and Reimbursement Agreement dated as of December __, 1997 (the "Agreement")
among the Wackenhut Corporation (the "Borrower"), the Lenders (as defined in the
Agreement), and NationsBank, National Association, as Agent for the Lenders
("Agent"). Capitalized terms used but not defined herein shall have the
respective meanings therefor set forth in the Agreement.
The Borrower through its Authorized Representative hereby confirms its
prior notice of borrowing given to the Agent by telephone on _____________, 199_
to the effect that Swing Line Loans in the amount set forth below be made on the
date indicated by deposit of such amount to the Borrower's Account:
Aggregate
Amount (1) Date of Loan
---------- ------------
- ----------------
(1) Must be an integral multiple of $50,000.
The undersigned hereby certifies that:
1. No Default or Event of Default exists either now or after giving
effect to the borrowing described herein; and
2. All the representations and warranties set forth in the Loan
Documents (other than those expressly stated to refer to a particular date) are
true and correct in all material respects as of the date hereof as if made on
and as of the date hereof except that the reference to the financial statements
in SECTION 6.03 thereof are to those financial statements most recently
delivered to you pursuant to SECTION 7.17 of the Agreement (it being understood
that any financial statements delivered pursuant to SECTION 7.17(A) have not
been certified by
D-2-1
<PAGE> 99
independent public accountants).
D-2-2
<PAGE> 100
3. After giving effect to Loans requested hereby, (i) the principal
amount of outstanding Loans plus Letter of Credit Outstandings will not exceed
the Total Revolving Credit Commitment and (ii) Swing Line Outstandings will not
exceed $15,000,000.
THE WACKENHUT CORPORATION
By:
---------------------------
Authorized Representative
D-2-3
<PAGE> 101
EXHIBIT E
FORM OF NOTE
1 2
- --------------- [------------, -----------]
_______________, 199__
FOR VALUE RECEIVED, THE WACKENHUT CORPORATION, a Florida corporation
having its principal place of business located in Coral Gables, Florida (the
"Borrower"), hereby promises to pay to the order of
----------------------------------- 3 (the "Lender"), in its individual
capacity, at the office of NationsBank, National Association, as agent for the
Lender (the "Agent"), located at 150 Southeast Third Avenue, Miami, Florida
33131 (or at such other place or places as the Agent may designate) at the times
set forth in the Amended and Restated Revolving Credit and Reimbursement
Agreement dated as of December __, 1997 among the Borrower, the financial
institutions parties thereto as lenders (collectively, the "Lenders") and the
Agent (as the same may be amended, modified or restated from time to time, the
"Agreement" -- all capitalized terms not otherwise defined herein shall have the
respective meanings set forth in the Agreement), in lawful money of the United
States of America, in immediately available funds, the principal amount of
[----------------------------------------------]4 DOLLARS
($__________)1 or, if less than such principal amount, the aggregate unpaid
principal amount of all Revolving Loans made by the Lender to the Borrower
pursuant to the Agreement on the Revolving Credit Termination Date or such
earlier date as may be required pursuant to the terms of the Agreement, and to
pay interest from the date hereof on the unpaid principal amount hereof, in like
money, at said office, on the dates and at the rates provided in ARTICLE II of
the Agreement.
- -------------------------------
1 Insert Lender's pro rata share of Total Revolving Commitment in Arabic
numerals.
2 Insert name of city of Lender's Principal Office.
3 Insert name of Lender in capital letters
4 Insert Lender's pro rata share of Total Revolving Credit Commitment in
words.
E-1
<PAGE> 102
If payment of all sums due hereunder is accelerated under the terms of
the Agreement or under the terms of the other Loan Documents executed in
connection with the Agreement, the then remaining principal amount and accrued
but unpaid interest shall bear interest which shall be payable on demand at a
rate two percent (2%) per annum in excess of the rate at which interest was
payable on such amount under the Agreement immediately preceding the date of
such acceleration or the maximum rate permitted under applicable law, if lower,
until such principal and interest have been paid in full. Further, in the event
of such acceleration, this Note, and all other indebtedness of the Borrower to
the Lender shall become immediately due and payable, without presentation,
demand, protest or notice of any kind, all of which are hereby waived by the
Borrower.
In the event this Note is not paid when due at any stated or
accelerated maturity, the Borrower agrees to pay, in addition to the principal
and interest, all costs of collection, including reasonable attorneys' fees, and
interest thereon at the rates set forth above.
Interest hereunder shall be computed on the basis of a 360 day year for
the actual number of days in the interest period.
All Persons bound on this obligation, whether primarily or secondarily
liable as principals, sureties, guarantors, endorsers or otherwise, hereby waive
to the full extent permitted by law the benefits of all provisions of law for
stay or delay of execution or sale of property or other satisfaction of judgment
against any of them on account of liability hereon until judgment be obtained
and execution issues against any other of them and returned satisfied or until
it can be shown that the maker or any other party hereto had no property
available for the satisfaction of the debt evidenced by this instrument, or
until any other proceedings can be had against any of them, also their right, if
any, to require the holder hereof to hold as security for this Note any
collateral deposited by any of said Persons as security. Protest, notice of
protest, notice of dishonor, diligence or any other formality are hereby waived
by all parties bound hereon.
E-2
<PAGE> 103
IN WITNESS WHEREOF, the Borrower has caused this Note to be made,
executed and delivered by its duly authorized officer as of the date and year
first above written, all pursuant to authority duly granted.
WITNESS: THE WACKENHUT CORPORATION
By
-----------------------------
Title
-------------------------
- -------------------------
E-3
<PAGE> 104
EXHIBIT F
[Reserved]
F-1
<PAGE> 105
EXHIBIT G-1
OPINION OF VICE PRESIDENT AND LEGAL COUNSEL
(SECTION 5.01)
See attached.
G-1-1
<PAGE> 106
EXHIBIT G-2
OPINION OF COUNSEL TO THE GUARANTORS
(SECTION 5.01)
See attached.
G-2-1
<PAGE> 107
EXHIBIT H
FORM OF GUARANTY AGREEMENT
THIS GUARANTY AND SURETYSHIP AGREEMENT, dated as of _________ __, 199_
(the "Guaranty"), is made by _____________________, ____________________ (the
"Guarantor"), to the parties named in Section 1 hereof. Except as otherwise
defined herein, terms used herein defined in the Revolving Credit and
Reimbursement Agreement referred to below shall be used herein as so defined.
W I T N E S S E T H:
WHEREAS, The Wackenhut Corporation, a Florida corporation (the
"Borrower"), the banks party thereto (the "Lenders"), and NationsBank, National
Association, as Agent (in such capacity and together with any successor agent in
such capacity, the "Agent") have entered into an Amended and Restated Revolving
Credit and Reimbursement Agreement dated as of December 30, 1997 (as at any time
amended, modified or restated, the "Credit Agreement"); and
WHEREAS, the Guarantor is a Subsidiary of the Borrower and has been or
may be provided with advances from the Borrower or other working capital made
available directly or indirectly by the Lenders under the Credit Agreement, and
has thereby materially benefitted or will materially benefit from the loans made
to the Borrower pursuant to the Credit Agreement; and
WHEREAS, pursuant to the terms of the Credit Agreement the Guarantor is
required to deliver this Guaranty;
NOW, THEREFORE, in consideration of the premises, the Guarantor hereby
agrees as follows:
11. GUARANTY AND SURETY. The Guarantor does hereby absolutely, unconditionally,
continually and irrevocably for the benefit of the Agent and the Lenders
(collectively, the "Beneficiaries"), guarantee and become surety for the full
and timely payment when due (whether by acceleration or otherwise) (including
amounts which, but for the operation of the automatic stay under Section 362(a)
of the Bankruptcy Code (or any successor statute), would become due) of:
A. All Obligations as defined in the Credit Agreement; and
B. all other indebtedness, obligations and liabilities of the
Borrower under written financing arrangements stated by the Guarantor
and each of the Beneficiaries to be guaranteed hereby;
H-1
<PAGE> 108
in each case whether direct or indirect, joint or several, absolute or
contingent, liquidated or unliquidated, now or hereafter existing, extended,
renewed, replaced, refinanced or restructured, whether or not from time to time
decreased or extinguished and later increased, created or incurred (all
indebtedness, obligations and liabilities of the Borrower described in this
SECTION 1 are collectively referred to as the "Guarantied Obligations");
PROVIDED, HOWEVER, that the liability of the Guarantor with respect to the
Guarantied Obligations shall not exceed at any time the Maximum Amount (as
hereinafter defined). The "Maximum Amount" means the greater of (X) the
aggregate amount of all advances to or investments in the Guarantor made
directly or indirectly with the proceeds of Loans under the Credit Agreement or
(Y) 95% of (a) the fair salable value of the assets of such Guarantor as of the
date hereof minus (b) the total liabilities of the Guarantor (including
contingent liabilities, but excluding liabilities of the Guarantor under this
Guaranty and the other Loan Documents executed by the Guarantor) as of the date
hereof; PROVIDED FURTHER, HOWEVER, that if the calculation of the Maximum Amount
in the manner provided above as of the date payment is required of the Guarantor
pursuant to this Guaranty would result in a greater positive number, then the
Maximum Amount shall be deemed to be such greater positive number.
1. GUARANTY OF PAYMENT. This is a guaranty of payment and not merely of
collection. In the event of any default by the original obligor in payment or
otherwise on any of the Guarantied Obligations, the Guarantor will pay all or
any portion of the Guarantied Obligations due or thereafter becoming due,
whether by acceleration or otherwise, without offset of any kind whatsoever,
without any Beneficiary first being required to make demand upon the original
obligor or pursue any of its rights against the original obligor, or against any
other Person, including other guarantors (whether or not party to this
Guaranty); and without being required to liquidate or to realize on any
collateral security. In any right of action accruing to any Beneficiary, such
Beneficiary may elect to proceed against (a) the Guarantor together with the
original obligor or obligors; (b) the Guarantor and the original obligor or
obligors individually; or (c) the Guarantor only without having first commenced
any action against the original obligor or obligors.
2. RIGHT TO DEAL WITH GUARANTIED OBLIGATIONS. Subject to the terms and
conditions of the Credit Agreement, any Beneficiary, without notice to
Guarantor, may deal with any Guarantied Obligations and any collateral security
therefor in such manner as it may deem advisable and may renew or extend the
Guarantied Obligations or any part thereof; accept partial payment, or settle,
release, compound, or compromise the same; demand additional collateral security
therefor, and substitute or release the same; and may compromise or settle with
or release and discharge from liability any other guarantor of any Guarantied
Obligation, or any other Person liable to such Beneficiary for all or any
portion of the obligations of any original obligor; all without impairing the
liability of the Guarantor hereunder.
3. OTHER WAIVERS. Guarantor hereby unconditionally waives with respect
to this Guaranty: (a) notice of acceptance of this Guaranty by any Beneficiary
and any notice of the
H-2
<PAGE> 109
incurring by the Borrower of any Guarantied Obligation; (b) presentment for
payment, protest, notice of protest and notice of dishonor to any party
including the Borrower or the Guarantor; (c) any disability of the original
obligor or obligors or defense available to the original obligor or obligors,
including absence or cessation of any original obligor's liability for any
reason whatsoever; (d) any defense or circumstances which might otherwise
constitute a legal or equitable discharge of a guarantor or surety; and (e) all
rights under any state or federal statute dealing with or affecting the rights
of creditors.
4. SUBORDINATION. Until the Guarantied Obligations are paid in full and
no Beneficiary is under any further obligation to lend or extend funds or credit
which would constitute Guarantied Obligations, Guarantor hereby unconditionally
subordinates all present and future debts, liabilities or obligations of the
original obligor to such Guarantor to the Guarantied Obligations, and all
amounts due under such debts, liabilities, or obligations shall, upon the
occurrence and during the continuance of an Event of Default, be collected and
paid over forthwith to the Beneficiaries on account of the Guarantied
Obligations and, pending such payment, shall be held by the Guarantor as agent
and bailee of the Beneficiaries separate and apart from all other funds,
property and accounts of the Guarantor. Guarantor, at the request of any
Beneficiary, shall execute such further documents in favor of such Beneficiary
to further evidence and support the purpose of this SECTION 4. Guarantor hereby
irrevocably waives and releases any right or rights of subrogation or
contribution existing at law, by contract or otherwise to recover all or any
portion of any payment made hereunder from the Borrower or any other guarantor.
5. REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to
the Beneficiaries that: (a) no other agreement, representation or special
condition exists between the Guarantor and any Beneficiary regarding the
liability of the Guarantor under this Guaranty; nor does any understanding exist
between the Guarantor and any Beneficiary that the obligations of the Guarantor
under this Guaranty are or will be other than as set out herein; and (b) as of
the date hereof, the Guarantor has no defense whatsoever to any action or
proceeding that may be brought to enforce this Guaranty. Furthermore, the
Guarantor affirms to the Beneficiaries that each of the representations and
warranties contained in the Credit Agreement and made by the Borrower with
respect to the Guarantor is true and correct.
6. NO WAIVER BY BENEFICIARIES. No failure or delay on the part of any
Beneficiary in exercising any right, power or privilege hereunder shall operate
as a waiver thereof; nor shall any single or partial exercise of any right,
power or privilege hereunder preclude any other or further exercise thereof, or
the exercise of any other right, power or privilege. Failure by any Beneficiary
to insist upon strict performance hereof shall not constitute a relinquishment
of its right to demand strict performance at another time. Receipt by any
Beneficiary of any payment by any person on any Guarantied Obligation, with
knowledge of a default on any Guarantied Obligation or of a breach of this
Guaranty, or both, shall not be construed as a waiver of the default or breach.
H-3
<PAGE> 110
7. CONTINUING GUARANTY; TERMINATION. THIS GUARANTY IS A CONTINUING
GUARANTY AND SHALL CONTINUE IN FULL FORCE AND EFFECT UNTIL SUCH TIME AS ALL
GUARANTIED OBLIGATIONS SHALL HAVE BEEN INDEFEASIBLY PAID IN FULL (OTHER THAN
GUARANTIED OBLIGATIONS IN THE NATURE OF CONTINUING INDEMNITIES OR EXPENSE
REIMBURSEMENT OBLIGATIONS NOT YET DUE AND PAYABLE) AND NO BENEFICIARY SHALL BE
UNDER ANY FURTHER OBLIGATION TO LEND OR TO ADVANCE FUNDS TO THE ACCOUNT OF THE
BORROWER CONSTITUTING GUARANTIED OBLIGATIONS.
8. BENEFITS OF AGREEMENT. This Guaranty is freely assignable and
transferable by the Beneficiaries to any permitted assignee and transferee of
any Guarantied Obligation; however, the duties and obligations of the Guarantor
may not be delegated or transferred by the Guarantor without the written consent
of all Beneficiaries. The rights and privileges of the Beneficiaries shall inure
to the benefit of their respective successors and assigns, and the duties and
obligations of the Guarantors shall bind their respective successors and
assigns.
9. EXPENSES; INDEMNITY. The Guarantor will upon demand pay to each
Beneficiary the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and of any experts and agents, which
it may reasonably incur in connection with enforcement of this Guaranty or the
failure by the Guarantor to perform or observe any of the provisions hereof. The
Guarantor agrees to indemnify and hold harmless each Beneficiary from and
against any and all claims, demands, losses, judgments and liabilities
(including liabilities for penalties) of whatsoever kind or nature, growing out
of or resulting from this Guaranty or the exercise by any Beneficiary of any
right or remedy granted to it hereunder or under the other Loan Documents, other
than such items arising out of the bad faith, gross negligence or willful
misconduct on the part of such Beneficiary or an officer, co-officer, director,
co-director, employee, co-employee, agent or co-agent thereof or breach of this
Agreement by such Beneficiary or an officer, co-officer, director, co-director,
employee, co-employee, agent or co- agent thereof. If and to the extent that the
obligations of the Guarantor under this SECTION 9 are unenforceable for any
reason, the Guarantor hereby agree to make the maximum contribution to the
payment and satisfaction of such obligations which is permissible under
applicable law.
10. AMENDMENTS, WAIVERS AND CONSENTS. No amendment or waiver of any
provision of this Guaranty or consent to any departure by the Guarantor herefrom
shall in any event be effective unless the same shall be in writing and signed
by the Guarantor and the Agent (which execution by Agent shall be evidence that
Agent has received the consent thereto of the Lenders required to effect such
amendment or waiver), and then such amendment, waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, that no such amendment, waiver or consent shall (a) deprive any
Beneficiary of the benefits generally of this Guaranty without the written
consent of such Beneficiary, or (b) alter the provisions of this SECTION 10
without the written consent of all of the Beneficiaries.
H-4
<PAGE> 111
11. ADDRESSES FOR NOTICES. All notices and other communications
provided for hereunder shall be in writing (including telecopy communication)
and shall be sent by registered or certified mail, return receipt requested, or
first class express mail or overnight courier, or by telecopy, in all cases with
charges prepaid, and shall be effective when delivered against a receipt
therefor or when telecopy transmission is confirmed, as the case may be. All
notices shall be sent to the applicable party at the address stated on the
signature page hereof or in accordance with the last unrevoked written direction
from such party to the other parties hereto.
12. INTERPRETATION; PARTIAL INVALIDITY. Whenever possible each
provision of this Guaranty shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Guaranty
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Guaranty.
13. MISCELLANEOUS; REMEDIES CUMULATIVE. Unless the context of this
Guaranty otherwise clearly requires, references to the plural include the
singular, the singular the plural and the part the whole and "or" has the
inclusive meaning represented by the phrase "and/or." The section headings used
herein are for convenience of reference only and shall not define, limit or
extend the provisions of this Guaranty. All remedies hereunder are cumulative
and are not exclusive of any other rights and remedies of the Beneficiaries
provided by law or under the Credit Agreement, the other Loan Documents, or
other applicable agreements or instruments. The making of the Loans to the
Borrower and the issuance of Letters of Credit pursuant to the Credit Agreement
shall be presumed conclusively to have been made, extended or issued,
respectively, in reliance upon the obligations of the Guarantor incurred
pursuant to this Guaranty.
14. GOVERNING LAW. This Guaranty shall in all respects be governed by
the internal substantive laws of the State of Florida without regard to its
choice of law principles. Guarantor 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 the purpose of collection and (ii) to the maximum extent permitted
by applicable law, waives trial by jury in connection with any such litigation.
15. REPAYMENT OR RECOVERY. If claim is ever made upon any Beneficiary
for repayment or recovery of any amount or amounts received in payment or on
account of any of the Guarantied Obligations and any of the Beneficiaries repays
all or part of said amount by reason of (a) any judgment, decree or order of any
court or administrative body having jurisdiction over such payee or any of its
property, or (b) any settlement or compromise of any such claim effected by such
Beneficiary with any such claimant (including the original obligor), then and in
such event the Guarantor agrees that any such judgment, decree, order,
settlement or compromise shall be binding upon it, notwithstanding any
revocation hereof or the cancellation of any Revolving Note or other instrument
evidencing any Guarantied
H-5
<PAGE> 112
Obligation or any security therefor, and the Guarantor shall be and remain
liable to the aforesaid Beneficiary for the amount so repaid or recovered to the
same extent as if such amount had never originally been received by any such
Beneficiary.
16. SET-OFF. In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence and during the continuance of an Event of Default (as defined in the
Credit Agreement), Guarantor agrees that each Beneficiary shall have a lien for
all the liabilities of the Guarantor upon all deposits or deposit accounts, of
any kind, or any interest in any deposits or deposit accounts thereof, now or
hereafter pledged, mortgaged, transferred or assigned to such Beneficiary or
otherwise in the possession or control of such Beneficiary (other than for
safekeeping) for any purpose for the account or benefit of the Guarantor and
including any balance of any deposit account or of any credit of the Guarantor
with such Beneficiary, whether now existing or hereafter established, hereby
authorizing each Beneficiary at any time or times with or without prior notice
to apply such balances or any part thereof to such of the liabilities of the
Guarantor to such Beneficiary then past due and in such amounts as they may
elect, and whether or not the collateral or the responsibility of other Persons
primarily, secondarily or otherwise liable may be deemed adequate. For the
purposes of this SECTION 16, all remittances and property shall be deemed to be
in the possession of such Beneficiary as soon as the same may be put in transit
to it by mail or carrier or by other bailee.
17. CREDIT AGREEMENT CONTROLS. In the event that any term of this
Guaranty or of any other Loan Document (other than the Credit Agreement)
conflicts with any term of the Credit Agreement, then the term of the Credit
Agreement shall control.
[Remainder of page intentionally left blank]
H-6
<PAGE> 113
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its officers hereunto duly authorized as of the date
first above written.
WITNESS: ---------------------------------------
- ------------------------
- ------------------------
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Address:
-------------------------------
-------------------------------
-------------------------------
-------------------------------
Telephone No.
------------------
Telefacsimile No.
---------------
H-7
<PAGE> 114
NATIONSBANK, NATIONAL ASSOCIATION,
AS AGENT FOR THE LENDERS
WITNESS:
By:
- ----------------------- --------------------------------
Name:
------------------------------
Title:
- ----------------------- -----------------------------
H-8
<PAGE> 115
EXHIBIT I
COVENANT COMPLIANCE CERTIFICATE
NationsBank, National Association
as Agent
NationsBank Plaza
150 S.E. Third Avenue
Miami, Florida 33131
Attention: Corporate Banking Department
Reference is hereby made to the Amended and Restated Revolving Credit
and Reimbursement Agreement dated as of December __, 1997 (the "Agreement")
among The Wackenhut Corporation (the "Borrower"), the Lenders (as defined in the
Agreement) and NationsBank, National Association, as Agent for the Lenders
("Agent"). Capitalized terms used but not defined herein shall have the
respective meanings therefor set forth in the Agreement. The undersigned, a duly
authorized and acting Authorized Representative, hereby certifies to you as of
__________ [insert Determination Date] as follows:
1. CALCULATIONS:
<TABLE>
<CAPTION>
<S> <C> <C>
A. COMPLIANCE WITH SECTION 7.06: CONSOLIDATED NET WORTH
1. CONSOLIDATED NET WORTH AT THE LAST DAY OF THE
MOST RECENT FISCAL QUARTER $_________
2. CONSOLIDATED NET INCOME X 50% $_________
3. NET PROCEEDS OF SALE OF BORROWER'S CAPITAL
STOCK X 75% $_________
4. SUM OF A.1 + A.2 + A.3 $_________
5. ACTUAL CONSOLIDATED NET WORTH $_________
REQUIRED: LINE A.5 MUST NOT BE LESS THAN LINE A.4
B. COMPLIANCE WITH SECTION 7.07: INDEBTEDNESS
1. CONSOLIDATED FUNDED DEBT: $__________
2. FUNDED DEBT OF WCC $__________
3. B.1 - B.2 $__________
</TABLE>
I-1
<PAGE> 116
<TABLE>
<CAPTION>
<S> <C> <C>
4. CONSOLIDATED TOTAL CAPITALIZATION $__________
5. B.3 divided by B.4 ___________
6. OUTSTANDING TRADE RECEIVABLES SUBJECT
TO ASSET SECURITIZATION FACILITY $__________
7. ADDITIONAL INDEBTEDNESS DESCRIBED IN
SECTION 7.07(B)(VI) $__________
REQUIRED: LINE B.5 MUST NOT EXCEED .40. LINE B.6 MUST NOT EXCEED
$75,000,000. LINE B.7 MUST NOT EXCEED $15,000,000.
C. COMPLIANCE WITH SECTION 7.08: FIXED CHARGE RATIO
1. CONSOLIDATED NET INCOME $__________
2. INCOME TAXES DEDUCTED IN ARRIVING
AT C.1 $__________
3. FIXED CHARGES $__________
4. C.1 + C.2 + C.3 $__________
5. RATIO OF C.4 TO C.3 ___ TO 1.00
REQUIRED: LINE C.5 MUST NOT BE LESS THAN 1.50 TO 1.00.
D. COMPLIANCE WITH SECTION 7.11: RESTRICTED PAYMENTS
1. RESTRICTED PAYMENTS SINCE
DECEMBER 30, 1997 $__________
2. CONSOLIDATED NET INCOME SINCE
DECEMBER 31, 1997 X .50 $__________
3. D.2 + $5,000,000 $__________
4. D.3 - D.1 $__________
LINE D.4 MUST BE EQUAL TO OR GREATER THAN 0.
</TABLE>
I-2
<PAGE> 117
<TABLE>
<CAPTION>
<S> <C> <C>
E. COMPLIANCE WITH SECTION 7.20: LOANS TO WCC
1. LOANS AND ADVANCES TO WCC $__________
SINCE CLOSING DATE
REQUIRED: LINE E.1 MUST NOT EXCEED $1,500,000.
</TABLE>
2. NO DEFAULT
A. TO THE BEST KNOWLEDGE OF THE UNDERSIGNED, SINCE
__________ (THE DATE OF THE LAST SIMILAR CERTIFICATION), (A)
THE BORROWER HAS NOT DEFAULTED IN THE KEEPING, OBSERVANCE,
PERFORMANCE OR FULFILLMENT OF ANY OF THE LOAN DOCUMENTS; AND
(B) NO DEFAULT OR EVENT OF DEFAULT SPECIFIED IN ARTICLE VIII
OF THE AGREEMENT HAS OCCURRED.
B. IF A DEFAULT OR EVENT OF DEFAULT HAS OCCURRED
SINCE __________ (THE DATE OF THE LAST SIMILAR CERTIFICATION),
THE BORROWER PROPOSES TO TAKE THE FOLLOWING ACTION WITH
RESPECT TO SUCH DEFAULT OR EVENT OF DEFAULT:
-------------------------------------------------------------
(NOTE, IF NO DEFAULT OR EVENT OF DEFAULT HAS
OCCURRED, INSERT "NOT APPLICABLE").
3. ADDITIONAL SUBSIDIARIES
LISTED ON THE SCHEDULE OF ADDITIONAL PERSONS ATTACHED HERETO IS A TRUE
AND CORRECT DESCRIPTION OF ALL SUBSIDIARIES IN RESPECT OF WHICH THE BORROWER IS
REQUIRED PURSUANT TO SECTION 7.19 OF THE AGREEMENT TO DELIVER OR CAUSE TO BE
DELIVERED A GUARANTY AGREEMENT AND RELATED DOCUMENTS NOT LATER THAN THE DATE OF
THIS CERTIFICATE, AND ALL DOCUMENTS SO REQUIRED TO BE DELIVERED IN RESPECT OF
EACH SUCH PERSONS ARE DELIVERED TO YOU SIMULTANEOUSLY HEREWITH.
THE DETERMINATION DATE IS THE DATE OF THE LAST REQUIRED FINANCIAL
STATEMENTS SUBMITTED TO THE LENDERS IN ACCORDANCE WITH SECTION 7.17 OF THE
AGREEMENT.
IN WITNESS WHEREOF, I HAVE EXECUTED THIS CERTIFICATE THIS _____ DAY OF
__________, 19___.
-------------------------------------------
AUTHORIZED REPRESENTATIVE FOR THE WACKENHUT
CORPORATION
I-3
<PAGE> 118
SCHEDULE OF ADDITIONAL PERSONS TO COMPLIANCE CERTIFICATE
___________________, 199__
[INSERT APPLICABLE DETERMINATION DATE]
[PROVIDE FOR EACH SUBSIDIARY LISTED THE SAME INFORMATION
FURNISHED ON SCHEDULE 6.01 OF THE AGREEMENT IN RESPECT OF
SUBSIDIARIES]
I-4
<PAGE> 119
SCHEDULE 1.01
EXISTING LCS
<TABLE>
<CAPTION>
L/C
BENEFICIARY ISSUER NUMBER AMOUNT
- ----------- ------ ------ ------
<S> <C> <C> <C>
NATIONAL UNION FIRE NATIONSBANK, N.A. 41313 $21,391,997
INSURANCE COMPANY
OF PITTSBURGH
THAI FARMERS BANK NATIONSBANK, N.A. 40078 $ 39,200
WACKENHUT MOZAMBIQUE NATIONSBANK, N.A. 40644 $ 3,551
BANCO DE LARA-CARACAS NATIONSBANK, N.A. 900210 $ 200,000
VENEZUELA
BANK OF AMERICA NT & SA NATIONSBANK, N.A. 911760 $ 1,200,000
ATHENS, GREECE
THE HOME INSURANCE CO. NATIONSBANK, N.A. 913820 $ 591,292
RISCORP INSURANCE CO. NATIONSBANK, N.A. 920535 $ 523,797
CONTINENTAL CASUALTY NATIONSBANK, N.A. 920772 $ 704,500
(CNA)
STATE OF NEVADA NATIONSBANK, N.A. 920942 $ 100,000
DIVISION OF INS.
</TABLE>
<PAGE> 120
SCHEDULE 6.01
SUBSIDIARIES OF THE BORROWER
<TABLE>
<CAPTION>
PERCENTAGE OF
VOTING STOCK OWNED
JURISDICTION OF BY BORROWER
NAME OF SUBSIDIARY INCORPORATION OR SUBSIDIARY
------------------ --------------- -------------------
<S> <C> <C>
AMERICAN GUARD AND ALERT, INCORPORATED ALASKA 100%
DIVERSIFIED CORRECTIONAL SERVICES, INCORPORATED FLORIDA 100%
TITANIA ADVERTISING, INCORPORATED FLORIDA 100%
TITANIA INSURANCE COMPANY OF AMERICA VERMONT 100%
TUHNEKCAW, INC. DELAWARE 100%
WACKENHUT AIRLINE SERVICES, INC. FLORIDA 100%
WACKENHUT CORRECTIONS CORPORATION FLORIDA 55%
WACKENHUT EDUCATIONAL SERVICES, INC. FLORIDA 100%
WACKENHUT FINANCIAL, INC. DELAWARE 100%
WACKENHUT INTERNATIONAL, INCORPORATED FLORIDA 100%
WACKENHUT OF NEVADA, INC. NEVADA 100%
WACKENHUT SERVICES, INCORPORATED FLORIDA 100%
WACKENHUT SERVICES LIMITED LIABILITY COMPANY COLORADO 100%
WACKENHUT SPORTS SECURITY, INC. FLORIDA 100%
WACKENHUT RESOURCES, INCORPORATED FLORIDA 100%
SUBSIDIARIES OF WACKENHUT INTERNATIONAL, INCORPORATED
WACKENHUT BELIZE LTD. BELIZE 100%
WACKENHUT BOLIVIA BOLIVIA 85%
WACKENHUT S.A. COSTA RICA 73%
WACKENHUT DOMINICANA, S.A. DOMINICAN REPUBLIC 90%
WACKENHUT DEL ECUADOR, S.A. ECUADOR 90%
WACKENHUT GUATAMALA GUATAMALA 51%
WACKENHUT DE HONDURAS, S.A. HONDURAS 80%
WACKENHUT JAMAICA JAMAICA 51%
WACKENHUT MEXICO SEGURIDAD MEXICO 54%
WACKENHUT NICARAGUA NICARAGUA 51%
WACKENHUT PARAGUAY S.R.L. PARAGUAY 80%
PERUANA DE SEGURIDAD Y VIGILANCIA, S.A. PERU 70%
WACKENHUT PUERTO RICO, INC. PUERTO RICO 100%
WACKENHUT EL SALVADOR EL SALVADOR 90%
WACKENHUT URUGUAY URUGUAY 75%
WACKENHUT VENEZUELA VENEZUELA 51%
WACKENHUT WITCORP FLORIDA 100%
WACKENHUT ENGLAND ENGLAND 100%
WACKENHUT FRANCE FRANCE 100%
WACKENHUT CZECH REPUBLIC CZECH REPUBLIC 92%
WACKENHUT AUSTRALIA AUSTRALIA 100%
WACKENHUT RUSSIA RUSSIA 67%
WACKENHUT GAMBIA GAMBIA 100%
WACKENHUT JORDAN JORDAN 51%
WACKENHUT PAKISTAN PAKISTAN 75%
WACKENHUT CAMEROUN CAMEROUN 100%
</TABLE>
<PAGE> 121
<TABLE>
<CAPTION>
<S> <C> <C>
WACKENHUT MOROCCO MOROCCO 100%
WACKENHUT SIERRA LEONE SIERRA LEONE 90%
WACKENHUT MOZAMBIQUE MOZAMBIQUE 100%
WACKENHUT IVORY COAST IVORY COAST 60%
WACKENHUT CENTRAL AFRICAN REPUBLIC AFRICA 51%
WACKENHUT GHANA GHANA 51%
SUBSIDIARIES OF WACKENHUT RESOURCES, INCORPORATED
OASIS OUTSOURCING, INC. FLORIDA 94%
KING STAFFING, INC. FLORIDA 100%
SOUTHEASTERN RESOURCES, INC. FLORIDA 100%
WORKFORCE ALTERNATIVE, INC. FLORIDA 100%
KING TEMPORARY STAFFING, INC. FLORIDA 100%
WRI II, INC. FLORIDA 100%
PROFESSIONAL EMPLOYEE MANAGEMENT, INC. FLORIDA 100%
</TABLE>
<PAGE> 122
SCHEDULE 6.04
DESCRIPTION OF INDEBTEDNESS AND LEASES (AS OF 12/29/97)
1. FUNDED DEBT OF THE BORROWER AND ITS SUBSIDIARIES
DESCRIPTION AMOUNT
- ----------- ------
REVOLVING CREDIT LINE FOR START-UP AND WORKING 5,621,820
CAPITAL FOR A CORRECTIONAL FACILITY IN AUSTRALIA.
LINE EXPIRES IN JUNE 1998 AND IS FULLY SECURED
BY L/C'S ISSUED BY LENDER'S PARENT.
REVOLVING CREDIT LINE FOR WORKING CAPITAL FOR (EST.) 1,056,150
OPERATIONS IN CANADA FULLY SECURED BY PARENT ----------
GUARANTY. $6,677,970
==========
2. CURRENT DEBT OF THE BORROWER AND ITS SUBSIDIARIES:
NONE
3. CAPITALIZED LEASES OF THE BORROWER AND ITS SUBSIDIARIES:
NONE
4. LETTERS OF CREDIT OUTSTANDING:
<TABLE>
<CAPTION>
BENEFICIARY ISSUER LC NUMBER AMOUNT
- ----------- ------ --------- ------
<S> <C> <C> <C>
CREDIT LYONNAIS CREDIT LYONNAIS 940128LS917 (A$)1,000,000
AUSTRALIA LIMITED 940112LS895 (A$)3,500,000
(AUSTRALIAN DOLLARS) 950629LS888 (A$)50,000
950629LS889 (A$)4,000,000
950508LS367 (A$)50,000
BANCO SECURITY COMMERZBANK 1C015067878 $2,000,000
ATLANTA AGENCY
</TABLE>
<PAGE> 123
SCHEDULE 6.06
LITIGATION
EXCEPT FOR ORDINARY ROUTINE AND NON-MATERIAL LITIGATION INCIDENTAL TO THE
COMPANY'S BUSINESS, THERE ARE NO MATERIAL LEGAL PROCEEDINGS TO WHICH THE COMPANY
OR ANY OF ITS SUBSIDIARIES IS PARTY OR OF WHICH ANY OF THEIR PROPERTY IS
SUBJECT.
<PAGE> 124
SCHEDULE 7.10
EXISTING LIENS
WACKENHUT CORRECTIONS CORPORATION FLORIDA S/S
WACKENHUT CORRECTIONS CORPORATION NEW YORK S/S
(ORDINARY)
NEW YORK S/S
(FIXTURE)
WACKENHUT CORRECTIONS CORPORATION NEW YORK, QUEENS COUNTY
(ORDINARY)
NEW YORK, QUEENS COUNTY
(FIXTURE)
WCC RE HOLDINGS, INC.. FLORIDA S/S
WCC RE HOLDINGS, INC. COLORADO S/S
(ORDINARY)
COLORADO S/S
(FIXTURE)
WCC RE HOLDINGS, INC. COLORADO, ADAMS COUNTY
(ORDINARY)
COLORADO, ADAMS COUNTY
(FIXTURE)
WCC RE HOLDINGS, INC. CALIFORNIA S/S
(ORDINARY)
CALIFORNIA S/S
(FIXTURE)
WCC RE HOLDINGS, INC. CALIFORNIA, KERNS COUNTY
(ORDINARY)
CALIFORNIA, KERNS COUNTY
(FIXTURE)
<PAGE> 1
Exhibit 4.2
TRANSFER AND ADMINISTRATION AGREEMENT
Dated as of December 30, 1997
Among
WACKENHUT FUNDING CORPORATION,
AS TRANSFEROR
and
THE WACKENHUT CORPORATION,
INDIVIDUALLY AND
AS SERVICER
and
ENTERPRISE FUNDING CORPORATION,
AS PURCHASER
and
NATIONSBANK, N.A.,
AS AGENT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
ARTICLE I
THE COMMITMENT
<S> <C> <C>
SECTION 1.1. Commitment....................................................................2
SECTION 1.2. Purchase and Reinvestment Limits..............................................3
SECTION 1.3. Making Purchases from the Transferor..........................................3
SECTION 1.4. Number of Undivided Interests.................................................4
SECTION 1.5. Commitment Termination Date...................................................4
SECTION 1.6. Purchase Termination Date.....................................................4
SECTION 1.7. Voluntary Termination of Commitment or
Reduction of Maximum Purchase Limit...........................................5
SECTION 1.8. Limitation of Ownership Interest..............................................5
SECTION 1.9. Special Undivided Interests...................................................5
SECTION 1.10. Benefits of Agreement.........................................................6
ARTICLE II
UNDIVIDED INTEREST AND PURCHASER'S SHARE
SECTION 2.1. Undivided Interest............................................................6
SECTION 2.2. Purchaser's Investment........................................................7
SECTION 2.3. Net Pool-Balance..............................................................9
SECTION 2.4. Shares........................................................................9
ARTICLE III
SETTLEMENTS
SECTION 3.1. Non-Run Off Settlement Procedures for
Collections..................................................................10
SECTION 3.2. Run Off-Settlement Procedures for
Collections..................................................................12
SECTION 3.3. Special Settlement Procedures: Reduction
of Purchaser's Investment, Etc...............................................13
SECTION 3.4. Reporting....................................................................16
SECTION 3.5. Payments and Computations, Etc...............................................16
SECTION 3.6. Dividing or Combining Undivided
Interests....................................................................17
SECTION 3.7. Treatment of Collections and Deemed
Collections..................................................................17
ARTICLE IV
FEES AND YIELD PROTECTION
SECTION 4.1. Fees.........................................................................18
SECTION 4.2. Yield Protection.............................................................19
ARTICLE V
CONDITIONS OF PURCHASES
SECTION 5.1. Conditions Precedent to Initial
Purchase.....................................................................21
</TABLE>
ii
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 5.2. Conditions Precedent to All Purchases
and Reinvestments............................................................24
SECTION 5.3. Additional Condition Precedent to
Purchases....................................................................25
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.1. Representations and Warranties of the
Transferor...................................................................25
SECTION 6.2. Representations and Warranties of the
Servicer.....................................................................30
ARTICLE VII
GENERAL COVENANTS OF THE TRANSFEROR AND SERVICER
SECTION 7.1. Affirmative Covenants of the
Transferor...................................................................34
SECTION 7.2. Reporting Requirements of the
Transferor...................................................................37
SECTION 7.3. Negative Covenants of the Transferor. .......................................39
SECTION 7.4. Affirmative Covenants of Servicer............................................40
SECTION 7.5. Reporting Requirements of Servicer...........................................42
SECTION 7.6. Negative Covenants of the Servicer...........................................44
SECTION 7.7. Financial Covenants of the Servicer..........................................46
ARTICLE VIII
ADMINISTRATION AND COLLECTION
SECTION 8.1. Designation of Servicer......................................................48
SECTION 8.2. Successor Notice: Servicer Transfer
Event........................................................................48
SECTION 8.3. Subcontracts.................................................................48
SECTION 8.4. Duties of Servicer...........................................................49
SECTION 8.5. Allocation of Collections; Segregation. .....................................49
SECTION 8.6. Modification of Receivables..................................................49
SECTION 8.7. Documents and Records........................................................49
SECTION 8.8. Certain Duties to the Transferor.............................................50
SECTION 8.9. Lock-Box Accounts............................................................50
SECTION 8.10. Rights of the Agent..........................................................50
SECTION 8.11. Rights on Servicer Transfer Event............................................51
SECTION 8.12. Responsibilities of the Transferor...........................................51
SECTION 8.13. Further Action Evidencing Purchases..........................................52
SECTION 8.14. Application of Collections...................................................53
ARTICLE IX
SECURITY INTEREST
SECTION 9.1. Grant of Security Interest...................................................53
SECTION 9.2. Further Assurances...........................................................53
</TABLE>
iii
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 9.3. Remedies.....................................................................54
ARTICLE X
[RESERVED]
ARTICLE XI
TERMINATION
SECTION 11.1. Termination Events...........................................................54
SECTION 11.2. Remedies.....................................................................56
ARTICLE XII
THE AGENT
SECTION 12.1. Authorization and Action.....................................................57
SECTION 12.2. Agents' Reliance, Etc........................................................57
SECTION 12.3. Agents and Affiliates........................................................58
ARTICLE XIII
BANK COMMITMENT; ASSIGNMENT OF PURCHASER'S INTEREST
SECTION 13.1. Rights as Bank Investor......................................................58
SECTION 13.2. Indemnification of the Agent.................................................59
SECTION 13.3. Non-Reliance.................................................................59
SECTION 13.4. Payments by the Agent........................................................60
SECTION 13.5. Bank Commitment; Assignment to Bank
Investors....................................................................60
SECTION 13.6. Restrictions on Assignments..................................................64
SECTION 13.7. Rights of Assignee...........................................................64
SECTION 13.8. Authorization of Agent.......................................................65
SECTION 13.9. Notice of Assignment.........................................................65
SECTION 13.10. Evidence of Assignment; Endorsement
of Certificate...............................................................65
SECTION 13.11. Rights of Support Providers..................................................65
ARTICLE XIV
INDEMNIFICATION
SECTION 14.1. Indemnities by the Transferor................................................66
SECTION 14.2. Contest of Tax Claim; After-Tax Basis........................................68
SECTION 14.3. Contribution.................................................................69
ARTICLE XV
MISCELLANEOUS
SECTION 15.1. Amendments, Etc..............................................................69
SECTION 15.2. Notices, Etc.................................................................69
SECTION 15.3. No Waiver; Remedies..........................................................70
SECTION 15.4. Binding Effect; Survival.....................................................70
SECTION 15.5. Costs, Expenses and Taxes....................................................71
SECTION 15.6. No Proceedings...............................................................71
</TABLE>
iv
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 15.7. NationsBank Program Confidentiality..........................................72
SECTION 15.8. Confidentiality of the Transferor
Information..................................................................74
SECTION 15.9. Captions and Cross References................................................76
SECTION 15.10. Integration..................................................................77
SECTION 15.11. Governing Law................................................................77
SECTION 15.12. Waiver Of Jury Trial.........................................................77
SECTION 15.13. Consent To Jurisdictions Waiver Of
Immunities...................................................................77
SECTION 15.14. Execution in Counterparts....................................................78
SECTION 15.15. Purchaser's Liabilities......................................................78
SECTION 15.16. Agent's Liabilities..........................................................78
SECTION 15.17. Delegation of Servicer's Duties. ............................................78
SECTION 15.18. Characterization of the Transactions
Contemplated by this Agreement...............................................78
Appendix A Definitions
Appendix B Calculation of Discount and Reserve
Appendix C Definitions to Financial Covenants
Schedule 2.3(b) Form of Concentration Limit Certificate
Schedule 5.1(a) Form of Certificate of Assignments
Schedule 5.1(h) Form of Lock Box Agreement
Schedule 5.1(i) Form of opinion of Akerman,
Sentersitt & Eidson, P.A.
Schedule 13.5 (b) Form of Assignment and Assumption
Agreement
Schedule 5.1(p)(i) Purchase and Sale Agreement
Schedule 5.1 (p)(ii) Amended and Restated Purchase and
Sale Agreement
Schedule 6.1(j) Litigation
Schedule 6.1(n) Location of Transferor's books,
records and documents
Schedule 6.2(n) Location of Services, books, records
and documents
Schedule 6.2(o) Lock Box Accounts
</TABLE>
v
<PAGE> 6
TRANSFER AND ADMINISTRATION AGREEMENT
Dated as of December 30, 1997
THIS IS A TRANSFER AND ADMINISTRATION AGREEMENT, among
WACKENHUT FUNDING CORPORATION, a Delaware corporation (the "TRANSFEROR") and its
successors and assigns, THE WACKENHUT CORPORATION, a Florida corporation,
individually and as Servicer ("WACKENHUT" or the "SERVICER"), ENTERPRISE FUNDING
CORPORATION, a Delaware corporation ("ENTERPRISE" or the "PURCHASER") and its
successors assigns, and NATIONSBANK, N.A., a national banking association
("NATIONSBANK"), as agent for Enterprise and the Bank Investors (in such
capacity, the "AGENT") and as a Bank Investor (the "AGREEMENT"). Unless
otherwise indicated, capitalized terms used in this Agreement are defined in
APPENDIX A.
BACKGROUND
1. The Originator has originated, and in the future will originate,
Receivables in the ordinary course of its business, and the Originator has sold,
and from time to time in the future will sell such Receivables to the Seller
pursuant to the Purchase and Sale Agreement.
2. The Seller will from time to time sell such Receivables (together
with Receivables originated by the Seller from time to time in the ordinary
course of its business) to the Transferor pursuant to the terms of the
Receivables Purchase Agreement.
3. Transferor has requested the Purchaser and the Bank Investors to
purchase, and the Purchaser may agree, and the Bank Investors have agreed, to
purchase, subject to the terms and conditions contained in this Agreement,
undivided interests in such Receivables, referred to herein as Undivided
Interests, from Transferor from time to time during the term of this Agreement.
4. Transferor, the Purchaser and the Bank Investors also desire that,
subject to the terms and conditions of this Agreement, certain of the daily
Collections in respect of the Undivided Interests in the Receivables be
reinvested in Receivables through the sale by the Transferor to the Purchaser or
the Bank Investors, as the case may be, of additional Undivided Interests in the
Receivables, such daily reinvestment of Collections to be effected by an
automatic daily adjustment to the Purchaser's Undivided Interest or Bank
Investor's as the case may be, and to be intended to permit the Purchaser or the
Bank Investors, as the
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case may be, to maintain its Purchaser's Investment fully invested in
uncollected Pool Receivables.
5. NationsBank has been requested, and is willing, to act
as the Agent for the Purchaser and the Bank Investors.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein contained, the parties hereto agree as follows:
ARTICLE I
THE COMMITMENT
SECTION 1.1. COMMITMENT. On the terms and subject to
the conditions set forth in this Agreement (including ARTICLE V):
(a) PURCHASES. Upon the terms and subject to the conditions
herein set forth the Transferor may, at its option, convey, transfer
and assign to the Agent, on behalf of the Purchaser or the Agent, on
behalf of the Bank Investors, as applicable, and the Agent, on behalf
of the Purchaser may, provided the Purchase Termination Date shall not
have occurred, at the Purchaser's option, or the Agent, on behalf of
the Bank Investors, provided that the Purchase Termination Date shall
not have occurred and that the Bank Investors shall have previously
accepted the assignment by the Purchaser of all of its interest in the
Undivided Interests, shall, if so requested by the Transferor, accept
such conveyance, transfer and assignment from the Transferor, without
recourse except as provided herein, undivided percentage ownership
interests in the Receivables, together with Related Security,
Collections and Proceeds with respect thereto (each such conveyance,
transfer and assignment, a "PURCHASE"). Each Purchase shall be in
accordance with SECTION 1.3(B). Under no circumstances shall
Reinvestments be deemed to be Purchases.
(b) REINVESTMENTS. Pursuant to SECTION 3.1, during the period
from the date hereof to the Purchase Termination Date, Servicer shall
cause certain of the Collections in respect of the Undivided Interests
to be applied to the purchase of additional undivided interests in Pool
Receivables, thereby resulting in an appropriate readjustment of such
Undivided Interests. Each such purchase of an additional undivided
interest pursuant to SECTION 3.1 is herein called a "REINVESTMENT". The
Bank Investors' obligation to make such Purchases and Reinvestments is
herein called the "COMMITMENT" and the amount thereof shall be equal to
the Facility Limit.
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SECTION 1.2. PURCHASE AND REINVESTMENT LIMITS. Under no
circumstances shall the Agent, on behalf of the Purchaser or the Bank Investors,
as applicable, make any Purchase or Reinvestment to the extent that, after
giving effect to such Purchase or Reinvestment, as the case may be:
(a) PURCHASE LIMIT. The Aggregate Purchaser
Investments would exceed an amount (the "PURCHASE LIMIT") equal to
the lesser of (x) $60,000,000 as such amount may be reduced
pursuant to SECTION 1.7 (the "MAXIMUM PURCHASE LIMIT"), and
(y) the then Net Pool Balance; or
(b) REQUIRED ALLOCATIONS LIMIT. The Aggregate
Required Allocations would exceed an amount (the "REQUIRED
ALLOCATIONS LIMIT") equal to 100% of the Net Pool Balance
(as defined in SECTION 2.3); or
(c) The sum of the Aggregate Purchaser Investments
plus the Interest Component of all outstanding Related Commercial
Paper would exceed the Facility Limit.
SECTION 1.3. MAKING PURCHASES FROM THE TRANSFEROR. (a) NOTICE
OF PURCHASE. Each Purchase from the Transferor shall be made by the Agent on
behalf of the Purchaser or the Agent on behalf of the Bank Investors, as
applicable, and shall be made on notice from the Transferor to the Agent
received by the Agent not later than 11:00 a.m. (New York time) on the Business
Day next preceding the date of such proposed Purchase; it being understood and
agreed that once any proposed Purchase hereunder is acquired on behalf of the
Bank Investors, the Agent, on behalf of such Bank Investors, shall be required
to purchase, and the Purchaser shall be required to sell, all Undivided
Interests held by the Agent on behalf of the Purchaser in accordance with
SECTION 13.5 and thereafter no additional Purchases shall be acquired on behalf
of the Purchaser hereunder. If such notice is received after 11:00 a.m. (New
York time) by the Agent, such notice shall be deemed provided on the next
following Business Day. Each such notice of a proposed Purchase shall specify
the desired amount and date of such Purchase and the desired duration of the
initial Yield Periods for the resulting Undivided Interests. The Agent (or, if
then funding, an Enterprise Liquidity Provider or Enterprise Credit Support
Provider, as applicable) shall select the duration of such initial, and each
subsequent, Yield Period with regard to the Purchaser's Investment Percentage of
such Purchase in its discretion; PROVIDED that the Agent shall use reasonable
efforts, taking into account market conditions, to accommodate the Transferor's
preferences.
(b) AMOUNT OF PURCHASE. The amount of each Purchase
shall be equal to the lesser of (x) the amount proposed by the
Transferor pursuant to SECTION 1.3(A) and (y) the maximum amount
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<PAGE> 9
permitted for the Purchaser or the Bank Investors, as the case may be under
SECTION 1.2.
(c) FUNDING OF PURCHASE. On the date of each Purchase, upon
satisfaction of the applicable conditions set forth in ARTICLE V, the Purchaser
or each Bank Investor, as the case may be, shall make available to the Agent at
the address of its office set forth on the signature pages hereto, the dollar
amount of the Purchase Price, in the case of the Purchaser, or in the case of
the Bank Investors, the amount of each Bank Investors Percentage of such
Purchase Price (determined pursuant to SECTION 1.3(B)) in same day funds, and
the Agent will make such funds immediately available to the Transferor at such
office.
SECTION 1.4. NUMBER OF UNDIVIDED INTERESTS. The number of
Undivided Interests hereunder at any one time, after giving effect to any
Purchase, Reinvestment, division or combination, shall not exceed 8 for the
Purchaser, individually or for the Bank Investors, collectively.
SECTION 1.5. COMMITMENT TERMINATION DATE. (a) The "COMMITMENT
TERMINATION DATE" shall be the earlier to occur of (i) December 29, 1998
(herein, as the same may be extended, called the "SCHEDULED COMMITMENT
TERMINATION DATE"), and (ii) the date of Termination of the Commitment pursuant
to SECTION 1.7 or 11.2.
(b) The then Scheduled Commitment Termination Date may be
extended from time to time beginning with December 29, 1998, by written notice
of request given by the Transferor to the Agent at least 75 days before the then
Scheduled Commitment Termination Date, and written notice of acceptance given by
the Agent to the Transferor not later than 15 days prior to such Scheduled
Commitment Termination Date. No such extension shall be effective unless the
Agent shall provide such notice of acceptance to the Transferor.
SECTION 1.6. PURCHASE TERMINATION DATE. As to the Purchaser or
any Bank Investor (a) the "PURCHASE TERMINATION DATE" with respect to such
entity shall be the earlier to occur of (i) the Commitment Termination Date and
(ii) the date of termination of the Commitment with respect to Purchases by the
Purchaser or the Bank Investors, as the case may be, pursuant to SUBSECTIONS (B)
OR (C) HEREOF.
(b) The Commitment shall terminate with respect to Purchases
by the Purchaser and the Purchaser shall have no obligation to make any further
Purchases or Reinvestments hereunder, on the date of termination of the
commitment of any (i) Enterprise Liquidity Provider under an Enterprise
Liquidity Agreement or (ii) Enterprise Credit Support Provider under an
Enterprise Credit Support Agreement. The Purchaser agrees to
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<PAGE> 10
give the Transferor (with a copy to the Agent) at least 30 days' prior written
notice, unless circumstances shall not permit such 30 days' notice, of the
termination of the Commitment with respect to Purchases by the Purchaser
pursuant to the foregoing sentence, but failure to give or delay in giving such
notice shall not prevent or delay such termination.
(c) The provisions of SECTION 3.1 or SECTION 3.2, as
applicable, shall apply with respect to the Purchaser's Investment until such
time as the Purchaser has or the Bank Investors, as applicable, have received
the return of the Aggregate Purchaser's Investment, Earned Discount thereon and
all other amounts due to the Purchaser or the Bank Investors, as the case may
be, at which time the Purchaser's or the Bank Investors', as the case may be,
rights and obligations under this Agreement shall terminate.
SECTION 1.7. VOLUNTARY TERMINATION OF COMMITMENT OR REDUCTION
OF MAXIMUM PURCHASE LIMIT. The Transferor may, upon at least five Business Days'
notice to the Agent, terminate the Commitment in whole or reduce in part the
unused portion of the Maximum Purchase Limit; PROVIDED, HOWEVER, that (a) each
partial reduction shall be in an amount equal to $5,000,000 or an integral
multiple thereof and (b) after giving effect to such reduction, the remaining
Maximum Purchase Limit will not be less than $20,000,000.
SECTION 1.8. LIMITATION OF OWNERSHIP INTEREST. Nothing in this
Agreement shall be interpreted as providing the Purchaser or any Bank Investor
with an ownership interest in Receivables that are not Pool Receivables.
SECTION 1.9. SPECIAL UNDIVIDED INTERESTS. The Transferor
shall maintain with the Purchaser or with the Bank Investors, as the case may
be, at least one Undivided Interest, the Purchaser's Investment in which shall
be no less than $4,000,000 (unless otherwise agreed by the Agent) and which
shall have a related Yield Period of no more than 35 days ending on the
twenty-fourth day of each calendar month (or if such day is not a Business Day,
the next succeeding Business Day) and beginning on the day immediately
succeeding the last day of the previous Yield Period (provided that the first
Yield Period shall begin on the date of the first Purchase hereunder). If on any
day the Undivided Interest required to be maintained with the Purchaser or with
the Bank Investors pursuant to this SECTION 1.9 shall for any reason have a
Purchaser's Investment of less than $4,000,000, the Agent shall manage the Yield
Periods related to the Purchaser's Investment other Undivided Interests in a
manner such that within 60 days of such day the Purchaser's Investment of such
Undivided Interest required to be maintained pursuant to this SECTION 1.9 shall
again equal $4,000,000.
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SECTION 1.10. BENEFITS OF AGREEMENT. In the event the Bank
Investors acquire Undivided Interests hereunder, each Bank Investor shall be
equally and ratably entitled to the benefits of this Agreement, the other
Agreement Documents and the Receivables Pool, the Related Security and the
Collections without preference, priority or distinction on account of the
actual timing of the filing of any financing statements under the UCC, all in
accordance with the terms and provisions of this Agreement and the other
Agreement Documents.
ARTICLE II
UNDIVIDED INTEREST AND PURCHASER'S SHARE
SECTION 2.1. UNDIVIDED INTEREST. (a) DEFINITION AND
COMPUTATION OF UNDIVIDED INTEREST. For purposes of this Agreement, "UNDIVIDED
INTEREST" for the Purchaser and/or Bank Investors, as applicable, means, as the
context may require (i) undivided ownership interest, in a percentage determined
from time to time as provided in CLAUSE (II) below, in (A) all then outstanding
Pool Receivables, (B) all Related Security with respect to such Pool
Receivables, and (C) all Collections with respect to, and other proceeds of,
such Pool Receivables and Related Security; and (ii) at any time, the quotient,
expressed as a percentage, obtained by dividing the Required Allocation for such
Undivided Interest by the Net Pool Balance. Each Undivided
Interest shall be computed as follows:
UI = RA = PI + DF + DR + LR + SFR
-- -------------------------------
NPB NPB
WHERE:
UI = the Undivided Interest at any time;
RA = the Required Allocations of such undivided Interest
at such time, which shall be an amount at any
time equal to the amount of the numerator of the
fraction set forth above;
PI = the Purchaser's Investment of such Undivided
Interest at such time as determined pursuant to
SECTION 2.02;
DF = the Discount Factor of such Undivided Interest at
such time, as determined pursuant to PART I of
APPENDIX B;
DR = the Dilution Reserve of such Undivided Interest at
such time, as determined pursuant to PART II of
APPENDIX B;
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LR = the Loss Reserve of such Undivided Interest at
such time, as determined pursuant to PART II of
APPENDIX B;
SFR = the Servicer's Fee Reserve of such Undivided
Interest at such time, as determined pursuant to
PART III of APPENDIX B; and
NPB = the Net Pool Balance at such time, as determined
pursuant to SECTION 2.3.
The "RELATED" Undivided Interest with respect to any of the foregoing items
shall mean the Undivided Interest as to which such item is calculated.
(b) FREQUENCY OF COMPUTATION OF PURCHASER'S INTEREST. Each
Undivided Interest shall initially be computed as of the opening of business of
Servicer on the date of Purchase of such Undivided Interest from the Transferor,
and such Undivided Interest shall be recomputed upon receipt of each Periodic
Report. The Agent on behalf of the Purchaser or the Bank Investors, as the case
may be, may at any time request Servicer to recompute its Undivided Interests.
In addition, until such Undivided Interest shall be reduced to zero, such
Undivided Interest shall be deemed to be automatically recomputed as of the
close of business of Servicer on each day (other than a day on which an actual
recomputation is done), and, as so recomputed, shall constitute the percentage
ownership interest in Pool Receivables held by the Purchaser or the Bank
Investors, as the case may be, on such day. Such Undivided Interest shall become
zero at such time as the Purchaser, or the Bank Investors, as the case may be,
shall have received the accrued Earned Discount for such Undivided Interest,
shall have recovered the Purchaser's Investment of such Undivided Interest and
shall have received all other amounts payable to the Purchaser or the Bank
Investors, as applicable, pursuant to this Agreement in respect of such
Undivided Interest and Servicer shall have received the accrued Servicer's Fee
for such Undivided Interest. Such Undivided Interest shall remain constant from
the time as of which any such computation or recomputation is made until the
time as of which the next such recomputations if any, shall be made.
SECTION 2.2. PURCHASER'S INVESTMENT. (a) Subject to
SUBSECTIONS (B) and (C), the "PURCHASER'S INVESTMENT" of an Undivided Interest
owned by the Purchaser or any Bank Investor at any time means an amount equal
to:
(i) the aggregate of the amounts theretofore paid by the
Purchaser or the Bank Investors, to the Transferor (and, in the case of
the Bank Investors, to the Purchaser) for the acquisition of such
Undivided Interest (A) by Purchase pursuant to SECTIONS 1.1(A)
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and 1.3 and (B) by Reinvestments pursuant to SECTIONS 1.1(B) and 3.1,
and (C) in the case of the Bank Investors, pursuant to SECTION 13.5,
less
(ii) the aggregate amount of Collections theretofore received
and distributed on account of the Purchaser's Investment pursuant to
SECTIONS 3.1 and 3.2.
(b) Solely for purposes of calculating the Earned Discount
(and each component thereof) with respect to a portion of an Undivided Interest
purchased or funded by an Enterprise Liquidity Provider or Enterprise Credit
Support Provider pursuant to the PROVISO to the definition of "EARNED DISCOUNT"
in APPENDIX B:
(i) "PURCHASER'S INVESTMENT" of any portion of an Undivided
Interest owned by an Enterprise Liquidity Provider or otherwise funded
pursuant to an Enterprise Liquidity Agreement shall be deemed to be the
amount paid to Enterprise by such Enterprise Liquidity Provider as the
purchase price of, or the original principal amount loaned with
respect to, such portion (less any portion of such purchase price or
principal amount allocable to Earned Discount accrued and unpaid at the
time of purchase or funding by such Enterprise Liquid ity Provider), as
reduced from time to time by Collections indefeasibly received and
distributed to such Enterprise Liquidity Provider on account of such
purchase price or principal amount (other than any portion allocable
to Earned Discount pursuant to Sections 3.1 and 3.2 hereof);
(ii) "PURCHASER'S INVESTMENT" of any portion of an Undivided
Interest funded under an Enterprise Credit Support Agreement shall be
deemed to be the principal amount of the advance or drawing under such
Enterprise Credit Support Agreement with respect to such portion (less
the amount, if any, of such advance or drawing used to fund Earned
Discount accrued and unpaid at the time of the making of such advance
or drawing), as reduced by any payments indefeasibly made by Enterprise
or the Enterprise Liquidity Provider to the Enterprise Credit Support
Provider in reimbursement of such drawing or repayment of such
advance, as the case may be (less any amount allocable to such accrued
and unpaid Earned Discount); and
(iii) "PURCHASER'S INVESTMENT" of any other portion of an
Undivided Interest shall mean such Purchaser's Investment of such
Undivided Interest LESS the sum of such Purchaser's Investments of all
portions of such Undivided Interest described in CLAUSES (I) and
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<PAGE> 14
(II) above, calculated in accordance with such CLAUSES (I) and (II),
as applicable.
(c) The Purchaser's Investment shall not be considered reduced
by any distribution of any portion of Collections if at any time such
distribution is rescinded or must otherwise be returned for any reason.
(d) The "RELATED" Purchaser's Investment with regard to a
Yield Period or Undivided Interest (or portion thereof) means the Purchaser's
Investment calculated with regard to such Yield Period or Undivided Interest (or
such portion), as the case may be.
SECTION 2.3. NET POOL-BALANCE. (a) The "NET POOL BALANCE" at
any time means an amount equal to:
(i) the aggregate Unpaid Balance of the Eligible Receivables
in the Receivables Pool at such time, MINUS
(ii) the aggregate (for all Obligors) of the amounts by which
(x) the Unpaid Balance of all Pool Receivables of each Obligor exceeds
(y) the Concentration Limit for such Obligor at such time.
(b) "CONCENTRATION LIMIT" for any Obligor or Government
Obligor (Government Obligors in the aggregate may not exceed 15% of the Net Pool
Balance at any time as set forth on Schedule 2.03(b)) at any time means the
greater of (x) the Special Concentration Limit, if any, for such Obligor and
(y) 2.0% of the Aggregate Unpaid Balance of the Eligible Receivables in the
Receivables Pool at such time.
(c) "SPECIAL CONCENTRATION LIMIT" for any Obligor means the
amount designated from time to time as such by the Agent with regard to any
Obligor in a writing in the form of SCHEDULE 2.03(B) delivered to the Transferor
(it being understood that the most recent writing at any time delivered to the
Transferor shall supersede each previous writing).
(d) In the case of any Obligor which is an Affiliate of any
other Obligor, the Concentration Limit, the Special Concentration Limit, if any,
and the aggregate Unpaid Balance of Pool Receivables of such Obligors shall be
calculated as if such Obligors were one Obligor.
SECTION 2.4. SHARES.
(a) AGGREGATE PURCHASER'S SHARE. The Purchaser's, or the Bank
Investors', as the case may be, "AGGREGATE PURCHASER'S SHARE" of Collections of
Pool Receivables received (or deemed received) by the Transferor or Servicer on
any day means an
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amount calculated by the Servicer (subject to recalculation by
any Agent) equal to the product of:
(i) the amount of all Collections of Pool Receivables
received (or deemed received) by the Transferor or Servicer on such
day, TIMES
(ii) the Aggregate Required Allocations divided by the Net
Pool Balance.
(b) PURCHASER'S SHARE. With respect to each Undivided
Interest, the related "PURCHASER'S SHARE" of Collections of Pool Receivables
received (or deemed received) by the Transferor or Servicer on any day means an
amount equal to the product of:
(i) the Aggregate Purchaser's Share of Collections for such
day, TIMES
(ii) (A) if such day is not a Run Off Day, the quotient of (1)
such Undivided Interest on such day, expressed as a decimal DIVIDED BY
(2) all of the Undivided Interests on such day, expressed as a
decimal,
(B) if such day is a Run Off Day, the quotient of (1) such
Undivided Interest on the first Run Off Day to have occurred during the
then current Run Off Period, expressed as a decimal, DIVIDED BY (2) all
of the Undivided Interests on such day, expressed as a decimal;
PROVIDED that after such time as an Undivided Interest shall equal
zero, the Purchaser's Share of Collections therefor shall also equal
zero, and
(C) each Bank Investor shall share PRO RATA in the Aggregate
Purchaser's Share.
ARTICLE III
SETTLEMENTS
SECTION 3.1. NON-RUN OFF SETTLEMENT PROCEDURES FOR
COLLECTIONS. (a) DAILY PROCEDURE. On each day (other than a Run Off Day) in any
Yield Period for any Undivided Interest, Servicer shall deem an amount equal to
the Purchaser's Share but not in excess of the Aggregate Purchaser's Share (as
determined in SECTION 2.4) of Collections of Pool Receivables received or deemed
received on such day to be received in respect of such Undivided Interest; and
(i) out of the Purchaser's Share of such Collections, hold in
trust for the benefit of the Purchaser or the Bank Investors, as the
case may be, of such Undivided Interest an amount equal to the related
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Earned Discount and related Servicer's Fee accrued through such day and
not previously so held for the benefit of the Purchaser or the Bank
Investors, as the case may be,
(ii) apply an amount equal to the remainder of the Purchaser's
Share of such Collections (the "REMAINING COLLECTIONS") to reduce the
Purchaser's Investment of such Undivided Interest (it being understood
that such amount need not be physically paid to the Purchaser or the
Bank Investors under this CLAUSE (II)),
(iii) subject to SECTION 3.3, after such reduction, (A) apply
such Remaining Collections to the Reinvestment, for the benefit of the
Purchaser or the Bank Investor, as the case may be, of additional
undivided interests in Pool Receivables by recomputation of such
Undivided Interest pursuant to SECTION 2.1 as of the end of such day,
thereby increasing the Purchaser's Investment, and (B) pay to the
Transferor such Remaining Collections.
The recomputed Undivided Interest shall constitute the percentage ownership
interest in Pool Receivables on such day held by the Purchaser or the Bank
Investors, as the case may be, with regard to such Undivided Interest.
(b) SETTLEMENT DATE PROCEDURE. On the Settlement Date for each
Undivided Interest, for each day in the related Yield Period of such Settlement
Period that is not a Run Off Day for such Undivided Interest, out of the related
Purchaser's Share of Collections for each such Undivided Interest, Servicer
shall deposit to the Agent's account for the Purchaser, or the Bank Investors,
whichever then holds such Undivided Interest, as described in SECTION 3.5, the
amounts set aside as described in SECTION 3.1(A)(I) and the amounts, if any, set
aside pursuant to SECTION 3.3(B) or (C) for payment to the Agent on such
Settlement Date; PROVIDED, HOWEVER, that if the Agent gives its consent (which
consent may be revoked at any time), Servicer may retain amounts which would
otherwise be deposited in respect of Servicer's Fee, in which case no
distribution shall be made in respect of Servicer's Fee under CLAUSE (C) below.
(c) ORDER OF APPLICATION. Upon receipt by the Agent of funds
distributed pursuant to SUBSECTION (B) in respect of an Undivided Interest owned
by the Purchaser or the Bank Investors, as the case may be, the Agent shall
distribute such funds first, (i) to the Purchaser or the Bank Investors, as
applicable, in payment of the accrued and unpaid Earned Discount [and Program
Fee] for such Undivided Interest until paid in full, then (ii) to Servicer in
payment of the accrued and unpaid Servicer's Fee payable with respect to such
Undivided Interest until paid in
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full, and (iii) in the case of any amounts set aside pursuant to SECTION 3.3(B)
or (C), to the Purchaser or the Bank Investors, as applicable, in reduction of
the Purchaser's Investment therein.
SECTION 3.2. RUN OFF-SETTLEMENT PROCEDURES FOR COLLECTIONS.
(a) DAILY PROCEDURE. On each Run Off Day occurring in any Yield Period for an
Undivided Interest, Servicer shall set aside and hold in trust for the Purchaser
or the Bank Investors, as appropriate, the Purchaser's Share of the Collections
of Pool Receivables in respect of such Undivided Interest for such Run Off Day
but not in excess of the Aggregate Purchaser's Share and, if requested in
writing by the Agent (in its sole discretion), by depositing such Collections
within one Business Day of the Servicer's receipt thereof into a bank account at
the Agent on behalf of the Purchaser or the Bank Investors in which no other
funds shall be deposited.
(b) SETTLEMENT DATE PROCEDURE. On each Settlement Date for
each Undivided Interest, if one or more Run Off Days for such Undivided Interest
occurred during the related Yield Period for the Settlement Period ending on
such Settlement Date for such Undivided Interest, Servicer shall deposit to the
account of the Agent for the benefit of the Purchaser or the Bank Investors then
owning such Undivided Interest, as described in SECTION 3.5, the amounts set
aside pursuant to SECTION 3.2(A) out of the Purchaser's Share of Collections
during such Settlement Period, but not to exceed the sum of (i) the accrued and
unpaid Earned Discount, (ii) the Purchaser's Investment of such Undivided
Interest, (iii) the aggregate of other amounts owed hereunder by the Transferor
to the Purchaser, any Bank Investor or the Agent in respect of such Undivided
Interest, and (iv) the accrued Servicer's Fee payable with respect to such
Undivided Interest. If no Termination Event or Unmatured Termination Event shall
have occurred and be continuing, any amounts set aside pursuant to the first
sentence of this SECTION 3.2 and not required to be deposited to the Agent's
account pursuant to the next preceding sentence shall be paid to the Transferor
by Servicer.
(c) ORDER OF APPLICATION. Upon receipt by the Agent of funds
deposited to its account pursuant to SECTION 3.2(B), the Agent shall distribute
such funds (i) to the Purchaser or the Bank Investors, as the case may be, or to
the Agent (as the case may be) (A) in payment of the accrued and unpaid Earned
Discount and Program Fee for such Undivided Interest, (B) in reduction of the
Purchaser's Investment of such Undivided Interest and (C) in payment of any
other amounts owed by the Transferor hereunder to the Purchaser or the Agent, in
each case until reduced to zero, and (ii) to Servicer in payment of the accrued
and unpaid Servicer's Fee payable with respect to such Undivided Interest, also
until reduced to zero. If there shall be insufficient funds on deposit for the
Agent to distribute funds in payment in full of the aforementioned amounts, the
Agent shall distribute funds
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on deposit, FIRST, in payment of the Earned Discount and Program Fee for such
Undivided Interest, SECOND, in payment of the Servicer's Fee payable with
respect to such Undivided Interest, if any, (if Servicer is not the Transferor
or an Affiliate of the Transferor), THIRD, in reduction of Purchaser's
Investment of such Undivided Interest, FOURTH, in payment of any other amounts
payable to the Purchaser, any Bank Investor, or to the Agent hereunder, and
FIFTH, in payment of the Servicer's Fee payable with respect to such Undivided
Interest (if Servicer is the Transferor or an Affiliate of the Transferor).
SECTION 3.3. SPECIAL SETTLEMENT PROCEDURES: REDUCTION OF
PURCHASER'S INVESTMENT, ETC. (a) DEEMED COLLECTIONS. If on any day:
(i) the Unpaid Balance of any Pool Receivable is:
(A) reduced as a result of any defective, rejected or
returned merchandise or services, any cash discount, or any
adjustment by the Transferor, any Originator or Seller or any
Affiliate of the Transferor or any Originator or Seller (other
than any adjustment permitted by SECTION 8.2(C) unless the
Agent, the Purchaser or any Bank Investor, as the case may be,
shall reasonably object thereto within 30 days of being
informed thereof); or
(B) reduced or cancelled as a result of a setoff in
respect of any claim by the Obligor thereof against the
Transferor, any Originator or Seller or any Affiliate of the
Transferor or any Originator or Seller (whether such claim
arises out of the same or a related or an unrelated
transaction); or
(C) reduced on account of the obligation of
the Transferor to pay to the related Obligor any
rebate or refund; or
(ii) any of the representations or warranties of the
Transferor set forth in SECTION 6.1(L) or (P) is no longer true with
respect to a Pool Receivable, then, on such day, Servicer shall be
deemed to have received a Collection of such Pool Receivable
(I) in the case of CLAUSE (I) above, in the
amount of such reduction or cancellation; and
(II) in the case of CLAUSE (II) above, in the amount
of the Unpaid Balance of such Pool Receivable.
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(b) UNREINVESTED COLLECTIONS. Collections that may not be
reinvested by means of Reinvestments in an Undivided Interest on account of the
application of the Required Allocations Limit or the Purchase Limit pursuant to
SECTION 1.2 shall be so reinvested as soon as it is possible to do so without
violating such Required Allocations Limit or Purchase Limit, as the case may be.
To the extent and so long as such Collections may not be so reinvested, Servicer
shall hold such Collections ratably in trust for the benefit of the Purchaser or
the Bank Investors, as the case may be, and, if requested by the Agent, in a
separate deposit account with the Agent containing only the Purchaser's Share of
such Collections and no other funds, for payment to the Agent on the next
following Settlement Date for application to the next maturing Undivided
Interests.
(c) THE TRANSFEROR'S REDUCTION OF AGGREGATE PURCHASER'S
INVESTMENT. If at any time the Transferor shall wish to cause the reduction of
the Aggregate Purchaser's Investment (but not to commence the liquidation, or
reduction to zero, of all Undivided Interests), the Transferor may do so as
follows:
(i) the Transferor shall give the Agent at least three
Business Days' prior written notice thereof (including the amount of
such proposed reduction and the proposed date on which such reduction
will commence) and, if applicable, shall cause the reduction to be
allocated ratably among the Bank Investors such that each Bank Investor
shall receive its pro rata share of the aggregate amount of such
proposed reductions;
(ii) on the proposed date of commencement of such reduction
and on each day thereafter, Servicer shall refrain from reinvesting
Remaining Collections in Undivided Interests, until the amount thereof
not so reinvested shall equal the desired amount of reduction for the
Purchaser or the Bank Investors, as the case may be; and
(iii) Servicer shall hold such Collections for the benefit of
the Purchaser or the Bank Investors, as the case may be, for the
payment to the Agent for each Undivided Interest proposed to be reduced
in connection herewith, in which such Collections are accumulated, and
such amounts shall be applied to reduce the Purchaser's Investment in
such Undivided Interests in accordance with the PROVISOS hereto and
with regard to any Undivided Interest, the related Purchaser's
Investment of such Undivided Interest shall be deemed reduced in the
amount to be paid to the Agent only when in fact finally so paid;
PROVIDED that,
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(A) any such reduction may only be effected on the
last day of the related Yield Period for any Undivided
Interest the related Purchaser's Investment in which has been
requested to be reduced and only to the extent that after
giving effect to any such reduction the remaining Purchaser's
Investment in such Undivided Interest shall not be less than
$1,000,000 (unless the Purchaser's Investment of such
Undivided Interest shall thereby be reduced to zero) and shall
be in an integral multiple of $100,000,
(B) if the Transferor shall commence any voluntary
reduction in a Yield Period containing all or a portion of any
Run Off Period, Collections not so reinvested shall be
treated as if collected on the next following Run Off Day,
(C) the Transferor shall use reasonable efforts to
attempt to choose a reduction amount, and the date of
commencement thereof, so that such reduction shall commence
and conclude in the same Yield Period, and
(D) if two or more Undivided Interests of the
Purchaser or any Bank Investor shall be outstanding at the
time of any proposed reduction, such proposed reduction shall
be applied, unless the Agent shall consent otherwise, to the
Undivided Interest with the shortest remaining Yield Period.
(d) ALLOCATIONS OF OBLIGOR'S PAYMENTS. Except as provided in
SECTION 3.3(A) or as otherwise required by law or the underlying Contract, all
Collections received from an Obligor of any Receivable shall be applied to
Receivables then outstanding of such Obligor in the order of the age of such
Receivables, starting with the oldest such Receivable; PROVIDED, HOWEVER, that,
if payment is designated by such Obligor for application to specific
Receivables, it shall be applied to such specified Receivables.
(e) DEPOSIT TO COLLECTION ACCOUNT. Notwithstanding anything
herein to the contrary, the Agent may require the Transferor and Servicer (or
their designees or successors) at any time (such instruction shall be deemed
given upon the occurrence and continuance of a Termination Event), to deposit
all Collections of Pool Receivables received (including, without limitation,
received by any Lock-Box Bank) to an account established at the Agent (the
"COLLECTION ACCOUNT") within one Business Day of receipt thereof. Such
Collections shall be applied by the Agent in accordance with the provisions of
this Agreement, including
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SECTIONS 3.1, 3.2 or 3.3 hereof. Servicer (or its designee or successor) shall
notify the Agent of the amount of funds deposited in the Collection Account not
received from Pool Receivables and the Agent shall remit such funds as soon as
practicable after such notification to such account as Servicer (or its designee
or successor) shall designate.
SECTION 3.4. REPORTING. (a) On or prior to the twentieth day
of each month (or if such day is not a Business Day, the next succeeding
Business Day), Servicer shall prepare and forward to the Agent a PERIODIC REPORT
(including a certification that no Termination Event or Unmatured Termination
Event shall have occurred) relating to all Undivided Interests owned by the
Purchaser or the Bank Investors, as applicable, as of the close of business of
Servicer on the next preceding Month End Date.
(b) On or prior to each Settlement Date, the Transferor will
advise the Agent and, if Wackenhut is not the Servicer, the Servicer of each Run
Off Day occurring during the Settlement Period ending on such Settlement Date.
(c) On or prior to each Purchase or Reinvestment hereunder,
the Transferor shall permanently mark in the computer records for each
Receivable subject to such Purchase or Reinvestment that such Receivable is
subject to the interest of the Agent, on behalf of the Purchaser or the Bank
Investors hereunder, as the case may be.
SECTION 3.5. PAYMENTS AND COMPUTATIONS, ETC. (a) Unless
otherwise required pursuant to this Agreement, all amounts to be paid or
deposited by the Transferor hereunder shall be paid or deposited in accordance
with the terms hereof no later than noon (New York time) on the day when due in
lawful money of the United States of America in same day funds to accounts
indicated in SECTION [ ] hereof unless otherwise notified by the Agent. If the
Agent shall have received such funds by noon (New York time), it shall forward
the portion of the funds deposited that are due to the Purchaser or the Bank
Investors by 3:00 p.m. (New York time) on such day and if received after noon
(New York time), on the next following Business Day.
(b) The Transferor or Servicer, as applicable, shall, to the
extent permitted by law, pay to the Agent interest on all amounts not paid or
deposited when due hereunder at 2% PER ANNUM above the Alternate Reference Rate,
payable on demand; PROVIDED, HOWEVER, that such interest rate shall not at any
time exceed the maximum rate permitted by applicable law. Such interest shall be
retained by the Agent except to the extent that such failure to make a timely
payment or deposit has continued beyond the date for distribution by the Agent
of such overdue amount to the Purchaser or the Bank Investors, if any, or any
other Person
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having an interest in such overdue amount, in which case such interest accruing
after such date shall be for the account of, and distributed by the Agent, to
such Persons ratably in accordance with their respective interests in such
overdue amount.
(c) All computations of interest, Earned Discount, Negative
Spread Fee and any other fees hereunder shall be made on the basis of a year of
360 days for the actual number of days (including the first day but excluding
the last day) elapsed.
SECTION 3.6. DIVIDING OR COMBINING UNDIVIDED INTERESTS.
(a) DIVISION OF UNDIVIDED INTERESTS. The Agent may at any
time, as of the last day of any Yield Period for any then existing Undivided
Interest owned by the Purchaser or any Bank Investor, as the case may be, divide
such existing Undivided Interest on such last day into two or more new Undivided
Interests, each such new Undivided Interest having a Purchaser's Investment as
designated by the Agent and all such new Undivided Interests collectively having
aggregate Purchaser's Investments equal to the Purchaser's Investment of such
existing Undivided Interest.
(b) COMBINATION OF UNDIVIDED INTERESTS. The Agent may at any
time, as of the last day of any Yield Period for two or more existing Undivided
Interests owned by the Purchaser or the Bank Investors, as the case may be, on
or before the date of any proposed Purchase of an Undivided Interest pursuant to
SECTIONS 1.1 and 1.4 by the Purchaser or the Bank Investors, as the case may be,
on such last day or such date of Purchase, as the case may be, combine into one
new Undivided Interest such existing and/or proposed Undivided Interests or any
combination thereof, such new Undivided Interest having a Purchaser's Investment
equal to the aggregate Purchaser's Investments of such Undivided Interests so
combined.
(c) EFFECT OF DIVISION OR COMBINATION. On and after any
division or combination of Undivided Interests as described above, each of the
new Undivided Interests resulting from such division, or the new Undivided
Interest resulting from such combination, as the case may be, shall be a
separate Undivided Interest having a Purchaser's Investment as set forth above,
and shall take the place of such existing Undivided Interest or Undivided
Interests or proposed Undivided Interest, as the case may be, in each case under
and for all purposes of this Agreement.
SECTION 3.7. TREATMENT OF COLLECTIONS AND DEEMED COLLECTIONS.
The Transferor shall forthwith deliver to Servicer all Collections deemed
received by the Transferor pursuant to SECTION 3.3(A), and Servicer shall hold
or distribute such
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Collections as Earned Discount, accrued Servicer's Fee, repayment of Purchaser's
Investment, etc., to the same extent as if such Collections had actually been
received on the date of such delivery to Servicer. If Collections are then being
paid to the Agent, or lock boxes or accounts directly or indirectly owned or
controlled by the Agent, Servicer shall forthwith cause such deemed Collections
to be ratably paid to the Agent or to such lock boxes or accounts, as
applicable. So long as the Transferor shall hold any Collections or deemed
Collections required to be paid to Servicer or to the Agent, it shall hold such
Collections in trust and separate and apart from its own funds and shall clearly
mark its records to reflect such trust.
ARTICLE IV
FEES AND YIELD PROTECTION
SECTION 4.1. FEES. (a) AGENT'S FEES. Fees payable to the Agent
for services performed in its capacity as Agent or as Agent for the benefit of
the Purchaser or the Bank Investors, as the case may be, shall be due and
payable on such dates and in such amounts as set forth in the letters dated the
date the conditions precedent set forth in Section 5.1 are first satisfied,
from the Agent to the Transferor (the "FEE LETTERS").
(b) NOTE FEE. From the date hereof until the date, on or after
the Commitment Termination Date, on which the Aggregate Total Investments shall
be reduced to zero, the Transferor shall pay to the Agent for the account of the
Purchaser, a note issuance fee ("NOTE FEE") in an amount equal to the product
of (x) the greater of $15, or the note fee actually paid or payable by the
Purchaser to the issuing agent and depositary for the Commercial Paper Notes
for the authentication and delivery of each Commercial Paper Note, as notified
by the Agent on behalf of the Purchaser to the Transferor and Servicer from time
to time, TIMES (y) the number of Commercial Paper Notes issued by the Purchaser
to fund its Undivided Interests hereunder during the period for which such Note
Fee is payable, as notified by the Agent on behalf of the Purchaser to the
Transferor and Servicer; PROVIDED THAT, if such Commercial Paper Notes shall at
any time become "book-entry" Notes, the "Note Fee" therefor shall equal $30 per
trade. Such Note Fee shall be paid in arrears on the first Business Day of each
month for the preceding calendar month for the number of Commercial Paper Notes
issued to fund the Undivided Interests owned by the Purchaser during the
preceding calendar month for which no Note Fee shall have theretofore been paid.
The Agent, on behalf of the Purchaser, shall notify the Transferor and Servicer
at least one Business Day prior to the end of each calendar month of the number
of Commercial Paper Notes issued by the Purchaser to fund its Undivided
Interests hereunder during such calendar month.
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(c) DEALER FEE. The dealer fee is set forth in CLAUSE (II) of
the definition of Commercial Paper Rate.
SECTION 4.2. YIELD PROTECTION. (a) If (i) Regulation D or (ii)
any Regulatory Change occurring after the date hereof:
(A) shall subject an Affected Party to any tax, duty or other
charge with respect to any Undivided Interest owned by or funded by it
or any obligations or right to make Purchases or Reinvestments or to
provide funding therefor, or shall change the basis of taxation of
payments to the Affected Party of any Purchaser's Investments or Earned
Discount owned by, owed to or funded by it or any other amounts due
under this Agreement in respect of any Undivided Interest owned by or
funded by it or its obligations or rights, if any, to make Purchases or
Reinvestments or to provide funding therefor (except for changes in the
rate of tax on the overall net income of such Affected Party imposed by
the United States of America, by the jurisdiction in which such
Affected Party's principal executive office is located and, if such
Affected Party's principal executive office is not in the United States
of America, by the jurisdiction where such Affected Party's principal
office in the United States is located); or
(B) shall impose, modify or deem applicable any reserve
(including, without limitation, any reserve imposed by the Federal
Reserve Board, but excluding any reserve included in the determination
of Earned Discount), special deposit or similar requirement against
assets of any Affected Party, deposits or obligations with or for the
account of any Affected Party or with or for the account of any
affiliate (or entity deemed by the Federal Reserve Board to be an
affiliate) of any Affected Party, or credit extended by any Affected
Party; or
(C) shall change the amount of capital maintained or required
or requested or directed to be maintained by any Affected Party; or
(D) shall impose any other condition affecting any Undivided
Interest owned or funded by any Affected Party, or its obligations or
rights, if any, to make Purchases or Reinvestments or to provide
funding therefor; or
(E) shall impose on any Affected Party any other expense
(including attorneys' fees and litigation costs);
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and the result of any of the foregoing is or would be:
(x) to increase the cost to (or in the case of Regulation D
referred to above, to impose a cost on) (I) an Affected Party funding
or making or maintaining any Purchases or Reinvestments, any purchases,
reinvestments, or loans or other extensions of credit under this
Agreement, the Enterprise Liquidity Agreement or Enterprise Credit
Support Agreement, as applicable or any commitment of such Affected
Party with respect to any of the foregoing, or (II) any Agent for
continuing its, or the Transferor's, or any Originator's relationship
with the Purchaser or any Bank Investor, as the case may be; or
(y) to reduce the amount of any sum received or receivable by
an Affected Party under this Agreement or the Certificate of
Assignments, or under the Enterprise Liquidity Agreement or the
Enterprise Credit Support Agreement with respect thereto; or
(z) in the sole determination of such Affected Party, to
reduce the rate of return on the capital of an Affected Party as a
consequence of its obligations hereunder or arising in connection
herewith to a level below that which such Affected Party could
otherwise have achieved, then within thirty days after demand by such
Affected Party (which demand shall be accompanied by a statement
setting forth the basis of such demand), the Transferor shall pay
directly to such Affected Party such additional amount or amounts as
will compensate such Affected Party for such additional or increased
cost or such reduction; PROVIDED THAT, such demand shall be made only
with regard to amounts accruing not more than six months prior to the
earlier of (x) such demand being made upon the Transferor and (y)
notification of the Transferor pursuant to PARAGRAPH (B) below.
(b) Each Affected Party will promptly notify the Transferor and the
Agent of any event of which it has knowledge which will entitle such Affected
Party to compensation pursuant to this SECTION 4.2; PROVIDED, HOWEVER, no
failure to give or delay in giving such notification shall adversely affect the
rights of any Affected Party to such compensation.
(c) In determining any amount provided for or referred to in this
SECTION 4.2, an Affected Party may use any reasonable averaging and attribution
methods that it (in its sole discretion) shall deem applicable. Any Affected
Party when making a claim under this SECTION 4.2 shall submit to the Transferor
a statement as to such increased cost or reduced return (including
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calculation thereof in reasonable detail), which statement shall, in the absence
of manifest error, be conclusive and binding upon the Transferor.
ARTICLE V
CONDITIONS OF PURCHASES
SECTION 5.1. CONDITIONS PRECEDENT TO INITIAL PURCHASE. The
initial Purchase hereunder is subject to the condition precedent that the Agent
shall have received, on or before the date of such Purchase, the following, each
(unless otherwise indicated) dated such date and in form and substance
satisfactory to the Agent:
(a) A Certificate of Assignment for the Agent on behalf of the
Purchaser, in substantially the form attached hereto as SCHEDULE
5.1(A);
(b) A copy of the resolutions of the Board of Directors of the
Transferor approving this Agreement, the Receivables Purchase
Agreement, the Certificate of Assignments and the other Agreement
Documents to be delivered by it hereunder and the transactions
contemplated hereby, certified by its Secretary or Assistant Secretary;
(c) a copy of the resolutions of the Board of Directors of
Wackenhut approving this Agreement, the Receivables Purchase Agreement,
the Purchase and Sale Agreement and the other Agreement Documents to be
delivered hereunder and thereunder, certified by its Secretary or
Assistant Secretary;
(d) a copy of the resolutions of each Originator approving the
Purchase and Sale Agreement and the other Agreement Documents to be
delivered hereunder and thereunder and as certified by the Secretary or
Assistant Secretary of each Originator;
(e) A Good Standing Certificate for the Transferor, Wackenhut
and each Originator issued by the Secretary of State or a similar
official of the Transferor's, the Servicer's and each Originator's
jurisdiction of incorporation and certificates of qualification as a
foreign corporation issued by the Secretaries of State or other similar
officials of each jurisdiction when such qualification is material to
the transactions contemplated by this Agreement, the Receivables
Purchase Agreement, the Purchase and Sale Agreement and
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the other Agreement Documents, in each case, dated a date reasonably
prior to such date;
(f) A certificate of the Secretary or Assistant Secretary of
each of the Transferor, Wackenhut and each Originator certifying the
names and true signatures of the officers authorized on its behalf to
sign this Agreement, the Purchase and Sale Agreement, the Receivables
Purchase Agreement, the Certificate of Assignments and the other
Agreement Documents to be delivered by them hereunder (on which
certificate the Agent, the Purchaser and each Bank Investor may
conclusively rely until such time as the Agent shall receive from the
Transferor, Wackenhut or the applicable Originator, as applicable, a
revised certificate meeting the requirements of this SUBSECTION (F));
(g) The Articles of Incorporation of each of the Transferor,
Wackenhut and each Originator, duly certified by the Secretary of
State or similar official of the jurisdiction of its organization, as
of a recent date acceptable to each Agent, together with a copy of the
By-laws of each of the Transferor, Wackenhut and each Originator, duly
certified by the Secretary or an Assistant Secretary of the Transferor,
Wackenhut and such Originator, as applicable;
(h) Acknowledgment copies of proper Financing Statements (Form
UCC-1 and in the case of clause (iv) below, Form UCC-3), filed on or
prior to the date of the initial Purchase, naming (i) each Originator
as debtor/seller, the Seller as secured party and the Transferor as
assignee and filed in connection with transactions contemplated by the
Purchase and Sale Agreement, (ii) the Seller as debtor/seller, the
Transferor as secured party and the Agent as assignee and filed in
connection with transactions contemplated by the Receivables Purchase
Agreement, (iii) the Transferor as the debtor/seller of Receivables or
an undivided interest therein and the Agent, on behalf of the
Purchaser and the Bank Investors, as the secured party/purchaser, and
(iv) the Transferor as assignor, and the Agent, on behalf of the
Purchaser and the Bank Investors, as assignee, of the security
interests evidenced by the financing statement(s) referred to in clause
(i) above, or other, similar instruments or documents, as may be
necessary or, in the opinion of the Agent, desirable under the UCC or
any comparable law of all appropriate jurisdictions to perfect the
Agent's interests in all Undivided Interests assigned to it on behalf
of the Purchaser or the Bank Investors or otherwise created or arising
hereunder;
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(i) A search report provided in writing to the Agent by LEXIS
Document Services, listing all effective financing statements that name
the Transferor, the Seller or any Originator as debtor and that are
filed in the jurisdictions in which filings were made pursuant to
SUBSECTION (H) above and in such other jurisdictions that the Agent
shall reasonably request, together with copies of such financing
statements (none of which shall cover any Receivables or Contracts or
interests therein or Collections or proceeds of any thereof);
(j) Duly executed copies of Lock-Box Agreements with each of
the Lock-Box Banks, in substantially the form attached hereto as
SCHEDULE 5.1(H);
(k) A favorable opinion of associate General Counsel for the
Transferor, Wackenhut, each Originator and Servicer, in substantially
the form of SCHEDULE 5.1(I);
(l) A favorable opinion of Akerman, Senterfitt & Eidson,
P.A.,covering certain bankruptcy and insolvency matters in form and
substance satisfactory to Purchaser's counsel;
(m) Such sublicenses as the Agent shall require with regard to
all programs leased by the Transferor, Wackenhut, any Originator or
Servicer and used in the servicing of the Receivables Pool;
(n) Such powers of attorney as the Agent shall reasonably
request to enable the Agent to collect all amounts due under any and
all Pool Receivables;
(o) A Periodic Report as of the most recent Month End Date;
(p) Evidence (i) of the execution and delivery by Wackenhut
and each Originator of the Purchase and Sale Agreement (substantially
in the form attached hereto as SCHEDULE 5.1(P)(I)) and each other
Agreement Document to be executed and delivered in connection
therewith, (ii) of the execution and delivery by the Seller and the
Transferor of the Receivables Purchase Agreement (substantially in the
form attached hereto as SCHEDULE 5.1(P)(II)), and each other Agreement
Document to be executed and delivered in connection therewith, and
(iii) that each of the conditions precedent to the execution, delivery
and effectiveness of the Purchase and Sale Agreement and each other
Agreement Document has been satisfied;
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(q) Executed Letter Agreement (Segregation of Funds) of even
date herewith between Wackenhut Funding Corporation and NationsBank;
(r) A computer tape or disc containing such information
relating to each of the Pool Receivables the subject of the first
Purchase hereunder as is satisfactory to the Agent; and
(s) Evidence of the payment of all fees required to be paid
prior to closing.
SECTION 5.2. CONDITIONS PRECEDENT TO ALL PURCHASES AND
REINVESTMENTS. Each Purchase (including the initial Purchase) and each
Reinvestment hereunder shall be subject to the further conditions precedent
("CONDITIONS PRECEDENT") that on the date of such Purchase or Reinvestment the
following statements shall be true (and the Transferor by accepting the amount
of such Purchase or by receiving the proceeds of such Reinvestment shall be
deemed to have certified that):
(a) the representations and warranties contained in SECTION
6.1 and SECTION 6.2 and in the Purchase and Sale Agreement and in the
Receivables Purchase Agreement are correct in all material respects on
and as of such day as though made on and as of such day and shall be
deemed to have been made on such day except for those representations
and warranties made solely with respect to an earlier date which shall
be correct in all material respects as of such date;
(b) no event has occurred and is continuing, or would result
from such Purchase or Reinvestment, that constitutes a Termination
Event or Unmatured Termination Event;
(c) after giving effect to each proposed Purchase or
Reinvestment, (i) Aggregate Purchaser's Investments will not exceed the
Purchase Limit, and (ii) Aggregate Required Allocations will not exceed
the Required Allocations Limit and (iii) the sum of the Aggregate
Purchaser's Investment plus the Interest Component of all outstanding
Related Commercial Paper would not exceed the Facility Limit; and
(d) the Commitment Termination Date shall not have occurred;
PROVIDED, HOWEVER, the absence of the occurrence and continuance of an Unmatured
Termination Event shall not be a Condition Precedent to any reinvestment being
made with the proceeds of
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Collections that were, on the same day, applied in reduction of the Aggregate
Total Investments.
SECTION 5.3. ADDITIONAL CONDITION PRECEDENT TO PURCHASES. Each
Purchase (including the initial Purchase) shall be subject to the further
condition precedent that the Purchase Termination Date shall not have occurred.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.1. REPRESENTATIONS AND WARRANTIES OF THE TRANSFEROR.
The Transferor represents and warrants as follows:
(a) ORGANIZATION AND GOOD STANDING. The Transferor has been
duly organized and is validly existing as a corporation in good
standing under the laws of the State of Delaware, with power and
authority to own its properties and to conduct its business as such
properties are presently owned and such business is presently
conducted, and had at all relevant times, and now has, all necessary
power, authority, and legal right to acquire and own the Pool
Receivables.
(b) DUE QUALIFICATION. The Transferor is duly qualified to do
business as a foreign corporation in good standing, and has obtained
all necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of property or the conduct of its business
requires such qualification, licenses or approvals.
(c) POWER AND AUTHORITY; DUE AUTHORIZATION. The Transferor (i)
has all necessary power, authority and legal right to (A) execute and
deliver this Agreement, the Certificate of Assignments and other
Agreement Documents to which it is a party, (B) carry out the terms of
the Agreement Documents, and (C) sell and assign undivided Interest on
the terms and conditions herein provided and (ii) has duly authorized
by all necessary corporate action the execution, delivery and
performance of this Agreement and the other Agreement Documents to
which it is a party and the sale and assignment of the Undivided
Interests on the terms and conditions herein provided.
(d) VALID SALE; BINDING OBLIGATIONS. This Agreement
constitutes a valid sale, transfer, and assignment of Undivided
Interests to the Agent, on behalf of the Purchaser or the Bank
Investors, as the case may be,
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enforceable against creditors of, and purchasers from, the Transferor;
and this Agreement constitutes, and each other Agreement Document to be
signed by the Transferor when duly executed and delivered will
constitute, a legal, valid and binding obligation of the Transferor
enforceable in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, or other similar
laws affecting the enforcement of creditors, rights generally and by
general principles of equity, regardless of whether such enforceability
is considered in a proceeding in equity or at law.
(e) NO VIOLATION. The consummation of the transactions
contemplated by this Agreement and the other Agreement Documents and
the fulfillment of the terms hereof will not (i) conflict with, result
in any breach of any of the terms and provisions of, or constitute
(with or without notice or lapse of time or both) a default under, the
articles of incorporation or by-laws of the Transferor, or any
indenture, loan agreement, receivables purchase agreement, mortgage,
deed of trust, or other agreement or instrument to which the Transferor
is a party or by which it or any of its properties is bound, (ii)
result in the creation or imposition of any Adverse Claim upon any of
the Transferor's properties pursuant to the terms of any such
indenture, loan agreement, receivables purchase agreement, mortgage,
deed of trust, or other agreement or instrument, other than this
Agreement and the Certificate of Assignments, or (iii) violate any law
or order, rule, or regulation applicable to the Transferor of any court
or of any federal or state regulatory body, administrative agency, or
other governmental instrumentality having jurisdiction over the
Transferor or any of its properties.
(f) NO PROCEEDINGS. There are no proceedings or investigations
pending, or to its knowledge threatened, before any court, regulatory
body, administrative agency, or other tribunal or governmental
instrumentality (i) asserting the invalidity of this Agreement, the
Certificate of Assignments or any other Agreement Documents, (ii)
seeking to prevent the sale and assignment of any Undivided Interest,
the issuance of the Certificate of Assignments or the consummation of
any of the other transactions contemplated by this Agreement or any
other Agreement Document, (iii) seeking any determination or ruling
that might materially and adversely affect (A) the performance by the
Transferor or Servicer of its obligations under this Agreement, or (B)
the validity or enforceability of this Agreement,
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the Certificate of Assignments, any other Agreement Document, the
Receivables or the Contracts or (iv) seeking to adversely affect the
federal income tax attributes of the Purchases hereunder or the
Certificate of Assignments.
(g) NOT AN INVESTMENT COMPANY. The Transferor is not, and is
not controlled by, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or is exempt from all
provisions of such Act.
(h) BULK SALES ACT. No transaction contemplated hereby
requires compliance with any bulk sales act or similar law.
(i) GOVERNMENT APPROVALS. No authorization or approval or
other action by, and no notice to or filing with, any governmental
authority or regulatory body is required for the due execution,
delivery and performance by the Transferor of this Agreement, the
Certificate of Assignments or any other Agreement Document, EXCEPT for
the filing of the UCC Financing Statements referred to in ARTICLE V,
all of which, at the time required in ARTICLE V, shall have been duly
made and shall be in full force and effect.
(j) LITIGATION. No injunction, decree or other decision has
been issued or made by any court, governmental agency or
instrumentality thereof that prevents, and to its knowledge no threat
by any person has been made to attempt to obtain any such decision that
would prevent, the Transferor from conducting a significant part of its
business operations, except as described in SCHEDULE 6.1(J).
(k) MARGIN REGULATIONS. The use of all funds obtained by the
Transferor under this Agreement will not conflict with or contravene
any of Regulations G, T, U and X promulgated by the Board of Governors
of the Federal Reserve System from time to time.
(l) QUALITY OF TITLE. Each Pool Receivable, together with the
related Contract and all purchase orders and other agreements related
to such Pool Receivable, is owned by the Transferor free and clear of
any Adverse Claim (other than any Adverse Claim arising solely as the
result of any action taken by the Purchaser or any Bank Investor, as
the case may be (or any assignee thereof) or by the Agent) and
restriction on assignment, except as provided herein; when the
Purchaser or any Bank Investor, as the case may be, makes a Purchase,
it or they or the Agent shall have acquired
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and shall continue to have maintained a valid and perfected first
priority undivided percentage ownership interest to the extent of its
Undivided Interest in each Pool Receivable and in the Related Security
and Collections with respect thereto, free and clear of any Adverse
Claim (other than any Adverse Claim arising solely as the result of any
action taken by the Purchaser or any Bank Investor (or any assignee
thereof) or by the Agent) except as provided hereunder; and no
effective financing statement or other instrument similar in effect
covering any Pool Receivable, any interest therein, the Related
Security or Collections with respect thereto is on file in any
recording office except such as may be filed (i) in favor of the
Transferor in accordance with the Contracts, (ii) in favor of the
Purchaser or any Bank Investor or the Agent in accordance with this
Agreement or in connection with any Adverse Claim arising solely as the
result of any action taken by the Purchaser or any Bank Investor (or
any assignee thereof) or by the Agent; or (iii) in favor of
NationsBank, or any successor, as described in SECTION 11.1.
(m) ACCURATE REPORTS. No Periodic Report (if prepared by the
Transferor, or to the extent that information contained therein was
supplied by the Transferor), information, Exhibit, financial statement,
document, book, record or report furnished or to be furnished by the
Transferor to the Agent or the Purchaser or any Bank Investor in
connection with this Agreement was or will be inaccurate in any
material respect as of the date it was or will be dated or (except as
otherwise disclosed to the Agent, the Purchaser or any Bank Investor,
as the case may be, at such time) as of the date so furnished, or
contained or will contain any material misstatement of fact or omitted
or will omit to state a material fact or any fact necessary to make the
statements contained therein not materially misleading.
(n) OFFICES. The chief place of business and chief executive
office of the Transferor are located at the address of the Transferor
referred to in SECTION 13.2, and the offices where the Transferor keeps
all of its books, records, and documents evidencing Pool Receivables,
the related Contracts and all purchase orders and other agreements
related to such Pool Receivables are located at the addresses
specified in SCHEDULE 6.1(N) (or at such other locations, notified to
the Agents in accordance with SECTION 7.1(F), in jurisdictions where
all action required by SECTION 8.5 has been taken and completed).
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(o) LOCK-BOX ACCOUNTS. The names and addresses of all the
Lock-Box Banks, together with the account numbers of the lock-box
accounts of the Transferor or Servicer at such Lock-Box Banks, are
specified in SCHEDULE 6.1(O) (or have been notified to the Agents in
accordance with SECTION 7.3(D)).
(p) ELIGIBLE RECEIVABLES. Each Receivable included in the Net
Pool Balance as an Eligible Receivable on the date of any Purchase or
Reinvestment shall be an Eligible Receivable on such date.
(q) SERVICING PROGRAMS. Any and all programs used by the
Transferor or the Servicer in the servicing of the Receivables Pool are
owned by the Transferor or the Servicer, as applicable, and not leased
or licensed.
(r) TRANSFERS. No purchase of an interest in Receivables by
the Purchaser or a Bank Investor from the Transferor or by the
Transferor from Wackenhut constitutes a fraudulent transfer or
fraudulent conveyance or is otherwise void or voidable under similar
laws or principles, the doctrine of equitable subordination or for any
other reason.
(s) PURCHASE AND SALE AGREEMENT. Each of the representations
and warranties made by each Originator in the Purchase and Sale
Agreement and by The Wackenhut Corporation in the Receivables Purchase
Agreement are true and correct in all material respects as of the date
or dates made.
(t) SOLVENCY. Immediately after giving effect to the
Transferor's, the Seller's and the Originator's obligations now or
hereafter arising pursuant to any Agreement Document and to each
transaction contemplated thereby, the Transferor, the Seller and each
Originator will each be Solvent.
(u) USE OF PROCEEDS. Neither the Transferor nor any Originator
will use the proceeds of the Purchases hereunder to acquire a security
in a transaction subject to Section 13 or 14 of the Securities
Exchange Act of 1934, as amended.
(v) TAX. The Transferor has filed each and every tax return
required to be filed by it in each jurisdiction in which it is
required to do so and has paid in each such jurisdiction all taxes
required to be paid by it on a consolidated basis.
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(w) TRADENAMES, ETC. As of the date hereof: (A) the
Transferor's chief executive office is located at the address set forth
under its signature to this Agreement; and (B) the Transferor has,
within the last five (5) years, used only the tradenames identified in
EXHIBIT 6.1(W) hereto, and, within the last five (5) years, has not
changed its name, merged with or into or consolidated with any other
corporation or been the subject of any proceeding under Title 11,
United States Code (Bankruptcy).
(x) NO TERMINATION EVENT. No event has occurred and is
continuing and no condition exists which constitutes a Termination
Event or an Unmatured Termination Event.
(y) ERISA. The Transferor is in compliance in all material
respects with ERISA and there exists no lien in favor of the Pension
Benefit Guaranty Corporation on any of the Receivables.
SECTION 6.2. REPRESENTATIONS AND WARRANTIES OF THE SERVICER.
The Servicer, represents and warrants to the Purchaser and to the Bank Investors
that:
(a) ORGANIZATION AND GOOD STANDING. Servicer has been duly
organized and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its organization, with power and
authority to own its properties and to conduct its business as such
properties are presently owned and such business is presently
conducted, and had at all relevant times, and now has, all necessary
power, authority, and legal right to acquire, own and sell the Pool
Receivables.
(b) DUE QUALIFICATION. Servicer is duly qualified to do
business as a foreign corporation in good standing, and has obtained
all necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of property or the conduct of its business requires
such qualification, licenses or approvals.
(c) POWER AND AUTHORITY; DUE AUTHORIZATION. Servicer (i) has
all necessary power, authority and legal right to (A) execute and
deliver this Agreement, the Receivables Purchase Agreement and the
Purchase and Sale Agreement and other Agreement Documents, (B) carry
out the terms of the Agreement Documents to which it is a party, and
(C) sell and assign the Receivables to the Transferor pursuant to the
Receivables Purchase Agreement on the terms and conditions therein
provided and (ii) has duly authorized by all necessary corporate
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action the execution, delivery and performance of this Agreement, the
Receivables Purchase Agreement, the Purchase and Sale Agreement and the
other Agreement Documents to which it is a party and the sale and
assignment of the Receivables to the Transferor pursuant to the
Receivables Purchase Agreement on the terms and conditions therein
provided.
(d) VALID SALE; BINDING OBLIGATIONS. The Receivables Purchase
Agreement constitutes a valid sale, transfer, and assignment of the
Receivables to the Transferor, enforceable against creditors of, and
purchasers from, Wackenhut; and this Agreement constitutes, and each
other Agreement Document to be signed by Wackenhut (in whatever
capacity) when duly executed and delivered will constitute, a legal,
valid and binding obligation of Wackenhut enforceable in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, or other similar laws affecting the
enforcement of creditors, rights generally and by general principles
of equity, regardless of whether such enforceability is considered in a
proceeding in equity or at law.
(e) NO VIOLATION. The consummation of the transactions
contemplated by this Agreement and the other Agreement Documents and
the fulfillment of the terms hereof will not (i) conflict with, result
in any breach of any of the terms and provisions of, or constitute
(with or without notice or lapse of time or both) a default under, its
articles of incorporation or by-laws, or any indenture, loan agreement,
receivables purchase agreement, mortgage, deed of trust, or other
agreement or instrument to which it is a party or by which it or any of
its properties is bound, (ii) result in the creation or imposition of
any Adverse Claim upon any of its properties pursuant to the terms of
any such indenture, loan agreement, receivables purchase agreement,
mortgage, deed of trust, or other agreement or instrument, other than
the Receivables Purchase Agreement and this Agreement, or (iii)
violate any law or order, rule, or regulation applicable to it of any
court or of any federal or state regulatory body, administrative
agency, or other governmental instrumentality having jurisdiction over
Wackenhut or any of its properties.
(f) NO PROCEEDINGS. There are no proceedings or investigations
pending, or to its knowledge threatened, before any court, regulatory
body, administrative agency, or other tribunal or governmental
instrumentality (i) asserting the invalidity of this Agreement, the
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<PAGE> 37
Receivables Purchase Agreement, the Purchase and Sale Agreement or any
other Agreement Documents, (ii) seeking to prevent the sale and
assignment of the Receivables to the Transferor pursuant to the
Receivables Purchase Agreement or the consummation of any of the other
transactions contemplated by this Agreement or any other Agreement
Document, (iii) seeking any determination or ruling that might
materially and adversely affect (A) the performance by it (in whatever
capacity) of its obligations under this Agreement, the Receivables
Purchase Agreement or any other Agreement Document to which it is a
party, or (B) the validity or enforceability of this Agreement, the
Receivables Purchase Agreement, any other Agreement Document, the
Receivables or the Contracts or (iv) seeking to adversely affect the
federal income tax attributes of the Purchases hereunder or the
Certificate of Assignments.
(g) GOVERNMENT APPROVALS. No authorization or approval or
other action by, and no notice to or filing with, any governmental
authority or regulatory body is required for the due execution,
delivery and performance by Wackenhut of this Agreement, the
Receivables Purchase Agreement or any other Agreement Document, EXCEPT
for the filing of the UCC Financing Statements referred to in ARTICLE
V, all of which, at the time required in ARTICLE V, shall have been
duly made and shall be in full force and effect.
(h) FINANCIAL CONDITION. (x) The consolidated balance sheets
of the Servicer and its consolidated subsidiaries as at September 30,
1997, and the related statements of income and shareholders, equity of
it and its consolidated subsidiaries for the fiscal year then ended,
copies of which have been furnished to the Agent, fairly present the
consolidated financial condition, business, business prospects and
operations of it and its consolidated subsidiaries as at such date and
the consolidated results of the operations of it and its consolidated
subsidiaries for the period ended on such date all in accordance with
generally accepted accounting principles consistently applied, and (y)
since September 30, 1997 there has been no material adverse change in
any such condition, business, business prospects or operations except
as described in SCHEDULE 6.2(H).
(i) CREDIT AND COLLECTION POLICY. Since January 5, 1995, there
have been no material changes in the Credit and Collection Policy other
than as permitted hereunder. Since such date, no material adverse
change has occurred in the overall rate of collection of the
Receivables.
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(j) COLLECTIONS AND SERVICING. Since January 5, 1995, there
has been no material adverse change in the ability of the Servicer to
service and collect the Receivables.
(k) NOT AN INVESTMENT COMPANY. The Servicer is not, and is not
controlled by, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or is exempt from all
provisions of such Act.
(l) LITIGATION. No injunction, decree or other decision has
been issued or made by any court, governmental agency or
instrumentality thereof that prevents, and to its knowledge no threat
by any person has been made to attempt to obtain any such decision that
would prevent, it from conducting a significant part of its business
operations, except as described in SCHEDULE 6.2(I).
(m) ACCURATE REPORTS. No Periodic Report (if prepared by it,
or to the extent that information contained therein was supplied by
it), information, Exhibit, financial statement, document, book, record
or report furnished or to be furnished by it to the Agent or the
Purchaser or any Bank Investor in connection with this Agreement was or
will be inaccurate in any material respect as of the date it was or
will be dated or (except as otherwise disclosed to the Agent, the
Purchaser or any Bank Investor, as the case may be, at such time) as of
the date so furnished, or contained or will contain any material
misstatement of fact or omitted or will omit to state a material fact
or any fact necessary to make the statements contained therein not
materially misleading.
(n) OFFICES. The chief place of business and chief executive
office of the Servicer are located at its address referred to in
SECTION 13.2, and the offices where the Servicer keeps all of its
books, records, and documents evidencing Pool Receivables, the related
Contracts and all purchase orders and other agreements related to such
Pool Receivables are located at the addresses specified in SCHEDULE
6.2(N) (or at such other locations, notified to the Agent in accordance
with SECTION 7.1(F), in jurisdictions where all action required by
SECTION 8.5 has been taken and completed).
(o) LOCK-BOX ACCOUNTS. The names and addresses of all the
Lock-Box Banks, together with the account numbers of the lock-box
accounts of the Servicer at such Lock-Box Banks, are specified in
SCHEDULE 6.2(O)
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(or have been notified to the Agent in accordance with
SECTION 7.3(D)).
(p) SERVICING PROGRAMS. Any and all programs used by the
Servicer in the servicing of the Receivables Pool are owned by it and
not leased or licensed.
(q) NO TERMINATION EVENT. No event has occurred and is
continuing and no condition exists which constitutes a Termination
Event or an Unmatured Termination Event.
ARTICLE VII
GENERAL COVENANTS OF THE TRANSFEROR AND SERVICER
SECTION 7.1. AFFIRMATIVE COVENANTS OF THE TRANSFEROR. From the
date hereof until the date, following the Commitment Termination Date, on which
all Undivided Interests shall be reduced to zero, the Transferor will, unless
the Agent shall otherwise consent in writing:
(a) COMPLIANCE WITH LAWS, ETC. Comply in all material respects
with all applicable laws, rules, regulations and orders with respect to
the Pool Receivables and related Contracts.
(b) PRESERVATION OF CORPORATE EXISTENCE. Preserve and
maintain its corporate existence, rights, franchises and privileges in
the jurisdiction of its incorporation, and qualify and remain qualified
in good standing as a foreign corporation in each jurisdiction where
the failure to preserve and maintain such existence, rights,
franchises, privileges and qualification would materially adversely
affect (i) the interests of the Agent, the Purchaser or any Bank
Investor hereunder or (ii) the ability of the Transferor or Servicer to
perform their respective obligations hereunder.
(c) FIELD REVIEWS. (i) At any time and from time to time
during regular business hours, permit the Agent, or its agents or
representatives, (A) to examine and make copies of and abstracts from
all books, records and documents (including, without limitation,
computer tapes and disks) in the possession or under the control of the
Transferor relating to Pool Receivables, including, without limitation,
the related Contracts and purchase orders and other agreements, and (B)
to visit the offices and properties of the Transferor for the purpose
of examining such materials described in CLAUSE (I)(A) next above, and
to discuss
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matters relating to Pool Receivables or the Transferor's performance
hereunder with any of the officers or employees of the Transferor
having knowledge of such matters; and (ii) without limiting the
provisions of CLAUSE (I)(A) next above, from time to time on request of
the Agent, permit Coopers & Lybrand or other certified public
accountants or other auditors reasonably acceptable to the Agent to
conduct, at the Transferor's expense, a review of the Transferor's
books and records with respect to the Pool Receivables.
(d) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Maintain and
implement administrative and operating procedures (including, without
limitation, an ability to recreate records evidencing Pool Receivables
in the event of the destruction of the originals thereof), and keep and
maintain, all documents, books, records and other information
reasonably necessary or advisable for the collection of all Pool
Receivables (including, without limitation, records adequate to permit
the daily identification of each new Pool Receivable and all
Collections of and adjustments to each existing Pool Receivable); such
records to be retained by Servicer for such periods as are usual and
customary and in accordance with the Credit and Collection Policy.
(e) PERFORMANCE AND COMPLIANCE WITH RECEIVABLES AND CONTRACTS.
At its expense timely and fully perform and comply with all material
provisions, covenants and other promises required to be observed by it
under the Contracts related to the Pool Receivables and all purchase
orders and other agreements related to such Pool Receivables.
(f) LOCATION OF RECORDS. Keep its chief place of business and
chief executive office, and the offices where it keeps its records
concerning the Pool Receivables, all related Contracts and all
purchase orders and other agreements related to such Pool Receivables
(and all original documents relating thereto), at the addresses) of the
Transferor referred to in SECTION 6.1(N) or, upon 30 days' prior
written notice to each Agent, at such other locations in jurisdictions
where all action required by SECTION 8.5 shall have been taken and
completed.
(g) CREDIT AND COLLECTION POLICIES. Comply in all material
respects with the Credit and Collection Policy in regard to each Pool
Receivable and the related Contract.
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(h) MINIMUM NET WORTH. The Transferor shall at all
times maintain a minimum Net Worth of not less than 10% of
the Net Pool Balance;
(i) COLLECTIONS. Instruct all Obligors to cause all
Collections of Pool Receivables to be deposited directly with a
Lock-Box Bank.
(j) SALE TREATMENT. The Transferor will not account for
(including for accounting and tax purposes), or otherwise treat, the
transactions contemplated by the Receivables Purchase Agreement in any
manner other than as a sale of Receivables by the Seller to the
Transferor. In addition, the Transferor shall disclose (in a footnote
or otherwise) in all of its financial statements (including any such
financial statements consolidated with any other Persons' financial
statements) the existence and nature of the Transaction contemplated
hereby and by the Receivables Purchase Agreement and the interest of
the Agent, on behalf of the Company and the Bank Investors, in the
Receivables.
(k) SEPARATE BUSINESS. The Transferor shall at all times (a)
to the extent the Transferor's office is located in the offices of
Wackenhut or any Affiliate of Wackenhut, pay fair market rent for its
executive office space located in the offices of Wackenhut or any
Affiliate of Wackenhut, (b) have at all times at least two members of
its board of directors which are not and have never been employees,
officers or directors of Wackenhut or any Affiliate of Wackenhut or of
any major creditor of Wackenhut or any Affiliate of Wackenhut and are
persons who are familiar and have experience with asset securitization,
(c) maintain the Transferor's books, financial statements, accounting
records and other corporate documents and records separate from those
of Wackenhut or any other entity, (d) not commingle the Transferor's
assets with those of Wackenhut or any other entity, (e) not sell,
exchange or otherwise convey any of its assets in any inter-company
transactions except for fair market value in an arms length transaction
approved by a majority of its board of directors (including Independent
Directors, as defined in the Transferor's "Certificate of
Incorporation"), (f) act solely in its corporate name and through its
own authorized officers and agents, (g) make investments directly or by
brokers engaged and paid by the Transferor or its agents (provided that
if any such agent is an Affiliate of the Transferor it shall be
compensated at a fair market rate for its services), (h) separately
manage the Transferor's liabilities from those of Wackenhut or any
Affiliates of Wackenhut and pay its own liabilities, including all
administrative expenses, from its own separate assets, except that
Wackenhut may pay the organizational expenses of the Transferor, and
(i) pay from the Transferor's
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assets all obligations and indebtedness of any kind incurred by the
Transferor. The Transferor shall abide by all corporate formalities,
including the maintenance of current minute books, and the Transferor
shall cause its financial statements to be prepared in accordance with
generally accepted accounting principles in a manner that indicates the
separate existence of the Transferor and its assets and liabilities.
The Transferor shall (i) pay all its liabilities, (ii) not assume the
liabilities of Wackenhut or any Affiliate of Wackenhut, (iii) not lend
funds or extend credit to Wackenhut or any affiliate of Wackenhut
except pursuant to the Receivables Purchase Agreement in connection
with the purchase of Receivables thereunder and (iv) not guarantee the
liabilities of Wackenhut or any Affiliates of Wackenhut. The officers
and directors of the Transferor (as appropriate) shall make decisions
with respect to the business and daily operations of the Transferor
independent of and not dictated by any controlling entity. The
Transferor shall not engage in any business not permitted by its
Certificate of Incorporation as in effect on the Closing Date.
(l) CORPORATE DOCUMENTS. The Transferor shall only amend,
alter, change or repeal Articles of its Certificate of Incorporation
with the prior written consent of the Agent.
(m) RIGHTS UNDER RECEIVABLES PURCHASE AGREEMENT. Exercise all
of its rights under or in connection with the Receivables Purchase
Agreement to the fullest extent thereof except to the extent otherwise
consented to in writing by the Agent.
SECTION 7.2. REPORTING REQUIREMENTS OF THE TRANSFEROR. From
the date hereof until the date, following the Commitment Termination Date, on
which all Undivided Interests shall be reduced to zero and all other amounts
owing hereunder shall have been paid, the Transferor will, unless the Agent
shall otherwise consent in writing, furnish to the Agent:
(a) FINANCIAL REPORTING. The Transferor will maintain, or
cause to be maintained, a system of accounting established and
administered in accordance with GAAP, and furnish to the Agent:
(i) QUARTERLY FINANCIAL STATEMENTS. As soon as
available and in any event within 45 days after the end of
each of the first three quarters of each fiscal year of the
Transferor, copies of the Transferor's quarterly financial
reports, certified by the vice president and treasurer, chief
financial officer or chief accounting officer of the
Transferor; together with a certificate
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from such officer certifying that no Termination Event or
Unmatured Termination Event has occurred and containing a
computation of, and showing compliance with, the financial
restrictions contained in SECTION 7;
(ii) ANNUAL REPORTING. Within ninety (90) days after
the close of the Transferor's fiscal year, financial
statements, prepared in accordance with GAAP for the
Transferor, including balance sheets as of the end of such
period, related statements of operations, shareholder's equity
and cash flows, and reviewed by a nationally recognized
accounting firm reasonably acceptable to the Agent and
accompanied by a certificate of said accountants that, in the
course of the foregoing, they have obtained no knowledge of
any Termination Event or Unmatured Termination Event, or if,
in the opinion of such accountants, any Termination Event or
Unmatured Termination Event shall exist, stating the nature
and status thereof.
(iii) COMPLIANCE CERTIFICATE. Within forty-five (45)
days after the close of the first three quarterly periods of
the Transferor's fiscal year and together with the financial
statements required hereunder, a compliance certificate signed
by the Transferor's chief financial officer stating that to
the best of such Person's knowledge, no Termination Event or
Unmatured Termination Event exists, or if any Termination
Event or Unmatured Termination Event exists, stating the
nature and status thereof.
(iv) SHAREHOLDERS STATEMENTS AND REPORTS. Promptly
upon the furnishing thereof to the shareholders of or the
Transferor, copies of all financial statements, reports and
proxy statements so furnished.
(b) REPORTS TO HOLDERS AND EXCHANGES. In addition to the
reports required by SUBSECTION (A) next above, promptly upon the
Agent's request, copies of any reports specified in such request which
the Transferor sends to any of its security holders, and any reports
or registration statements that Servicer files with the Securities and
Exchange Commission or any national securities exchange other than
regis tration statements relating to employee benefit plans and to
registrations of securities for selling security holders;
(c) ERISA. Promptly after the filing or receiving thereof,
copies of all reports and notices with respect to any Reportable Event
defined in Article IV of ERISA which the Transferor, the Seller or any
Originator files under ERISA with the Internal Revenue Service, the
Pension Benefit Guaranty Corporation or the U.S. Department of Labor or
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which the Transferor, the Seller or any Originator receives
from the Pension Benefit Guaranty Corporation;
(d) TERMINATION EVENTS. As soon as possible and in any event
within five days after the occurrence of each Termination Event and
each Unmatured Termination Event, written statement of the vice
president and treasurer, chief financial officer or chief accounting
officer of the Transferor setting forth details of such Event and the
action that the Transferor proposes to take with respect thereto;
(e) LITIGATION. As soon as possible and in any event within
three Business Days of the Transferor's knowledge thereof, notice of
(i) any litigation, investigation or proceeding which may exist at any
time which could have a material adverse effect on the business,
operations, property or financial condition of the Transferor, the
Seller or any Originator or impair the ability of the Transferor or the
Servicer to perform its obligations under this Agreement and (ii) any
material adverse development in previously disclosed litigation;
(f) PURCHASE AND SALE AGREEMENT/RECEIVABLES PURCHASE
AGREEMENT. Promptly after receipt thereof, copies of all
documents and other information delivered by either of the
Originator or the Seller to the Transferor pursuant to
either the Purchase and Sale Agreement or the Receivables
Purchase Agreement; and
(g) OTHER. Promptly, from time to time, such other information
(including a listing by Obligor of all Pool Receivables), documents,
records or reports respecting the Receivables or the condition or
operations, financial or otherwise, of the Transferor as the Agent may
from time to time reasonably request in order to protect the interests
of the Agent or any Purchaser under or as contemplated by this
Agreement.
SECTION 7.3. NEGATIVE COVENANTS OF THE TRANSFEROR. From the
date hereof until the date, following the Commitment Termination Date, on which
all Undivided Interests shall be reduced to zero and all other amounts owing
hereunder shall have been paid, the Transferor will not, without the prior
written consent of the Agent:
(a) SALES, LIENS, ETC. Except as otherwise provided herein,
sell, assign (by operation of law or otherwise) or otherwise dispose
of, or create or suffer to exist any Adverse Claim upon or with respect
to, any Pool Receivable or related Contract or Related Security, or any
interest therein, or any lock-box account to which any Collections of
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any Pool Receivable are sent, or any right to receive income
from or in respect of any of the foregoing.
(b) EXTENSION OR AMENDMENT OF RECEIVABLES. Except as otherwise
permitted in SECTION 8.2, extend, amend or otherwise modify the terms
of any Pool Receivable, or amend, modify or waive any term or condition
of any Contract related thereto unless such extension, amendment or
modification (i) does not conflict with the Credit and Collection
Policy and (ii) does not affect the collectibility of the related
Receivable.
(c) CHANGE IN BUSINESS OR CREDIT AND COLLECTION POLICY. Make
any change in the character of its business or in the Credit and
Collection Policy.
(d) CHANGE IN PAYMENT INSTRUCTIONS TO OBLIGORS. Add or
terminate any bank as a Lock-Box Bank from those listed in SCHEDULE
6.2(O) or make any change in its instructions to Obligors regarding
payments to be made to Servicer or Servicer or payments to be made to
any Lock-Box Bank, unless the Agent shall have received notice of such
addition, termination or change and duly executed copies of Lock-Box
Agreements with each new Lock-Box Bank in a form satisfactory to the
Agent.
(e) AMENDMENTS TO PURCHASE AND SALE AGREEMENT/RECEIVABLES
PURCHASE AGREEMENT. Amend, supplement, waive the application of any
provision of, amend and restate or otherwise modify the Purchase and
Sale Agreement or the Receivables Purchase Agreement except in each
case (i) in accordance with the terms thereof and (ii) with the prior
written consent of the Agent.
(f) CORPORATE IDENTITY. At any time change its name, identity,
corporate structure or location unless at least 10 days prior thereto
the Transferor shall have delivered to the Agent UCC financing
statements or other statements amending or otherwise modifying UCC
financing statements filed hereunder in order to maintain a first
perfected ownership interest in favor of the Agent on behalf of the
Purchaser and the Bank Investors hereunder.
SECTION 7.4. AFFIRMATIVE COVENANTS OF SERVICER. From the date
hereof until the date, following the Commitment Termination Date, on which all
Undivided Interests shall be reduced to zero, Servicer will, unless the Agent
shall otherwise consent in writing:
(a) COMPLIANCE WITH LAWS, ETC. Comply in all material respects
with all applicable laws, rules,
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regulations and orders with respect to the Pool Receivables and related
Contracts.
(b) PRESERVATION OF CORPORATE EXISTENCE. Preserve and
maintain its corporate existence, rights, franchises and privileges in
the jurisdiction of its incorporation, and qualify and remain qualified
in good standing as a foreign corporation in each jurisdiction where
the failure to preserve and maintain such existence, rights,
franchises, privileges and qualification would materially adversely
affect (i) the interests of the Agent or the Purchaser or any Bank
Investor hereunder or (ii) the ability of Servicer or the Transferor
to perform their respective obligations hereunder or under the
Receivable Purchase Agreement.
(c) DUE DILIGENCE. Servicer shall permit the Agent and its
authorized representatives to make, or cause to be made, on or prior to
March 31, 1998, such reasonable investigation and physical inspections
of the Servicer, its servicing facilities and its financial and legal
condition as the Agent deems necessary or advisable. In connection with
such inspection, the Servicer shall further permit the Agent and its
authorized representatives (including legal counsel and independent
accountants) upon reasonable notice to have full access to the
properties, assets, personnel (including the Servicer's accountants)
and its relevant books and records during reasonable business hours,
and the Servicer will furnish the Agent and/or such representatives
with such financial and operating data and other information and copies
of documents with respect to the Receivables, and the servicing and the
servicing operations of the Servicer as the Agent and/or such
representatives shall from time to time reasonably request.
(d) FIELD REVIEWS. (i) At any time and from time to time
during regular business hours, permit the Agent, or its agents or
representatives, (A) to examine and make copies of and abstracts from
all books, records and documents (including, without limitation,
computer tapes and disks) in the possession or under the control of
Servicer relating to Pool Receivables, including, without limitation,
the related Contracts and purchase orders and other agreements, and (B)
to visit the offices and properties of Servicer for the purpose of
examining such materials described in CLAUSE (I)(A) next above, and to
discuss matters relating to Pool Receivables or Servicer's performance
hereunder with any of the officers or employees of Servicer having
knowledge of such matters; and (ii) without limiting the provisions of
CLAUSE (I)(A) next above, from time to time on request of the Agent,
permit
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Coopers & Lybrand or other certified public accountants or other
auditors acceptable to the Agent to conduct, at Servicer's expense, a
review of Servicer's books and records with respect to the Pool
Receivables.
(e) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Maintain and
implement administrative and operating procedures (including, without
limitation, an ability to recreate records evidencing Pool Receivables
in the event of the destruction of the originals thereof), and keep and
maintain, all documents, books, records and other information
reasonably necessary or advisable for the collection of all Pool
Receivables (including, without limitation, records adequate to permit
the daily identification of each new Pool Receivable and all
Collections of and adjustments to each existing Pool Receivable); such
records to be retained by Servicer for such periods as are usual and
customary and in accordance with the Credit and Collection Policy.
(f) PERFORMANCE AND COMPLIANCE WITH RECEIVABLES AND CONTRACTS.
At its expense timely and fully perform and comply with all material
provisions, covenants and other promises required to be observed by it
under the Contracts related to the Pool Receivables and all purchase
orders and other agreements related to such Pool Receivables.
(g) LOCATION OF RECORDS. Keep its chief place of business and
chief executive office, and the offices where it keeps its records
concerning the Pool Receivables, all related Contracts and all
purchase orders and other agreements related to such Pool Receivables
(and all original documents relating thereto), at the addresses) of
Servicer referred to in SECTION 6.2(N) or, upon 30 days' prior written
notice to each Agent, at such other locations in jurisdictions where
all action required by SECTION 8.5 shall have been taken and completed.
(h) CREDIT AND COLLECTION POLICIES. Comply in all material
respects with the Credit and Collection Policy in regard to each Pool
Receivable and the related Contract.
(i) COLLECTIONS. Instruct all Obligors to cause all
Collections of Pool Receivables to be deposited directly with a
Lock-Box Bank.
SECTION 7.5. REPORTING REQUIREMENTS OF SERVICER. From the date
hereof until the date, following the Commitment Termination
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Date, on which all Undivided Interests shall be reduced to zero and all
other amounts owing hereunder shall have been paid, the Servicer will, unless
the Agent shall otherwise consent in writing, furnish to the Agent:
(a) QUARTERLY FINANCIAL STATEMENTS. As soon as available and
in any event within 45 days after the end of each of the first three
quarters of each fiscal year of the Servicer, copies of the Servicer
quarterly financial reports, on Form 10-Q, as filed with the
Securities and Exchange Commission (or if the Servicer is no longer
required to file such Form 10-Q, the Servicer shall furnish such
financial reports containing the information typically found on Form
10-Q, certified by the vice president and treasurer, chief financial
officer or chief accounting officer of the Servicer; together with a
certificate from such officer certifying that no Termination Event or
Unmatured Termination Event has occurred and containing a computation
of, and showing compliance with, the financial restrictions con tained
in SECTION 7.6;
(b) ANNUAL FINANCIAL STATEMENTS. As soon as available and in
any event within 90 days after the end of each fiscal year of the
Transferor, a copy of the Servicer's Annual Report, on Form 10-K, as
filed with the Securities and Exchange Commission (or if the Servicer
is no longer required to file such Form 10-K, the Servicer shall
furnish such financial reports containing information typically found
on Form 10-K) and as reported on by nationally recognized independent
certified public accountants on a consolidated (for the Originator
only) basis; together with a copy of the year-end financial statements
of each Originator (which need not be reported by independent certified
accountants); and together with a certificate from vice president and
treasurer, chief financial officer or chief accounting officer of the
Servicer certifying that no Termination Event or Unmatured Termination
Event has occurred and containing a computation of, and showing
compliance with, the financial restrictions contained in SECTION 7.6;
(c) REPORTS TO HOLDERS AND EXCHANGES. In addition to the
reports required by SUBSECTION (A) next above, promptly upon the
Agent's request, copies of any reports specified in such request which
the Servicer sends to any of its security holders, and any reports or
registration statements that the Servicer files with the Securities and
Exchange Commission or any national securities exchange other than
registration statements relating to employee benefit plans and to
registrations of securities for selling security holders;
(d) ERISA. Promptly after the filing or receiving thereof,
copies of all reports and notices with respect to
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any Reportable Event defined in Article IV of ERISA which the Servicer
or any Originator files under ERISA with the Internal Revenue Service,
the Pension Benefit Guaranty Corporation or the U.S. Department of
Labor or which the Servicer or any Originator receives from the Pension
Benefit Guaranty Corporation;
(e) TERMINATION EVENTS. As soon as possible and in any event
within five days after the occurrence of each Termination Event and
each Unmatured Termination Event, written statement of the vice
president and treasurer, chief financial officer or chief accounting
officer of the Servicer setting forth details of such Event and the
action that the Servicer proposes to take with respect thereto;
(f) LITIGATION. As soon as possible and in any event within
three Business Days of the Servicer's knowledge thereof, notice of (i)
any litigation, investigation or proceeding which may exist at any time
which could have a material adverse effect on the business, operations,
prop erty or financial condition of the Servicer or any Originator or
impair the ability of the Servicer to perform its obligations under
this Agreement and (ii) any material adverse development in previously
disclosed litigation; and
(g) OTHER. Promptly, from time to time, such other information
(including a listing by Obligor of all Pool Receivables), documents,
records or reports respecting the Receivables or the condition or
operations, financial or otherwise, of the Servicer as the Agent may
from time to time reasonably request in order to protect the interests
of such Agent or any Purchaser under or as contemplated by this
Agreement.
SECTION 7.6. NEGATIVE COVENANTS OF THE SERVICER. From the date
hereof until the date, following the Commitment Termination Date, on which all
Undivided Interests shall be reduced to zero and all other amounts owing
hereunder shall have been paid, the Servicer will not, without the prior written
consent of the Agent:
(a) SALES, LIENS, ETC. Except as otherwise provided herein,
sell, assign (by operation of law or otherwise) or otherwise dispose
of, or create or suffer to exist any Adverse Claim upon or with respect
to, any Pool Receivable or related Contract or Related Security, or any
interest therein, or any lock-box account to which any Collections of
any Pool Receivable are sent, or any right to receive income from or in
respect of any of the foregoing.
(b) EXTENSION OR AMENDMENT OF RECEIVABLES. Except as otherwise
permitted in SECTION 8.2, extend, amend or otherwise
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modify the terms of any Pool Receivable, or amend, modify or waive
any term or condition of any Contract related thereto unless such
extension, amendment or modification (i) does not conflict with the
Credit and Collection Policy and (ii) does not affect the
collectibility of the related Receivable.
(c) CHANGE IN BUSINESS OR CREDIT AND COLLECTION POLICY. Make
any change in the character of its business or in the Credit and
Collection Policy.
(d) CHANGE IN PAYMENT INSTRUCTIONS TO OBLIGORS. Add or
terminate any bank as a Lock-Box Bank from those listed in SCHEDULE
6.2(O) or make any change in its instructions to Obligors regarding
payments to be made to the Servicer or the Servicer or payments to be
made to any Lock-Box Bank, unless the Agent shall have received notice
of such addition, termination or change and duly executed copies of
Lock-Box Agreements with each new Lock-Box Bank in a form satisfactory
to the Agent.
(e) SOURCE OF BUSINESS. At any time permit more than 50% of
the Transferor's aggregate consolidated revenues to be derived from
businesses other than from the protective and/or correctional services
business.
(f) MERGERS, ACQUISITIONS, LINE OF BUSINESS. Be a party to any
merger or consolidation, or purchase or otherwise acquire all or
substantially all of the assets, or any stock of any class of, or any
partnership or joint venture interest in any other Person, or, except
in the ordinary course of its business, sell transfer, convey or lease
all or any substantial part of its assets, or sell or assign with or
without recourse, any receivables (other than pursuant hereto), or
permit any Subsidiary to do any of the foregoing, PROVIDED, HOWEVER,
that:
(i) any Subsidiary may merge or consolidate with or
into the Transferor or any wholly-owned Subsidiary so long as
in any merger or consolidation involving the Servicer, the
Servicer shall be the surviving or continuing corporation;
(ii) the Servicer may consolidate or merge with any
other corporation if (1) either (x) the Servicer shall be the
surviving or continuing corporation or (y) the surviving
corporation is organized and existing under the laws of the
United States of America or any state thereof or the District
of Columbia and such continuing or surviving corporation
expressly assumes in writing, in form and substance
satisfactory to the Agent, all obligations of the Servicer
under this
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Agreement, (2) at the time of such consolidation or merger and
after giving effect thereto no Unmatured Termination Event or
Termination Event shall have occurred and be continuing and
(3) after giving effect to such consolidation or merger the
Servicer or such surviving corporation, as the case may be,
could incur at least $1.00 of additional Consolidated Funded
Debt without causing Consolidated Funded Debt to exceed 60% of
Total Capitalization;
(iii) any Subsidiary may sell, lease or otherwise
dispose of all or any substantial part of its assets to
the Servicer or any wholly-owned Subsidiary; and
(iv) the Servicer and each Subsidiary may enter into,
any agreement, contract or arrangement, providing for the
acquisition of any Person or all or substantially all of the
assets of any Person (however structured); but if the amount
to be paid exceeds $5,000,000, the Servicer may do so only if
it shall, at least 30 days prior to consummation of such
transaction, have furnished to the Agent a certificate of an
authorized financial officer of Seller (x) certifying that
after giving effect to such acquisition no Unmatured
Termination Event or Termination Event will have occurred
hereunder, and (y) containing calculations conclusively
demonstrating that after giving effect to the proposed
transaction, and for the prior twelve months, if the
transaction had been consummated at the beginning of such
twelve month period, the Servicer will not be, and would not
have been, in violation of any covenant contained in SECTIONS
7.3(F) and 7.3(G) hereof.
(g) CORPORATE IDENTITY. At any time change its name, identity,
corporate structure or location unless at least 10 days prior thereto
the Servicer shall have delivered to the Agent UCC financing statements
or other statements amending or otherwise modifying UCC financing
statements filed here under in order to maintain a first perfected
ownership interest in favor of the Transferor pursuant to the
Receivables Purchase Agreement.
SECTION 7.7. FINANCIAL COVENANTS OF THE SERVICER.
(Additional terms used in this Section and not defined in Appendix A shall have
the meanings ascribed to such terms in Appendix C).
(A) CONSOLIDATED NET WORTH. The Servicer will at all times
keep and maintain Consolidated Net Worth at an amount not less than (i) 90% of
the Servicer and its Subsidiaries
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Consolidated Net Worth at the Closing Date and (ii) as at the last day of each
succeeding fiscal quarter of the Servicer and until (but excluding) the last day
of the next following fiscal quarter of the Servicer, the sum of (A) the amount
of Consolidated Net Worth required to be maintained pursuant to this SECTION
7.7 as at the end of the immediately preceding fiscal quarter, plus, (B) 50% of
Consolidated Net Income (with no reduction for net losses for any period) for
the fiscal quarter of the Servicer ending on such day, plus (C) 75% of the net
proceeds to the Servicer from the sale of shares of the Servicer's capital
stock.
(B) LIMITATIONS ON TOTAL DEBT.
(i) The Servicer will at all times keep and maintain
Consolidated Funded Debt in an amount not to exceed 40% of Total
Capitalization (excluding Funded Debt of WCC).
(ii) The Servicer and its Subsidiaries (other than WCC) will
not, at any time, issue, incur, assume, be or become liable in respect
of any Indebtedness other than (i) Indebtedness arising under this
Agreement, (ii) the purchase of products, merchandise and services in
the ordinary course of business, (iii) Indebtedness outstanding on the
Closing Date, (iv) Indebtedness of a Guarantor to the Servicer or to
another Guarantor, (v) Indebtedness representing amounts received by
the Servicer or any Subsidiary in exchange for the transfer of
interests in trade receivables under the Asset Securitization Facility
in excess of the amounts repaid to the purchasers in respect of such
purchase price from collections on such trade receivables, which shall
at no time exceed $75,000,000 in aggregate amount outstanding, and (vi)
Indebtedness in an aggregate amount for the Servicer and all
Subsidiaries (other than WCC) taken as a whole not greater than
$15,000,000.
(iii) Any corporation which becomes a Subsidiary after the
date hereof shall for all purposes of this SECTION 7.7 be deemed to
have created, assumed or incurred at the time it becomes a Subsidiary
all Indebtedness of such corporation existing immediately after it
becomes a Subsidiary.
(C) FIXED CHARGES COVERAGE RATIO. The Servicer will at all
times keep and maintain the ratio of Net Income Available for Fixed Charges,
determined as of the last day of each fiscal quarter for the immediately
preceding Four-Quarter Period, to Fixed Charges for such Four-Quarter Period, at
not less than 1.50:1.00.
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ARTICLE VIII
ADMINISTRATION AND COLLECTION
SECTION 8.1. DESIGNATION OF SERVICER. WACKENHUT AS INITIAL
SERVICER. The servicing, administering and collection of the Pool Receivables
shall be conducted by the Person designated as Servicer hereunder ("SERVICER")
from time to time in accordance with this SECTION 8.1. Until the Agent gives a
Successor Notice (as defined in SECTION 8.1(B), Wackenhut is hereby designated
as, and hereby agrees to perform the duties and obligations of, Servicer
pursuant to the terms hereof.
SECTION 8.2. SUCCESSOR NOTICE: SERVICER TRANSFER EVENT. Upon
Wackenhut's receipt of a notice from the Agent of the Agent's designation of a
new Servicer (a "SUCCESSOR NOTICE"), Wackenhut agrees that it will terminate its
activities as Servicer hereunder in a manner that the Agent reasonably believes
will facilitate the transition of the performance of such activities to the new
Servicer, and the Agent (or its designee) shall assume, until a new Servicer is
appointed or designated, each and all of Wackenhut's said obligations to service
and administer such Receivables, on the terms and subject to the conditions
herein set forth, and Wackenhut shall use its best efforts to assist the Agent
(or its designee) in assuming such obligations. The Agent will not give
Wackenhut a Successor Notice until after the occurrence of any Termination Event
listed in any of clauses (A), (E), (F), (G), (H), (I), (1) or (K) of SECTION
10.1 or any event which, in the reasonable opinion of the Agent, could have a
material adverse effect on Wackenhut's ability to perform its obligations as
Servicer hereunder (any such Termination Event or other event being herein
called a "SERVICER TRANSFER EVENT"), in which case such Successor Notice may be
given at any time in the Agent's discretion. If Wackenhut disputes the
occurrence of a Servicer Transfer Event, Wackenhut may take appropriate action
to resolve such dispute; PROVIDED that Wackenhut must terminate its activities
hereunder as Servicer and allow the newly designated Servicer to perform such
activities on the date provided by the Agent as described above, notwithstanding
the commencement or continuation of any proceeding to resolve the aforementioned
dispute. The Agent may at any time after the occurrence of a Servicer Transfer
Event designate any other Person as successor Servicer hereunder. If at any time
the Agent shall be servicing hereunder, upon the transfer of servicing by the
Agent to any successor Servicer, the Agent shall no longer perform the duties of
Servicer and shall have no further obligations or liabilities whatsoever in
respect thereof.
SECTION 8.3. SUBCONTRACTS. Servicer may, with the prior
consent of the Agent, subcontract with any other person for servicing,
administering or collecting the Pool Receivables, provided that Servicer shall
remain liable for the performance of
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the duties and obligations of Servicer pursuant to the terms hereof.
SECTION 8.4. DUTIES OF SERVICER. APPOINTMENT; DUTIES IN
GENERAL. Each of the Transferor, Purchaser, each Bank Investor and the Agent
hereby appoints as its agent the Servicer, as from time to time designated
pursuant to SECTION 8.1, to enforce its rights and interests in and under the
Pool Receivables, the Related Security and the Contracts. Servicer shall take or
cause to be taken all such actions as may be necessary or advisable in
accordance with the Credit and Collection Policy or otherwise at the direction
or with the consent of the Agent to collect each Pool Receivable from time to
time, all in accordance with applicable laws, rules and regulations, with
reasonable care and diligence. Servicer shall adopt the Credit and Collection
Policy for the servicing of the Pool Receivables.
SECTION 8.5. ALLOCATION OF COLLECTIONS; SEGREGATION. Servicer
shall set aside for the account of the Transferor, the Purchaser and each Bank
Investor, their respective allocable shares of the Collections of Pool
Receivables in accordance with SECTIONS 3.1 and 3.2 but shall not be required
(unless otherwise requested by the Agent, and subject to SECTION 3.7) to
segregate the funds constituting such portions of such Collections, or to
segregate the respective allocable shares of Enterprise and the Enterprise
Liquidity Provider and the Enterprise Credit Support Provider, as applicable,
prior to the remittance thereof in accordance with said Sections. If instructed
by the Agent, Servicer shall segregate and deposit with the Agent such allocable
shares of Collections of Pool Receivables, set aside for the Purchaser, the Bank
Investors, the Enterprise Liquidity Provider and Enterprise Credit Support
Provider and any other assignee from the Purchaser or any Bank Investor of any
Undivided Interest, on the first Business Day following receipt by Servicer of
such Collections in immediately available funds.
SECTION 8.6. MODIFICATION OF RECEIVABLES. So long as no
Termination Event or Unmatured Termination Event shall have occurred and be
continuing, the Servicer, may, strictly in accordance with the Credit and
Collection Policy, (i) extend the maturity or adjust the Unpaid Balance of any
Defaulted Receivable as it may determine to be appropriate to maximize
Collections thereof; PROVIDED that, after giving effect to such extension of
maturity, the Aggregate Required Allocations will not exceed the Required
Allocations Limit, and (ii) adjust the Unpaid Balance of any Receivable to
reflect the reductions or cancellations described in the first sentence of
SECTION 3.3(A).
SECTION 8.7. DOCUMENTS AND RECORDS. The Transferor shall, and
shall cause the Seller, to deliver to Servicer, and Servicer shall hold in trust
for the Transferor, each Originator, the Purchaser and the Bank Investors, in
accordance with their
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respective interests, all documents, instruments and records (including, without
limitation, computer tapes or disks) that evidence or relate to Pool
Receivables.
SECTION 8.8. CERTAIN DUTIES TO THE TRANSFEROR. Servicer shall,
as soon as practicable following receipt, turn over to the Transferor (i) that
portion of Collections of Pool Receivables representing its undivided interest
therein, less, all reasonable and appropriate out-of-pocket costs and expenses
of Servicer of servicing, collecting and administering the Pool Receivables to
the extent not covered by the Servicer's Fee received by it, and (ii) the
Collections of any Receivable which is not a Pool Receivable. Servicer, shall,
as soon as practicable upon demand, deliver to the Transferor all documents,
instruments and records in its possession that evidence or relate to Receivables
of the Transferor other than Pool Receivables, and copies of documents,
instruments and records in its possession that evidence or relate to Pool
Receivables.
SECTION 8.9. LOCK-BOX ACCOUNTS. Upon the occurrence of any
Lock-Box Control Event (as such term is defined in the Letter Agreement
(Segregation of Funds) of even date herewith between Wackenhut and NationsBank),
Servicer shall deliver to the Agent, in its capacity as Lock-Box Segregation
Agent thereunder, a list, referred to in such Letter Agreement as the
Identification List, setting forth those Collections held by Servicer and by
each Lock- Box Bank and received prior to said Business Day, and designating
such Collections as Collections in respect of Pool Receivables or as Collections
not subject to this Agreement. The Segregation Agent's duties shall be governed
solely by the terms of such Letter Agreement and no other duties or terms shall
be implied therein.
SECTION 8.10. RIGHTS OF THE AGENT. (a) NOTICE TO OBLIGORS. At
any time the Agent, in its discretion, after notice to the Transferor or
Servicer, may notify the Obligors of Pool Receivables, or any of them, of the
ownership of Undivided Interests by the Purchaser or the Bank Investors, as the
case may be.
(b) NOTICE TO LOCK-BOX BANKS. At any time following the
earliest to occur of (i) the occurrence of a Termination Event, (ii) any of the
Conditions Precedent shall not be satisfied and the Agent shall have requested
implementation of the Settlement procedures set forth in SECTION 3.2, and (iii)
the warranty in SECTION 6.1(I) shall no longer be true, the Agent is hereby
authorized to give notice to the Lock-Box Banks, as provided in the Lock-Box
Agreements, of the transfer to the Agent of dominion and control over the
lock-box accounts to which the Obligors of Pool Receivables make payments. The
Transferor hereby transfers to the Agent, effective when the Agent shall give
notice to the Lock-Box Banks as provided in the Lock-Box Agreements, the
exclusive dominion and control over such lock-box accounts, and shall take
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any further action that the Agent may reasonably request to effect
such transfer.
SECTION 8.11. RIGHTS ON SERVICER TRANSFER EVENT. At any time
following the designation of a Servicer other than the Transferor pursuant to
SECTION 8.1:
(a) The Agent may direct the Obligors of Pool
Receivables, or any of them, to pay all amounts payable under any Pool
Receivable directly to the Agent or its designee.
(b) Servicer shall, and shall direct each Originator
to, at the Agent's request and at the Servicer's expense, give notice
of such ownership to each said Obligor and direct that payments be made
directly to the Agent or its designee.
(c) The Transferor shall, and shall direct each
Originator to, at the Agent's request (with the written consent of the
Agent), (A) assemble all of the documents, instruments and other
records (including, without limitation, computer programs, tapes and
disks) which evidence the Pool Receivables, and the related Contracts
and Related Security, or which are otherwise necessary or desirable to
collect such Pool Receivables, and shall make the same available to the
Agent at a place selected by the Agent or its designee, and (B)
segregate all cash, checks and other instruments received by it from
time to time constituting Collections of Pool Receivables in a manner
acceptable to the Agent and shall, promptly upon receipt, remit all
such cash, checks and instruments, duly endorsed or with duly executed
instruments of transfer, to the Agent or its designee.
(d) Each of the Transferor, the Purchaser and the
Bank Investors, as the case may be, hereby authorizes the Agent to take
any and all steps in the Transferor's name and on behalf of the
Transferor and the Purchaser, the Bank Investors, as the case may be,
which are necessary or desirable, in the determination of the Agent,
to collect all amounts due under any and all Pool Receivables,
including, without limitation, endorsing the Transferor's name on
checks and other instruments representing Collections and enforcing
such Pool Receivables and the related Contracts.
SECTION 8.12. RESPONSIBILITIES OF THE TRANSFEROR. Anything
herein to the contrary notwithstanding:
(a) None of the Agent, the Purchaser nor any Bank
Investor shall have any obligation or liability with respect to any
Pool Receivables, Contracts related thereto or any other related
purchase orders or other agreements, nor shall any of them be obligated
to perform any of the obligations of the Transferor, Wackenhut or any
Originator thereunder.
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(b) The Transferor hereby grants to the Servicer and
the Agent, for the benefit of the Purchaser and the Bank Investors, as
the case may be, an irrevocable power of attorney, with full power of
substitution, coupled with an interest, to take in the name of the
Transferor all steps which are necessary or advisable to endorse,
negotiate or otherwise realize on any writing or other right of any
kind held or transmitted by the Transferor or transmitted or received
by the Purchaser or any Bank Investor, as the case may be (whether or
not from the Transferor) in connection with any Receivable after the
occurrence of any default by the Transferor hereunder or the occurrence
of any Termination Event.
SECTION 8.13. FURTHER ACTION EVIDENCING PURCHASES. (a) The
Transferor will, and will cause the Seller to, from time to time, at its
expense, promptly execute and deliver all further instruments and documents, and
take all further action that any Agent may reasonably request in order to
perfect, protect or more fully evidence the Purchases hereunder and the
resulting Undivided Interests, or to enable the Purchaser, the Bank Investors or
the Agent to exercise or enforce any of their respective rights hereunder or
under the Certificate of Assignments. Without limiting the generality of the
foregoing, the Transferor will upon the request of any Agent: execute and file
such financing or continuation statements, or amendments thereto or assignments
thereof, and such other instruments or notices, as may be necessary or
appropriate and will maintain such procedures as are necessary to permit daily
identification of Pool Receivables and Eligible Receivables.
(b) The Transferor hereby authorizes the Agent to file one or
more financing or continuation statements on behalf of and for the benefit of
the Agent, the Purchaser or the Bank Investors, as the case may be, and
amendments thereto and assignments thereof, relative to all or any of the Pool
Receivables and the Related Security now existing or hereafter arising in the
name of the Transferor. If the Transferor fails to perform any of its agreements
or obligations under this Agreement, the Agent may (but shall not be required
to) itself perform, or cause performance of, such agreement or obligation, and
the expenses of the Agent incurred in connection therewith shall be payable by
the Transferor as provided in SECTION 13.1.
(c) Without limiting the generality of SUBSECTION (A), the
Transferor will, not earlier than six (6) months and not later than three (3)
months from the fifth anniversary of the date of filing of the financing
statement referred to in SECTION 5.1(F) or any other financing statement filed
pursuant to this Agreement or in connection with any Purchase hereunder, unless
the Commitment Termination Date shall have occurred and all Undivided Interests
shall have been reduced to zero:
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(i) execute and deliver and file or cause to be
filed an appropriate continuation statement with respect to such
financing statement; and
(ii) deliver or cause to be delivered to the Agent an
opinion of the counsel for the Transferor referred to in SECTION 5.1(I)
(or other counsel for the Transferor reasonably satisfactory to the
Agent), in form and substance reasonably satisfactory to the Agent,
confirming and updating the opinion delivered pursuant to SECTION
5.1(I) with respect to the matters set forth in paragraph No. [ ] of
EXHIBIT 5.1(I) and otherwise to the effect that all of the Undivided
Interests hereunder continue to be first and prior perfected security
interests.
SECTION 8.14. APPLICATION OF COLLECTIONS. Any payment by an
Obligor in respect of any indebtedness owed by it to the Transferor shall,
except as otherwise specified by an Obligor or otherwise required by contract or
law and unless the Agent instructs otherwise, be applied as a Collection of any
Pool Receivable or Receivables of an Obligor to the extent of any amounts then
due and payable thereunder before such payment is applied to any other
indebtedness of an Obligor.
ARTICLE IX
SECURITY INTEREST
SECTION 9.1. GRANT OF SECURITY INTEREST. To secure all
obligations of the Transferor arising in connection with this Agreement, the
Certificate of Assignments and each other Agreement Document to which it is a
party, whether now or hereafter existing, due or to become due, direct or
indirect, or absolute or contingent, Indemnified Amounts, payments on account
of Collections received or deemed to be received, fees and Earned Discount, in
each case PRO RATA according to the respective amounts thereof, the Transferor
hereby assigns and grants the Agent, on behalf of the Purchaser and each Bank
Investor, a security interest in all of the Transferor's (i) right, title and
interest (including specifically any undivided interest retained by the
Transferor hereunder) now or hereafter existing in, to and under all the Pool
Receivables, the Related Security and all Collections with regard thereto and
(ii) rights, remedies, powers and privileges under and in respect of the
Receivables Purchase Agreement.
SECTION 9.2. FURTHER ASSURANCES. The provisions of SECTION
8.5 shall apply to the security interest granted under SECTION 9.1 as well as to
the Purchases and all Undivided Interests hereunder.
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SECTION 9.3. REMEDIES. Upon the occurrence of a Termination
Event, the Agent shall have, with respect to the collateral granted pursuant to
SECTION 9.1, and in addition to all other rights and remedies available to the
Purchaser, the Bank Investors, or the Agent under this Agreement or other
applicable law, all the rights and remedies of a secured party upon default
under the UCC.
ARTICLE X
[RESERVED]
ARTICLE XI
TERMINATION
SECTION 11.1. TERMINATION EVENTS. If any of the
following events ("TERMINATION EVENTS") shall occur:
(a) Servicer (if Wackenhut) shall fail to perform or
observe any term, covenant or agreement hereunder (other than as
referred to in CLAUSE (II) next following) and such failure shall
remain unremedied for five Business Days or (ii) Servicer (if
Wackenhut) or the Transferor (if not Servicer) shall fail to make any
payment or deposit to be made by it hereunder when due; or
(b) Any representation or warranty made or deemed to
be made by the Transferor, Servicer or any Originator (or any of their
respective officers) under or in connection with this Agreement, any
other Agreement Document, or any Periodic Report or other information
or report delivered pursuant hereto shall prove to have been false or
incorrect in any material respect when made and, if such condition
shall be amenable to remedy, such condition shall continue unremedied
for a period of ten Business Days after (i) written notice thereof by
the Agent or (ii) the Transferor, Servicer or such Originator has
actual knowledge thereof; or
(c) The Transferor, Servicer, Wackenhut or any
Originator shall fail to perform or observe any other term, covenant or
agreement contained in this Agreement or any other Agreement Document,
on their respective parts to be performed or observed and any such
failure shall remain unremedied for five Business Days after the date
on which the Transferor, Servicer, Wackenhut or such Originator knew or
should have known of such failure; or
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(d) A default shall have occurred and be continuing under any
instrument or agreement evidencing, securing or providing for the
issuance of indebtedness for borrowed money in excess of $100,000 of,
or guaranteed by, the Transferor, Servicer, Wackenhut, any Originator
or of any Affiliate of either thereof, which default if unremedied,
uncured, or unwaived (with or without the passage of time or the giving
of notice or both) would permit acceleration of the maturity of such
indebtedness and such default shall have continued unremedied, uncured
or unwaived for a period long enough to permit such acceleration and
any notice of default required to permit acceleration shall have been
given; or any default under any agreement or instrument relating to the
purchase of receivables of the Transferor, Wackenhut, any Originator or
of any Affiliate of either thereof, or any other event, shall occur and
shall continue after the applicable grace period, if any, specified in
such agreement or instrument, if the effect of such default is to
terminate, or permit the termination of, the commitment of any party to
such agreement or instrument to purchase receivables or the right of
the Transferor to reinvest in receivables the principal amount paid by
any party to such agreement or instrument for interest in receivables;
or
(e) An Event of Bankruptcy shall have occurred and remained
continuing with respect to the Transferor, Servicer, Wackenhut any
Originator or any Affiliate of any thereof; or
(f) Any litigation (including, without limitation, derivative
actions), arbitration proceedings or governmental proceedings not
disclosed in writing by the Transferor to the Agent, prior to the date
of execution and delivery of this Agreement is pending against the
Transferor, Servicer, Wackenhut, any Originator or any Affiliate of any
thereof, or (ii) any material development not so disclosed has occurred
in any litigation (including, without limitation, derivative actions),
arbitration proceedings or governmental proceedings so disclosed,
which, in the case of CLAUSE (I) or (II), in the opinion of the Agent,
is likely to materially adversely affect the financial position or
business of the Transferor, Servicer, any Originator or any Affiliate
of any thereof or impair the ability of the Transferor or Servicer to
perform its obligations under this Agreement; or
(g) After any Settlement Date, the Aggregate Required
Allocations shall exceed the Required Allocations Limit; or
(h) The Losses to Liquidations Ratio exceeds 2%; or
(i) Three-Month Default Ratio at any time exceeds 6%; or
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(j) Three-Month Dilution Ratio at any time exceeds 2.5%; or
(k) There shall have occurred any event which materially
adversely affects the collectibility of the Pool Receivables or there
shall have occurred any other event which materially adversely affects
the ability of the Transferor, any Originator or Servicer to collect
Pool Receivables or the ability of the Transferor or Servicer to
perform hereunder or the warranty in SECTION 6.1(N) shall not be true
at any time; or
(l) The Internal Revenue Service shall file notice of a lien
pursuant to Section 6323 of the Internal Revenue Code with regard to
any of the assets of the Transferor, Servicer, the Seller, any
Originator or any Affiliate and such lien shall not have been released
within 30 days, or the Pension Benefit Guaranty Corporation shall, or
shall indicate its intention to, file notice of a lien pursuant to
Section 4068 of the Employee Retirement Income Security Act of 1974
with regard to any of the assets of the Transferor, Servicer, the
Seller or any Originator; or
(m) A Purchase and Sale Termination Event shall have occurred;
or
(n) The Wackenhut Family shall at any time, directly or
indirectly, control less than 33 1/3% of the voting securities of the
Transferor, the Seller, Servicer or any Originator; or
(o) The Agent on behalf of the Purchaser and the Bank
Investors, fail for any reason to have a perfected first priority
security interest as described in SECTION 9.1; or
(p) The Aggregate Required Allocations shall at any time
exceed the Required Allocations Limit.
SECTION 11.2. REMEDIES. (a) OPTIONAL TERMINATION. Upon the
occurrence of a Termination Event (other than a Termination Event described in
SUBSECTION (A), (E), (F), or (P) of SECTION 11.1), the Agent shall, at the
request, or may with the consent, of the Purchaser, by notice to the Transferor
declare the Commitment Termination Date to have occurred.
(b) AUTOMATIC TERMINATION. Upon the occurrence of a
Termination Event described in SUBSECTION (A), (E), (F) or (P) of SECTION 11.1,
the Commitment Termination Date shall be deemed to have occurred automatically
upon the occurrence of such event; PROVIDED, HOWEVER, that with respect to any
proceeding instituted against the Transferor pursuant to 11 U.S.C. ss.303 (an
"INVOLUNTARY FEDERAL PROCEEDING"), the settlement procedures described in
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SECTION 3.2 shall become applicable upon the commencement of such Proceeding and
no further Purchases or Reinvestments of Collections shall be made; and
PROVIDED, FURTHER, that if such Involuntary Federal Proceeding is dismissed
within 60 days after its commencement, and if no other Termination Event has
occurred, then following such dismissal, the Commitment shall be reinstated as
if the Commitment Termination Date had not occurred upon the commencement of
such Involuntary Federal Proceeding.
(c) ADDITIONAL REMEDIES. Upon any termination of the Facility
pursuant to this SECTION 11.2, the Agent, the Purchaser and the Bank Investors
shall have, in addition to all other rights and remedies under this Agreement or
otherwise, all other rights and remedies provided under the UCC of each
applicable jurisdiction and other applicable laws, which rights shall be
cumulative. Without limiting the foregoing or the general applicability of
ARTICLE XIII hereof, the occurrence of a Termination Event shall not deny to
the Agent, the Purchaser or any Bank Investor any remedy in addition to
termination of the Commitment to which the Agent, the Purchaser or any Bank
Investor may be otherwise appropriately entitled, whether at law or in equity.
ARTICLE XII
THE AGENT
SECTION 12.1. AUTHORIZATION AND ACTION. The Purchaser and each
Bank Investor hereby appoints and authorizes the Agent to take such action as
agent on its behalf and to exercise such powers under this Agreement as are
delegated to such Agent by the terms hereof, together with ,such powers as are
reasonably incidental thereto. The provisions of this ARTICLE XII are solely for
the benefit of the Agent, the Purchaser and the Bank Investors, and the
Transferor shall not have any rights as a third-party beneficiary or otherwise
under any of the provisions hereof. In performing its functions and duties
hereunder, the Agent shall act solely as the agent for the Purchaser and the
Bank Investors, as the case may be, and does not assume nor shall be deemed to
have assumed any obligation or relationship of trust or agency with or for the
Transferor or any Originator or any of their respective successors and assigns.
SECTION 12.2. AGENTS' RELIANCE, ETC. Neither the Agent nor any
of its directors, officers, agents or employees shall be liable for any action
taken or omitted to be taken by it or the Agent under or in connection with this
Agreement (including, without limitation, the servicing, administering or
collecting Pool Receivables as Servicer pursuant to SECTION 8.1), except for its
or their own gross negligence or willful misconduct. Without limiting the
generality of the foregoing, the Agent: (a) may consult with legal counsel
(including counsel for the Transferor), independent
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certified public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (b) makes no
warranty or representation to the Purchaser, any Bank Investor or any other
holder of any interest in Pool Receivables and shall not be responsible to the
Purchaser, any Bank Investor or any such other holder for any statements,
warranties or representations made in or in connection with this Agreement; (c)
shall not have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of this Agreement on the
part of the Transferor or to inspect the property (including the books and
records) of the Transferor; (d) shall not be responsible to the Purchaser any
Bank Investor or any other holder of any interest in Pool Receivables for the
due execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement, the Certificate of Assignments or any Agreement
Document; and (e) shall incur no liability under or in respect of this Agreement
by acting upon any notice (including notice by telephone), consent, certificate
or other instrument or writing (which may be by facsimile or telex) believed by
it to be genuine and signed or sent by the proper party or parties.
SECTION 12.3. AGENTS AND AFFILIATES. NationsBank and its
Affiliates may generally engage in any kind of business with the Transferor,
Servicer, any Originator or any Obligor, any of their respective Affiliates and
any Person who may do business with or own securities of the Transferor or any
Obligor or any of their respective Affiliates, all as if NationsBank was not the
Agent and without any duty to account therefor to the Purchaser, any Bank
Investor or any other holder of an interest in Pool Receivables.
ARTICLE XIII
BANK COMMITMENT; ASSIGNMENT OF PURCHASER'S INTEREST
SECTION 13.1. RIGHTS AS BANK INVESTOR. With respect to its
Bank Commitment, NationsBank (and any successor acting as Agent) in its capacity
as a Bank Investor hereunder shall have the same rights and powers hereunder as
any other Bank Investor and may exercise the same as though it were not acting
as the Agent, and the term "BANK INVESTOR" or "BANK INVESTORS" shall, unless the
context otherwise indicates, include the Agent in its individual capacity.
NationsBank (and any successor acting as Agent) and its affiliates may (without
having to account therefor to the Purchaser or any Bank Investor) accept
deposits from, lend money to, make investments in, provide services to, and
generally engage in any kind of lending, trust, or other business with any of
the Trans feror and the Agent or any of their Subsidiaries or affiliates as if
it were not acting as Agent, and NationsBank (and any successor acting as Agent)
and its affiliates may accept fees and other
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consideration from any of the Transferor and its affiliates and the Agent or any
of their Subsidiaries or affiliates for services in connection with this
Agreement or otherwise without having to account for the same to the Purchaser
or any Bank Investor.
SECTION 13.2. INDEMNIFICATION OF THE AGENT. The Bank Investors
agree to indemnify the Agent (to the extent not reimbursed by the Transferor),
ratably in accordance with their PRO RATA portions of the Undivided Interests,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses (including attorneys'
fees), or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against the Agent (including by the Purchaser or
any Bank Investor) in any way relating to or arising out of this Agreement or
any other PROVIDED, HOWEVER, or the transactions contemplated thereby or any
action taken or omitted by the Agent under this Agreement or any other Agreement
Document, PROVIDED that no Bank Investors shall be liable for any of the
foregoing to the extent they arise from the gross negligence or willful
misconduct of the Person indemnified. Without limitation of the foregoing, the
Bank Investors agree to reimburse the Agent, ratably in accordance with their
PRO RATA portions of the Undivided Interests promptly upon demand for any
out-of-pocket expenses (including attorneys' fees) incurred by the Agent in
connection with the administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this Agreement and the
other Agreement Documents, to the extent that such expenses are incurred in the
interests of or otherwise in respect of the Bank Investors hereunder and/or
thereunder and to the extent that the Agent is not reimbursed for such expenses
by the Transferor. The agreements contained in this SECTION 13.2 shall survive
payment in full of the Undivided Interests and all other amounts payable under
this Agreement.
SECTION 13.3. NON-RELIANCE. The Purchaser and each Bank
Investor agrees that it has, independently and without reliance on the Agent or
the Purchaser or any Bank Investor, and based on such documents and information
as it has deemed appropriate, made its own credit analysis of the Transferor and
the Agent and their Subsidiaries and decision to enter into this Agreement and
that it will, independently and without reliance upon the Agent, the Purchaser
or any Bank Investor, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under the Agreement Documents. Except for notices,
reports, and other documents and information expressly required to be furnished
to the Purchaser and the Bank Investors by the Agent hereunder, the Agent shall
not have any duty or responsibility to provide any Lender with any credit or
other information concerning the affairs, financial condition, or business of
the Transferor or the Agent or
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any of their Subsidiaries or affiliates that may come into the possession of the
Agent or any of its affiliates.
SECTION 13.4. PAYMENTS BY THE AGENT. Unless specifically
allocated to a Bank Investor pursuant to the terms of this Agreement, all
amounts received by the Agent on behalf of the Bank Investors shall be paid by
the Agent to the Bank Investors (at their respective accounts specified in their
respective Assignment and Assumption Agreements) in accordance with their
respective related pro rata interests in the Undivided Interest, on the Business
Day received by the Agent, unless such amounts are received after 12:00 noon on
such Business Day, in which case the Agent shall use its reasonable efforts to
pay such amounts to the Bank Investors on such Business Day, but, in any event,
shall pay such amounts to the Bank Investors in accordance with their respective
related pro rata interests in the Undivided Interest, not later than the
following Business Day.
SECTION 13.5. BANK COMMITMENT; ASSIGNMENT TO BANK INVESTORS.
(a) BANK COMMITMENT. At any time on or prior to the Commitment
Termination Date, in the event that the Purchaser does not effect a Purchase as
requested under SECTION 2.1 then at any time, the Transferor shall have the
right to require the Purchaser to assign its interest in the Aggregate
Purchaser's Investment in whole to the Bank Investors pursuant to this SECTION
13.5. In addition, at any time on or prior to the Commitment Termination Date
(i) upon the occurrence of a Termination Event that results in the Commitment
Termination Date or (ii) the Purchaser elects to give notice to the Transferor
of a Reinvestment Termination Date, the Transferor hereby requests and directs
that the Purchaser assign its interest in the Aggregate Purchaser's Investment
in whole to the Bank Investors pursuant to this SECTION 13.5 and the Transferor
hereby agrees to pay the amounts described in SECTION 13.6(D) below. Provided
that the Net Asset Test is satisfied, upon any such election by the Purchaser or
any such request by the Transferor, the Purchaser shall make such assignment and
the Bank Investors shall accept such assignment and shall assume all of the
Purchaser's obligations hereunder. In connection with any assignment from the
Purchaser to the Bank Investors pursuant to this SECTION 13.5, each Bank
Investor shall, on the date of such assignment, pay to the Purchaser an amount
equal to its Assignment Amount. Upon any assignment by the Purchaser to the Bank
Investors contemplated hereunder, the Purchaser shall cease to make any
additional Purchases hereunder.
(b) ASSIGNMENT. No Bank Investor may assign all or a portion
of its interest in the Purchaser's Investment, the Receivables, and Collections,
Related Security and Proceeds with respect thereto and its rights and
obligations hereunder to any Person unless approved in writing by the
Transferor, the Purchaser
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and the Agent. In the case of an assignment by the Purchaser to the Bank
Investors or by a Bank Investor to another Person, the assignor shall deliver to
the assignee(s) an Assignment and Assumption Agreement in substantially the form
of Schedule 13.5(b) attached hereto, duly executed, assigning to the assignee a
pro rata interest in the Purchaser's Investment, the Receivables, and
Collections, Related Security and Proceeds with respect thereto and the
assignor's rights and obligations hereunder and the assignor shall promptly
execute and deliver all further instruments and documents, and take all further
action, that the assignee may reasonably request, in order to protect, or more
fully evidence the assignee's right, title and interest in and to such interest
and to enable the Agent, on behalf of such assignee, to exercise or enforce any
rights hereunder and under the other Agreement Documents to which such assignor
is or, immediately prior to such assignment, was a party. Upon any such
assignment, (i) the assignee shall have all of the rights and obligations of the
assignor hereunder and under the other Agreement Documents to which such
assignor is or, immediately prior to such assignment, was a party with respect
to such interest for all purposes of this Agreement and under the other
Agreement Documents to which such assignor is or, immediately prior to such
assignment, was a party (it being understood that the Bank Investors, as
assignees, shall (x) be obligated to fund Purchases under Section 1.3(c) in
accordance with the terms thereof, notwithstanding that the Purchaser was not so
obligated and (y) not have the right to elect the commencement of the
amortization of the Purchaser's Investment pursuant to the definition of
"Reinvestment Termination Date", notwithstanding that the Company had such
right) and (ii) the assignor shall relinquish its rights with respect to such
interest for all purposes of this Agreement and under the other Agreement
Documents to which such assignor is or, immediately prior to such assignment,
was a party. No such assignment shall be effective unless a fully executed copy
of the related Assignment and Assumption Agreement shall be delivered to the
Agent and the Transferor. All costs and expenses of the Agent and the assignor
and assignee incurred in connection with any assignment hereunder shall be borne
by the Transferor and not by the assignor or any such assignee. No Bank Investor
shall assign any portion of its Commitment hereunder without also simultaneously
assigning an equal portion of its interest in the Liquidity Provider Agreement.
(c) EFFECTS OF ASSIGNMENT. By executing and delivering an
Assignment and Assumption Agreement, the assignor and assignee thereunder
confirm to and agree with each other and the other parties hereto as follows:
(i) other than as provided in such Assignment and Assumption Agreement, the
assignor makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with this Agreement, the other Agreement Documents or any other
instrument or document furnished pursuant hereto or thereto or the execution,
legality, validity, enforceability,
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genuineness, sufficiency or value or this Agreement, the other Agreement
Documents or any such other instrument or document; (ii) the assignor makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Transferor or the Agent or the performance or
observance by the Transferor or the Agent of any of their respective obligations
under this Agreement, the other Agreement Documents or any other instrument or
document furnished pursuant hereto; (iii) such assignee confirms that it has
received a copy of this Agreement, and such other instruments, documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Assumption Agreement and to purchase
such interest; (iv) such assignee will, independently and without reliance upon
the Agent, or any of its Affiliates, or the assignor and based on such
agreements, documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement and the other Agreement Documents; (v) such assignee appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement, the other Agreement Documents and any other
instrument or document furnished pursuant hereto or thereto as are delegated to
the Agent by the terms hereof or thereof, together with such powers as are
reasonably incidental thereto and to enforce its respective rights and interests
in and under this Agreement, the other Agreement Documents, the Receiv ables,
and the Contracts; (vi) such assignee agrees that it will perform in accordance
with their terms all of the obligations which by the terms of this Agreement and
the other Agreement Documents are required to be performed by it as the assignee
of the assignor; and (vii) such assignee agrees that it will not institute
against the Purchaser any proceeding of the type referred to in SECTION 15.6
prior to the date which is one year and one day after the payment in full of all
Commercial Paper issued by the Purchaser.
(d) THE TRANSFEROR'S OBLIGATION TO PAY CERTAIN AMOUNTS;
ADDITIONAL ASSIGNMENT AMOUNT. The Transferor shall pay to the Agent, for the
account of the Purchaser, in connection with any assignment by the Purchaser to
the Bank Investors pursuant to SECTION 13.5, an aggregate amount equal to the
Discount Factor to accrue through the end of each outstanding Yield Period plus
all other Aggregate Unpaids (other than the Aggregate Purchaser's Investment).
To the extent that such Discount Factor relates to interest or discount on
Related Commercial Paper, if the Transferor fails to make payment of such
amounts at or prior to the time of assignment by the Purchaser to the Bank
Investors, such amount shall be paid by the Bank Investors (in accordance with
their respective PRO RATA portion) to the Purchaser as additional consideration
for the interests assigned to the Bank Investors and the amount of the
"Aggregate Purchaser's Investment" hereunder held by the Bank Investors shall be
increased by an amount equal to the additional amount so paid by the Bank
Investors.
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(e) DOWNGRADE OF BANK INVESTOR. If at any time prior to any
assignment by the Purchaser to the Bank Investors as contem plated pursuant to
this SECTION 13.5, the short term debt rating of any Bank Investor shall be
"A-2" or "P-2" from Standard & Poor's or Moody's, respectively, with negative
credit implications, such Bank Investor, upon request of the Agent, shall,
within 30 days of such request, assign its rights and obligations hereunder to
another financial institution (which institution's short term debt shall be
rated at least "A-2" and "P-2" from Standard & Poor's and Moody's, respectively,
and which shall not be so rated with negative credit implications). If the short
term debt rating of a Bank Investor shall be "A-3" or "P-3", or lower, from
Standard & Poor's or Moody's, respectively (or such rating shall have been
withdrawn by Standard & Poor's or Moody's), such Bank Investor, upon request of
the Agent, shall, within five (5) Business Days of such request, assign its
rights and obligations hereunder to another financial institution (which
institution's short term debt shall be rated at least "A-2" and "P-2" from
Standard & Poor's and Moody's, respec tively, and which shall not be so rated
with negative credit implications). In either such case, if any such Bank
Investor shall not have assigned its rights and obligations under this Agreement
within the applicable time period described above, the Purchaser shall have the
right to require such Bank Investor to accept the assignment of such Bank
Investor's PRO RATA portion of the Pool Balance; such assignment shall occur in
accordance with the applicable provisions of this SECTION 13.5(D). Such Bank
Investor shall be obligated to pay to the Purchaser, in connection with such
assignment, in addition to the PRO RATA portion of the Aggregate Purchaser's
Investment, an amount equal to the interest component of the outstanding
Commercial Paper Notes issued to fund the portion of the Aggregate Purchaser's
Investment being assigned to such Bank Investor, as reasonably determined by the
Agent. Notwithstanding anything contained herein to the contrary, upon any such
assignment to a downgraded Bank Investor as contemplated pursuant to the
immediately preceding sentence, the aggregate available amount of the Facility
Limit, solely as it relates to new Purchases by the Purchaser, shall be reduced
by the amount of unused Commitment of such downgraded Bank Investor; it being
understood and agreed, that nothing in this sentence or the two preceding
sentences shall affect or diminish in any way any such downgraded Bank
Investor's Commitment to the Transferor or such downgraded Bank Investor's other
obligations and liabilities hereunder and under the other Agreement Documents.
(f) ADMINISTRATION OF AGREEMENT AFTER ASSIGNMENT. After any
assignment by the Purchaser to the Bank Investors pursuant to this SECTION 13.5
(and the payment of all amounts owing to the Purchaser in connection therewith),
all rights of the Agent set forth herein shall be deemed to be afforded to the
Agent on behalf of the Bank Investors instead of the Purchaser.
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SECTION 13.6. RESTRICTIONS ON ASSIGNMENTS. Except as otherwise
contemplated by Section 13.5, neither the Transferor nor the Purchaser may
assign its rights hereunder or any interest herein without the prior written
consent of the Agent, and the Purchaser may not assign any Undivided Interest
(or portion thereof) to any Person without the prior written consent of the
Transferor; PROVIDED, HOWEVER, that:
(a) Enterprise may assign or grant a security
interest in, any Undivided Interest (or portion thereof) owned by it to
NationsBank, the Enterprise Liquidity Provider or the Enterprise Credit
Support Provider (or any successor thereof by merger, consolidation or
otherwise), any Affiliate of Enterprise (including any securitization
vehicle managed by NationsBank) or such Enterprise Liquidity Provider
or Enterprise Credit Support Provider (which may then assign any such
Undivided Interest (or portion thereof) so assigned or any interest
therein to such party or parties as it may choose); and
(b) The Purchaser may assign and grant a security
interest in any interest in, to and under any Undivided Interest owned
by it, this Agreement and the other Agreement Documents to NationsBank,
as collateral agent or collateral trustee, and any successor in such
capacity, to secure each such Purchaser's obligations under or in
connection with its Commercial Paper Notes, the Enterprise Liquidity
Agreement, the Enterprise Credit Support Agreement and certain other
obligations of the Purchaser incurred in connection with the funding of
the Purchases and Reinvestments hereunder, which assignment and grant
of a security interest shall not be considered an "assignment" for
purposes of SECTION 13.5(B), or, prior to the enforcement of such
security interest, for purposes of any other provision of this
Agreement.
(c) The Transferor agrees to advise the Agent within
five Business Days after notice to the Transferor of any proposed
assignment by the Purchaser of any Undivided Interest (or portion
thereof), not otherwise permitted under SUBSECTION (A), of the
Transferor's consent or non-consent to such assignment. If the
Transferor does not consent to such assignment, the Purchaser may
immediately assign such Undivided Interest (or portion thereof), to
NationsBank, the Enterprise Liquidity Provider or the Enterprise Credit
Support Provider or any Affiliate of NationsBank, the Enterprise
Liquidity Provider or the Enterprise Credit Support Provider. All of
the aforementioned assignments shall be upon such terms and conditions
as the Purchaser and the assignee may mutually agree.
SECTION 13.7. RIGHTS OF ASSIGNEE. Upon the assignment by the
Purchaser of any Undivided Interest (or portion thereof)
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owned by it in accordance with this ARTICLE XIII, (a) the assignee receiving
such assignment shall have all of the rights of the Purchaser hereunder with
respect to such Undivided Interest (or such parties thereof) and (b) all
references to the Purchaser in SECTION 4.2 shall be deemed to apply to such
assignee to the extent of its interest the Purchaser's Investment and the
related Collections.
SECTION 13.8. AUTHORIZATION OF AGENT. The Purchaser authorizes
the Agent to, and the Agent agrees that it shall, endorse the Certificate(s) of
the Purchaser to reflect any assignments made pursuant to this ARTICLE XIII or
otherwise.
SECTION 13.9. NOTICE OF ASSIGNMENT. The Purchaser shall
provide notice to the Transferor and the Agent of any assignment of
any Undivided Interest (or portion thereof) by the Purchaser to any
assignee.
SECTION 13.10. EVIDENCE OF ASSIGNMENT; ENDORSEMENT OF
CERTIFICATE. Any assignment of any Undivided Interest (or portion thereof) to
any Person may be evidenced by an instrument of assignment in the form of
SCHEDULE 13.5 or by such other instruments) or documents) as may be
satisfactory to the Purchaser, the Agent and the assignee. The Purchaser
authorizes the Agent to, and the Agent agrees that it shall, endorse its
Certificate of Assignments to reflect any assignments made pursuant to this
ARTICLE XIII or otherwise.
SECTION 13.11. RIGHTS OF SUPPORT PROVIDERS. The Transferor
hereby agrees that, upon notice to the Transferor, the Enterprise Liquidity
Provider, the Enterprise Credit Support Provider and the collateral agent or
collateral trustee referred to in SECTION 13.1 (collectively, the "ASSIGNEE
PARTIES", each an "ASSIGNEE PARTY"), or any of them, may exercise all the rights
of NationsBank (or Enterprise) respectively hereunder, with respect to Undivided
Interests, and Collections with respect thereto, which have been assigned (or in
which a security interest has been granted) to such Assignee Party, with respect
to all Undivided Interests (or portions thereof), and Collections with respect
thereto, which are owned by Enterprise (and not subject to an assignment or a
separate security interest in favor of the Enterprise Liquidity Provider or
Enterprise Credit Support Provider), and all other rights and interests of
Enterprise, in, to or under this Agreement or any other Agreement Document.
Without limiting the foregoing, upon such notice such Assignee Party may request
Servicer to segregate its allocable shares of Collections, in accordance with
SECTION 8.2(A), may give a Successor Notice pursuant to SECTION 8.1(A), may give
or require the Agent to give notice to the Lock-Box Banks as referred to in
SECTION 8.3(A), and may direct the Obligors of Pool Receivables to make payments
in respect thereof directly to an account designated by them (provided that such
Assignee Party shall designate a single account for the
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making of such payments with respect to any Pool Receivable), in each case, to
the same extent as NationsBank (or Enterprise) might have done.
ARTICLE XIV
INDEMNIFICATION
SECTION 14.1. INDEMNITIES BY THE TRANSFEROR AND SERVICER. (a)
GENERAL INDEMNITY. Without limiting any other rights which any such Person may
have hereunder or under applicable law, the Transferor hereby agrees to
indemnify each of the Agent, the Purchasers, the Enterprise Liquidity Support
Provider, the Enterprise Credit Support Provider, NationsBank, each of and
NationsBank's Affiliates, their respective successors, transferees, participants
and assigns and all officers, directors, shareholders, controlling persons,
employees and agents of any of the foregoing (each an "INDEMNIFIED PARTY"),
forthwith on demand from and against any and all damages, losses, claims,
liabilities and related costs and expenses, including reasonable attorneys fees
and disbursements (all of the foregoing being collectively referred to as
"INDEMNIFIED AMOUNTS") awarded against or incurred by any of them arising out
of or relating to this Agreement or the ownership or funding of any Undivided
Interest or in respect of any Receivable or any Contract, EXCLUDING, HOWEVER,
(a) Indemnified Amounts to the extent resulting from gross negligence or willful
misconduct on the part of such Indemnified Party or (b) recourse (except as
otherwise specifically provided in this Agreement) for Defaulted Receivables or
delinquent receivables. Without limiting the foregoing, the Transferor shall
indemnify each Indemnified Party for Indemnified Amounts arising out of or
relating to:
(i) the transfer by the Transferor of any interest in
any Receivable other than the transfer of an Undivided Interest to the
Agent on behalf of the Purchaser or the Bank Investors, as the case may
be, pursuant this Agreement and the grant of a security interest to the
Agent on behalf of Purchaser and the Bank Investors pursuant to SECTION
9.1;
(ii) the breach of any representation or warranty
made by the Transferor or the Seller (or any of their officers) under
or in connection with this Agreement, any other Agreement Document to
which such entity is a party, any Periodic Report or any other
information or report delivered by the Transferor pursuant hereto,
which shall have been false or incorrect in any material respect when
made or deemed made and any losses, if any, relating to Receivables
included in the Receivables Pool as Eligible Receivables that were 60
days or more past due on the date of their inclusion and any amounts
relating to dilutions on Eligible Receivables included in the
Receivables Pool;
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(iii) the failure by the Transferor or the Seller to
comply with any applicable law, rule or regulation with respect to any
Pool Receivable or the related Contract, or the nonconformity of any
Pool Receivable or the related Contract with any such applicable law,
rule or regulation;
(iv) the failure to vest and maintain vested in the
Agent, on behalf of the Purchaser and the Bank Investors, an undivided
percentage ownership interest, to the extent of each Undivided Interest
owned by them hereunder, in the Receivables in, or purporting to be in,
the Receivables Pool, free and clear of any Adverse Claim, other than
an Adverse Claim arising solely as a result of an act of the Agent, on
behalf of the Purchaser or any Bank Investor, or any assignee therefrom
(when used in this CLAUSE (IV), an Adverse Claim shall include any lien
for taxes whether accrued and payable or not), whether existing at the
time of any Purchase or Reinvestment of Undivided Interest or at any
time thereafter;
(v) the failure to file, or any delay in filing,
financing statements or other similar instruments or documents under
the UCC of any applicable jurisdiction or other applicable laws with
respect to any Receivables in, or purporting to be in, the Receivables
Pool, whether at the time of any Purchase or Reinvestment or at any
time thereafter;
(vi) any dispute, claim, offset or defense (other
than discharge in bankruptcy) of the Obligor to the payment of any
Receivable in, or purporting to be in, the Receivables Pool (including,
without limitation, a defense based on such Receivable's or the related
Contract's not being a legal, valid and binding obligation of such
Obligor enforceable against it in accordance with its terms), or any
other claim resulting from the sale of the merchandise or services
related to such Receivable or the furnishing or failure to furnish such
merchandise or services;
(vii) any products liability claim or personal injury
or property damage suit or other similar or related action arising out
of or in connection with merchandise or services that are the subject
of any Pool Receivable; or
(viii) any tax or governmental fee or charge
(including, without limitation, all intangibles and similar taxes and
all other taxes, but not including taxes upon or measured by net income
or any portion thereof), all interest and penalties thereon or with
respect thereto, and all out-of-pocket costs and expenses, including
the reasonable fees and expenses of counsel in defending against the
same, which may arise by reason of the purchase or ownership of any
Undivided Interest, or any other interest in the Pool Receivables or in
any goods which secure any such Pool Receivables.
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(b) SERVICER INDEMNITY. Without limiting any other rights
which any such Person may have hereunder or under applicable law, the Servicer
hereby agrees to indemnify each INDEMNIFIED PARTY, forthwith on demand from and
against any and all INDEMNIFIED AMOUNTS awarded against or incurred by any of
them arising out of or relating to this Agreement or the ownership, servicing or
funding of any Undivided Interest or in respect of any Receivable or any
Contract, EXCLUDING, HOWEVER, (a) Indemnified Amounts to the extent resulting
from gross negligence or willful misconduct on the part of such Indemnified
Party or (b) recourse (except as otherwise specifically provided in this
Agreement) for Defaulted Receivables and Delinquent Accounts. Without limiting
the foregoing, the Servicer shall indemnify each Indemnified Party for
Indemnified Amounts arising out of or relating to:
(i) the breach of any representation or warranty made
by the Servicer (or any of its officers) under or in connection with
this Agreement, any other Agreement Document to which Servicer is a
party, any Periodic Report or any other information or report delivered
by the Servicer pursuant hereto, which shall have been false or
incorrect in any material respect when made or deemed made and any
losses, if any, relating to Receivables included in the Receivables
Pool as Eligible Receivables that were 60 days or more past due on the
date of their inclusion and any amounts relating to dilutions on
Eligible Receivables included in the Receivables Pool;
(ii) the failure by the Servicer to comply with any
applicable law, rule or regulation with respect to any Pool Receivable
or the related Contract, or the nonconformity of any Pool Receivable or
the related Contract with any such applicable law, rule or regulation;
and
(iii) any failure of the Servicer to perform its
duties or obligations in accordance with the provisions of Article
VIII.
SECTION 14.2. CONTEST OF TAX CLAIM; AFTER-TAX BASIS. If any
Indemnified Party shall have notice of any attempt to impose or collect any tax
or governmental fee or charge for which indemnification will be sought from the
Transferor under SECTION 14.1(A)(IX), such Indemnified Party shall give prompt
and timely notice of such attempt to the Transferor and the Transferor shall
have the right, at its expense, to conduct or participate in any proceedings
resisting or objecting to the imposition or collection of any such tax,
governmental fee or charge. Indemnification hereunder shall be in an amount
necessary to make the Indemnified Party whole after taking into account any tax
consequences to the Indemnified Party of the payment of any of the aforesaid
taxes and the receipt of the indemnity provided hereunder or of any refund of
any such tax previously indemnified hereunder, including the effect
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of such tax or refund on the amount of tax measured by net income or profits
which is or was payable by the Indemnified Party.
SECTION 14.3. CONTRIBUTION. If for any reason the
indemnification provided above in this SECTION 14.3 is unavailable to an
Indemnified Party or is insufficient to hold an Indemnified Party harmless, then
the Transferor shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, claim, damage or liability in such
proportion as is appropriate to reflect not only the relative benefits received
by such Indemnified Party on the one hand and the Transferor on the other hand
but also the relative fault of such Indemnified Party as well as any other
relevant equitable considerations.
ARTICLE XV
MISCELLANEOUS
SECTION 15.1. AMENDMENTS, ETC. Any provision of this Agreement
or any other Agreement Document may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed by the Transferor, the Servicer,
the Purchaser and the Bank Investors, as applicable (and, if ARTICLE IX or the
rights or duties of the Agent are affected thereby, by the Agent); PROVIDED that
no such amendment or waiver shall, unless signed by each Bank Investor directly
affected thereby, (i) increase the Commitment of a Bank Investor, (ii) reduce
the Aggregate Purchaser's Investment or rate of interest to accrue thereon or
any fees or other amounts payable hereunder, (iii) postpone any date fixed for
the payment of any Scheduled distribution in respect of Aggregate Purchaser's
Investment or interest with respect thereto or any fees or other amounts payable
hereunder or for termination of any Commitment, (iv) change the percentage of
the Commitments or the number of Bank Investors, which shall be required for the
Bank Investors or any of them to take any action under this Section or any other
provision of this Agreement, (v) release all or substantially all of the
property with respect to which a security or ownership interest therein has been
granted hereunder to the Agent or the Bank Investors or (vi) extend or permit
the extension of the Commitment Termination Date. In the event the Agent
requests the Purchaser's or a Bank Investor's consent pursuant to the foregoing
provisions and the Agent does not receive a consent (either positive or
negative) from the Purchaser or such Bank Investor within 10 Business Days of
the Purchaser's or Bank Investor's receipt of such request, then the Purchaser
or such Bank Investor (and its percentage interest hereunder) shall be
disregarded in determining whether the Agent shall have obtained sufficient
consent hereunder.
SECTION 15.2. NOTICES, ETC. All notices and other
communications provided for hereunder shall, unless otherwise
stated herein, be in writing (including Telex and facsimile
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communication) and shall be personally delivered or sent by certified mail,
postage prepaid, or by Telex, or by facsimile, to the intended party at the
address or Telex or facsimile number of such party set forth under its name on
the signature pages hereof or at such other address or Telex or facsimile number
as shall be designated by such party in a written notice to the other parties
hereto. All such notices and communications shall be effective, (a) if
personally delivered, when received, (b) if sent by certified mail, three
Business Days after having been deposited in the mail, postage prepaid, (c) if
sent by overnight courier, one Business Day after having been given to such
courier, (d) if transmitted by Telex, when sent, answerback confirmed, and (e)if
transmitted by facsimile, when sent, receipt confirmed by telephone or
electronic means, except that notices and communications pursuant to ARTICLE I
shall not be effective until received.
SECTION 15.3. NO WAIVER; REMEDIES. No failure on the part of
the Agent, NationsBank, any Affected Party, any Indemnified Party, the
Purchaser, any Bank Investor or any other holder of any Undivided Interest to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law. Without limiting the foregoing, each of NationsBank
and any Enterprise Liquidity Provider or Enterprise Credit Support Provider is
hereby authorized by the Transferor at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by NationsBank, Enterprise Liquidity
Provider or Enterprise Credit Support Provider to or for the credit or the
account of the Transferor, now or hereafter existing under this Agreement, to
the payment of any amounts owed by the Transferor hereunder to the Agent, any
Affected Party, any Indemnified Party or the Purchaser, any Bank Investor or
their respective successors and assigns; PROVIDED, HOWEVER, that none of
NationsBank, Enterprise Liquidity Provider or Enterprise Credit Support Provider
shall, through the exercise of such setoff or otherwise, obtain payment with
respect to any amounts due to it (or their respective successors and assigns)
which results in its or their receiving more than their PRO RATA share of the
aggregate of such amounts due hereunder.
SECTION 15.4. BINDING EFFECT; SURVIVAL. This Agreement shall
be binding upon and inure to the benefit of the Transferor, the Servicer, the
Agent, the Purchaser, the Bank Investors and their respective successors and
assigns, and the provisions of SECTION 4.2 and ARTICLE XIII shall inure to the
benefit of the Affected Parties and the Indemnified Parties, respectively, and
their respective successors and assigns; PROVIDED, HOWEVER, nothing in the
foregoing shall be deemed to authorize any assignment not
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permitted by SECTION 13.1. This Agreement shall create and constitute the
continuing obligations of the parties hereto in accordance with its terms, and
shall remain in full force and effect until such time, after the Commitment
Termination Date, as all Undivided Interests shall have been reduced to zero.
The rights and remedies with respect to any breach of any representation and
warranty made by the Transferor or the Servicer pursuant to ARTICLE VI and the
indemnification and payment provisions of ARTICLE XIV and SECTIONS 4.2, 15.5 and
15.7 shall be continuing and shall survive any termination of this Agreement.
SECTION 15.5. COSTS, EXPENSES AND TAXES. In addition to
its obligations under ARTICLE XIII, the Transferor agrees to pay on
demand:
(a) all costs and expenses incurred by the Agent, the
Purchaser, each Bank Investor, NationsBank, the Enterprise Liquidity
Provider, the Enterprise Credit Support Provider and their respective
Affiliates in connection with the negotiation, preparation, execution
and delivery, the administration (including periodic auditing) or the
enforcement of, or any actual or claimed breach of, or any amendment to
or waiver of any provision contained in this Agreement, the Certificate
of Assignments and the other Agreement Documents, including, without
limitation (i) the reasonable fees and expenses of counsel to any of
such Persons incurred in connection with any of the foregoing or in
advising such Persons as to their respective rights and remedies under
any of the Agreement Documents, and (ii) all reasonable out-of-pocket
expenses (including reasonable fees and expenses of independent
accountants) incurred in connection with any review of the Transferor's
books and records either prior to the execution and delivery hereof or
pursuant to SECTION 7.1(C); and
(b) all stamp and other taxes and fees payable or
determined to be payable in connection with the execution, delivery,
filing and recording of this Agreement, the Certificate of Assignments
or the other Agreement Documents, and agrees to indemnify each
Indemnified Party against any liabilities with respect to or resulting
from any delay in paying or omission to pay such taxes and fees.
SECTION 15.6. NO PROCEEDINGS. The Transferor and NationsBank,
individually and as Agent, each hereby agrees that it will not institute against
the Purchaser or any Bank Investor or join any other Person in instituting
against the Purchaser any insolvency proceeding (namely, any proceeding of the
type referred to in the definition of Event of Bankruptcy) so long as any
Commercial Paper Notes issued by the Purchaser shall be outstanding or there
shall not have elapsed one year plus one day since the last day on which any
such Commercial Paper Notes shall have been outstanding. The foregoing shall not
limit the Transferor's right
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to file any claim in or otherwise take any action with respect to any insolvency
proceeding that was instituted by any Person other than the Transferor.
SECTION 15.7. NATIONSBANK PROGRAM CONFIDENTIALITY. Each party
hereto (other than NationsBank) acknowledges that NationsBank regards the
structure of the transactions contemplated by this Agreement, and by the
Enterprise Liquidity Agreement and Enterprise Credit Support Agreement and its
other program documents referred to therein, to be proprietary, and each such
party severally agrees that:
(a) unless NationsBank shall otherwise agree in writing, and
except as provided in SUBSECTION (B), such party will not disclose to
any other person or entity:
(i) any information regarding, or copies of, this
Agreement or any transaction contemplated hereby,
(ii) any information regarding the organization or
business of Enterprise generally, or
(iii) any information regarding NationsBank which is
designated by NationsBank to such party in writing or
otherwise as confidential or not otherwise available to the
general public;
(b) such party will make the Information available to
only such of its officers, directors, employees and agents who (A) in
the good faith belief of such party, have a need to know such
Information, (B) are informed by such party of the confidential nature
of the Information and the terms of this SECTION 15.7, and (C) are
subject to confidentiality restrictions consistent with this SECTION
15.7;
(c) such party will use the Information solely for
the purposes of evaluating, administering and enforcing the
transactions contemplated by this Agreement and making any necessary
business judgments with respect thereto; and
(d) such party will, upon demand, return (and cause
its representatives to return) to NationsBank, or to such other
Information Provider as shall have furnished it with any Information,
all documents or other written material received from NationsBank or
such other Information Provider which constitute or contain any
Information described in SUBCLAUSE (B) or (C) of CLAUSE (I) above and
all copies of such documents or other material in its possession or in
the possession of any of its representatives, and will not retain any
copy, summary or extract thereof on any storage medium whatsoever.
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(e) Notwithstanding CLAUSE (I) of SUBSECTION (A),
each party may disclose any Information:
(i) to its attorneys, consultants and
auditors who (A) in the good faith belief of such party, have
a need to know such Information, (B) are informed by such
party of the confidential nature of the Information and the
terms of this SECTION 15.7, and (C) are subject to
confidentiality restrictions consistent with this SECTION
15.7,
(ii) to any other party to this Agreement,
for the purposes contemplated hereby or to any rating agency
then rating the Commercial Paper Notes,
(iii) as may be required by any municipal,
state, federal or other regulatory body having or claiming to
have jurisdiction over such party, in order to comply with any
law, order, regulation, regulatory request or ruling
applicable to such party, or
(iv) Subject to SUBSECTION (C), in the event
such party is legally compelled (by interrogatories, requests
for information or copies, subpoena, civil investigative
demand or similar process) to disclose such Information.
(f) In the event that any party hereto or any one to
whom such party or its representatives transmits the Information is
requested or becomes legally compelled (by interrogatories, requests
for information or documents, subpoena, civil investigative demand or
similar process) to disclose any of the Information, such party will
(or will cause its representatives to): provide NationsBank with prompt
written notice so that (A) Enterprise, NationsBank, or any other
Information Provider may seek a protective order or other appropriate
remedy, or (B) NationsBank may, if it so chooses, agree that such party
(or its representatives) may disclose such Information pursuant to such
request or legal compulsion.
(g) unless NationsBank agrees that such Information
may be disclosed, make a timely objection to the request or compulsion
to provide such Information on the basis that such Information is
confidential and subject to the agreements contained in this SECTION
15.7;
(h) take any action as NationsBank or any other
Information Provider may reasonably request to seek a protective order
or other appropriate remedy, PROVIDED that, in connection therewith,
such party shall have first received such assurances as it may
reasonably request that NationsBank
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or such other Information Provider shall reimburse such party's or its
representatives' reasonable costs and expenses or provide such other
assistance as such party or its representatives may reasonably
require; and
(i) in the event that such protective order or other
remedy is not obtained, or NationsBank agrees that such Information may
be disclosed, furnish only that portion of the Information which is
legally required to be furnished, and, provided such party (or its
representative) is reimbursed or assisted as referred to in CLAUSE
(III) above, exercise best efforts to obtain reliable assurance that
confidential treatment will be accorded the Information.
This SECTION 15.7 shall survive termination of this Agreement.
SECTION 15.8. CONFIDENTIALITY OF THE TRANSFEROR INFORMATION.
(a) Each party hereto (other than the Transferor) acknowledges
that certain of the information provided to such party by or on behalf
of the Transferor in connection with this Agreement and the
transactions contemplated hereby is or may be confidential, and each
such party severally agrees that, unless the Transferor shall otherwise
agree in writing, and except as provided in SUBSECTION (B), such party
will not disclose to any other person or entity:
(i) any information regarding, or copies of, any Periodic
Reports, and any non-public financial statements, reports and other
information, furnished by the Transferor to the Purchaser, any Bank
Investor or the Agent pursuant to SECTION 3.4, 5.1(M), 5.1(N), 6.1(I),
6.1(J), 7.1(C) or 7.2, or
(ii) any other information regarding the Transferor, Servicer,
Seller and any Originator which is designated by the Transferor to such
party in writing or otherwise as confidential;
the information referred to in CLAUSES (I) AND (II), above, furnished by the
Transferor or any attorney for or other representative of the Transferor (each
a "TRANSFEROR INFORMATION PROVIDER"), is collectively referred to as the
"TRANSFEROR INFORMATION;" PROVIDED, HOWEVER, the "TRANSFEROR INFORMATION" shall
not include:
(i) any information which is or becomes generally available to
the general public or to such party on a nonconfidential basis from a
source other than the Transferor or any other Transferor Information
Provider, or which was known to such party on a nonconfidential basis
prior to its
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disclosure by the Transferor or any other Transferor Information
Provider), or
(ii) general information regarding the nature of this
Agreement, the basic terms hereof (including without limitation the
amount and nature of the Purchaser's Investments or any Bank Investor's
hereunder and of the recourse or other credit enhancement provided by
the Transferor hereunder), the nature, amount and status of the Pool
Receivables, and the current and/or historical ratios of losses to
liquidations and/or outstandings with respect to the Receivables Pool,
and the identity of the Transferor.
(b) Notwithstanding SUBSECTION (A), each party may
disclose any Transferor Information:
(i) to any of such party's attorneys, consultants and
auditors, and to such of the Enterprise Liquidity Provider, Enterprise
Credit Support Provider, assignee, any dealer or placement agent for
the Purchaser's commercial paper, and any actual or potential assignees
of, or participants in, any of the rights or obligations of the
Purchaser, Enterprise Liquidity Provider or Enterprise Credit Support
Provider, NationsBank under or in connection with this Agreement, who
(A) in the good faith belief of such party, have a need to know such
the Transferor Information, (B) are informed by such party of the
confidential nature of the Transferor Information and the terms of this
SECTION 15.8, and (C) are subject to confidentiality restrictions
generally consistent with this SECTION 15.8,
(ii) to any rating agency that maintains a rating for
the Purchaser's commercial paper or is considering the issuance of such
a rating, for the purposes of reviewing the credit of the Purchaser in
connection with such rating,
(iii) to any other party to this Agreement, for the
purposes contemplated hereby,
(iv) as may be required by any municipal, state,
federal or other regulatory body having or claiming to have
jurisdiction over such party, in order to comply with any law, order,
regulation, regulatory request or ruling applicable to such party, or
(v) subject to SUBSECTION (C), in the event such
party is legally compelled (by interrogatories, requests for
information or copies, subpoena, civil investigative demand or similar
process) to disclose such the Transferor Information.
(c) In the event that any party hereto (other than the
Transferor) or any of its representatives is requested or becomes
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legally compelled (by interrogatories, requests for information or documents,
subpoena, civil investigative demand or similar process) to disclose any of the
Transferor Information, such party will (or will cause its representatives to):
(i) provide the Transferor with prompt written notice
so that (A) the Transferor or any other the Transferor Information
Provider may seek a protective order or other appropriate remedy, or
(B) the Transferor may, if it so chooses, agree that such party (or its
representatives) may disclose such the Transferor Information pursuant
to such request or legal compulsion;
(ii) unless the Transferor agrees that such the
Transferor Information may be disclosed, make a timely objection to the
request or compulsion to provide such the Transferor Information on the
basis that such the Transferor Information is confidential and subject
to the agreements contained in this SECTION 15.8;
(iii) take any action as the Transferor or any other
the Transferor Information Provider may reasonably request to seek a
protective order or other appropriate remedy, PROVIDED that, in
connection therewith, such party shall have first received such
assurances as it may reasonably request that the Transferor or such
other the Transferor Information Provider shall reimburse such party's
or its representatives, reasonable costs and expenses or provide such
other assistance as such party or its representatives may reasonably
require; and
(iv) in the event that such protective order or other
remedy is not obtained, or the Transferor agrees that such the
Transferor Information may be disclosed, furnish only that portion of
the Transferor Information which is legally required to be furnished,
and, provided such party (or its representative) is reimbursed or
assisted as referred to in CLAUSE (III) above, exercise best efforts to
obtain reliable assurance that confidential treatment will be accorded
the Transferor Information.
This SECTION 15.8 shall survive termination of this Agreement.
SECTION 15.9. CAPTIONS AND CROSS REFERENCES. The various
captions (including, without limitation, the table of contents) in this
Agreement are provided solely for convenience of reference and shall not affect
the meaning or interpretation of any provision of this Agreement. Unless
otherwise indicated, references in this Agreement to any Section, Appendix,
Schedule or Exhibit are to such Section of or Appendix, Schedule or Exhibit to
this Agreement, as the case may be, and references in any Section, subsection,
or
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clause to any subsection, clause or subclause are to such subsection, clause or
subclause of such Section, subsection or clause.
SECTION 15.10. INTEGRATION. This Agreement contains a final
and complete integration of all prior expressions by the parties hereto with
respect to the subject matter hereof and shall constitute the entire Agreement
among the parties hereto with respect to the subject matter hereof, superseding
all prior oral or written understandings.
SECTION 15.11. GOVERNING LAW. THIS AGREEMENT, INCLUDING THE
RIGHTS AND DUTIES OF THE PARTIES HERETO, SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK.
SECTION 15.12. WAIVER OF JURY TRIAL. THE TRANSFEROR AND
SERVICER HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT THE CERTIFICATE
OF ASSIGNMENTS, ANY OTHER AGREEMENT DOCUMENT OR UNDER ANY AMENDMENT, INSTRUMENT
OR DOCUMENT DELIVERED OR WHICH MAY BE IN THE FUTURE BE DELIVERED IN CONNECTION
HEREWITH OR ARISING FROM ANY BANKING OR OTHER RELATIONSHIP EXISTING IN
CONNECTION WITH THIS AGREEMENT, THE CERTIFICATE OF ASSIGNMENTS OR ANY OTHER
AGREEMENT DOCUMENT AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED
BEFORE A COURT AND NOT A JURY TRIAL.
SECTION 15.13. CONSENT TO JURISDICTIONS WAIVER OF IMMUNITIES.
EACH OF THE TRANSFEROR AND SERVICER, THE PURCHASER, EACH BANK INVESTOR AND AGENT
HEREBY ACKNOWLEDGES AND AGREES THAT:
(a) IT IRREVOCABLY (i) SUBMITS TO THE JURISDICTION, FIRST, OF
ANY UNITED STATES FEDERAL COURT, AND SECOND, IF FEDERAL JURISDICTION IS
NOT AVAILABLE, OF ANY NEW YORK STATE COURT, IN EITHER CASE SITTING IN
NEW YORK CITY, NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT, (ii) AGREES THAT ALL CLAIMS IN RESPECT OF
SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED ONLY IN SUCH NEW
YORK STATE OR FEDERAL COURT AND NOT IN ANY OTHER COURT, AND (iii)
WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF
AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING.
(b) TO THE EXTENT THAT IT HAS OR HEREAFTER MAY ACQUIRE ANY
IMMUNITY FROM THE JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS
(WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID TO EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT TO
ITSELF OR ITS PROPERTY, IT HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN
RESPECT OF ITS OBLIGATIONS UNDER OR IN CONNECTION WITH THIS AGREEMENT.
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SECTION 15.14. EXECUTION IN COUNTERPARTS. This Agreement may
be executed in any number of counterparts and by the different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
Agreement.
SECTION 15.15. PURCHASER'S LIABILITIES. The obligations of the
Purchaser hereunder are solely the corporate obligations of the Purchaser and no
personal liability shall attach to or be incurred by Merrill Lynch Money Markets
Inc. or any stockholder, employee, officer, director or incorporator of the
Purchaser, and the Transferor and Servicer expressly waive any claim based on
such personal liability. No recourse shall be had for an obligation or claim
arising out of or based upon this Agreement against Merrill Lynch Money Markets
Inc. or against any stockholder, employee, officer, director or incorporator of
the Purchaser. This SECTION 15.15 shall not relieve any such Person of any
liability it might otherwise have for its own gross negligence or willful
misconduct.
SECTION 15.16. AGENT'S LIABILITIES. The obligations of the
Agent hereunder are solely the corporate obligations of such Agent and no
personal liability shall attach to or be incurred by the Agent or any
stockholder, employee, officer, director or incorporator of the Agent, and the
Transferor and Servicer expressly waive any claim based on such personal
liability. No recourse shall be had for an obligation or claim arising out of or
based upon this Agreement against NationsBank or against any stockholder,
employee, officer, director or incorporator of either of them; PROVIDED THAT,
this SECTION 15.16 shall not relieve any such Person of any liability it might
otherwise have for its own gross negligence or willful misconduct.
SECTION 15.17. DELEGATION OF SERVICER'S DUTIES. Wackenhut, as
Servicer, may at any time, with the consent of the Agent, delegate to an
Affiliate of Wackenhut any of its servicing obligations hereunder, PROVIDED
HOWEVER that no such delegation shall operate to relieve the Servicer of any of
its liabilities hereunder.
SECTION 15.18. CHARACTERIZATION OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT. It is the intention of the parties hereto that
the transactions contemplated hereby constitute the sale of the Undivided
Interests, conveying good title thereto free and clear of any Liens to the
Purchaser and the Bank Investors, as the case may be and that the Undivided
Interests not be part of the Transferor's estate in an Event of Bankruptcy. If,
notwithstanding the foregoing, the transactions contemplated hereby are deemed a
financing, the parties intend that the Transferor shall be deemed to have
granted to the Agent, for the benefit of the Purchaser and the Bank Investors
and the Transferor hereby grants to the Agent, for the benefit of the Purchaser
and the Bank Investors, a first priority perfected security interest in all of
the Transferor's
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right, title and interest in, to and under the Receivables, together with
Related Security and Collections with respect thereto and under the Receivables
Purchase Agreement, and that this Agreement shall constitute a security
agreement under applicable law.
- SIGNATURE PAGES FOLLOW -
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<PAGE> 85
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
date first above written.
WACKENHUT FUNDING CORPORATION,
as the Transferor
By
--------------------------------------
Title
----------------------------------
4200 Wackenhut Drive, No. 100
Palm Beach Gardens, Florida 33410
Facsimile: (561) 691-6648
Attention: Corey Glover
Telephone: (561) 622-5656
THE WACKENHUT CORPORATION,
as Servicer
By
--------------------------------------
Title
----------------------------------
4200 Wackenhut Drive, No. 100
Palm Beach Gardens, Florida 33410
Facsimile: (561) 691-6648
Attention: Corey Glover
Telephone: (561) 622-5656
ENTERPRISE FUNDING CORPORATION,
as Purchaser
By
--------------------------------------
Title
----------------------------------
c/o Merrill Lynch Money Markets Inc.
World Financial Center - South Tower
225 Liberty Street - 8th Floor
New York, New York 10080
Attention: Stewart Cutler
Telephone: (212) 449-7468
Facsimile: (212) 449-8939
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NATIONSBANK, N.A.,
as Agent
By
--------------------------------------
Title: Senior Vice President
100 North Tryon Street
10th Floor
Charlotte, North Carolina 28255
Attention: Structured Finance Group
Michelle M. Heath
Telephone: (704) 386-7922
Facsimile: (704) 388-9169
Commitment: NATIONSBANK, N.A.,
$61,200,000__________ as Bank Investor
By
--------------------------------------
Title: Senior Vice President
100 North Tryon Street
10th Floor
Charlotte, North Carolina 28255
Attention: Structured Finance Group
Michelle M. Heath
Telephone: (704) 386-7922
Facsimile: (704) 388-9169
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APPENDIX A
DEFINITIONS
This is APPENDIX A to the Transfer and Administration Agreement dated
as of December 30, 1997 among Wackenhut Funding Corporation, The Wackenhut
Corporation, and Enterprise Funding Corporation, and NationsBank, N.A., as Agent
(as amended, supplemented or otherwise modified from time to time, this
"AGREEMENT"). Each reference in this APPENDIX A to any Section, Appendix or
Exhibit refers to such Section of or Appendix or Exhibit to this Agreement.
A. DEFINED TERMS. As used in this Agreement, unless the context
requires a different meaning, the following terms have the meanings indicated
hereinbelow:
"ADJUSTED AVERAGE MATURITY" has the meaning set forth in
APPENDIX B.
"AGENT" has the meaning set forth in the preamble.
"ADVERSE CLAIM" means a lien, security interest, charge, or
encumbrance, or other right or claim of any Person other than (a) a potential
claim or right (that has not yet been asserted) of a trustee appointed for an
Obligor in connection with any Event of Bankruptcy or (b) an unfiled lien for
taxes accrued but not yet payable.
"AFFECTED PARTY" means each of the Purchaser, any Bank Investor, the
Enterprise Liquidity Provider, each Enterprise Credit Support Provider, any
other Person providing credit or liquidity support to the Purchaser, or any Bank
Investor any permitted assignee of any Purchaser, any Bank Investor, Enterprise
Liquidity Provider, Enterprise Credit Support Provider or such other Person, any
assignee of any of the Purchaser's obligations to any Enterprise Liquidity
Provider, any Enterprise Credit Support Provider, any holder of a participation
interest in the rights and obligations of any Enterprise Liquidity Provider or
Enterprise Credit Support Provider, the Agent, NationsBank, and any holding
company of NationsBank.
"AFFILIATE" when used with respect to a Person, means any other Person
controlling, controlled by, or under common control with, such Person.
"AGGREGATE UNPAIDS" means, at any time, an amount equal to the sum of
(i) the aggregate Earned Discount at such time, (ii) the Aggregate Total
Investment at such time, and (iii) all other amounts owed (whether due or
accrued) hereunder by the Transferor to the Purchaser, the Bank Investors, or
the Agent at such time.
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"AGREEMENT DOCUMENTS" means this Agreement, the Purchase and Sale
Agreement, the Receivables Purchase Agreement, the Certificate of Assignments
and the other documents to be executed and delivered in connection herewith.
"AGGREGATE PURCHASER'S INVESTMENTS" means, at any time, with respect to
the Purchaser or the Bank Investors, as the case may be, the sum of the Dollar
amount of all of the Purchaser's Investments.
"AGGREGATE PURCHASER'S SHARE" shall have the meaning set forth
in SECTION 2.5.
"AGGREGATE REQUIRED ALLOCATIONS" at any time means the sum of
all Required Allocations of all Undivided Interests.
"AGGREGATE UNPAID BALANCE" has the meaning set forth in SECTION 2.1 of
the Purchase and Sale Agreement.
"ALTERNATE REFERENCE RATE" has the meaning set forth in
APPENDIX B.
"ASSIGNMENT AMOUNT" with respect to a Bank Investor shall mean at any
time an amount equal to the lesser of (i) such Bank Investor's PRO RATA portion
of the Aggregate Purchaser's Investment at such time and (ii) such Bank
Investor's unused Commitment.
"ASSIGNMENT AND ASSUMPTION AGREEMENT" means an Assignment and
Assumption Agreement substantially in the form of Exhibit B attached hereto.
"AVERAGE MATURITY" has the meaning set forth in APPENDIX B.
"BANK COMMITMENT" means (i) with respect to each Bank Investor party
hereto, the commitment of such Bank Investor to make acquisitions from the
Transferor or the Purchaser in accordance herewith in an amount not to exceed
the dollar amount set forth opposite such Bank Investor's signature on the
signature page hereto under the heading "COMMITMENT", MINUS the dollar amount of
any Commitment or portion thereof assigned pursuant to an Assignment and
Assumption Agreement PLUS the dollar amount of any increase to such Bank
Investor's Commitment consented to by such Bank Investor prior to the time of
determination, (ii) with respect to any assignee of a Bank Investor party hereto
taking pursuant to an Assignment and Assumption Agreement, the commitment of
such assignee to make acquisitions from the Transferor or the Purchaser not to
exceed the amount set forth in such Assignment and Assumption Agreement MINUS
the dollar amount of any Commitment or portion thereof assigned pursuant to an
Assignment and Assumption Agreement prior to such time of determination and
(iii) with respect to any assignee of an assignee referred to in clause (ii),
the commitment of such assignee to make acquisitions from the Transferor or the
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Purchaser not to exceed the amount set forth in an Assignment and Assumption
Agreement between such assignee and its assign.
"BANK RATE" has the meaning set forth in APPENDIX B.
"BUSINESS DAY" means a day on which both (a) NationsBank at its office
in Charlotte, North Carolina is open for business and (b) commercial banks in
New York City are not authorized or required to be closed for business.
"CERTIFICATE OF ASSIGNMENTS" means each certificate of assignment, by
the Transferor to a Purchaser, in the form of EXHIBIT 5.1(A), evidencing an
Undivided Interest.
"COLLECTION ACCOUNT" shall have the meaning set forth in
SECTION 3.3(E).
"COLLECTIONS" means, with respect to any Receivable, all funds which
either (a) are received by the Transferor, any Originator or Servicer from or on
behalf of the related Obligors in payment of any amounts owed (including,
without limitation, purchase prices, finance charges, interest and all other
charges) in respect of such Receivable, or applied to such amounts owed by such
Obligors (including, without limitation, insurance payments that the Transferor,
each Originator or Servicer applies in the ordinary course of its business to
amounts owed in respect of such Receivable and net proceeds of sale or other
disposition repossessed goods or other collateral or property of the Obligor or
any other party directly or indirectly liable for payment of such Receivable and
available to be applied thereon), or (b) are deemed to have been received by the
Transferor, any Originator or any other Person as a Collection pursuant to
SECTION 3.3; PROVIDED THAT, prior to such time as Wackenhut shall cease to be
Servicer, late payment charges, collection fees and extension fees shall not be
deemed to be Collections.
"COMMERCIAL PAPER NOTES" means short-term promissory notes issued or to
be issued by the Purchaser to fund its investments in accounts receivable or
other financial assets.
"COMMERCIAL PAPER RATE" has the meaning set forth in APPENDIX B.
"COMMITMENT" has the meaning set forth in SECTION 1.1.
"COMMITMENT TERMINATION DATE" has the meaning set forth in
SECTION 1.5(A).
"CONCENTRATION LIMIT" has the meaning set forth in SECTION 2.3(B).
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"CONDITIONS PRECEDENT" has the meaning set forth in SECTION 5.2.
"CONSOLIDATED FUNDED DEBT" means all Funded Debt of Wackenhut and its
Subsidiaries determined on a consolidated basis eliminating intercompany items.
(a) any gains on the sale or other disposition of Investments
or fixed or capital assets, and any taxes on such excluded gains and
any tax deductions or credits on account of any such excluded losses;
(b) the proceeds of any life insurance policy except for
proceeds received during such period with respect to deferred
compensation plans to the extent that Seller or any Subsidiary
recognized any expenses during such period with respect to such plans;
(c) net earnings and losses of any Subsidiary accrued
prior to the date it became a Subsidiary;
(d) net earnings and losses of any corporation (other than a
Subsidiary), substantially all the assets of which have been acquired
in any manner by Wackenhut or any Subsidiary, realized by such
corporation prior to the date of such acquisition;
(e) net earnings and losses of any corporation (other than a
Subsidiary) with which Wackenhut or a Subsidiary shall have
consolidated or which shall have merged into or with Wackenhut or a
Subsidiary prior to the date of such consolidation or merger;
(f) net earnings of any business entity (other than a
Subsidiary) in which Wackenhut or any Subsidiary has an ownership
interest unless such net earnings shall have actually been received by
Wackenhut or such Subsidiary in the form of cash distributions;
(g) any portion of the net earnings of any Subsidiary
which for any reason is unavailable for payment of dividends
to Wackenhut or any other Subsidiary;
(h) earnings resulting from any reappraisal, revaluation
or write-up of assets;
(i) any deferred or other credit representing any excess of
the equity in any Subsidiary at the date of acquisition thereof over
the amount invested in such Subsidiary;
(j) any gain arising from the acquisition of any Securities
of Wackenhut or any Subsidiary; and
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(k) any reversal of any contingency reserve, except to the
extent that provision for such contingency reserve shall have been made
from income arising during such period.
"CONSOLIDATED NET WORTH" means at any time as of which the amount
thereof is to be determined, the sum of the following in respect of Wackenhut
and its Subsidiaries (on a consolidated basis and excluding intercompany items):
(i) the amount of issued and outstanding share capital, PLUS (ii) the amount of
additional paid-in capital and retained income (or, in the case of a deficit,
minus the amount of such deficit), MINUS (iii) the sum of the following (without
duplication of deductions in respect of items already deducted in arriving at
surplus and retained earnings): (A) all reserves, except legal reserves and
other contingency reserves (i.e., reserves not allocated to specific purposes
and not deducted from assets), which are properly treated as appropriations of
surplus or retained earnings; (B) any treasury stock, capital stock subscribed
and unissued and other contra-equity accounts; and (C) the cumulative amount of
any net write-up of asset values after the date of the audit immediately
preceding the date of revolver, plus or minus, as the case may be (iv) the
cumulative effect of foreign exchange valuations.
"CONSOLIDATED TOTAL ASSETS" means as of the date of any determination
thereof the total amount of all assets of Wackenhut and its Subsidiaries
determined on a consolidated basis in accordance with generally accepted
accounting principles.
"CONTRACT" means any writing evidencing a Receivable.
"CREDIT AND COLLECTION POLICY" shall mean the Servicer's credit and
collection policy or policies and practices, relating to Contracts and
Receivables existing on the date hereof and referred to in SECTION 8.2(A) and
described in SCHEDULE A-1, and as modified from time to time in compliance with
SECTION 7.3(C).
"CURRENT DEBT" of any Person as of the date of any determination
thereof means (i) all Indebtedness of such Person for borrowed money other than
Funded Debt of such Person and (ii) Guaranties by such Person of Current Debt of
others.
"DEFAULTED RECEIVABLE" means, without duplication, a Receivable: (a)
as to which any payment, or part thereof, remains unpaid for 120 days from the
original invoice date for such Receivable, (b) with regard to which an Event of
Bankruptcy has occurred and remains continuing, (c) as to which payments have
been extended, or the terms of payment thereof rewritten, or (d) which
consistent with the Credit and Collection Policy, would be fully reserved
against or required to be sent to attorneys or collection agencies or would be
charged-off the Transferor's or Servicer's books as uncollectible.
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"DELINQUENT RECEIVABLE" means a Receivable that is not a Defaulted
Receivable and: (a) as to which any payment, or part thereof, remains unpaid for
60 days or more from the original invoice date for such Receivable; or (b)
which, consistent with the Credit and Collection Policy, would be classified as
delinquent by the Transferor.
"DESIGNATED OBLIGOR" means, at any time, all Obligors of the Transferor
except any such Obligor as to which the Agent has, at least three Business Days
prior to the date of determination, given written notice to the Transferor that
such Obligor shall not be considered a Designated Obligor.
"DISCOUNT FACTOR" has the meaning set forth in APPENDIX B.
"DOMESTIC CD RATE (ADJUSTED)" has the meaning set forth in
APPENDIX B.
"EARNED DISCOUNT" has the meaning set forth in APPENDIX B.
"ELIGIBLE RECEIVABLE" means, at any time, a Receivable:
(a) which has been originated by an Originator and sold to Wackenhut
pursuant to (and in accordance with) the Purchase and Sale Agreement and has
been sold by Wackenhut to the Transferor pursuant to (and in accordance with)
the Receivables Purchase Agreement, and to which the Transferor has good title
thereto, free and clear of all address claims;
(b) which (together with the Collections), has been the subject of
either a valid transfer and assignment from the Transferor to the Agent, on
behalf of the Purchaser and the Bank Investors, all of the Transferor's right,
title and interest therein or the grant of a first priority security interest
therein (and in the Collections and Related Security) effective until the
termination of this Agreement;
(c) with regard to which the related service has been rendered and all
other obligations performed by the Transferor or an Originator (except as
permitted by Schedule 2.3(b)), as applicable, and which is generated by the
Transferor and the applicable Originator in the ordinary course of their
respective business of providing Services and is required to be paid in full by
the related Obligor within 30 days of the billing thereof;
(d) which, (i) if the perfection of the Agent's, on behalf of the
Purchaser and the Bank Investors, undivided ownership interest therein is
governed by the laws of a jurisdiction where the Uniform Commercial Code --
Secured Transactions is in force, constitutes an account or general intangible
as defined in the Uniform Commercial Code as in effect in such jurisdiction, and
(ii) if the perfection of the Agent's undivided ownership interest therein is
governed by
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the law of any jurisdiction where the Uniform Commercial Code -- Secured
Transactions is not in force, the Transferor has furnished to the Agent such
opinions of counsel and other evidence as has reasonably been requested,
establishing to the reasonable satisfaction of the Agent that the Agent's
undivided ownership interest and other rights with respect thereto are not
significantly less protected and favorable than such rights under the Uniform
Commercial code;
(e) which is a domestic Receivable, the Obligor of which is a
United States resident, and is not an Affiliate of any of the
parties hereto;
(f) the Obligor of which is a Designated Obligor;
(g) the Obligor of which is not the private sector Obligor of Defaulted
Receivables aggregating more than 15% of such Obligor's total obligations to the
Transferor and each Originator;
(h) which is not a Defaulted Receivable;
(i) with regard to which the warranty of the Transferor in
SECTION 6.1(L) is true and correct;
(j)(x) the sale of an undivided interest in which does not require the
consent of or notice to the related Obligor under the related Contract and does
not contravene or conflict with any law, and (y) in the case of Receivables
generated by an Originator, the sale of which to the Transferor does not
contravene or conflict with any law;
(k) which is an account receivable representing all or part of the
sales price of merchandise, insurance and services within the meaning of Section
3(c)(5) of the Investment Company Act of 1940, as amended;
(l) which arises out of a current transaction, or the proceeds of which
have been or are to be used for current transactions, within the meaning of
Section 3(a)(3) of the Securities Act of 1933, as amended;
(m) which is denominated and payable only in Dollars in the
United States;
(n) which arises under a Contract that has been duly authorized and
that, together with such Receivable, is in full force and effect and constitutes
the legal, valid and binding obligation of the Obligor of such Receivable
enforceable against such Obligor in accordance with its terms and is not subject
to any dispute, offset, counterclaim or defense whatsoever (except the discharge
in bankruptcy of such Obligor);
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(o) which, together with the Contract related thereto, does not
contravene in any material respect any laws, rules or regulations applicable
thereto (including, without limitation, laws, rules and regulations relating to
usury, truth in lending, fair credit billing, fair credit reporting, equal
credit opportunity, fair debt collection practices and privacy) and with respect
to which no party to the Contract related thereto is in violation of any such
law, rule or regulation in any material respect if such violation would impair
the collectibility of such Receivable;
(p) which (i) satisfies all applicable requirements of the Credit and
Collection Policy and (ii) complies with such other criteria and requirements
(other than those relating to the collectibility of such Receivable) as the
Agents may from time to time specify to the Transferor following thirty days,
notice;
(q) as to which the Agent has not notified the Transferor that the
Agent has determined, in its sole discretion, that such Receivable (or class of
Receivables) is not acceptable for purchase hereunder;
(r) which, if originated by Wackenhut, was originated in The
Wackenhut Corporation or Wackenhut Airline Services, Inc.;
(s) which does not include any amount payable for sales taxes,
Payroll taxes or any other tax; and
(t) the related Obligor of which is not, directly or indirectly, an
Affiliate of the Transferor or any Originator.
"ENTERPRISE CREDIT SUPPORT AGREEMENT" means any agreement between
Enterprise and the Enterprise Credit Support Provider evidencing the obligation
of the Enterprise Credit Support Provider to provide credit support to
Enterprise in connection with the issuance by Enterprise of Commercial Paper.
"ENTERPRISE CREDIT SUPPORT PROVIDER" means any Person or Persons who
are providing or will provide credit support to Enterprise in connection with
the issuance by Enterprise of Commercial Paper Notes, together with the
successors and assigns of any such Person or Persons.
"ENTERPRISE LIQUIDITY AGREEMENT" means any agreement between Enterprise
and the Enterprise Liquidity Provider evidencing the obligation of the Liquidity
Provider to provide liquidity support to Enterprise in connection with the
issuance by Enterprise of Commercial Paper Notes, as such agreement may be
modified, amended, supplemented or restated from time to time.
"ENTERPRISE LIQUIDITY PROVIDER" means any Person or Persons who are
providing or will provide liquidity support to Enterprise in connection with the
issuance by Enterprise of Commercial Paper
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Notes, together with the successors and assigns of any such Person or Persons.
"ERISA" means the U.S. Employee Retirement Income Security Act
of 1974, as amended from time to time.
"EURODOLLAR RATE (RESERVE ADJUSTED)" has the meaning set forth
in APPENDIX C.
"EVENT OF BANKRUPTCY" shall be deemed to have occurred with respect to
a Person if either:
(a) a case or other proceeding shall be commenced, without the
application or consent of such Person, in any court, seeking the
liquidation, reorganization, debt arrangement, dissolution, winding
up, or composition or readjustment of debts of such Person, the
appointment of a trustee, receiver, custodian, liquidator, assignee,
sequestrator or the like for such Person or all or substantially all of
its assets, or any similar action with respect to such Person under any
law relating to bankruptcy, insolvency, reorganization, winding up or
composition or adjustment of debts, and such case or proceeding shall
continue undismissed, or unstayed and in effect, for a period of 60
consecutive days; or an order for relief in respect of such Person
shall be entered in an involuntary case under the federal bankruptcy
laws or other similar laws now or hereafter in effect; or
(b) such Person shall commence a voluntary case or other
proceeding under any applicable bankruptcy, insolvency, reorganization,
debt arrangement, dissolution or other similar law now or hereafter in
effect, or shall consent to the appointment of or taking possession by
a receiver, liquidator, assignee, trustee, custodian, sequestrator (or
other similar official) for, such Person or for any substantial part of
its property, or shall make any general assignment for the benefit of
creditors, or shall fail to, or admit in writing its inability to, pay
its Debts generally as they become due, or, if a corporation or similar
entity, its board of directors shall vote to implement any of the
foregoing.
"FACILITY" has the meaning set forth in SECTION 1.1 of the
Purchase and Sale Agreement.
"FACILITY FEE" has the meaning set forth in the fee letter.
"FACILITY LIMIT" means an amount equal to $61,200,000.
"FEDERAL RESERVE BOARD" means the Board of Governors of the Federal
Reserve System, or any successor thereto or to the functions thereof.
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"FEE LETTERS" has the meaning set forth in SECTION 4.1(A).
"FIXED CHARGES" for any period means on a consolidated basis the sum of
(i) 100% of Rentals (other than Rentals on Capitalized Leases) payable during
such period by Wackenhut and its Subsidiaries other than WCC and (ii) all
Interest Charges on all indebtedness (including, without duplication, the
interest component of Rentals on Capitalized Leases and the Earned Discount and
fees and expenses payable under this Agreement) of Wackenhut and its
Subsidiaries other than WCC payable during said period by Wackenhut.
"FUNDED DEBT" of any Person shall mean (i) all Indebtedness of such
Person for borrowed money or which has been incurred in connection with the
acquisition of assets, including all payments in respect thereof that are
required to be made within one year from the date of any determination of Funded
Debt, whether or not the obligation to make such payments shall constitute a
current liability to the obligor under GAAP, (ii) all Capitalized Rentals of
such Person (iii) all Guaranties by such Person of Funded Debt of others,(iv)
with respect to Funded Debt of Wackenhut, the product of (x) the aggregate
amounts available for drawing under all outstanding Letters of Credit, and
(y).50; and (v) to the extent not otherwise included in clauses (i) through (iv)
above, the Aggregate Total Investments.
"GOVERNMENT OBLIGOR" means a department, agency, bureau, division or
instrumentality of the United States of America or any state thereof or the
District of Columbia or any county or municipal government chartered or
otherwise existing by authority of any of the foregoing, or any department,
agency, bureau, division or instrumentality thereof obligated to make payments
with respect to a Receivable.
"GROSS REVENUES" for any period means the gross revenues, determined in
accordance with generally accepted accounting principles, of Wackenhut and its
Subsidiaries for such period, determined on a consolidated basis after
eliminating revenues attributable to outstanding minority Interests.
"HEADQUARTERS" shall mean the Transferor's office located at
4200 Wackenhut Drive, No. 100, Palm Beach Gardens, Florida 33410.
"INDEMNIFIED AMOUNTS" has the meaning set forth in SECTION 14.1.
"INDEMNIFIED PARTY" has the meaning set forth in SECTION 14.1.
"INITIAL PURCHASER" means the Transferor as Initial Purchaser under the
Purchase and Sale Agreement.
"INFORMATION" has the meaning set forth in SECTION 15.7.
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"INFORMATION PROVIDER" has the meaning set forth in SECTION 15.7.
"INTEREST COMPONENT" shall mean, (i) with respect to any Related
Commercial Paper issued on an interest-bearing basis, the interest payable on
such Related Commercial Paper at its maturity and (ii) with respect to any
Related Commercial Paper issued on a discount basis, the portion of the face
amount of such Related Commercial Paper representing the discount incurred in
respect thereof (including any dealer commissions to the extent included as part
of such discount).
"INVESTMENTS" means all investments, in cash or by delivery of Property
made, directly or indirectly in any Person, whether by acquisition of shares of
capital stock, indebtedness or other obligations or Security or by loan,
advance, capital contribution or otherwise; PROVIDED, HOWEVER, that
"Investments" shall not mean or include routine investments in Property to be
used or consumed in the ordinary course of business or investments in accounts
receivable or notes receivable arising in the ordinary course of business.
"INVOLUNTARY FEDERAL PROCEEDING" has the meaning set forth in
SECTION 10.2(B).
"LETTER OF CREDIT ISSUER" means NationsBank as issuer of a Letter of
Credit.
"LOCK-BOX AGREEMENT" means a letter agreement, in substantially the
form of EXHIBIT 5.1(H), between the Transferor and any Lock-Box Bank.
"LOCK-BOX BANK" means any of the banks holding one or more lock-box
accounts for receiving Collections from Pool Receivables.
"LOSSES" means, at any time, with respect to the Receivables Pool, the
sum of (x) all Receivables theretofore fully reserved against by the Transferor
or Servicer plus (y), without duplication, all Receivables theretofore sent to
attorneys or collection agencies to be collected plus (z), without duplication,
all Receivables theretofore charged-off the Transferor's or Servicer's books as
uncollectible.
"LOSSES TO LIQUIDATIONS RATIO" means the percentage that (x) Losses
during the three fiscal month period ending on the most recent Month End Date on
all Pool Receivables owned by the Transferor was of (y) Collections of such Pool
Receivables during such period.
"LOSS RESERVE DISCOUNT" has the meaning set forth in SECTION 2.1 of the
Purchase and Sale Agreement.
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"MAXIMUM PURCHASE LIMIT" has the meaning set forth in clause
(x)of Section 1.2(A).
"MONTH END DATE" means the last day of each fiscal month.
"NEGATIVE SPREAD FEE" has the meaning set forth in APPENDIX B.
"NET ASSET TEST" shall mean in connection with any assignment by the
Purchaser to the Bank Investors of an interest in the Aggregate Purchaser's
Investment pursuant to Section 13.5 hereof, that as of the day immediately
preceding the day on which such transfer is to take effect, the Net Pool Balance
shall be greater than or equal to the Aggregate Purchaser's Investment.
"NET POOL BALANCE" has the meaning set forth in SECTION 2.3(A).
"NET WORTH" shall mean the Net Pool Balance minus the Aggregate
Purchaser's Investment minus the outstanding principal balance of the Initial
Purchaser's Note minus all other liabilities of the Transferor.
"NOTE FEE" has the meaning set forth in SECTION 4.1(E).
"OBLIGOR" means a Person (including any Affiliate of such Person)
obligated to make payments with respect to a Receivable.
"ORIGINATOR" means, at any time, each Subsidiary of the Seller at such
time a signatory to the Purchase and Sale Agreement.
"ORIGINATOR RECEIVABLE" means the indebtedness owed to any
Originator by any Obligor (without giving effect to any purchase under the
Purchase and Sale Agreement by The Wackenhut Corporation and any purchase under
the Receivables Purchase Agreement by Wackenhut Funding Corporation, in each
case, at any time) under a Contract.
"PERIODIC REPORT" means a report in substantially the form of
SCHEDULE 3.4 (A) .
"PERSON" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture, limited liability company or limited liability partnership, government
or any agency or political subdivision thereof or any other entity.
"POOL RECEIVABLE" means a Receivable in the Receivables Pool.
"PROGRAM FEE" shall have the meaning set forth in the Fee Letter.
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"PROPERTY" means any interest in any kind of property or asset, whether
real, personal or mixed, and whether tangible or intangible.
"PURCHASE" has the meaning set forth in SECTION 1.1(A).
"PURCHASE AND SALE AGREEMENT" means that certain Amended and Restated
Purchase and Sale Agreement dated as of December 30, 1997 between the Seller as
Initial Purchaser and Wackenhut Airline Services, Inc. and each other Affiliate
of the Seller from time to time a party thereto, as the same may be amended and
otherwise modified from time to time.
"PURCHASE AND SALE INDEMNIFIED AMOUNTS" has the meaning set forth in
SECTION 9.1 of the Purchase and Sale Agreement
"PURCHASE AND SALE INDEMNIFIED PARTIES" has the meaning set forth in
forth in SECTION 9.1 of the Receivable Purchase Agreement.
"PURCHASE LIMIT" has the meaning set forth in SECTION 1.2(A).
"PURCHASE PRICE" has the meaning set forth in SECTION 2.1 of
the Purchase and Sale Agreement.
"PURCHASE TERMINATION DATE" has the meaning set forth in SECTION 1.6.
"PURCHASER" has the meaning set forth in the PREAMBLE.
"PURCHASER RATE" has the meaning set forth in APPENDIX B.
"PURCHASER'S INVESTMENT" has the meaning set forth in SECTION 2.2.
"PURCHASER'S SHARE" has the meaning set forth in SECTION 2.4.
"RATE VARIANCE FACTOR" has the meaning set forth in APPENDIX B.
"RECEIVABLE" means (i) the indebtedness owed to any Originator by any
Obligor (without giving effect to any purchase under the Purchase and Sale
Agreement by the Seller at any time) under a Contract and sold by any such
Originator to the Seller pursuant to the Purchase and Sale Agreement and sold by
the Seller to the Transferor pursuant to the Receivables Purchase Agreement, and
(ii) the indebtedness owed to the Seller by any Obligor (without giving effect
to any purchase under the Receivables Purchase Agreement by the Transferor at
any time) under a Contract and sold by the Seller to the Transferor pursuant to
the Receivables Purchase Agreement, in each case whether constituting an
account, chattel paper, instrument, investment property or general intangible,
arising in connection with the sale or lease of merchandise or the rendering
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of Services by any Originator or the Seller, and includes the right to payment
of any interest or Finance Charges and other obligations of such Obligor with
respect thereto.
"RECEIVABLE PURCHASE TERMINATION DATE" has the meaning set forth in
SECTION 1.4 of the Receivable Purchase Agreement.
"RECEIVABLE PURCHASE TERMINATION EVENTS" has the meaning set forth in
SECTION 8.1 of the Receivable Purchase Agreement.
"RECEIVABLES POOL" means at any time all then outstanding Receivables
which (a) arose from or relate to a Contract, and (b) as to which the Obligors
thereunder are Designated Obligors. If a Receivable is a Pool Receivable on the
day immediately preceding the Commitment Termination Date, such Receivable shall
continue to be considered a Pool Receivable at all times thereafter.
"RECEIVABLES PURCHASE AGREEMENT" means that certain Purchase Agreement
dated as of December 30, 1997, between the Seller and the Transferor, with
respect to the purchase of the Pool Receivables by the Transferor, as the same
may be altered or supplemented from time to time.
"REGULATION D" means Regulation D of the Federal Reserve Board, or any
other regulation of the Federal Reserve Board that prescribes reserve
requirements applicable to nonpersonal time deposits or "Eurocurrency
Liabilities" as presently defined in Regulation D, as in effect from time to
time.
"REGULATORY CHANGE" means, relative to any Affected Party:
(a) any change in (or the adoption, implementation,
phase-in or commencement of effectiveness of) any:
(i) United States federal or state law or foreign
law applicable to such Affected Party;
(ii) regulation, interpretation, directive,
requirement or request (whether or not having the force of
law) applicable to such Affected Party of (A) any court,
government authority charged with the interpretation or
administration of any law referred in CLAUSE (A)(I) or of (3)
any fiscal, monetary or other authority having jurisdiction
over such Affected Party; or
(iii) generally accepted accounting principles or
regulatory accounting principles applicable to such Affected
Party and affecting the application to such Affected Party of
any law, regulation, interpretation, CLAUSE (A)(I) or (A)(II)
above; or
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(b) any change in the application to such Affected Party of
any existing law, regulation, interpretation, directive, requirement,
request or accounting principles referred to in CLAUSE (A)(I), (A)(II)
or (A)(III) above.
"REINVESTMENT" has the meaning set forth in SECTION 1.01(B).
"REINVESTMENT TERMINATION DATE" means the second Business Day after the
delivery by the Purchaser to the Transferor of written notice that the Purchaser
elects to commence the amortization of its Purchaser's Investment or otherwise
liquidate its interest in the Receivables Pool.
"RELATED COMMERCIAL PAPER" shall mean Commercial Paper issued by the
Purchaser the proceeds of which were used to acquire, or refinance the
acquisition of, an interest in Receivables with respect to the Transferor.
"RELATED SECURITY" means, with respect to any Receivable, Seller
Receivable, or Originator Receivable, as the casey may be: (a) all of the
Transferor's right, title and interest in and to all Contracts or other
agreements that relate to such Receivable; (b) all of the Transferor's interest
in the merchandise (including returned merchandise), if any, relating to the
sale which gave rise to such Receivable; (c) all other security interests or
liens and property subject thereto from time to time purporting to secure
payment of such Receivable, whether pursuant to the Contract related to such
Receivable or otherwise; (d) the assignment to any Agent, for the benefit of
Purchaser and any assignee, of all UCC financing statements covering any
collateral securing payment of such Receivable (but such assignment is made only
to the extent of the interest of the Purchaser in the respective Receivable);
and (e) all guarantees and other agreements or arrangements of whatever
character from time to time supporting or securing payment of such Receivable
whether pursuant to the Contract related to such Receivable or otherwise. The
interest of the Purchaser in any Related Security is only to the extent of the
Purchaser's Undivided interest, as more fully described in the definition of an
Undivided Interest.
"REMAINING COLLECTIONS" has the meaning set forth in SECTION
3.01(A)(II).
"RENTALS", with respect to any lease, means and includes as of the date
of any determination thereof, all fixed payments (including as such all
payments which the lessee is obligated to make to the lessor on termination of
the lease or surrender of the Property) payable by Wackenhut or a Subsidiary, as
lessee or sublessee under a lease of real or personal property, but shall be
exclusive of any amounts required to be paid by Wackenhut or a Subsidiary
(whether or not designated as rents or additional rents) on account of
maintenance, repairs, insurance, taxes and similar
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charges. Fixed rents under any so-called "percentage leases" shall be computed
solely on the basis of the minimum rents, if any, required to be paid by the
lessee regardless of sales volume or gross revenues.
"REQUIRED ALLOCATIONS" has the meaning set forth in SECTION 2.01.
"REQUIRED ALLOCATIONS LIMIT" has the meaning set forth in
SECTION 1.02(B).
"RESERVE PERCENTAGE" has the meaning set forth in APPENDIX B.
"RESTRICTED INVESTMENTS" means all Investments in any Person, other
than:
(a) Investments by Wackenhut and its Subsidiaries in and to
Subsidiaries, including any investment in a corporation which, after
giving effect to such Investments, will become a Subsidiary;
(b) Investments in (i) commercial paper maturing in 270 days
or less from the date of issuance and which, at the time of acquisition
by Wackenhut or any Subsidiary, is accorded one of the two highest
ratings by Standard & Poor's Corporation or Moody's Investors Service,
Inc.; (ii) Variable Rate Demand Notes of issuers whose commercial
paper, at the time of acquisition, is accorded one of the two highest
ratings by Standard & Poor's Corporation or Moody's Investors Service,
inc.; or (iii) Direct obligations of any State of the United States of
America or of any political subdivision thereof located in the United
States of America and which, at the time of acquisition, is accorded
one of the two highest ratings by Standard & Poor's Corporation or
Moody's Investors Service, Inc., maturing in twelve months or less from
the date of acquisition;
(c) Investments in direct obligations of the United States of
America, or investments in any Person, which Investments are guaranteed
by the full faith and credit of the United States of America, in either
case maturing in twelve months or less from the date of acquisition
thereof by Wackenhut or any Subsidiary;
(d) Investments in certificates of deposit maturing within one
year from the date of issuance thereof, issued by a bank or trust
company organized under the laws of the United States or any state
thereof, having capital, surplus and undivided profits aggregating at
least $100,000,000 and whose long-term certificates of deposit are, at
the time of acquisition thereof by Wackenhut or any Subsidiary, rated
A by
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Standard & Poor's Corporation or A by Moody's Investors Service, Inc.;
(e) Loans or advances in the usual and ordinary course of
business to officers, directors and employees for expenses (including
moving expenses related to a transfer) incidental to carrying on the
business of Wackenhut or any Subsidiary; PROVIDED, HOWEVER that
Wackenhut may make up with aggregate at any one time outstanding, up to
$300,000 of such loans or advances which are not incidental to carrying
on the business of Wackenhut or any Subsidiary;
(f) receivables arising from the sale of goods and
services in the ordinary course of business of Wackenhut and
its Subsidiaries; and
(g) PROVIDED, HOWEVER, that with respect to investments made
by or on behalf of Titania Insurance Company of America, a Vermont
Corporation, the following shall not be Restricted Investments;
(1) Certificates of deposit, time deposits and banker's
acceptance maturing within one year from the date of
acquisition, issued by a bank or trust company
organized under the laws of the United States or any
state thereof, or any foreign bank whose branch is
organized under-the laws of the United States or any
state thereof, having capital, surplus and undivided
profits aggregating at least $100,000,000 and whose
long-term certificates of deposit are, at the time of
acquisition, rated at least A by Standard & Poor's
Corporation or Moody's Investors Service, Inc.;
(2) Repurchase Agreements with any domestic bank with
debt rated 'AA' or better by Standard & Poor's
Corporation, or any foreign bank rated at least 'AA'
by Standard & Poor's Corporation and 'Aa' by Moody's
Investors Service, Inc.; or repurchase agreements
with such other Persons on such terms as Wackenhut
and Agent shall agree in writing; provided the term
of all such repurchase agreements is for one year or
less;
(3) Direct obligations of the United States of America,
or Investments in any Person, which Investments are
guaranteed by the full faith and credit of the United
States of America;
(4) Mortgage-backed securities issued by the United
States Government or any agency or instrumentality
thereof, having at the time of acquisition, a
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credit rating of at least AA by a nationally
recognized rating service;
(5) Bonds, notes and other direct obligations (other than
those referred to in clause (b), above) of any
corporation domiciled in the United States of
America, or a State of the United State of America,
or of any sovereign or supranational institution
whose obligations are denominated in United States
dollars, at the time of acquisition rated at least A
by a nationally recognized rating service.
Obligations of sovereign or supranational
institutions at the time of acquisition, shall be
rated at least AA by a nationally recognized rating
service;
(6) Preferred stock obligations of any corporation
domiciled in the United States of America, whose
obligations at the time of acquisition are rated at
least A by a nationally recognized rating service;
(7) Shares in mutual funds that invest solely in
investments of the types described in clause (b)(i),
clause (b)(iii), clause (3), clause (4), clause (5)
and/or clause (6) above and have assets in excess of
$100,000,000;
(8) Any Investments (other than the Investments set forth
in clause (b) and clause (1) through clause (7)
inclusive, above), provided that the aggregate fair
value for all such investments shall not, at any
time, exceed five percent (5%) of the aggregate fair
value of all Investments set forth in clause (1)
through (8) inclusive, above. For the purposes of
this subsection (8) only, fair value shall mean the
greater of book value or fair market value.
In valuing any investments for the purpose of applying the limitations
set forth in this Agreement, such investments, loans and advances shall be taken
at the original cost thereof, without allowance for any subsequent write-offs or
appreciation or depreciation therein, but less any amount repaid or recovered on
account of capital or principal.
For purposes of this Agreement, at any time when a corporation becomes
a Subsidiary, all Investments of such corporation at such time shall be deemed
to have been made by such corporation, as a Subsidiary, at such time.
"RUN OFF DAY" for any Undivided Interest means any of (a) each day
which occurs on or after the date designated by any Agent to the Transferor to
be the "Run Off Commencement Date", provided such date is designated on at least
one Business Day's notice during a
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time when any of the conditions set forth in SECTION 5.02 are not satisfied, and
on or before the date, if any, designated by the Agent in its sole discretion on
at least one Business Day's notice to the Transferor as the "Run Off Termination
Date", and (b) each day which occurs on or after the Termination Date for such
Undivided Interest.
"RUN OFF DISCOUNT" has the meaning set forth in APPENDIX B.
"RUN OFF PERIOD" means one or more successive Run Off Days.
"RUN OFF SERVICER'S FEE" has the meaning set forth in APPENDIX B.
"SCHEDULED COMMITMENT TERMINATION DATE" has the meaning set
forth in SECTION 1.02(A).
"SECURITY" shall have the same meaning as in Section 2(l) of the
Securities Act of 1933, as amended.
"SELLER RECEIVABLES" means (i) the indebtedness owed to any Originator
by any Obligor (without giving effect to any purchase under the Purchase and
Sale Agreement by The Wackenhut Corporation and any purchase under the
Receivables Purchase Agreement by Wackenhut Funding Corporation, in each case,
at any time) under a Contract and sold by any such Originator to the The
Wackenhut Corporation pursuant to the Purchase and Sale Agreement, and (ii) the
indebtedness owed to The Wackenhut Corporation by any Obligor (without giving
effect to any purchase under the Receivables Purchase Agreement by Wackenhut
Funding Corporation, at any time) under a Contract, in each case, and sold by
The Wackenhut Corporation to Wackenhut Funding Corporation pursuant to the
Receivables Purchase Agreement, in each case whether constituting an account,
chattel paper, instrument, investment property or general intangible, arising
in connection with the sale or lease of merchandise or the rendering of Services
by any Originator or the Wackenhut Corporation, and includes the right to
payment of any interest or Finance Charges and other obligations of such Obligor
with respect thereto.
"SERVICER" initially means The Wackenhut Corporation, and thereafter
the Person determined pursuant to SECTION 8.01(A).
"SERVICER TRANSFER EVENT" has the meaning set forth in SECTION 8.01(B).
"SERVICER'S FEE", has the meaning set forth in APPENDIX B.
"SERVICER'S FEE RESERVE" has the meaning set forth in APPENDIX B.
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"SERVICES" means (i) security related services (including, without
limitation, physical security, investigations, transit security, nuclear site
security, emergency protection and similar services) and (ii) corrections
related services (including, without limitation, correctional facility guard,
food and similar services).
"SETTLEMENT DATE" means the last day of each Settlement Period.
"SETTLEMENT PERIOD" for any Undivided Interest means
(a) each period commencing on the first day of each Yield
Period for such Undivided Interest and ending on the last day of such
Yield Period; and
(b) on and after the Termination Date for such Undivided
Interest, such period (including, without limitation, a daily period)
as shall be selected from time to time by the Agent or, in absence of
any such selection, each period of thirty days from the next preceding
Settlement Date;
PROVIDED, HOWEVER, that
(i) with respect to any Yield Period of one day (as described
in CLAUSE (II) of the PROVISO of the definition of "Yield Period"), the
related Settlement Period shall be the first day following such Yield
Period;
(ii) any Settlement Period which would otherwise end on a day
which is not a Business Day shall be extended to the next succeeding
Business Day; and
(iii) the last Settlement Period shall end on the date on
which all Undivided Interests have been reduced to zero.
"SOLVENT" shall mean, when used with respect to any Person, that at the
time of determination: (i) the fair value of its assets (both at fair valuation
and present fair saleable value) is in excess of the total amount of its
liabilities, including, without limitation, contingent liabilities; (ii) it is
then able and expects to be able to pay its debts as they mature; and (iii) it
has capital sufficient to carry on its business as conducted and as proposed to
be conducted.
"SPECIAL CONCENTRATION LIMIT" has the meaning set forth in
SECTION 2.3(C).
"SUCCESSOR NOTICE" has the meaning set forth in SECTION 8.1(B).
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"TERMINATION DATE" for any Undivided Interest means the
Commitment Termination Date.
"TERMINATION EVENT" has the meaning set forth in SECTION 10.1.
"THREE-MONTH DEFAULT RATIO" means the ratio (expressed as a percentage)
computed as of any Month End Date by dividing (x) the aggregate Unpaid Balance
of all Defaulted Receivables calculated as at each of the three most recent
Month End Dates less Losses (without giving effect to CLAUSE (Z) of the
definition thereof) at the three preceding fiscal Month End Dates by (y) the
aggregate Unpaid Balance of all Pool Receivables calculated as at each of the
three most recent Month End Dates less Losses (without giving effect to CLAUSE
(Z) of the definition thereof) at the three most recent fiscal Month End Dates.
"THREE-MONTH DILUTION RATIO" means the ratio (expressed as a
percentage) computed as of each Month End Date by dividing (x) the aggregate
reduction in the Unpaid Balance of all Pool Receivables arising from dilutive
credits during the three immediately preceding fiscal months by (y) Collections
of Pool Receivables received during such period.
"TOTAL CAPITALIZATION" means the sum of (i) Consolidated Funded Debt
PLUS (ii) Consolidated Net Worth.
"TRANSFEROR" has the meaning set forth in the PREAMBLE.
"TRANSFEROR INFORMATION" has the meaning set forth in SECTION 15.8.
"TRANSFEROR INFORMATION PROVIDER" has the meaning set forth in
SECTION 15.8.
"UCC" means the Uniform Commercial Code as from time to time in effect
in the applicable jurisdiction or jurisdictions.
"UNDIVIDED INTEREST" has the meaning set forth in SECTION 2.1.
"UNMATURED TERMINATION EVENT" means any event which, with the giving of
notice or lapse of time, or both, would become a Termination Event.
"UNPAID BALANCE" of any Receivable means at any time the SUM of (x) the
unpaid principal amount thereof, PLUS (y) the unpaid amount of all finance
charges, interest payments and other amounts actually accrued thereon at such
time, but EXCLUDING, in the case of CLAUSE (Y) next above, all late payment
charges, delinquency charges, and extension or collection fees.
"WACKENHUT" has the meaning set forth in the preamble.
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"WACKENHUT FAMILY" means (i) George R. Wackenhut, Ruth J. Wackenhut,
Richard R. Wackenhut and other lineal descendants of George R. Wackenhut, the
founder of Wackenhut; (ii) the spouses and lineal descendants of the persons
named in clause (i); and (iii) the estates or legal representatives of the
persons named in clause (i).
"WCC" means Wackenhut Corrections Corporation, a Florida
corporation.
"YIELD PERIOD" means with respect to any Undivided Interest
(or portion thereof):
(a) the period commencing on the date of the initial Purchase
of such Undivided Interest (or such portion) and ending such number of
days thereafter (not to exceed 100 days) as the applicable Managing
Agent shall select, after consultation with the Transferor, pursuant
to SECTIONS 1.03 or 2.01(B); and
(b) thereafter, each period commencing on the last day of the
immediately preceding Yield Period for such Undivided Interest (or such
portion) and ending such number of days thereafter (not to exceed 100
days) as the Agent shall select, after consultation with the
Transferor;
PROVIDED, HOWEVER, that
(i) any such Yield Period (other than a Yield Period
consisting of one day) which would otherwise end on a day that is not a
Business Day shall be extended to the next succeeding Business Day
(unless the related Undivided Interest shall be accruing Earned
Discount at a rate determined by reference to the Eurodollar Rate
(Reserve Adjusted), in which case if such succeeding Business Day is in
a different fiscal month, such Yield Period shall instead be shortened
to the next preceding Business Day);
(ii) in the case of Yield periods of one day for any Undivided
Interest, (A) the Initial Yield Period shall be the day of the related
Purchase; and (B) any subsequently occurring Yield Period which is one
day shall, if the immediately preceding Yield Period is more than one
day, be the last day of such immediately preceding Yield Period, and if
the immediately preceding Yield Period is one day, shall be the next
day following such immediately preceding Yield Period.
The "RELATED" Yield Period for any Undivided Interest at any time means the
Yield Period pursuant to which Earned Discount is then accruing for such
Undivided Interest.
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B. OTHER TERMS. All accounting terms not specifically defined herein
shall be construed in accordance with generally accepted accounting principles.
All terms used in Article 9 of the UCC in the State of New York, and not
specifically defined herein, are used herein as defined in such Article 9.
C. COMPUTATION OF TIME PERIODS. Unless otherwise stated in this
Agreement, in the computation of a period of time from a specified date to a
later specified date, the word "from" means "from and including" and the words
"to" and "until" each means "to but excluding".
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APPENDIX B
CALCULATION OF DISCOUNT AND RESERVE
This is APPENDIX B to the Transfer and Administration Agreement dated
as of December 30, 1997 among Wackenhut Funding Corporation, The Wackenhut
Corporation, Enterprise Funding Corporation and NationsBank, N.A. (as amended,
supplemented or otherwise modified from time to time, the "Agreement").
Capitalized terms used in this APPENDIX B without definition have the meanings
assigned to such terms in APPENDIX A or APPENDIX C to the Agreement. Each
reference in this APPENDIX B to any Section refers to such Section of the
Agreement. Each reference in this APPENDIX B to any Part refers to the part of
this APPENDIX B so designated.
PART I
DISCOUNT FACTOR
<TABLE>
<CAPTION>
Sub-
PART TERM PAGE NO.
- ---- ---- --------
<S> <C> <C>
A. Discount Factor................................................. B-2
B. Earned Discount................................................. B-2
C. Negative Spread Fee............................................. B-3
D. Run Off Discount................................................ B-3
E. Rate Definitions................................................ B-4
Alternate Reference Rate.................................. B-4
Bank Rate................................................. B-5
Commercial Paper Rate..................................... B-5
Domestic CD Rate (Adjusted)............................... B-5
Domestic CD Rate.......................................... B-6
Assessment Rate........................................... B-6
Reserve Requirement....................................... B-6
Eurodollar Rate (Reserve Adjusted)........................ B-8
Purchaser Rate............................................ B-9
F. Rate Variance Factor............................................ B-10
</TABLE>
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PART II
LOSS RESERVE; DILUTION RESERVE
<TABLE>
<CAPTION>
Sub-
PART TERM PAGE NO.
- ---- ---- --------
<S> <C> <C>
A. Loss Reserve B-10
B. Reserve Percentage.............................................. B-10
C. Dilution Reserve................................................ B-10
PART III
SERVICER'S FEE RESERVE
A. Servicer's Fee Reserve.......................................... B-11
B. Servicer's Fee.................................................. B-11
C. Run Off Servicer's Fee.......................................... B-10
PART IV
ADJUSTED AVERAGE MATURITY
A. Adjusted Average Maturity....................................... B-12
B. Average Maturity................................................ B-12
</TABLE>
------------------------------------
PART I
DISCOUNT FACTOR
A. DISCOUNT FACTOR. The "DISCOUNT FACTOR" for a related Undivided
Interest at any time in a Yield Period means an amount determined as follows:
DF = ED + ROD
WHERE:
DF = the Discount Factor of such Undivided Interest at such time;
ED = Earned Discount of such Undivided Interest accrued and unpaid
at such time, as determined pursuant to PART I.B;
ROD = Run Off Discount of such Undivided Interest at such time, as
determined pursuant to PART I.D.
B. EARNED DISCOUNT. The "EARNED DISCOUNT" for any
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Undivided Interest for each day in a related Yield Period means an amount
determined as follows:
ED = [PI x (PR + PF) x 1/360] + NSF (if any);
ED = Earned Discount of such Undivided Interest (or such portion)
accrued on such day;
PI = the Purchaser's Investment of such Undivided Interest (or
such portion) on such day, as determined pursuant to
SECTION 2.02;
PR = the Purchaser Rate for such Undivided Interest (or such
portion) on such day, as defined in PART I.E.;
PF = the Program Fee consisting of the fee as calculated
pursuant to the Fee Letters; and
NSF = the Negative Spread Fee for such Undivided Interest or such
portion thereof) on such day, as defined in PART C.
No provision of the Agreement shall require the payment or permit the collection
of Earned Discount in excess of the maximum permitted by applicable law. Earned
Discount for any Undivided Interest shall not be considered paid by any
distribution if at any time such distribution is rescinded or must otherwise be
returned for any reason.
C. NEGATIVE SPREAD FEE. The "NEGATIVE SPREAD FEE" means, for each
Undivided Interest (or portion thereof) for each day in any Yield Period during
which any Run Off Day or Termination Date for such Undivided Interest occurs,
the amount, if any, by which;
(i) the additional Earned Discount (calculated
without taking into account any Negative Spread Fee) which
would have accrued on the reductions of the related
Purchaser's Investment of such Undivided Interest (or such
portion) during such Yield Period (as so computed) if such
reductions had remained as Purchaser's Investment exceeds,
(ii) the income, if any, received by the owner of
such Undivided Interest (or such portion) from such owner's
investing the proceeds of such reductions of Purchaser's
Investment.
D. RUN OFF DISCOUNT. The "RUN OFF DISCOUNT" for the related Undivided
Interest at any time means an amount determined as follows:
ROD = PI X (PR + RVF) X AAM
---------------------
360
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WHERE:
ROD = the Run Off Discount for such Undivided Interest at
such time;
PI = the Purchaser's Investment of such Undivided Interest
at such time;
PR = the Purchaser Rate for such Undivided Interest for a Yield
Period deemed to commence at such time pursuant to PART I.E;
AAM = the Adjusted Average Maturity of the Receivables Pool
related to such Undivided Interest, as determined pursuant
to PART V; and
RVF = the Rate Variance Factor deemed to be in effect at such
time, as determined pursuant to PART I.F.
E. RATE DEFINITIONS. The "ALTERNATE REFERENCE RATE" means, on any date,
a fluctuating rate of interest PER ANNUM equal to the higher of
(a) the rate of interest most recently announced by
NationsBank at its office in Charlotte, North Carolina as its reference
rates from time to time, changing when and as said reference rates
change (such reference rates are not necessarily the lowest or best
rate charged by NationsBank) and
(b) the Federal Funds Rate (as defined below) most recently
determined by NationsBank plus 1.0% PER ANNUM.
For purposes of this definition, "FEDERAL FUNDS RATE" means, for any period, a
fluctuating interest rate PER ANNUM equal (for each day during such period) to
(i) the weighted average of the rates on overnight federal
funds transactions with members of the Federal Reserve System arranged
by federal funds brokers, as published for such day (or, if such day is
not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York; or
(ii) if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such
transactions received by NationsBank from three federal funds brokers
of recognized standing selected by it.
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The Alternate Reference Rate is not necessarily intended to be the lowest rate
of interest determined by BofA or NationsBank in connection with extensions of
credit.
"BANK RATE" for any Yield Period for the related Undivided Interest of
any Purchaser or Bank Investor, as the case may be, means an interest rate PER
ANNUM equal to the sum of (a) 0.50% PER ANNUM, PLUS (b) if the Fixed Charge
Coverage Ratio is at such time less than 1.75:1, .15% PER ANNUM, PLUS (c) the
Eurodollar Rate (Reserve Adjusted) of such Purchaser for such Yield Period;
PROVIDED, HOWEVER, that if (i) it shall become unlawful for the Agent, any
Enterprise Liquidity Provider or Enterprise Credit Support Provider to obtain
funds in the London interbank eurodollar market in order to fund any Purchase or
to maintain any Undivided Interest, or if such funds shall not be reasonably
available to the Agent, Enterprise Liquidity Provider or Enterprise Credit
Support Provider or (ii) there shall not be time prior to the commencement of an
applicable Yield Period to determine a Eurodollar Rate in accordance with its
terms, then the "BANK RATE" for any Yield Period for such Undivided Interest
shall be equal to a rate of (x) 0.50% PER ANNUM, (y) the Domestic CD Rate
(Adjusted) for such Yield Period PLUS (z) if the Fixed Charge Coverage Ratio is
at such time less than 1.75:1, .15% PER ANNUM ("DEALER FEE").
"COMMERCIAL PAPER RATE" for any Yield Period for the related Undivided
Interest means a rate PER ANNUM equal to the sum of (i) the rate or, if more
than one rate, the weighted average of the rates, determined by converting to an
interest-bearing equivalent rate PER ANNUM the discount rate (or rates) at which
Commercial Paper Notes having a term equal to such Yield Period and to be issued
to fund the Purchase of or to maintain such Undivided Interest by the Purchaser
purchasing such Undivided Interest (including, without limitation, Purchaser's
Investment and accrued and unpaid Earned Discount) may be sold by any placement
agent or commercial paper dealer selected by the Agent, as agreed between each
such dealer and the Agent, PLUS (ii) the greater of (A) the commissions and
charges charged by such placement agent or commercial paper dealer with respect
to such Commercial Paper Notes and (B) .05% times the face amount of such
Commercial Paper Notes, expressed as a percentage of such face amount and
converted to an interest-bearing equivalent rate PER ANNUM.
"ASSESSMENT RATE" for purposes of this definition and for any
Yield Period means the annual assessment rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of l%)
applicable to NationsBank on its insured deposits, on the
Business Day immediately preceding the first day of such Yield
Period, under the Federal Deposit Insurance Act, determined by
annualizing the most recent assessment levied on NationsBank
by the Federal Deposit Insurance Corporation (together with
any successor, the "FDIC" with respect to such deposits after
giving effect
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to the most recent rebate granted to such Managing Agent by
the FDIC with respect to deposit-insurance as well as the loss
to NationsBank (determined in the good faith judgment of
NationsBank) of the use of such rebate prior to the date a
credit is taken by NationsBank with respect to such rebate.
"RESERVE REQUIREMENT" means, for purposes of this definition
and with respect to any Yield Period, a percentage (expressed
as a decimal) equal to the daily average during such Yield
Period of the aggregate reserve requirement (including all
basic, supplemental, marginal and other reserves and taking
into account any transitional adjustments or other Scheduled
changes in reserve requirements during such period) specified
under Regulation D, as applicable to the class of banks of
which NationsBank is a member, at deposits of the types used
as a reference in determining the Domestic CD Rate and having
a maturity approximately equal to such Yield Period.
"DOMESTIC CD RATE (ADJUSTED)" means, with respect to any Yield Period,
a rate PER ANNUM equal to the sum (rounded upwards, if necessary, to the nearest
1/100 of 1%) of (A) the rate obtained by dividing (x) the Enterprise CD Rate for
such Yield Period by (y) a percentage equal to 100% minus the stated maximum
rate for all reserve requirements as specified in Regulation D (including
without limitation any marginal, emergency, supplemental, special or other
reserves) that would be applicable during such Yield Period to a negotiable
certificate of deposit in excess of $100,000, with a maturity approximately
equal to such Yield Period, of any member bank of the Federal Reserve System
plus (B) the then daily net annual assessment rate (rounded upward, if
necessary, to the nearest 1/100 of 1%) as estimated by NationsBank, the
Enterprise Liquidity Provider or the Enterprise Credit Support Provider, as
applicable, for determining the current annual assessment payable by it to the
FDIC for insuring such certificates of deposit;
WHERE, for purposes of this definition:
"EURODOLLAR RATE (RESERVE ADJUSTED)" means, with respect to Undivided
Interests owned or otherwise funded by NationsBank, Enterprise, any Enterprise
Liquidity Provider or any Enterprise Credit Support Provider and with respect to
any Yield Period for any related Undivided Interest (or portion thereof), a rate
per annum (rounded upwards, if necessary, to the nearest 1/100 of it) of (A) the
rate obtained by dividing (i) the applicable LIBO Rate by (ii) a percentage
equal to 100% minus the reserve percentage used for determining the maximum
reserve requirement as specified in Regulation D (including without limitation
any marginal, emergency, supplemental, special or other reserves) that is
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applicable to the Enterprise Liquidity Provider during such Yield Period in
respect of eurocurrency or eurodollar funding, lending or liabilities (or, if
more than one percentage shall be so applicable, the daily average of such
percentage for those days in such Yield Period during which any such percentage
shall be applicable) plus (B) the then daily net annual assessment rate (rounded
upwards, if necessary, to the nearest 1/100 of 1%) as estimated by the
Enterprise Liquidity Provider for determining the current annual assessment
payable by the Liquidity Provider to the FDIC in respect of eurocurrency or
eurodollar funding, lending or liabilities;
WHERE:
"LIBOR RATE" means, with respect to any Yield Period, the rate
at which deposits in dollars are offered to NationsBank, the
Enterprise Liquidity Provider or the Enterprise Credit Support
Provider in the London interbank market at approximately
11:00 a.m. (London time) two Enterprise Eurodollar Business
Days before the first day of such Yield Period in an amount
approximately equal to the Purchaser's Investment for a
related Undivided Interest to which the Eurodollar Rate
(Reserve Adjusted) is to apply and for a period of time
approximately equal to the applicable Yield Period.
"ENTERPRISE CD RATE" means, with respect to any Yield Period
for any related Undivided Interest owned or otherwise funded
by NationsBank, Enterprise, any Enterprise Liquidity Provider
or any Enterprise Credit Support Provider, the average of the
bid rates determined by NationsBank, the Enterprise Liquidity
Provider or the Enterprise Credit Support Provider, as
applicable, per annum, at approximately 10:00 a.m. (New York
City time) on the Business Day before the first day of such
Yield Period for which such Domestic CD Rate (Adjusted) is to
be applicable, of two or more New York certificate of deposit
dealers of recognized standing selected by NationsBank, the
Enterprise Liquidity Provider or the Enterprise Credit Support
Provider, as applicable, for the purchase in New York from the
Enterprise Liquidity Provider or the Enterprise Credit Support
Provider, as applicable, at face value of certificates of
deposit of the Enterprise Liquidity Provider or the Enterprise
Credit Support Provider, as applicable, in an aggregate amount
approximately comparable to the amount of Enter prise's
Purchaser's Investment for the related Undivided Interest (or
portion thereof) to which such Domestic CD Rate (Adjusted) is
to be applicable and with a maturity approximately equal to
the applicable Yield Period.
"PURCHASER RATE" for any Yield Period for any related
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Undivided Interest (or portion thereof) of any Purchaser means:
(a) in the case of an Undivided Interest (or portion thereof)
of any Purchaser other than one referred to in CLAUSE (B) of this
definition, the Commercial Paper Rate of such Purchaser for such
Undivided Interest (or such portion) for such Yield Period; and
(b) in the case of an Undivided Interest (or portion thereof)
owned or funded by a Bank Investor, an Enterprise Liquidity Provider or
an Enterprise Credit Support Provider, the Bank Rate of such Purchaser
for such Undivided Interest (or such portion) for such Yield Period;
PROVIDED, HOWEVER, that on any day when any Termination Event or Unmatured
Termination Event shall have occurred and be continuing, the Purchaser Rate
shall mean a rate PER ANNUM equal to the Alternate Reference Rate in effect on
such day plus 2% PER ANNUM.
F. RATE VARIANCE FACTOR. The "RATE VARIANCE FACTOR" means, during any
Yield Period, such percentage PER ANNUM not exceeding 2% as the Agents may
designate from time to time in their sole discretion.
PART II
LOSS RESERVE
A. LOSS RESERVE. The "LOSS RESERVE" of any Undivided Interest on any
day means the greater of (x) $3,000,000 and (y) an amount determined as follows:
LR = RP x (PI + DF)
WHERE:
LR = the Loss Reserve of such Undivided Interest on such
day;
RP = the Reserve Percentage at the close of business of
Purchaser on such day, as determined pursuant to
PART II.B;
PI = the related Purchaser's Investment of such Undivided
Interest at the opening of business of Purchaser on
such day, as determined pursuant to SECTION 1.3; and
DF = the Discount Factor of such Undivided Interest at
the close of business of Purchaser on such day, as
determined pursuant to PART I.A.
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B. RESERVE PERCENTAGE. The "RESERVE PERCENTAGE" means, for the related
Undivided Interest on any day, the greatest of (i) three times the most recent
Three-Month Default Ratio, (ii) 1.5 times the percentage that the largest
Special Concentration Limit set forth on SCHEDULE 2.3(C) bears to the then
Aggregate Unpaid Balance of Eligible Receivables and (iii) 10%.
C. DILUTION RESERVE. The "DILUTION RESERVE" for the related Undivided
Interest on any day means an amount equal to the product of (x) the sum of the
related Purchaser's Investment of such Undivided Interest at the close of
business of Purchaser on such day, as determined pursuant to SECTION 1.03 and
(y) the greater of (i) 2% and (ii) 1.5 times the highest Three-Month Dilutions
Ratio calculated on the Month End Date for each of the six fiscal months
preceding or ending on such day.
PART III
SERVICER'S FEE RESERVE
A. SERVICER'S FEE RESERVE. The "SERVICER'S FEE RESERVE" for the related
Undivided Interest at any time means an amount determined as follows:
SFR = SF + ROSF
WHERE:
SFR = the Servicer's Fee Reserve for such Undivided
Interest at any time;
SF = the unpaid Servicer's Fee relating to such
Undivided Interest accrued to such time and
unpaid as determined pursuant to Part III B;
and
ROSF = the Run Off Servicer's Fee for such Undivided
interest at such time, as determined pursuant to
PART III.C.
B. SERVICER'S FEE. The "SERVICER'S FEE" relating to any
Undivided Interest accrued for any day means
(i) an amount equal to (x) .50% PER ANNUM, TIMES
(y) the amount of the related Purchaser's Investment at the
close of business on such day, TIMES (z) 1/360; or
(ii) on and after Servicer's reasonable request
made at any time when the Transferor shall no longer be
Servicer, an alternative amount specified by Servicer not
exceeding (x) 110% of Servicer's cost and expenses of
performing its obligations under the Agreement during the
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Yield Period when such day occurs, divided by (y) the number
of days in such Yield Period.
C. RUN OFF SERVICER'S FEE. The "RUN OFF SERVICER'S FEE" for
any Undivided Interest at any time means an amount equal to
(x) the related Purchaser's Investment at such
time, TIMES
(y) (A) the percentage PER ANNUM set forth in
clause (i) (x) of the definition of "Servicer's Fee", or (B)
if Servicer's Fee is calculated pursuant to CLAUSE (II) of
such definition, the percentage PER ANNUM determined for each
day by dividing the amount of the Servicer's Fee accrued for
such day by the related Purchaser's Investment at the close of
business on such day, multiplying the quotient by 360 and
expressing the product as a percentage, TIMES
(z) a fraction, the numerator of which is the
number of days equal to the then Adjusted Average Maturity,
and the denominator of which is 360 days.
PART IV
ADJUSTED AVERAGE MATURITY
"ADJUSTED AVERAGE MATURITY" means, on any day, the product of (i) 2
times (ii) the Average Maturity for such day.
"AVERAGE MATURITY" means, on any day, that time period (expressed in
days) equal to the weighted average maturity of the Pool Receivables as shall be
calculated by Servicer, as set forth in the most recent Periodic Report in
accordance with the provisions thereof. If a Managing Agent shall disagree with
any such calculation, such Agent may recalculate the Average Maturity for such
day, which calculation shall, absent manifest error, be binding upon Servicer,
the Transferor and Purchaser.
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APPENDIX C
DEFINITIONS TO FINANCIAL COVENANTS
(Cross references are to the Loan Agreement as defined herein).
"ASSESSMENT RATE" means, for any day, the annual assessment rate
(rounded upwards, if necessary, to the nearest 1/100 of 1%) which is payable by
the Agent (in its individual capacity) to the Federal Deposit Insurance
Corporation (or any successor) for deposit insurance for Dollar time deposits
with the Agent (in its individual capacity) at its Principal Office as
determined by the Agent. The CD Rate shall be adjusted automatically as of the
effective date of each change in the Assessment Rate.
"ASSET SECURITIZATION FACILITY" means the asset backed commercial paper
funded receivables securitization facility among The Wackenhut Corporation as
Seller, NationsBank as Agent and as Administrative Agent, providing for the sale
by The Wackenhut Corporation and certain of its Subsidiaries of fractional
undivided interests in trade receivables, provided that at no time shall the
aggregate face amount of outstanding trade receivables of The Wackenhut
Corporation and its Subsidiaries sold or otherwise transferred (in whole or in
part) through such program exceed $75,000,000.
"CD RATE" means, for any CD Rate Loan, the rate of interest per annum
determined pursuant to the following formula:
"CD RATE LOAN" means all of the Loans for which the rate of interest is
determined by reference to the CD Rate.
CD = Applicable CD Rate + Assessment + Applicable
Rate 1 - Applicable Reserve Requirement Rate Margin
"CONSOLIDATED NET INCOME" for any period means the gross revenues of
The Wackenhut Corporation and its Subsidiaries for such period less all expenses
and other proper charges (including taxes on income and Interest Charges),
determined on a consolidated basis after eliminating earnings or losses
attributable to outstanding Minority Interests, but excluding in any event:
(a) any gains on the sale or other disposition of Investments
or fixed or capital assets, and any taxes on such excluded gains and
any tax deductions or credits on account of any such excluded losses;
(b) the proceeds of any life insurance policy except for
proceeds received during such period with respect to deferred
compensation plans to the extent that The Wackenhut
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Corporation or any Subsidiary recognized any expenses during
such period with respect to such plans;
(c) net earnings and losses of any Subsidiary accrued prior to
the date it became a Subsidiary;
(d) net earnings and losses of any corporation (other than a
Subsidiary), substantially all the assets of which have been acquired
in any manner by The Wackenhut Corporation or any Subsidiary, realized
by such corporation prior to the date of such acquisition;
(e) net earnings and losses of any corporation (other than a
Subsidiary) with which The Wackenhut Corporation or a Subsidiary shall
have consolidated or which shall have merged into or with The Wackenhut
Corporation or a Subsidiary prior to the date of such consolidation or
merger;
(f) net earnings of any business entity (other than a
Subsidiary) in which The Wackenhut Corporation or any Subsidiary has an
ownership interest unless such net earnings shall have actually been
received by The Wackenhut Corporation or such Subsidiary in the form of
cash distributions;
(g) any portion of the net earnings of any Subsidiary which
for any reason is unavailable for payment of dividends to The Wackenhut
Corporation or any other Subsidiary;
(h) earnings resulting from any reappraisal, revaluation or
write-up of assets;
(i) any deferred or other credit representing any excess of
the equity in any Subsidiary at the date of acquisition thereof over
the amount invested in such Subsidiary;
(j) any gain arising from the acquisition of any Securities of
The Wackenhut Corporation or any Subsidiary; and
(k) any reversal of any contingency reserve, except to the
extent that provision for such contingency reserve shall have been made
from income arising during such period.
"CONSOLIDATED NET WORTH" means at any time as of which the amount
thereof is to be determined, the sum of the following with respect to The
Wackenhut Corporation and its Subsidiaries (on a consolidated basis and
excluding intercompany items): (i) the amount of issued and outstanding share
capital, plus (ii) the amount of additional paid-in capital and retained income
(or, in the case of a deficit, minus the amount of such deficit), minus (iii)
the sum of the following (without duplication of deductions in respect of items
already deducted in arriving at surplus and retained earnings): (A) all
reserves, except legal reserves and
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other contingency reserves (i.e., reserves not allocated to specific purposes
and not deducted from assets), which are properly treated as appropriations of
surplus or retained earnings; (B) any treasury stock, capital stock subscribed
and unissued and other contra-equity accounts; and (C) the cumulative amount of
any net write-up of asset values after the date of the audit immediately
preceding the Closing Date, plus or minus, as the case may be (iv) the
cumulative effect of foreign exchange valuations.
"DOLLARS" and the symbol "$" means dollars constituting legal tender
for the payment of public and private debts in the United States of America.
"EURODOLLAR RATE" means the interest rate per annum calculated
according to the following formula:
Eurodollar Rate = INTERBANK OFFERED RATE + Applicable Margin
------------------------------
1 - Applicable Reserve Requirement
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day; provided that (a) if such day is not a Business Day, the Federal Funds Rate
for such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day, and (b) if no
such rate is so published on such next succeeding Business Day, the Federal
Funds Rate for such day shall be the average rate charged to the Agent (in its
individual capacity) on such day on such transactions as determined by the
Agent.
"FIXED CHARGES" for any period means on a consolidated basis the sum of
(i) 100% of all Rentals (other than Rentals on Capitalized Leases) payable
during such period by The Wackenhut Corporation and its Subsidiaries (other
than WCC), and (ii) all Interest Charges on all Indebtedness (including the
interest component of Rentals on Capitalized Leases and the discount factor or
other economic equivalent of interest under the Asset Securitization Facility)
of The Wackenhut Corporation and its Subsidiaries (other than Wackenhut
Connections Corporation) payable during said period by The Wackenhut Corporation
and its Subsidiaries (other than WCC).
"FIXED CHARGES COVERAGE RATIO" means the ratio of Net Income
Available for Fixed Charges to Fixed Charges.
"GAAP" or "Generally Accepted Accounting Principles" means generally
accepted accounting principles, being those principles of accounting set forth
in pronouncements of the Financial Accounting
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<PAGE> 123
Standards Board, the American Institute of Certified Public Accountants or which
have other substantial authoritative support and are applicable in the
circumstances as of the date of a report.
"GUARANTIES" by any Person means all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect, guaranteeing
any Indebtedness, dividend or other obligation, of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, all obligations incurred through an agreement, contingent or
otherwise, by such Person: (i) to purchase such Indebtedness or obligation or
any property or assets constituting security therefor, (ii) to advance or supply
funds (x) for the purchase or payment of such Indebtedness or obligation, (y) to
maintain working capital or other balance sheet condition or otherwise to
advance or make available funds for the purchase or payment of such Indebtedness
or obligation, or (iii) to lease property or to purchase Securities or other
Property or services primarily for the purpose of assuring the owner of such
Indebtedness or obligation of the ability of the primary obligor to make
payment of the Indebtedness of obligation, or (iv) otherwise to assure the owner
of the Indebtedness or obligation of the primary obligor against loss in respect
thereof. For the purposes of all computations made under the Loan Agreement, a
Guaranty in respect of any Indebtedness for borrowed money shall be deemed to be
Indebtedness equal to the principal amount of such Indebtedness for borrowed
money which has been guaranteed, and a Guaranty in respect of any other
obligation or liability or any dividend shall be deemed to be Indebtedness equal
to the maximum aggregate amount of such obligation, liability or dividend.
"INDEBTEDNESS" of any Person means and include all obligations of such
Person which in accordance with GAAP shall be classified upon a balance sheet of
such Person as liabilities of such Person, and in any event shall include all
(i) obligations of such Person for borrowed money or which has been incurred in
connection with the acquisition of property or assets, (ii) obligations secured
by any Lien upon property or assets owned by such Person, even though such
Person has not assumed or become liable for the payment of such obligations,
(iii) obligations created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person,
notwithstanding the fact that the rights and remedies of the seller, lender or
lessor under such agreement in the event of default are limited to repossession
or sale of property, (iv) Capitalized Rentals under any Capitalized Lease, (v)
Guaranties of Indebtedness of others, (vi) the Reimbursement Obligations, and
(vii) outstanding amounts received by The Wackenhut Corporation or any
Subsidiary in exchange for the transfer of interests in trade receivables under
the Asset Securitization Facility in excess of the amounts repaid to the
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<PAGE> 124
purchasers in respect of such purchase price from collections on such trade
receivables.
"INTEREST CHARGES" for any period means all interest and all
amortization of debt discount and expense on any particular Indebtedness for
which such calculations are being made, and shall include without limitation the
discount factor or other economic equivalent of interest arising under the Asset
Securitization Facility. Computations of Interest Charges on a pro forma basis
for Indebtedness having a variable interest rate shall be calculated at the
rate in effect on the date of any determination.
"INVESTMENTS" means all investments, in cash or by delivery of Property
made, directly or indirectly in any Person, whether by acquisition of shares of
capital stock, indebtedness or other obligations or Security or by loan,
advance, capital contribution or otherwise; provided, however, that
"Investments" shall not mean or include routine investments in Property to be
used or consumed in the ordinary course of business or investments in accounts
receivable or notes receivable arising in the ordinary course of business.
"LETTER OF CREDIT" or "LETTERS OF CREDIT" means a letter of credit
issued by the Issuing Bank for the account of The Wackenhut Corporation or The
Wackenhut Corporation and Titania in favor of a Person advancing credit,
providing insurance or securing obligations on behalf of The Wackenhut
Corporation or The Wackenhut Corporation and Titania, and shall include without
limitation all Existing LCS.
"LIEN" means any interest in Property securing an obligation owed to,
or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, and including but not
limited to the security interest lien arising from a mortgage, encumbrance,
pledge, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes. The term "Lien" shall include reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances (including, with respect to
stock, stockholder agreements, voting trust agreements, buy-back agreements and
all similar arrangements) affecting Property. For the purposes of the Loan
Agreement, The Wackenhut Corporation or a Subsidiary shall be deemed to be the
owner of any Property which it has acquired or holds subject to a conditional
sale agreement, Capitalized Lease or other arrangement pursuant to which title
to the Property has been retained by or vested in some other Person for security
purposes and such retention or vesting shall constitute a Lien.
"LOAN" or "LOANS" means any of the Fixed Rate Loans or Floating Rate
Loans, as the context may require.
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<PAGE> 125
"LOAN AGREEMENT" means the Amended and Restated Revolving Credit
Reimbursement Agreement dated as of December 30, 1997 among the Wackenhut
Corporation, NationsBank, N.A., as Lender and as agent.
"MINORITY INTERESTS" means any shares of stock of any class of a
Subsidiary (other than directors' qualifying shares as required by law) that are
not owned by The Wackenhut Corporation and/or one or more of its Subsidiaries.
Minority Interests shall be valued by valuing Minority Interests constituting
preferred stock at the voluntary or involuntary liquidating value of such
preferred stock, whichever is greater, and by valuing Minority Interests
constituting common stock at the book value of capital and surplus applicable
thereto adjusted, if necessary, to reflect any changes from the book value of
such common stock required by the foregoing method of valuing Minority Interests
in preferred stock.
"NET INCOME AVAILABLE FOR FIXED CHARGES" for any period means the sum
of (i) Consolidated Net Income during such period (excluding, for the purpose
of determining Net Income Available for Fixed Charges, revenues, expenses and
other appropriate charges or adjustments attributable to WCC) plus (to the
extent deducted in determining Consolidated Net Income), (ii) all provisions for
any Federal, state or other income taxes made by The Wackenhut Corporation and
its Subsidiaries (other than WCC) during such period, and (iii) Fixed Charges of
The Wackenhut Corporation and its Subsidiaries (other than WCC) during such
period.
"PARTICIPATION" means, with respect to any Lender and either a Letter
of Credit or a Swing Line Loan, as the case may be, the extension of credit
represented by the participation of such Lender hereunder in the Issuing Bank's
liability in respect of a Letter of Credit issued by the Issuing Bank in
accordance with the terms hereof, or in NationsBank's liability in respect of a
Swing Line Loan made in accordance with the terms hereof.
"PRINCIPAL OFFICE" means the principal office of NationsBank, presently
located at Independence Center, 15th Floor, NC1-001-15- 04, Charlotte, North
Carolina 28255, Attention: Agency Services.
"RENTALS" means and include as of the date of any determination
thereof, all fixed payments (including as such all payments which the lessee is
obligated to make to the lessor on termination of the lease or surrender of the
Property) payable by The Wackenhut Corporation or a Subsidiary, as lessee or
sublessee under a lease of real or personal property, but shall be exclusive of
any amounts required to be paid by The Wackenhut Corporation or a Subsidiary
(whether or not designated as rents or additional rents) on account of
maintenance, repairs, insurance, taxes and similar charges. Fixed rents under
any so-called "percentage leases" shall be computed solely on the basis of the
minimum rents, if any, required
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<PAGE> 126
to be paid by the lessee regardless of sales volume or gross revenues.
"SECURITY" shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
"SUBSIDIARY" means, as to any particular parent corporation, any
corporation of which more than 50% (by number of votes) of the Voting Stock
shall be owned by such parent corporation and/or one or more corporations which
are themselves subsidiaries of such parent corporation. The term "Subsidiary"
shall mean a subsidiary of The Wackenhut Corporation and The Atrium At Coral
Gables, Ltd., a Florida limited partnership.
"TITANIA" means Titania Insurance Company of America, a corporation
organized under the laws of Vermont and a wholly-owned Subsidiary of The
Wackenhut Corporation.
"TOTAL CAPITALIZATION" means the sum of (i) Consolidated Funded Debt
plus (ii) Consolidated Net Worth.
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<PAGE> 127
Schedule 2.3(b)
FORM OF SPECIAL CONCENTRATION LIMIT CERTIFICATE
Reference is made to that certain Transfer and Administration
Agreement dated as of December 30, 1997(as at any time amended or otherwise
modified, the "Purchase Agreement") among Wackenhut Funding Corporation, a
Florida corporation, The Wackenhut Corporation, Enterprise Funding Corporation,
and NationsBank N.A. Capitalized terms used herein have the meaning assigned
thereto in the Purchase Agreement. For purposes of Section 2.3(b) of the
Purchase Agreement, the following Special Concentration Limits shall be in
effect for the period from December 30, 1997 until such time as the
Administrative Agent delivers to the Transferor and the Servicer written notice
of a change in the Special Concentration Limits:
1. OBLIGOR LIMITS:
(a) Any one Obligor rated BBB or Baa2 or better by
Standard & Poor's Corporation and Moody's Investors
Service, Inc., respectively, may have a Special
Concentration Limit of the Aggregate Unpaid Balance
of the Eligible Receivables in the Receivables Pool
at any time, PLUS
(b) Any three Obligors rated BBB or Baa2 or better by
Standard & Poor's Corporation and Moody's Investors
Service, Inc., respectively, may each have Special
Concentration Limits of 4% of the Aggregate Unpaid
Balance of the Eligible Receivables in the
Receivables Pool at any time, PLUS
(c) Any five Obligors, regardless of rating, may each
have Special Concentration Limits of 3% of the
Aggregate Unpaid Balance of the Eligible Receivable
in the Receivable Pool at any time.
Transferor shall identify the specific Obligors to whom the
Special Concentration Limits described in this Paragraph 1 should be applied by
such form of notice as the Agent may from time to time require.
2. OBLIGOR CATEGORY LIMITS:
(a) The aggregate Concentration Limit for all Obligors
with respect to Receivables originated by Wackenhut
Airline Services, Inc. shall be 10% of the Aggregate
Unpaid Balance of the Eligible Receivables in the
Receivables Pool at any time.
<PAGE> 128
(b) The aggregate Concentration Limit for all Obligors
with respect to Receivables for which the related
service has not yet been rendered by the Seller or an
Originator shall be of the Aggregate Unpaid Balance
of the Eligible Receivables in the Receivables Pool
at any time.
(c) The aggregate Concentration Limit for all Government
Obligors shall be 15% of the Aggregate Unpaid Balance
of the Eligible Receivables in the Receivables Pool
at any time.
Date:____________________ NATIONSBANK, N.A.
By:
--------------------------------
Its:
-----------------------------
2
<PAGE> 129
SCHEDULE 5.1(a)
FORM OF CERTIFICATE OF ASSIGNMENTS
Reference is made to the Transfer and Administration
Agreement, dated as of December 30, 1997 (the "TRANSFER AGREEMENT"), among the
undersigned (as "SELLER"), Enterprise Funding Corporation (as the "Purchaser" or
"Enterprise"), NationsBank, N.A., as agent for Enterprise and the Bank Investors
(in such capacity, the "Agent") and The Wackenhut Corporation (as "Servicer").
Terms defined in the Transfer Agreement are used herein as therein defined.
The undersigned hereby sells, assigns and transfers unto
Enterprise each Undivided Interest purchased from the undersigned in one or more
Purchases pursuant to the Transfer Agreement.
Each Purchase by Enterprise from the undersigned of an
Undivided Interest shall be endorsed by Enterprise on a grid with respect to
each such Undivided Interest which has been or shall be attached hereto (and,
upon such attachment, made a part hereof) or, at Enterprise's option, in the
records of the Administrative Agent, and such endorsement shall evidence the
ownership by Enterprise of the Undivided Interest; PROVIDED, that the failure
of Enterprise (or the Administrative Agent on behalf of Enterprise) to make any
such endorsement shall not void or otherwise impair any Purchase or limit the
undersigned's obligations under the Transfer Agreement with respect to the
Undivided Interests purchased.
This Certificate of Assignments is made without recourse
except as provided in the Transfer Agreement. This Certificate of Assignments is
made pursuant to and upon all the representations, warranties, covenants and
agreements on the part of the undersigned contained in the Transfer Agreement.
This Certificate of Assignments is governed by and is to be
construed and interpreted in accordance with the Transfer Agreement and the
internal laws of the State of New York without regard to principles of conflicts
of laws.
Assignment by Enterprise of one or more Undivided Interests,
or any portion thereof, is subject to the terms of the Transfer Agreement,
including, without limitation, ARTICLE XIII thereof. Any such assignment shall
be endorsed by Enterprise on the grid with respect to each such Undivided
Interest attached hereto or, at Enterprise's option, in the records of the
Agent, and such endorsement shall evidence the ownership by the assignee named
therein of each Undivided Interest (or portion thereof) so assigned; PROVIDED,
that the failure of Enterprise (or the Agent
<PAGE> 130
on behalf of Enterprise) to make any such endorsement shall not void or
otherwise impair any such assignment or limit the undersigned's obligations
under the Agreement to the assignee with respect to any such Undivided Interest
(or portion thereof) so assigned.
Each reduction in Enterprise's Investment of each Undivided
Interest as a result of the occurrence of a Run Off Day or day of partial
liquidation as provided in SECTION 3.03(B) or (C) of the Transfer Agreement with
respect to such Undivided Interest and each combination or division of one or
more Undivided Interests shall also be endorsed by Enterprise on the grid with
respect to each such Undivided Interest and each combination or division of one
or more Undivided Interests attached hereto or, at Enterprise's option, in the
records of the Administrative Agent, but the failure of Enterprise (or the Agent
on behalf of Enterprise) to make any such endorsement shall not modify such
reduction in Enterprise's Investment or such combination or division of one or
more Undivided Interests.
The undersigned hereby certifies on and as of the date of each
Purchase that the conditions set forth in SECTIONS 5.02 AND 5.03 of the Transfer
Agreement are fulfilled on such date.
This letter agreement may be executed in counterparts each of
which shall be deemed to be an original and all of which together shall
constitute but one and the same letter agreement.
IN WITNESS WHEREOF, the undersigned has caused this Assignment
to be duly executed this , 199 .
WACKENHUT FUNDING CORPORATION
By
----------------------------------------
Title
------------------------------------
2
<PAGE> 131
Grid with Respect to Undivided Interest No. _____1
Attached to and Made a Part of Certificate of Assignments
dated ________ __, 199__ from Wackenhut Funding Corporation
to Enterprise Funding Corporation
<TABLE>
<CAPTION>
Amount of Amount of
Amount of Reduction Increase of
Date of Enter- of Enter- Enter-
Endorsed prise's Amount of prise's prise's
Transaction Investment Assignment Investment Investment
- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
</TABLE>
- --------
1 A separate grid should be attached reflecting each Undivided Interest as sold.
3
<PAGE> 132
December 30, 1997
NationsBank, N.A.
P.O. Box 277469
Atlanta, GA 30384-7469
Ladies and Gentlemen:
Reference is made to our lock-box account No. 3750156489
maintained with you (the "ACCOUNT"). Pursuant to a Transfer and Administration
Agreement (the "TRANSFER AGREEMENT") dated as of December 30, 1997, as the same
may be amended or otherwise modified from time to time, among us, as Transferor,
The Wackenhut Corporation, as Servicer (the "SERVICER"), Enterprise Funding
Corporation, as a Purchaser ("PURCHASER") and NationsBank N.A., as a Bank
Investor and as the agent for the Purchaser and the Bank Investors (in such
capacity, the "AGENT"). We have assigned and/or may hereafter assign to the
Agent, on behalf of the Purchaser and the Bank Investors, one or more undivided
percentage interests in certain of the accounts, chattel paper, instruments or
general intangibles (collectively, "RECEIVABLES") with respect to which payments
are or may hereafter be made to the Account, and have granted to the Agent, on
behalf of the Purchaser and the Bank Investors, a security interest in the
undersigned's retained interest in such Receivables. Your execution of this
letter agreement is a condition precedent to the continued maintenance by us of
the Account with you.
In accordance with the Transfer Agreement, we are hereby
transferring to the Agent exclusive ownership and control of the Account, and we
hereby transfer exclusive ownership and control of the Account to the Agent. The
Agent has agreed to permit us to access the Account until such time as the Agent
gives you notice that we shall no longer be permitted access to such Account,
which notice shall be substantially in the form attached hereto as Annex A.
<PAGE> 133
December 30, 1997
Page 2
We hereby irrevocably instruct you, at all times from and
after the date of your receipt of notice from the Agent as described above, to
make all payments to be made by you out of or in connection with the Account
directly to the Agent, at its address set forth below its signature hereto or as
the Agent otherwise in accordance with the instructions of the Agent.
We also hereby notify you that, at all times from and after
the date of your receipt of notice from the Agent as described above, the Agent
shall be irrevocably entitled to exercise in our place and stead any and all
rights in respect of or in connection with the Account, including, without
limitations, (a) the right to specify when payments are to be made out of or in
connection with the Account and (b) the right to require preparation of
duplicate monthly bank statements on the Account for the Agent's audit purposes
and mailing of such statements directly to an address specified by the Agent.
Notice from the Agent may be personally served or sent to
Telex, facsimile or U.S. mail, certified return receipt requested, to the
address, Telex or facsimile number set forth under your signature to this letter
of agreement, or to such other address, Telex or facsimile number which you
provide the Agent in writing. If notice is given by Telex or facsimile, it will
be deemed to have been received when the notice is sent and the answerback is
received (in the case of Telex) or receipt is confirmed by telephone or other
electronic means (in the case of facsimile). All other notices will be deemed to
have been received when actually received or, in the case of personal delivery,
delivered.
By executing this letter of agreement, you acknowledge the
Agent's ownership and control of the Account and its ownership of (in each
case, on behalf of the Purchaser and the Bank Investors) and security interest
in the amounts from time to time on deposit therein and agree that from the date
hereof the Account shall be maintained by you for the benefit of, and amounts
from time to time therein held by you as agent for, the Agent on the terms
provided herein. The Account is to be entitled "NationsBank, N.A." as the Agent
for Enterprise Funding Corporation and the Bank Investors". Except as otherwise
pro-
<PAGE> 134
December 30, 1997
Page 3
vided in this letter agreement, payments to the Account are to be processed
in accordance with the standard procedures currently in effect. All service
charges and fees with respect to the Account shall continue to be payable by us
under the arrangements currently in effect.
By executing this letter agreement, you irrevocably waive and
agree not to assert, claim or endeavor to exercise, irrevocably bar and estop
yourself from asserting, claiming or exercising, and acknowledge that you have
not heretofore received a notice, writ, order or any form of legal process from
any other party asserting, claiming or exercising, any right of set-off,
banker's lien or other purported form of claim with respect to the Account or
any funds from time to time therein. Except for your right to payment of your
customary service charges and fees for the routine maintenance and operation of
the Account and to make deductions for returned items, you shall have no rights
in the Account or funds therein. To the extent you may ever have such rights,
you hereby expressly subordinate all such rights to all rights of the Agent.
You may terminate this letter agreement by canceling the
Account maintained with you, which cancellation and termination shall become
effective only upon thirty days' prior written notice thereof from you to the
Agent. Incoming mail addressed to the Account received after such cancellation
shall be forwarded in accordance with the Agent's instructions. This letter
agreement may also be terminated upon written notice to you by the Agent
stating that the Transfer Agreement pursuant to which this letter agreement was
obtained is no longer in effect. Except as otherwise provided in this paragraph,
this letter agreement may not be terminated or amended without the prior written
consent of the Agent.
Please acknowledge your agreement to the terms set forth in
this letter agreement by signing the two copies of this letter agreement
enclosed herewith in the space provided below, sending one such signed copy to
the Agent at its address provided above and returning the other signed copy to
us.
<PAGE> 135
December 30, 1997
Page 4
Very truly yours,
WACKENHUT FUNDING CORPORATION
By: , Terry P. Mayotte
Title:
Accepted and confirmed as of
the date first written above:
ENTERPRISE FUNDING CORPORATION
Purchaser
By:
Title:
Acknowledged and agreed to as of
the date first written above:
NATIONSBANK, N.A.
By:
Title:
Address for notice:
100 Southeast Second Street, 14th Floor
FL7-950-14-06
Miami, FL 33131
Attention: Lourdes Viciedo
Facsimile No.: 305/533-2463
<PAGE> 136
ANNEX 1
TO LOCK-BOX AGREEMENT
NOTICE OF EFFECTIVENESS
DATED: ______________, 199_
TO: NationsBank, N.A.
P.O. Box 277469
Atlanta, GA 30384-7469
ATTN: ______________________
Re: Lock-Box Account No. 3750156489
Ladies and Gentlemen:
We hereby give you notice that the transfer of control of the
above-referenced Lock-Box Account, as described in our letter agreement with you
dated as of December 23, 1997 is effective as of the date hereof. You are hereby
instructed to comply immediately with the instructions set forth in that letter.
Very truly yours,
WACKENHUT FUNDING CORPORATION
By:
--------------------------------
Title:
-----------------------------
ACKNOWLEDGED AND AGREED:
NATIONSBANK, N.A.
By:
--------------------------
Title:
-----------------------
Date:
------------------------
P.O. Box 277469
Atlanta, GA 30384-7469
Attention:
-------------------
Facsimile No.:
----------------
<PAGE> 137
EXHIBIT 13.5(B)
Form of Assignment and Assumption Agreement
Reference is made to the Transfer and Administration Agreement
dated as of December 30, 1997 as it may be amended or otherwise modified from
time to time (as so amended or modified, the "Transfer Agreement") among
Wackenhut Funding Corporation, as transferor (in such capacity, the
"Transferor"), The Wackenhut Corporation, individually and as servicer (in such
capacity, the "Servicer"), Enterprise Funding Corporation, as purchaser (in such
capacity, the "Purchaser") and NationsBank, N.A., as agent for Enterprise and
certain financial institutions from time to time a party thereto as Bank
Investors(in such capacity, the "Agent"). Terms defined in the Transfer
Agreement are used herein with the same meaning.
___________________ (the "Assignor") and _____________________
(the "Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee,
without recourse and without representation and warranty, and the Assignee
hereby purchases and assumes from the Assignor, an interest in and to all of
the Assignor's rights and obligations under the Transfer Agreement and the other
Agreement Documents. Such interest expressed as a percentage of all rights and
obligations of the Bank Investors being equal to the percentage equivalent of a
fraction the numerator of which is $________ and the denominator of which is the
Facility Limit. After giving effect to such sale and assignment, the Assignee's
Commitment will be as set forth on the signature page hereto.
i. [In consideration of the payment of $___________, being
___% of the existing Aqggregate Purchaser's Investment, and of $___________,
being ___% of the aggregate unpaid accrued Earned Discount, receipt of which
payment is hereby acknowledged, the Assignor hereby assigns to the Agent for the
account of the Assignee, and the Assignee hereby purchases from the Assignor, a
___% interest in and to all of the Assignor's right, title and interest in and
to the Aggregate Purchaser's Investment purchased by the undersigned on
_______________, 19__ under the Transfer Agreement.][include if an existing
Aggregate Purchaser's Investment is being assigned.]
ii. The Assignor (i) represents and warrants that it
is the legal and beneficial owner of the interest being assigned
by it hereunder and that such interest is free and clear of any
<PAGE> 138
adverse claim; (ii) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Transfer Agreement, any other Agreement
Document or any other instrument or document furnished pursuant thereto or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Transfer Agreement or the Receivables, any other Agreement Document or
any other instrument or document furnished pursuant thereto; and (iii) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of any of the Transferor, the Servicer,the SELLER or any
Originator or the performance or observance by any of the Transferor, the
Servicer, the SELLER or any Originator of any of its obligations under the
Transfer Agreement, any other Agreement Document, or any instrument or document
furnished pursuant thereto.
iii. The Assignee (i) confirms that it has received a copy of
the Transfer Agreement, the Receivables Purchase Agreement and the Amended and
Restated Purchase and Sale Agreement, together with copies of the financial
statements referred to in Section 6.2 of the Transfer Agreement, to the extent
delivered through the date of this Agreement, and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment; (ii) agrees that it will, independently
and without reliance upon the Agent, any of its Affiliates, the Assignor or any
other Purchaser and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Transfer Agreement and any other Agreement Document;
(iii) appoints and authorizes the Agent to take such action as agent on its
behalf and to exercise such powers and discretion under the Transfer Agreement
and the other Agreement Documents as are delegated to the Agent by the terms
thereof, together with such powers and discretion as are reasonably incidental
thereto; (iv) agrees that it will perform in accordance with their terms all of
the obligations which by the terms of the Transfer Agreement are required to be
performed by it as a Bank Investor; and (vi) specifies as its address for
notices and its account for payments the office and account set forth beneath
its name on the signature pages hereof[; and (vii) attaches the forms prescribed
by the Internal Revenue Service of the United States of America certifying as to
the Assignee's status for purposes of determining exemption from United States
withholding taxes with respect to all payments to be made to the Assignee under
the Transfer Agreement or such other documents as
2
<PAGE> 139
are necessary to indicate that all such payments are subject to such rates at a
rate reduced by an applicable tax treaty].2
iv. The effective date for this Assignment shall be the later
of (i) the date on which the Agent receives this Assignment executed by the the
parties hereto and receives the consent of the Transferor and the Agent, on
behalf of the Purchaser, and (ii) the date of this Assignment (the "Effective
Date"). Following the execution of this Assignment and Assumption Agreement and
the consent of the Transferor and the Agent, on behalf of the Purchaser, this
Assignment and Assumption Agreement will be delivered to the Agent for
acceptance and, with respect to the Assignment and Assumption Agreement,
recording by the Agent.
v. Upon such acceptance and recording, as of the Effective
Date, (i) the Assignee shall be a party to the Transfer Agreement and, to the
extent provided in this Assignment, have the rights and obligations of a Bank
Investor thereunder and (ii) the Assignor shall, to the extent provided in this
Assignment, relinquish its rights and be released from its obligations under the
Transfer Agreement.
(vi.) Upon such acceptance and recording, from and after the
Effective Date, the Agent shall make all payments under the Transfer Agreement
in respect of the interest assigned hereby (including, without limitation, all
payments in respect of such interest in Aggregate Purchaser's Investment, Earned
Discount and fees) to the Assignee. The Assignor and Assignee shall make all
appropriate adjustments in payments under the Transfer Agreement for periods
prior to the Effective Date directly between them selves.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
- --------
2 If the Assignee is organized under the laws of a jurisdiction outside
the United States.
3
<PAGE> 140
(vii.) This Assignment shall be governed by, and
construed in accordance with, the laws of the State of New York.
(i) This Assignment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of the signature page to this Assignment by telecopier shall be
effective as delivery of a manually executed counterpart of this Assignment.
IN WITNESS WHEREOF, the parties hereto have caused this
Assignment and Assumption to be executed by their respective officers thereunto
duly authorized as of the ____ day of ______, 19__.
Remaining [NAME OF ASSIGNOR]
COMMITMENT
By:
------------------------
Name:
Title:
COMMITMENT [NAME OF ASSIGNEE]
$-----------
By:
------------------------
Name:
Title:
Address for notices and
Account for payments:
[Address]
[Account]
4
<PAGE> 141
Consented to this __ day
of _________, 199_
NATIONSBANK, N.A., as
Administrative Agent
By:
--------------------------
Name:
Title:
[TRANSFEROR]
By:
--------------------------
Name:
Title:
Accepted this ____ day
of _________, 199_
NATIONSBANK, N.A.
as Agent
By:
--------------------------
Name:
Title:
5
<PAGE> 142
Schedule 6.1(n)
List of Location of Records
4200 Wackenhut Drive #100
Palm Beach Gardens, Florida 33410
<PAGE> 143
Schedule 6.2(n)
List of Location of Records
4200 Wackenhut Drive #100
Palm Beach Gardens, Florida 33410
<PAGE> 144
Schedule 6.2(o)
List of Lockbox Banks and Accounts
BANK NAME ABA ACCOUNT NUMBER
- --------- --- --------------
NationsBank Customer Connection 111000012 3750156489
<PAGE> 1
Exhibit 4.8
LC ACCOUNT AGREEMENT
THIS LC ACCOUNT AGREEMENT (the "Agreement") dated as of December 30,
1997, and made between WACKENHUT CORPORATION, a Florida corporation (the
"Pledgor"), and NATIONSBANK, NATIONAL ASSOCIATION, a national banking
association, as a Lender ("NationsBank") and as Agent (in such capacity herein
and together with any successors in such capacity, the "Agent") for the lenders
(the "Lenders") party to the Credit Agreement (as hereinafter defined).
W I T N E S S E T H:
WHEREAS, the Pledgor, the Lenders, and the Agent have entered into that
certain Amended and Restated Revolving Credit and Reimbursement Agreement dated
as of the date hereof (as may hereafter be amended, restated, supplemented or
otherwise modified from time to time in accordance with the terms thereof and in
effect, hereinafter referred to as the "Credit Agreement");
WHEREAS, as a condition precedent to the Lenders' obligations to make
the Loans or to issue Letters of Credit, the Pledgor is required to execute and
deliver to the Agent a copy of this Agreement on or before the Closing Date;
NOW, THEREFORE, in consideration of the foregoing and the agreements,
provisions and covenants contained herein, the Pledgor and the Agent hereby
agree as follows:
Section 1. DEFINITIONS. Capitalized terms used in this Agreement shall
have the following meanings:
"COLLATERAL" means (a) all funds from time to time on deposit in the LC
Account; (b) all Investments and all certificates and instruments from time to
time representing or evidencing such Investments; (c) all notes, certificates of
deposit, checks and other instruments from time to time hereafter delivered to
or otherwise possessed by the Agent for or on behalf of the Pledgor in
substitution for or in addition to any or all of the Collateral described in
clause (a) or (b) above; (d) all interest, dividends, cash, instruments and
other property from time to time received, receivable or otherwise distributed
in respect of or in exchange for any or all of the Collateral described in
clause (a), (b) or (c) above; and (e) to the extent not covered by clauses (a)
through (d) above, all proceeds of any or all of the foregoing Collateral.
"INVESTMENTS" means those investments, if any, made by the Agent
pursuant to Section 5 hereof.
"LC ACCOUNT" means the cash collateral account established and
maintained pursuant to SECTION 2 hereof.
"SECURED OBLIGATIONS" means (i) all obligations of the Pledgor now
existing or hereafter arising under or in respect of the Credit Agreement or the
Notes (including, without limitation,
<PAGE> 2
the Pledgor's obligation to pay principal and interest and all other charges,
fees, expenses, commissions, reimbursements, indemnities and other payments
related to or in respect of the obligations contained in the Credit Agreement or
the Notes) or any documents or agreement related to the Credit Agreement or the
Notes; and (ii) without duplication, all obligations of the Pledgor now or
hereafter existing under or in respect of this Agreement, including, without
limitation, with respect to all charges, fees, expenses, commissions,
reimbursements, indemnities and other payments related to or in respect of the
obligations contained in this Agreement.
Capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the Credit Agreement.
Section 2. LC ACCOUNT; CASH COLLATERALIZATION OF LETTERS OF CREDIT.
(i) At any time, in the Agent's sole discretion, the Agent
shall establish and maintain at the offices of NationsBank, National
Association at 101 North Tryon Street, Charlotte, North Carolina, in
the name of the Agent and under the sole dominion and control of the
Agent, a cash collateral account designated as Wackenhut Corporation
Cash LC Account (the "LC Account").
(ii) In accordance with ARTICLE VIII of the Credit Agreement,
in the event that an Event of Default has occurred and shall not have
been waived pursuant to SECTION 10.07 of the Credit Agreement and the
Pledgor is required to pay to Agent an amount equal to the maximum
amount remaining undrawn or unpaid under the Letters of Credit, the
Agent shall, upon receipt of any such amounts, exercise the remedies
set forth in SECTION 12 hereof and shall apply the proceeds as provided
in ARTICLE VIII of the Credit Agreement. Any such amounts received by
the Agent shall be deposited in the LC Account. Upon a drawing under
the Letters of Credit in respect of which any amounts described above
have been deposited in the LC Account, the Agent shall apply such
amounts to reimburse NationsBank for the amount of such drawing. In the
event the Letters of Credit are canceled or expire or in the event of
any reduction in the maximum amount available at any time for drawing
under such Letters of Credit (the "Maximum Available Amount"), the
Agent shall apply the amount then in the LC Account designated to
reimburse NationsBank for any drawings under the Letters of Credit less
the Maximum Available Amount immediately after such cancellation,
expiration or reduction, if any, FIRST, to the cash collateralization
of the Letters of Credit if the Pledgor has failed to pay all or a
portion of the maximum amounts described above, SECOND, to the payment
in full of the outstanding Secured Obligations and THIRD, the balance,
if any, to the Pledgor.
(iii) Interest received in respect of Investments of any
amounts deposited in the LC Account pursuant to clause (ii) of this
SECTION 2 shall be delivered by the Agent to the Pledgor on the last
Business Day of each calendar month or, if earlier, upon cancellation
or expiration of or drawing of the Maximum Available Amount for drawing
under the Letters of Credit, as the case may be, in respect of which
such amounts were so
2
<PAGE> 3
deposited; PROVIDED, HOWEVER, that the Agent shall not deliver to the
Pledgor any such interest received in respect of Investments of any
amounts deposited in the LC Account pursuant to this SECTION 2 if an
Event of Default has occurred and shall not have been waived pursuant
to SECTION 10.07 of the Credit Agreement or unless all outstanding
Secured Obligations have been indefeasibly paid in full in cash.
Section 3. PLEDGE; SECURITY FOR SECURED OBLIGATIONS. The Pledgor hereby
pledges (or will cause to be pledged) to the Agent (for itself and on behalf of
the Lenders) a first priority lien and security interest in, the Collateral, as
collateral security for the prompt payment in full when due, whether at stated
maturity, by acceleration or otherwise (including, without limitation, the
payment of interest and other amounts which would accrue and become due but for
the filing of a petition in bankruptcy or the operation of the automatic stay
under Section 362(a) of the Bankruptcy Code), of all Secured Obligations.
Section 4. DELIVERY OF COLLATERAL. All certificates or instruments, if
any, representing or evidencing the Collateral shall be delivered to and held by
the Agent pursuant hereto and shall be in suitable form for transfer by
delivery, or shall be accompanied by duly executed instruments of transfer or
assignment in blank, all in form and substance reasonably satisfactory to the
Agent. In the event any Collateral is not evidenced by a certificate, a
notation, reflecting title in the name of the Agent or the security interest of
the Agent, shall be made in the records of the issuer of such Collateral or in
such other appropriate records as the Agent may require, all in form and
substance reasonably satisfactory to the Agent. The Agent shall have the right,
at any time and without notice to the Pledgor, to transfer to or to register in
the name of the Agent or any of its nominees any or all of the Collateral. In
addition, the Agent shall have the right at any time to exchange certificates or
instruments representing or evidencing Collateral for certificates or
instruments of smaller or larger denominations.
Section 5. INVESTING OF AMOUNTS IN THE LC ACCOUNT; AMOUNTS HELD BY THE
AGENT. Cash held by the Agent in the LC Account shall not be invested or
reinvested except as provided in this SECTION 5.
(i) Except as otherwise provided in SECTION 12 hereof, any
funds on deposit in the LC Account shall be invested by the Agent so
long as no Default or Event of Default shall have occurred and shall
not have been waived pursuant to SECTION 10.07 of the Credit Agreement,
in cash equivalents.
(ii) The Agent is hereby authorized to sell, and shall sell,
all or any designated part of the Collateral (A) so long as no Default
or Event of Default shall have occurred and shall not have been waived
pursuant to SECTION 10.07 of the Credit Agreement, upon the receipt of
appropriate written instructions from an Authorized Representative or
(B) in any event if such sale is necessary to permit the Agent to
perform its duties hereunder or under the Credit Agreement. The Agent
shall have no responsibility for any loss in the value of the
Collateral resulting from a fluctuation in interest rates or otherwise.
Any interest on securities constituting part of the Collateral and the
net proceeds of the sale or
3
<PAGE> 4
payment of any such securities shall be held in the LC Account by the
Agent.
Section 6. REPRESENTATIONS AND WARRANTIES. In addition to its
representations and warranties made pursuant to ARTICLE VI of the Credit
Agreement, the Pledgor represents and warrants to the Agent (for itself and as
agent on behalf of the Lenders), that the following statements are true, correct
and complete:
(i) The Pledgor will be the legal and beneficial owner of the
Collateral free and clear of any Lien except for the lien and security
interest created by this Agreement and the Credit Agreement;
(ii) The pledge and assignment of the Collateral pursuant to
this Agreement creates a valid and perfected first priority security
interest in the Collateral, securing the payment of the Secured
Obligations.
Section 7. FURTHER ASSURANCES. The Pledgor agrees that at any time and
from time to time, at the Pledgor's expense, the Pledgor will promptly execute
and deliver (or cause to be executed and delivered) to the Agent any further
instruments and documents, and take any further actions, that may be necessary
or that the Agent may reasonably request, in order to perfect and protect any
security interest granted or purported to be granted hereby or to enable the
Agent to exercise and enforce its rights and remedies hereunder with respect to
any Collateral.
Section 8. TRANSFERS AND OTHER LIENS. The Pledgor agrees that it will
not (a) sell or otherwise dispose of any of the Collateral, or (b) create or
permit to exist any Lien upon or with respect to any of the Collateral, except
for the lien and security interest created by this Agreement.
Section 9. THE AGENT APPOINTED ATTORNEY-IN FACT. The Pledgor hereby
appoints the Agent as its attorney-in-fact, with full authority in the place and
stead of the Pledgor and in the name of the Pledgor or otherwise, from time to
time in the Agent's reasonable discretion to take any action and to execute any
instrument which the Agent may reasonably deem necessary or advisable to
accomplish the purposes of the Agreement, including, without limitation, to
receive, endorse and collect all instruments made payable to the Pledgor or
either of them representing any payment, dividend, or other distribution in
respect of the Collateral or any part thereof and to give full discharge for the
same. In performing its functions and duties under this Agreement, the Agent
shall act solely for itself and as the agent of the Lenders and the Agent has
not assumed nor shall be deemed to have assumed any obligation towards or
relationship of agency or trust with or for the Pledgor.
Section 10. THE AGENT MAY PERFORM. If the Pledgor fails to perform any
agreement contained herein, after notice to the Pledgor, the Agent may itself
perform, or cause performance of, such agreement, and the expenses of the Agent
incurred in connection therewith shall be payable by the Pledgor under SECTION
13 hereof.
4
<PAGE> 5
Section 11. STANDARD OF CARE; NO RESPONSIBILITY FOR CERTAIN MATTERS. In
dealing with the Collateral in its possession, the Agent shall exercise the same
care which it would exercise in dealing with its own property of a similar
nature, but it shall not be responsible for (a) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Collateral, whether or not the Agent has or is deemed to
have knowledge of such matters, (b) taking any steps to preserve rights against
any parties with respect to any Collateral (other than steps taken in accordance
with the standard of care set forth above to maintain possession of the
Collateral), (c) the collection of any proceeds, (d) any loss resulting from
Investments made pursuant to Section 5 hereof, or (e) determining (x) the
correctness of any statement or calculation made by the Pledgor in any written
or telex (tested or otherwise) instructions, or (y) whether any deposit in the
LC Account is proper.
Section 12. REMEDIES UPON DEFAULT; APPLICATION OF PROCEEDS. If any
Event of Default shall have occurred and shall not have been waived pursuant to
SECTION 10.07 of the Credit Agreement:
(i) The Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein otherwise
available to it, all the rights and remedies of a secured party on
default under the Uniform Commercial Code (the "Code") as in effect in
the State of North Carolina at that time, and the Agent may, without
notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale, at any
exchange or broker's board or at any of the Agent's offices or
elsewhere, for cash, on credit or for future delivery, and at such
price or prices, and upon such other terms as the Agent may reasonably
deem commercially reasonable. The Pledgor agrees that, to the extent
notice of sale shall be required by law, at least ten (10) days' notice
to Pledgor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable
notification. The Agent shall not be obligated to make any sale of the
Collateral regardless of notice of sale having been given. The Agent
may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was
so adjourned.
(ii) Subject to the provisions of SECTION 2(II) hereof, any
cash held by the Agent as Collateral and all cash proceeds received by
the Agent in respect of any sale of, collection from, or other
realization upon all or part of the Collateral shall be applied (after
payment of any amounts payable to the Agent pursuant to SECTION 13
hereof) by the Agent to pay the Secured Obligations pursuant to ARTICLE
VIII of the Credit Agreement. Any surplus of such cash or cash proceeds
held by the Agent and remaining after payment in full of all Secured
Obligations shall be paid over to the Pledgor or to whomsoever may be
lawfully entitled to receive such surplus.
Section 13. EXPENSES. In addition to any payments of expenses of Agent
pursuant to the Credit Agreement or the other Loan Documents, the Pledgor agrees
to pay promptly to the Agent
5
<PAGE> 6
all the costs and expenses, including reasonable attorneys fees and expenses,
which the Agent may reasonably incur in connection with (a) the custody or
preservation of, or the sale of, collection from, or other realization upon, any
of the Collateral, (b) the exercise or enforcement of any of the rights of the
Agent hereunder, or (c) the failure by the Pledgor to perform or observe any of
the provisions hereof.
Section 14. NO DELAYS; WAIVER, ETC. No delay or failure on the part of
the Agent in exercising, and no course of dealing with respect to, any power or
right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise by the Agent of any power or right hereunder preclude other or
further exercise thereof or the exercise of any other power or right. The
remedies herein provided are to the fullest extent permitted by law cumulative
and are not exclusive of any remedies provided by law.
Section 15. AMENDMENTS, ETC. No amendment, modification, termination or
waiver of any provision of this Agreement, or consent to any departure by the
Pledgor therefrom, shall in any event be effective without the written
concurrence of the Agent.
Section 16. NOTICES. Except as otherwise specifically provided herein,
all notices which are to be sent to the Pledgor or Agent shall be given in
accordance with the Credit Agreement.
Section 17. CONTINUING SECURITY INTEREST; TERMINATION. This Agreement
shall create a continuing security interest in the Collateral and shall (a)
remain in full force and effect until all Secured Obligations (other than
Secured Obligations in the nature of continuing indemnities or expense
reimbursement obligations not yet due and payable) shall have been indefeasibly
paid in full in cash, the commitments or other obligations of the Agent or any
Lender to make any Loan under the Credit Agreement shall have expired and the
Letters of Credit shall have expired, (b) be binding upon Pledgor, its
successors and assigns, and (c) inure to the benefit of the Agent, the Lenders
and their respective successors, transferees and assigns. Without limiting the
generality of the foregoing clause (c) and subject to the provisions of the
Credit Agreement, any Lender may assign or otherwise transfer any Note held by
it to any other person or entity, and such other person or entity shall
thereupon become vested with all the benefits in respect thereof granted to such
Lender herein or otherwise. Upon the indefeasible payment in full in cash of the
Secured Obligations (other than Secured Obligations in the nature of continuing
indemnities or expense reimbursement obligations not yet due and payable) and
the cancellation or expiration of the Letters of Credit and termination or
expiration of all commitments and other obligations of the Agent and any Lender
to make any Loan, Pledgor shall be entitled, subject to the provisions of
SECTION 12 hereof, to the return, upon its request and at its expense, of such
of the Collateral as shall not have been sold or otherwise applied pursuant to
the terms hereof.
Section 18. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED BY,
AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
FLORIDA WITHOUT REGARD TO ANY OTHERWISE APPLICABLE PRINCIPLES OF CONFLICTS OF
LAWS, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY
6
<PAGE> 7
INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
FLORIDA. UNLESS OTHERWISE DEFINED HEREIN OR IN THE CREDIT AGREEMENT, TERMS
DEFINED IN ARTICLE 9 OF THE CODE ARE USED HEREIN AS THEREIN DEFINED.
Section 19. CONSENT TO JURISDICTION. ALL JUDICIAL PROCEEDINGS BROUGHT
AGAINST PLEDGOR WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN ANY STATE OR
FEDERAL COURT SITTING IN THE COUNTY OF BROWARD, STATE OF FLORIDA, UNITED STATES
OF AMERICA AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PLEDGOR ACCEPTS
FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY,
THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO
BE BOUND BY AND JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT
SUBJECT TO RIGHT OF APPEAL. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT
OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE PLEDGOR IN THE COURTS OF ANY
OTHER JURISDICTION.
Section 20. SUCCESSORS AND ASSIGNS. Whenever in this Agreement any of
the parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party and all covenants, promises, and agreements
by or on behalf of the Pledgor or by and on behalf of the Agent shall bind and
inure to the benefit of the successors and assigns of the Pledgor, the Agent and
the Lenders.
Section 21. EXECUTION IN COUNTERPARTS. This Agreement may be executed
in any number of counterparts and by the different parties on separate
counterparts and each such counterpart shall for all purposes be deemed an
original, but all such counterparts shall together constitute but one and the
same Agreement. The Pledgor and the Agent hereby acknowledge receipt of a true,
correct, and complete counterpart of this Agreement.
Section 22. SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such provision and
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 23. HEADINGS. This section headings in this Agreement are
inserted for convenience of reference and shall not be considered a part of this
Agreement or used in its interpretation.
7
<PAGE> 8
IN WITNESS WHEREOF, The Pledgor and the Agent have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
WITNESS: WACKENHUT CORPORATION
- ----------------------
By:
------------------------------------
Name: Terry P. Mayotte
Title: Treasurer
- ----------------------
WITNESS: NATIONSBANK, NATIONAL ASSOCIATION,
as Agent
- ----------------------
By:
-------------------------------------
Name: Johns Ellington
Title: Vice President
- -----------------------
8
<PAGE> 1
Exhibit 4.9
AMENDED AND RESTATED GUARANTY AND SURETYSHIP AGREEMENT
THIS AMENDED AND RESTATED GUARANTY AND SURETYSHIP AGREEMENT, dated as
of December 30, 1997 (the "Guaranty"), is made by EACH OF THE UNDERSIGNED (each
a "Guarantor" and collectively the "Guarantors"), to the parties named in
Section 1 hereof. Except as otherwise defined herein, terms used herein defined
in the Amended and Restated Revolving Credit and Reimbursement Agreement
referred to below shall be used herein as so defined.
W I T N E S S E T H:
WHEREAS, The Wackenhut Corporation, a Florida corporation (the
"Borrower"), the financial institutions party thereto (the "Prior Lenders"), and
NationsBank, National Association, as Agent (in such capacity and together with
any successor agent in such capacity, the "Agent") have heretofore entered into
a Revolving Credit and Reimbursement Agreement dated as of January 5, 1995 (as
at any time amended, modified or restated, the "Prior Credit Agreement"); and
WHEREAS, as a condition to entering into the Prior Credit Agreement,
certain Subsidiaries of the Borrower (the "Prior Guarantors") have heretofore
entered into Guaranty and Suretyship Agreements dated January 5, 1995 (the
"Prior Guarantys") pursuant to which the Prior Guarantors guaranteed the full
and timely payment of all of the Borrower's obligations (as defined in the Prior
Credit Agreement) pursuant to the terms of the Prior Credit Agreement; and
WHEREAS, the Borrower and the Lenders have agreed to amend and restate
the Prior Credit Agreement pursuant to the terms of that certain Amended and
Restated Revolving Credit and Reimbursement Agreement dated as of the date
hereof between the Borrower, the Agent and the Lenders (as from time to time
amended, supplemented or restated, the "Credit Agreement"); and
WHEREAS, each Guarantor is a Subsidiary of the Borrower and has been or
may be provided with advances from the Borrower or other working capital made
available directly or indirectly by the Lenders under the Credit Agreement, and
has thereby materially benefitted or will materially benefit from the loans made
to the Borrower pursuant to the Credit Agreement; and
WHEREAS, pursuant to the terms of the Credit Agreement each Guarantor
is required to deliver this Guaranty;
NOW, THEREFORE, in consideration of the premises, each Guarantor hereby
agrees as follows:
1. GUARANTY AND SURETY. Each Guarantor does hereby jointly, severally,
absolutely,
<PAGE> 2
unconditionally, continually and irrevocably for the benefit of the
Agent and the Lenders (collectively, the "Beneficiaries"), guarantee and become
surety for the full and timely payment when due (whether
by acceleration or otherwise) (including amounts which, but for the operation of
the automatic stay under Section 362(a) of the Bankruptcy Code (or any successor
statute), would become due) of:
A. All Obligations as defined in the Credit Agreement; and
B. all other indebtedness, obligations and liabilities of the Borrower
under written financing arrangements stated by each Guarantor and each of
the Beneficiaries to be guaranteed hereby;
in each case whether direct or indirect, joint or several, absolute or
contingent, liquidated or unliquidated, now or hereafter existing, extended,
renewed, replaced, refinanced or restructured, whether or not from time to time
decreased or extinguished and later increased, created or incurred (all
indebtedness, obligations and liabilities of the Borrower described in this
SECTION 1 are collectively referred to as the "Guarantied Obligations");
PROVIDED, HOWEVER, that the liability of the Guarantor with respect to the
Guarantied Obligations shall not exceed at any time the Maximum Amount (as
hereinafter defined). The "Maximum Amount" means the greater of (X) the
aggregate amount of all advances to or investments in the Guarantor made
directly or indirectly with the proceeds of Loans under the Credit Agreement or
(Y) 95% of (a) the fair salable value of the assets of such Guarantor as of the
date hereof minus (b) the total liabilities of such Guarantor (including
contingent liabilities, but excluding liabilities of such Guarantor under this
Guaranty and the other Loan Documents executed by such Guarantor) as of the date
hereof; PROVIDED FURTHER, HOWEVER, that if the calculation of the Maximum Amount
in the manner provided above as of the date payment is required of such
Guarantor pursuant to this Guaranty would result in a greater positive number,
then the Maximum Amount shall be deemed to be such greater positive number.
1. GUARANTY OF PAYMENT. This is a guaranty of payment and not merely of
collection. In the event of any default by the original obligor in payment or
otherwise on any of the Guarantied Obligations, each Guarantor will pay all or
any portion of the Guarantied Obligations due or thereafter becoming due,
whether by acceleration or otherwise, without offset of any kind whatsoever,
without any Beneficiary first being required to make demand upon the original
obligor or pursue any of its rights against the original obligor, or against any
other Person, including other guarantors (whether or not party to this
Guaranty); and without being required to liquidate or to realize on any
collateral security. In any right of action accruing to any Beneficiary, such
Beneficiary may elect to proceed against (a) any Guarantor together with the
original obligor or obligors; (b) any Guarantor and the original obligor or
obligors individually; or (c) any Guarantor only without having first commenced
any action against the original obligor or obligors.
2. RIGHT TO DEAL WITH GUARANTIED OBLIGATIONS. Subject to the terms and
conditions of the Credit Agreement, any Beneficiary, without notice to any
Guarantor, may deal
2
<PAGE> 3
with any Guarantied Obligations and any collateral security therefor in such
manner as it may deem advisable and may renew or extend the Guarantied
Obligations or any part thereof; accept partial payment, or settle, release,
compound, or compromise the same; demand additional collateral security
therefor, and substitute or release the same; and may compromise or settle with
or release and discharge from liability any other guarantor of any Guarantied
Obligation, or any other Person liable to such Beneficiary for all or any
portion of the obligations of any original obligor; all without impairing the
liability of the Guarantor hereunder.
3. OTHER WAIVERS. Each Guarantor hereby unconditionally waives with
respect to this Guaranty: (a) notice of acceptance of this Guaranty by any
Beneficiary and any notice of the incurring by the Borrower of any Guarantied
Obligation; (b) presentment for payment, protest, notice of protest and notice
of dishonor to any party including the Borrower or any Guarantor; (c) any
disability of the original obligor or obligors or defense available to the
original obligor or obligors, including absence or cessation of any original
obligor's liability for any reason whatsoever; (d) any defense or circumstances
which might otherwise constitute a legal or equitable discharge of a guarantor
or surety; and (e) all rights under any state or federal statute dealing with or
affecting the rights of creditors.
4. SUBORDINATION. Until the Guarantied Obligations are paid in full and
no Beneficiary is under any further obligation to lend or extend funds or credit
which would constitute Guarantied Obligations, each Guarantor hereby
unconditionally subordinates all present and future debts, liabilities or
obligations of the original obligor to such Guarantor to the Guarantied
Obligations, and all amounts due under such debts, liabilities, or obligations
shall, upon the occurrence and during the continuance of an Event of Default, be
collected and paid over forthwith to the Beneficiaries on account of the
Guarantied Obligations and, pending such payment, shall be held by such
Guarantor as agent and bailee of the Beneficiaries separate and apart from all
other funds, property and accounts of such Guarantor. Each Guarantor, at the
request of any Beneficiary, shall execute such further documents in favor of
such Beneficiary to further evidence and support the purpose of this SECTION 4.
Each Guarantor hereby irrevocably waives and releases any right or rights of
subrogation or contribution existing at law, by contract or otherwise to recover
all or any portion of any payment made hereunder from the Borrower or any other
guarantor.
5. REPRESENTATIONS AND WARRANTIES. Each Guarantor represents and
warrants to the Beneficiaries that: (a) no other agreement, representation or
special condition exists between the Guarantor and any Beneficiary regarding the
liability of the Guarantor under this Guaranty; nor does any understanding exist
between the Guarantor and any Beneficiary that the obligations of the Guarantor
under this Guaranty are or will be other than as set out herein; and (b) as of
the date hereof, the Guarantor has no defense whatsoever to any action or
proceeding that may be brought to enforce this Guaranty. Furthermore, each
Guarantor affirms to the Beneficiaries that each of the representations and
warranties contained in the Credit Agreement and made by the Borrower with
respect to the Guarantor is true and correct.
6. NO WAIVER BY BENEFICIARIES. No failure or delay on the part of any
Beneficiary
3
<PAGE> 4
in exercising any right, power or privilege hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof, or the
exercise of any other right, power or privilege. Failure by any Beneficiary to
insist upon strict performance hereof shall not constitute a relinquishment of
its right to demand strict performance at another time. Receipt by any
Beneficiary of any payment by any person on any Guarantied Obligation, with
knowledge of a default on any Guarantied Obligation or of a breach of this
Guaranty, or both, shall not be construed as a waiver of the default or breach.
7. CONTINUING GUARANTY; TERMINATION. THIS GUARANTY IS A CONTINUING
GUARANTY AND SHALL CONTINUE IN FULL FORCE AND EFFECT UNTIL SUCH TIME AS ALL
GUARANTIED OBLIGATIONS SHALL HAVE BEEN INDEFEASIBLY PAID IN FULL (OTHER THAN
GUARANTIED OBLIGATIONS IN THE NATURE OF CONTINUING INDEMNITIES OR EXPENSE
REIMBURSEMENT OBLIGATIONS NOT YET DUE AND PAYABLE) AND NO BENEFICIARY SHALL BE
UNDER ANY FURTHER OBLIGATION TO LEND OR TO ADVANCE FUNDS TO THE ACCOUNT OF THE
BORROWER CONSTITUTING GUARANTIED OBLIGATIONS.
8. BENEFITS OF AGREEMENT. This Guaranty is freely assignable and
transferable by the Beneficiaries to any permitted assignee and transferee of
any Guarantied Obligation; however, the duties and obligations of the Guarantor
may not be delegated or transferred by the Guarantor without the written consent
of all Beneficiaries. The rights and privileges of the Beneficiaries shall inure
to the benefit of their respective successors and assigns, and the duties and
obligations of the Guarantors shall bind their respective successors and
assigns.
9. EXPENSES; INDEMNITY. Each Guarantor will upon demand pay to each
Beneficiary the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and of any experts and agents, which
it may reasonably incur in connection with enforcement of this Guaranty or the
failure by any Guarantor to perform or observe any of the provisions hereof.
Each Guarantor agrees to indemnify and hold harmless each Beneficiary from and
against any and all claims, demands, losses, judgments and liabilities
(including liabilities for penalties) of whatsoever kind or nature, growing out
of or resulting from this Guaranty or the exercise by any Beneficiary of any
right or remedy granted to it hereunder or under the other Loan Documents, other
than such items arising out of the bad faith, gross negligence or willful
misconduct on the part of such Beneficiary or an officer, co-officer, director,
co-director, employee, co-employee, agent or co-agent thereof or breach of this
Agreement by such Beneficiary or an officer, co-officer, director, co-director,
employee, co-employee, agent or co-agent thereof. If and to the extent that the
obligations of any Guarantor under this SECTION 9 are unenforceable for any
reason, each Guarantor hereby agree to make the maximum contribution to the
payment and satisfaction of such obligations which is permissible under
applicable law.
10. AMENDMENTS, WAIVERS AND CONSENTS. No amendment or waiver of any
provision of this Guaranty or consent to any departure by any Guarantor herefrom
shall in any
4
<PAGE> 5
event be effective unless the same shall be in writing and signed by such
Guarantor and the Agent (which execution by the Agent shall be evidence that the
Agent has received the consent thereto of the Lenders required to effect such
amendment or waiver), and then such amendment, waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, that no such amendment, waiver or consent shall (a) deprive any
Beneficiary of the benefits generally of this Guaranty without the written
consent of such Beneficiary, or (b) alter the provisions of this SECTION 10
without the written consent of all of the Beneficiaries.
11. ADDRESSES FOR NOTICES. All notices and other communications
provided for hereunder shall be in writing (including telefacsimile
communication) and shall be sent by registered or certified mail, return receipt
requested, or first class express mail or overnight courier, or by
telefacsimile, in all cases with charges prepaid, and shall be effective when
delivered against a receipt therefor or when telefacsimile transmission is
confirmed, as the case may be. All notices shall be sent to the applicable party
at the address stated on the signature page hereof or in accordance with the
last unrevoked written direction from such party to the other parties hereto.
12. INTERPRETATION; PARTIAL INVALIDITY. Whenever possible each
provision of this Guaranty shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Guaranty
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Guaranty.
13. MISCELLANEOUS; REMEDIES CUMULATIVE. Unless the context of this
Guaranty otherwise clearly requires, references to the plural include the
singular, the singular the plural and the part the whole and "or" has the
inclusive meaning represented by the phrase "and/or." The section headings used
herein are for convenience of reference only and shall not define, limit or
extend the provisions of this Guaranty. All remedies hereunder are cumulative
and are not exclusive of any other rights and remedies of the Beneficiaries
provided by law or under the Credit Agreement, the other Loan Documents, or
other applicable agreements or instruments. The making of the Loans to the
Borrower and the issuance of Letters of Credit pursuant to the Credit Agreement
shall be presumed conclusively to have been made, extended or issued,
respectively, in reliance upon the obligations of the Guarantors incurred
pursuant to this Guaranty.
14. GOVERNING LAW. This Guaranty shall in all respects be governed by
the internal substantive laws of the State of Florida without regard to its
choice of law principles. Each Guarantor 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 the purpose of collection and (ii) to the maximum extent
permitted by applicable law, waives trial by jury in connection with any such
litigation.
15. REPAYMENT OR RECOVERY. If claim is ever made upon any Beneficiary
for repayment or recovery of any amount or amounts received in payment or on
account of any of the Guarantied Obligations and any of the Beneficiaries repays
all or part of said amount by
5
<PAGE> 6
reason of (a) any judgment, decree or order of any court or administrative body
having jurisdiction over such payee or any of its property, or (b) any
settlement or compromise of any such claim effected by such Beneficiary with any
such claimant (including the original obligor), then and in such event each
Guarantor agrees that any such judgment, decree, order, settlement or compromise
shall be binding upon it, notwithstanding any revocation hereof or the
cancellation of any Note or other instrument evidencing any Guarantied
Obligation or any security therefor, and each Guarantor shall be and remain
liable to the aforesaid Beneficiary for the amount so repaid or recovered to the
same extent as if such amount had never originally been received by any such
Beneficiary.
16. SET-OFF. In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence and during the continuance of an Event of Default (as defined in the
Credit Agreement), each Guarantor agrees that each Beneficiary shall have a lien
for all the liabilities of each Guarantor upon all deposits or deposit accounts,
of any kind, or any interest in any deposits or deposit accounts thereof, now or
hereafter pledged, mortgaged, transferred or assigned to such Beneficiary or
otherwise in the possession or control of such Beneficiary (other than for
safekeeping) for any purpose for the account or benefit of such Guarantor and
including any balance of any deposit account or of any credit of such Guarantor
with such Beneficiary, whether now existing or hereafter established, hereby
authorizing each Beneficiary at any time or times with or without prior notice
to apply such balances or any part thereof to such of the liabilities of such
Guarantor to such Beneficiary then past due and in such amounts as they may
elect, and whether or not the collateral or the responsibility of other Persons
primarily, secondarily or otherwise liable may be deemed adequate. For the
purposes of this SECTION 16, all remittances and property shall be deemed to be
in the possession of such Beneficiary as soon as the same may be put in transit
to it by mail or carrier or by other bailee.
17. CREDIT AGREEMENT CONTROLS. In the event that any term of this
Guaranty or of any other Loan Document (other than the Credit Agreement)
conflicts with any term of the Credit Agreement, then the term of the Credit
Agreement shall control.
[Remainder of page intentionally left blank]
6
<PAGE> 7
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be duly
executed and delivered by its officers hereunto duly authorized as of the date
first above written.
AMERICAN GUARD AND ALERT,
INCORPORATED
DIVERSIFIED CORRECTIONAL SERVICES,
INCORPORATED
TITANIA ADVERTISING, INCORPORATED
TITANIA INSURANCE COMPANY OF
AMERICA
TUHNEKCAW, INC.
WACKENHUT AIRLINE SERVICES, INC.
WACKENHUT EDUCATIONAL SERVICES, INC.
WACKENHUT FINANCIAL, INC.
WACKENHUT INTERNATIONAL, INCORPORATED
WACKENHUT OF NEVADA, INC.
WACKENHUT PUERTO RICO, INC.
WACKENHUT SERVICES, INCORPORATED
WACKENHUT SERVICES LIMITED
LIABILITY COMPANY
WACKENHUT SPORTS SECURITY, INC.
WACKENHUT RESOURCES, INCORPORATED
KING STAFFING, INC.
SOUTHEASTERN RESOURCES, INC.
WORKFORCE ALTERNATIVE, INC.
KING TEMPORARY STAFFING, INC.
WRI II, INC.
PROFESSIONAL EMPLOYEE MANAGEMENT, INC.
WITNESS:
- ----------------------- By:
---------------------------------------
Name: Terry P. Mayotte
Title: Treasurer
- -----------------------
Address: The Wackenhut Corporation
4200 Wackenhut Drive, Suite 100
Palm Beach Gardens, Florida 33410
Telephone No. (305) 666-5656
Telefacsimile No. (305) 662-7366
Signature Page 1 of 2
<PAGE> 8
NATIONSBANK, NATIONAL ASSOCIATION,
AS AGENT FOR THE LENDERS
WITNESS:
- --------------------------- By:
-------------------------------
Name: Johns Ellington
Title: Vice President
- ---------------------------
Signature Page 2 of 2
<PAGE> 1
Exhibit 10.1
DEFERRED COMPENSATION AGREEMENT
THE WACKENHUT CORPORATION, a Florida corporation (Company) and Richard
R. Wackenhut (Executive) hereby agree as follows:
1. EMPLOYMENT. Company will employ Executive as Senior Vice President or in
such other positions as may be determined from time to time by the Board of
Directors of Company and at such rate of compensation as may be so determined.
Executive will devote his full energy, skill and best efforts to the affairs of
Company on a full-time basis. It is contemplated that such employment will
continue until November 11, 2007 (Executive's Retirement Date), but
nevertheless either Company or Executive may terminate Executive's employment
at any time and for any reason upon sixty (60) days written notice to the other.
2. RETIREMENT. In the event Executive's employment continues until his
Retirement Date it shall thereupon terminate and, commencing with the first
month after Executive actually retires, Company will pay executive $8,333.00
monthly for two hundred for (240) months.
3. TERMINATION OF EMPLOYMENT. A. If Executive terminates his employment with
Company, or if Company terminates Executive's employment for "Cause" as defined
in subsection C. below, prior to Executive's Retirement Date, Company will pay
Executive monthly, commencing with the first month after Executive's Retirement
Date and continuing for two hundred forty (240) months, an amount calculated by
multiplying the monthly amount payable at retirement specified in Section 2
above by a fraction the numerator of which is the sum of the number of full
years between the date of this Agreement and the date of termination of
employment, and the denominator of which is the number four (4); provided
however, in no event shall the amount paid per month exceed the amount payable
under Section 2 of this Agreement. In the sole discretion of the Board of
Directors of Company, periods of time during which Executive may be disabled may
be treated as time of employment for purposes of this computation.
B. If Company terminates Executive's employment for any reason other
than "Cause" as defined in subsection C. below, prior to Executive's Retirement
Date, Company will pay Executive monthly, commencing with the first month after
Executive's Retirement Date and continuing for two hundred forty (240) months,
an amount calculated by multiplying the monthly amount payable at retirement
specified in Section 2 by a fraction the numerator of which is the sum of the
number of full years between the date of this Agreement and the date of
termination of employment plus one, and the denominator of which is the number
four (4); provided however, in no event shall the amount paid per month exceed
the amount payable under Section 2 of this Agreement. In the sole discretion of
the Board of Directors of Company, periods of time during which Executive may be
disabled may be treated as time of employment for purposes of this computation.
<PAGE> 2
C. For purposes of this Agreement, termination for "Cause" is defined
to mean gross or willful misconduct on the part of Executive in the performance
of his duties as an employee of Company as determined by the Board of Directors
of Company.
4. DEATH. If Executive dies before his Retirement Date and before termination of
his employment with Company, Company shall pay Executive's named beneficiary
(designated in Section 6 of this Agreement and hereinafter referred to as
Beneficiary) a monthly amount of $8,333.00 commencing with the first month
following death and continuing for one hundred twenty (120) months thereafter.
In the case of death of Executive after termination of employment with Company,
but before his Retirement Date, the Company shall pay to Beneficiary the lesser
of a) a monthly amount determined by multiplying $8,333.00 by the applicable
fraction from either subsections 3.A. or 3.B. of this Agreement, or b)
8,333.00, commencing with the first month following death and continuing for
one hundred and twenty (120) months thereafter. If Executive dies within two
hundred forty (240) months following his Retirement Date and while receiving
payments hereunder, Company shall pay Beneficiary the payments which would have
been made to Executive had he lived for the balance of said two hundred forty
(240) month period. If Executive shall die by suicide prior to January 1, 1987,
whether sane or insane, no payments shall be made by the Company. If the
Executive shall die by suicide after December 31, 1986, the Company shall make
such payments as would be required by this Agreement had Executive died at that
time other than by suicide.
5. SMALL AMOUNTS. In the event the amount of any monthly payments provided
herein shall be less than Twenty ($20) Dollars, the Company in its sole
discretion may in lieu thereof pay the commuted value of such payments
(calculated on the basis of the interest rate and mortality assumptions being
used by The Northwestern Mutual Life Insurance Company of Milwaukee, Wisconsin,
to calculate immediate annuity rates on the date of this Agreement) to the
person entitled to such payments.
6. BENEFICIARY. The Beneficiary (or Beneficiaries) of any payments to be made
after Executive's death, shall be as designated by Executive and shown on
attached Exhibit A or such other person or persons as Executive shall designate
in writing to Company. If no effective designation of Beneficiaries has been
made by Executive, any such payments shall be made to Executive's estate.
7. RESTRICTIONS. Executive shall not at any time, either directly or indirectly,
accept employment with, render service, assistance or advice to, or allow his
name to be used by any competitor of the Company unless approved by the Board of
Directors of the Company. Determination by the Board of Directors of the Company
that Executive has engaged in any such activity shall be binding and conclusive
on all parties, and in addition to all other rights and remedies which Company
shall have, neither Executive nor Beneficiary shall be entitled to any payments
hereunder.
8. INSURANCE. If Company shall elect to purchase a life insurance contract to
provide Company with funds to make payments hereunder, Company shall at all
times be the sole and complete Owner and beneficiary of such contract, and shall
have the unrestricted right to use all amounts and exercise all options and
privileges thereunder without knowledge or consent of Executive or beneficiary
or any other
<PAGE> 3
person, it being expressly agreed that neither Executive nor Beneficiary nor any
other person shall have any right, title or interest whatsoever in or to any
such contract.
9. SOURCE OF PAYMENTS. Executive, Beneficiary and any other person or persons
having or claiming a right to payments hereunder or to any interest in this
Agreement shall rely solely on the unsecured promise of Company set forth
herein, and nothing in this Agreement shall be construed to give Executive,
Beneficiary or any other person or persons any right, title, interest or claim
in or to any specific asset, fund, reserve, account or property of any kind
whatsoever owned by Company or in which it may have any right, title or interest
now or in the future, but Executive shall have the right to enforce his claim
against Company in the same manner as any unsecured creditor.
10. AMENDMENT. This Agreement may be amended at any time or from time to time by
written agreement of the parties.
11. ASSIGNMENT. Neither Executive, nor Beneficiary, nor any other person
entitled to payments hereunder shall have power to transfer, assign, anticipate,
mortgage or otherwise encumber in advance any of such payments, nor shall such
payments be subject to seizure for the payment of public or private debts,
judgments, alimony or separate maintenance, or be transferable by operation of
law in event of bankruptcy, insolvency or otherwise.
12. BINDING EFFECT. This Agreement shall be binding upon the parties hereto,
their heirs, executors, administrators, successors and assigns. The
Company agrees it will not be a party to any merger, consolidation or
reorganization, unless and until its obligations hereunder shall be expressly
assumed by its successor or successors.
IN WITNESS WHEREOF the parties have executed this Agreement effective the
29th day of December, 1985.
(Executive) (Company)
THE WACKENHUT CORPORATION
/s/ Richard R. Wackenhut By: /s/ George R. Wackenhut
-------------------------- -------------------------
Richard R. Wackenhut President
Attest: /s/ J. P. Rowan
----------------------
(CORPORATE SEAL)
<PAGE> 4
DEFERRED COMPENSATION AGREEMENT
THE WACKENHUT CORPORATION, a Florida corporation (Company) and Alan B.
Bernstein (Executive) hereby agree as follows:
1. EMPLOYMENT. Company will employ Executive as Senior Vice President or in such
other positions as may be determined from time to time by the Board of Directors
of Company and at such rate of compensation as may be so determined. Executive
will devote his full energy, skill and best efforts to the affairs of Company on
a full-time basis. It is contemplated that such employment will continue until
April 22, 2007, (Executive's Retirement Date), but nevertheless either Company
or Executive may terminate Executive's employment at any time and for any reason
upon sixty (60) days written notice to the other.
2. RETIREMENT. In the event Executive's employment continues until his
Retirement Date it shall thereupon terminate and, commencing with the first
month after Executive actually retires, Company will pay Executive $8,333.00
monthly for two hundred forty (240) months. See Section 10 of this Agreement
concerning the right of Company to decrease the monthly amounts herein provided.
3. TERMINATION OF EMPLOYMENT. A. If Executive terminates his employment with
Company, or if Company terminates Executive's employment for "Cause" as defined
in subsection C. below, prior to Executive's Retirement Date, Company will pay
Executive monthly, commencing with the first month after Executive's Retirement
Date and continuing for two hundred forty (240) months, an amount calculated by
multiplying the monthly amount payable at retirement specified in Section 2
above by a fraction the numerator of which is the sum of the number of full
years between the date of this Agreement and the date of termination of
employment, and the denominator of which is the number four (4); provided
however, in no event shall the amount paid per month exceed the amount payable
under Section 2 of this Agreement. In the sole discretion of the Board of
Directors of Company, periods of time during which Executive may be disabled may
be treated as time of employment for purposes of this computation.
B. If Company terminates Executive's employment for any reason other
than "Cause" as defined in subsection C. below, prior to Executive's Retirement
Date, Company will pay Executive monthly, commencing with the first month after
Executive's Retirement Date and continuing for two-hundred forty (240) months,
an amount calculated by multiplying the monthly amount payable at retirement
specified in Section 2 by a fraction the numerator of which is the sum of the
number of full years between the date of this Agreement and the date of
termination of employment plus one, and the denominator of which is the number
four (4); provided however, in no event shall the amount paid per month exceed
the amount payable under Section 2 of this Agreement. In the sole discretion of
the Board of Directors of Company, periods of time during which Executive may be
disabled may be treated as time of employment for purposes of this computation.
<PAGE> 5
C. For purposes of this Agreement, termination for "Cause" is defined to
mean gross or willful misconduct on the part of Executive in the performance of
his duties as an employee of Company as determined by the Board of Directors of
Company.
4. DEATH. If Executive dies before his Retirement Date and before termination of
his employment with Company, Company shall pay Executive's named beneficiary
(designated in Section 6 of this Agreement and hereinafter referred to as
Beneficiary) a monthly amount of $8,333.00 commencing with the first month
following death and continuing for one hundred twenty (120) months thereafter.
In the case of death of Executive after termination of employment with Company,
but before his Retirement Date, the Company shall pay to Beneficiary the lesser
of a) a monthly amount determined by multiplying $8,333.00 by the applicable
fraction from either subsections 3.A. or 3.B. of this Agreement, or b) 8,333.00,
commencing with the first month following death and continuing for one hundred
and twenty (120) months thereafter. If Executive dies within two hundred forty
(240) months following his Retirement Date and while receiving payments
hereunder, Company shall pay Beneficiary the payments which would have been
made to Executive had he lived for the balance of said two hundred forty (240)
month period. If Executive shall die by suicide prior to July 1, 1987,
whether sane or insane, no payments shall be made by the Company. If the
Executive shall die by suicide after June 30, 1987, the Company shall make
such payments as would be required by this Agreement had Executive died at that
time other than by suicide. See Section 10 of this Agreement concerning the
right of Company to decrease the monthly amounts herein provided.
5. SMALL AMOUNTS. In the event the amount of any monthly payments provided
herein shall be less than Twenty ($20) Dollars, the Company in its sole
discretion may in lieu thereof pay the commuted value of such payments
(calculated on the basis of the interest rate and mortality assumptions being
used by The Northwestern Mutual Life Insurance Company of Milwaukee, Wisconsin,
to calculate immediate annuity rates on the date of this Agreement) to the
person entitled to such payments.
6. BENEFICIARY. The Beneficiary (or Beneficiaries) of any payments to be made
after Executive's death, shall be as designated by Executive and shown on
attached Exhibit A or such other person or persons as Executive shall designate
in writing to Company. If no effective designation of Beneficiaries has been
made by Executive, any such payments shall be made to Executive's estate.
7. RESTRICTIONS. Executive shall not at any time, either directly or indirectly,
accept employment with, render service, assistance or advice to, or allow his
name to be used by any competitor of the Company unless approved by the Board of
Directors of the Company. Determination by the Board of Directors of the Company
that Executive has engaged in any such activity shall be binding and conclusive
on all parties, and in addition to all other rights and remedies which Company
shall have, neither Executive nor Beneficiary shall be entitled to any payments
hereunder.
<PAGE> 6
IN WITNESS WHEREOF the parties have executed this Agreement effective
the 29th day of December, 1985.
(Executive) (Company)
THE WACKENHUT CORPORATION
/s/ Alan B. Bernstein By: /s/ Richard R. Wackenhut
- ------------------------------ -------------------------------
Alan B. Bernstein President
Attest: /s/ J.P. Rowan
--------------------------
(CORPORATE SEAL)
<PAGE> 7
DEFERRED COMPENSATION AGREEMENT
THE WACKENHUT CORPORATION, a Florida corporation (Company) and
Fernando Carrizosa (Executive) hereby agree as follows:
1. EMPLOYMENT. Company will employ Executive as Senior Vice President
or in such other positions as may be determined from to time by the
Board of Directors of Company and at such rate of compensation as may be
so determined. Executive will devote his full energy, skill and best
efforts to the affairs of Company on a full-time basis. It is
contemplated that such employment will continue until September 30, 2003,
(Executive's Retirement Date), but nevertheless either Company or
Executive may terminate Executive's employment at any time and for any
reason upon sixty (60) days written notice to the other.
2. RETIREMENT. In the event Executive's employment continues until
his Retirement Date it shall thereupon terminate and, commencing with
the first month after Executive actually retires, Company will pay
Executive $4,166.00 monthly for two hundred forty (240) months.
3. TERMINATION OF EMPLOYMENT. A. If Executive terminates his employment with
Company, or if Company terminates Executive's employment prior to Executive's
Retirement Date but after March 30, 1994 Company will pay Executive monthly,
commencing with the first month after Executive's Retirement Date and continuing
for two hundred forty (240) months, an amount calculated by multiplying the
monthly amount payable at retirement specified in Section 2 above by a fraction
the numerator of which is the sum of the number of full years between the date
of this Agreement and the date of termination of employment, and the denominator
of which is the number ten (10); provided however, in no event shall the amount
paid per month exceed the amount payable under Section 2 of this Agreement. In
the sole discretion of the Board of Directors of Company, periods of time during
which Executive may be disabled may be treated as time of employment for
purposes of this computation.
B. If Executive terminates his employment with Company prior to
March 30, 1994, or if Company terminates Executive's employment for any
reason prior to March 30, 1994, Executive shall receive no payments
whatsoever under this Agreement.
4. DEATH. If Executive dies before his Retirement Date and before termination
of his employment with Company, Company shall pay Executive's named beneficiary
(designated as provided in Section 6 of this Agreement and hereinafter referred
to as Beneficiary) a monthly amount of $4,166.00 commencing with the first month
following death and continuing for one hundred twenty (120) months thereafter.
In the case of death of
1
<PAGE> 8
Executive after termination of employment with Company, but before his
Retirement Date, the Company shall pay to Beneficiary the lesser of a) a monthly
amount determined by multiplying $4,166.00 by the fraction determined from
subsection 3.A. of this Agreement, or b) $4,166.00, commencing with the first
month following death and continuing for one hundred and twenty (120) months
thereafter. If Executive dies within two hundred forty (240) months following
his Retirement Date and while receiving payments hereunder, Company shall pay
Beneficiary the payments which would have been made to Executive had he lived
for the balance of said two hundred forty (240) month period. If Executive shall
die by suicide prior to July 1, 1990, whether sane or insane, no payments shall
be made by the Company. If the Executive shall die by suicide after June 30,
1990 the Company shall make such payments as would be required by this Agreement
had Executive died at that time other than by suicide.
5. SMALL AMOUNTS. In the event the amount of any monthly payments provided
herein shall be less than Twenty ($20) Dollars, the Company in its sole
discretion may in lieu thereof pay the commuted value of such payments
(calculated on the basis of the interest rate and mortality assumptions being
used by The Northwestern Mutual Life Insurance Company of Milwaukee,
Wisconsin, to calculate immediate annuity rates on the date of this Agreement)
to the person entitled to such payments.
6. BENEFICIARY. The Beneficiary (or Beneficiaries) of any payments to be
made after Executive's death, shall be as designated by Executive and shown on
attached Exhibit A or such other person or persons as Executive shall designate
in writing to Company. If no effective designation of Beneficiaries has been
made by Executive, any such payments shall be made to Executive's estate.
7. RESTRICTIONS. Executive shall not at any time, either directly or
indirectly, accept employment with, render service, assistance or advice to,
or allow his name to be used by any competitor of the Company unless approved
by the Board of Directors of the Company. Determination by the Board of
Directors of the Company that Executive has engaged in any such activity shall
be binding and conclusive on all parties, and in addition to all other rights
and remedies which Company shall have, neither Executive nor Beneficiary shall
be entitled to any payments hereunder.
8. INSURANCE. If Company shall elect to purchase a life insurance contract to
provide Company with funds to make payments hereunder, Company shall at all
times be the sole and complete Owner and beneficiary of such contract, and
shall have the unrestricted right to use all amounts and exercise all options
and privileges thereunder without knowledge or consent of Executive or
Beneficiary or any other person, it being expressly agreed that neither
Executive nor Beneficiary nor any other person shall have any right, title or
interest whatsoever in or to any such contract.
2
<PAGE> 9
9. SOURCE OF PAYMENTS. Executive, Beneficiary and any other person or
persons having or claiming a right to payments hereunder or to any
interest in this Agreement shall rely solely on the unsecured promise of
Company set forth herein, and nothing in this Agreement shall be
construed to give Executive, Beneficiary or any other person or persons
any right, title, interest or claim in or to any specific asset, fund,
reserve, account or property of any kind whatsoever owned by Company or
in which it may have any right, title or interest now or in the future,
but Executive shall have the right to enforce his claim against Company
in the same manner as an unsecured creditor.
10. AMENDMENT. This Agreement may be amended at any time or from
time to time written agreement of the parties.
11. ASSIGNMENT. Neither Executive, nor Beneficiary, nor any other
person entitled to payments hereunder shall have power to transfer,
assign, anticipate, mortgage or otherwise encumber in advance any of
such payments, nor shall such payments be subject to seizure for the
payment of public or private debts, judgments, alimony or separate
maintenance, or be transferable by operation of law in event of
bankruptcy, insolvency or otherwise.
12. BINDING EFFECT. This Agreement shall be binding upon the parties
hereto, their heirs, executors, administrators, successors and assigns.
The Company agrees it will not be a party to any merger, consolidation
or reorganization, unless and until its obligations hereunder shall be
expressly assumed by its successor or successors.
IN WITNESS WHEREOF the parties have executed this Agreement
effective the 30th day of March, 1989.
(Executive) (Company)
THE WACKENHUT CORPORATION
/s/ Fernando Carrizosa By: /s/ Richard R. Wackenhut
--------------------------- ----------------------------
Fernando Carrizosa President
Attest: /s/ J.P. Rowan
-----------------------
(CORPORATE SEAL)
3
<PAGE> 10
DEFERRED COMPENSATION AGREEMENT
THE WACKENHUT CORPORATION, a Florida corporation (Company) and Robert
C. Kneip (Executive) hereby agree as follows:
1. EMPLOYMENT. Company will employ Executive as Senior Vice President or in
such other positions as may be determined from time to time by the Board of
Directors of Company and at such rate of compensation as may be so determined.
Executive will devote his full energy, skill and best efforts to the affairs of
Company on a full-time basis. It is contemplated that such employment will
continue until March 8, 2008, (Executive's Retirement Date), but nevertheless
either Company or Executive may terminate Executive's employment at any time
and for any reason upon sixty (60) days written notice to the other.
2. RETIREMENT. In the event Executive's employment continues until his
Retirement Date it shall thereupon terminate and, commencing with the first
month after Executive actually retires, Company will pay Executive $4,166.00
monthly for two hundred forty (240) months.
3. TERMINATION OF EMPLOYMENT. A. If Executive terminates his employment with
Company, or if Company terminates Executive's employment prior to Executive's
Retirement Date but after April 29, 1993, Company will pay Executive monthly,
commencing with the first month after Executive's Retirement Date and
continuing for two hundred forty (240) months, an amount calculated by
multiplying the monthly amount payable at retirement specified in Section 2
above by a fraction the numerator of which is the sum of the number of full
years between the date of this Agreement and the date of termination of
employment, and the denominator of which is the number ten (10); provided
however, in no event shall the amount paid per month exceed the amount payable
under Section 2 of this Agreement. In the sole discretion of the Board of
Directors of Company, periods of time during which Executive may be disabled
may be treated as time of employment for purposes of this computation.
B. If Executive terminates his employment with Company prior to April
30, 1993, or if Company terminates Executive's employment for any reason prior
to April 30, 1993, Executive shall receive no payments whatsoever under this
Agreement.
4. DEATH. If Executive dies before his Retirement Date and before termination
of his employment with Company, Company shall pay Executive's named beneficiary
(designated as provided in Section 6 of this Agreement and hereinafter referred
to as Beneficiary) a monthly amount of $4,166.00 commencing with the first
month following death and continuing for one hundred twenty (120) months
thereafter. In the case of death of
1
<PAGE> 11
Executive after termination of employment with Company, but before his
Retirement Date, the Company shall pay to Beneficiary the lesser of a) a
monthly amount determined by multiplying $4,166.00 by the fraction
determined from subsection 3.A. of this Agreement, or b) $4,166.00,
commencing with the first month following death and continuing for one
hundred and twenty (120) months thereafter. If Executive dies within two
hundred forty (240) months following his Retirement Date and while
receiving payments hereunder, Company shall pay Beneficiary the payments
which would have been made to Executive had he lived for the balance of
said two hundred forty (240) month period. If Executive shall die by
suicide prior to June 1, 1989, whether sane or insane, no payments shall
be made by the Company. If the Executive shall die by suicide after
May 31, 1989 the Company shall make such payments as would be required by
this Agreement had Executive died at that time other than by suicide.
5. SMALL AMOUNTS. In the event the amount of any monthly payments
provided herein shall be less than Twenty ($20) Dollars, the Company in
its sole discretion may in lieu thereof pay the commuted value of such
payments (calculated on the basis of the interest rate and mortality
assumptions being used by The Northwestern Mutual Life Insurance Company
of Milwaukee, Wisconsin, to calculate immediate annuity rates on the
date of this Agreement) to the person entitled to such payments.
6. BENEFICIARY. The Beneficiary (or Beneficiaries) of any payments
to be made after Executive's death, shall be as designated by Executive
and shown on attached Exhibit A or such other person or persons as
Executive shall designate in writing to Company. If no effective
designation of Beneficiaries has been made by Executive, any such
payments shall be made to Executive's estate.
7. RESTRICTIONS. Executive shall not at any time, either directly or
indirectly, accept employment with, render service, assistance or advice
to, or allow his name to be used by any competitor of the Company unless
approved by the Board of Directors of the Company. Determination by the
Board of Directors of the Company that Executive has engaged in any such
activity shall be binding and conclusive on all parties, and in addition
to all other rights and remedies which Company shall have, neither
Executive nor Beneficiary shall be entitled to any payments hereunder.
8. INSURANCE. If Company shall elect to purchase a life insurance
contract to provide Company with funds to make payments hereunder,
Company shall at all times be the sole and complete Owner and
beneficiary of such contract, and shall have the unrestricted right to
use all amounts and exercise all options and privileges thereunder
without knowledge or consent of Executive or Beneficiary or any other
person, it being expressly agreed that neither Executive nor Beneficiary
nor any other person shall have any right, title or interest whatsoever
in or to any such contract.
2
<PAGE> 12
9. SOURCE OF PAYMENTS. Executive, Beneficiary and any other person or persons
having or claiming a right to payments hereunder or to any interest in this
Agreement shall rely solely on the unsecured promise of Company set forth
herein, and nothing in this Agreement shall be construed to give Executive,
Beneficiary or any other person or persons any right, title, interest or claim
in or to any specific asset, fund, reserve, account or property of any kind
whatsoever owned by Company or in which it may have any right, title or interest
now or in the future, but Executive shall have the right to enforce his claim
against Company in the same manner as any unsecured creditor.
10. AMENDMENT. This Agreement may be amended at any time or from time to time
by written agreement of the parties.
11. ASSIGNMENT. Neither Executive, nor Beneficiary, nor any other person
entitled to payments hereunder shall have power to transfer, assign,
anticipate, mortgage or otherwise encumber in advance any of such payments, nor
shall such payments be subject to seizure for the payment of public or private
debts, judgments, alimony or separate maintenance, or be transferable by
operation of law in event of bankruptcy, insolvency or otherwise.
12. BINDING EFFECT. This Agreement shall be binding upon the parties hereto,
their heirs, executors, administrators, successors and assigns. The Company
agrees it will not be a party to any merger, consolidation or reorganization,
unless and until its obligations hereunder shall be expressly assumed by its
successor or successors.
IN WITNESS WHEREOF the parties have executed this Agreement effective
the 30th day of April, 1988.
(Executive) (Company)
The Wackenhut Corporation
/s/ Robert C. Kneip By: /s/ Richard R. Wackenhut
- ------------------------------ -------------------------------
Robert C. Kneip President
Attest: /s/ J. P. Rowan
---------------------------
(CORPORATE SEAL)
3
<PAGE> 1
(Exhibit 10.2)
ADDENDUM
TO
DEFERRED COMPENSATION AGREEMENT
This Addendum to the Deferred Compensation Agreement ("Agreement") is
effective as of July 27, 1991 between The Wackenhut Corporation ("Company") and
Richard R. Wackenhut ("Executive").
As a result of the action taken by the Board of Directors of Company at
its meeting of July 27, 1991, the retirement benefit to Executive shall increase
from $100,000 annually to $175,000 annually. This increased benefit amount
shall apply only after the Retirement Date as defined in the Agreement between
the parties, and shall not increase the amount payable to your Beneficiary(ies)
in the event that you should die prior to reaching such Retirement date.
All other terms of the Agreement between the parties hereto shall
remain the same.
IN WITNESS WHEREOF the parties have executed this Addendum effective
July 27, 1991.
EXECUTIVE COMPANY
The Wackenhut Corporation
/s/ Richard R. Wackenhut By: /s/ J. P. Rowan
- ------------------------- ---------------------
Richard R. Wackenhut Vice President
Attest: /s/ T.J. Howard
---------------------
(CORPORATE SEAL)
<PAGE> 2
ADDENDUM
TO
DEFERRED COMPENSATION AGREEMENT
This Addendum to the Deferred Compensation Agreement ("Agreement") is
effective as of July 27, 1991 between The Wackenhut Corporation ("Company")
and Alan B. Bernstein ("Executive").
As a result of the action taken by the Board of Directors of Company
at its meeting of July 27, 1991, the retirement benefit to Executive shall
increase from $100,000 annually to $150,000 annually. This increased benefit
amount shall apply only after the Retirement Date as defined in the Agreement
between the parties, and shall not increase the amount payable to your
Beneficiary(ies) in the event that you should die prior to reaching such
Retirement date.
All other terms of the Agreement between the parties hereto shall
remain the same.
IN WITNESS WHEREOF the parties have executed this Addendum effective
July 27, 1991.
EXECUTIVE COMPANY
The Wackenhut Corporation
/s/ Alan B. Bernstein By: /s/ J.P. Rowan
- ------------------------------ -------------------------------
Alan B. Bernstein Vice President
Attest: /s/ T.J. Howard
--------------------------
(CORPORATE SEAL)
<PAGE> 3
ADDENDUM
TO
DEFERRED COMPENSATION AGREEMENT
This Addendum to the Deferred Compensation Agreement ("Agreement") is
effective as of July 27, 1991 between The Wackenhut Corporation ("Company") and
Fernando Carrizosa ("Executive").
As a result of the action taken by the Board of Directors of Company
at its meeting of July 27, 1991, the retirement benefit to Executive shall
increase from $50,000 annually to $100,000 annually. This increased benefit
amount shall apply only after the Retirement Date as defined in the Agreement
between the parties, and shall not increase the amount payable to your
Beneficiary(ies) in the event that you should die prior to reaching such
Retirement date.
All other terms of the Agreement between the parties hereto shall
remain the same.
IN WITNESS WHEREOF the parties have executed this Addendum effective
July 27, 1991.
EXECUTIVE COMPANY
The Wackenhut Corporation
/s/ Fernando Carrizosa By: /s/ J. P. Rowan, Vice President
- ---------------------------- -------------------------------
Fernando Carrizosa
Attest: /s/ T.J. Howard
-------------------------------
(Corporate Seal)
<PAGE> 4
ADDENDUM
TO
DEFERRED COMPENSATION AGREEMENT
This Addendum to the Deferred Compensation Agreement ("Agreement")
is effective as of July 27, 1991 between The Wackenhut Corporation
("Company") and Robert C. Kneip ("Executive").
As a result of the action taken by the Board of Directors of
Company at its meeting of July 27, 1991, the retirement benefit to
Executive shall increase from $50,000 annually to $100,000 annually.
This increased benefit amount shall apply only after the Retirement Date
as defined in the Agreement between the parties, and shall not increase
the amount payable to your Beneficiary(ies) in the event that you should
die prior to reaching such Retirement date.
All other terms of the Agreement between the parties hereto shall
remain the same.
IN WITNESS WHEREOF the parties have executed this Addendum
effective July 27, 1991.
EXECUTIVE COMPANY
The Wackenhut Corporation
/s/ Robert C. Kneip By: /s/ J.P. Rowan, Vice President
- ------------------- -------------------------------
Robert C. Kneip
Attest: /s/ T.J. Howard
--------------------------
(CORPORATE SEAL)
<PAGE> 1
EXHIBIT 10.10
THIRD AMENDMENT TO OFFICE LEASE
This Third Amendment to Office Lease is made this 10 day of December,
1997, by and between PGA PROFESSIONAL CENTER, LTD., a Florida limited
partnership ("Landlord") and THE WACKENHUT CORPORATION, a Florida corporation
("Tenant").
WHEREAS, Landlord and Tenant are parties to that certain office Lease,
dated April 18, 1995, as amended by amendments dated November 3, 1995 and August
1, 1996 (collectively, the "Lease"); and
WHEREAS, Landlord and Tenant wish to modify the Lease as set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. The foregoing recitals are true and correct and are incorporated herein
by reference.
2. Capitalized terms used but not defined herein shall have the meanings
given to such terms in the Lease.
3. The Lease is in full force and effect. Neither Landlord nor Tenant is
in default thereunder, and to the knowledge of Landlord and Tenant, no event has
occurred which would, with the giving of notice or the passage of time or both,
constitute an event of default under the Lease.
4. Landlord hereby agrees to install, at Landlord's expense, 16 new air
conditioning units within the Building in accordance with the specifications
attached hereto as EXHIBIT "K." In addition, the above air conditioning units
will be integrated into and made a part of the Trane energy management system
previously paid for and installed by Tenant during the construction period but
thereafter removed and/or deactivated by Landlord. Landlord agrees to reactivate
the Trane energy management system to complete (or arrange for the completion
of) the training of Tenant's employees in the operation of said system. The
above work shall be completed no later than four (4) weeks from the execution of
this Amendment except that Landlord shall be afforded an additional reasonable
period of time to complete the employee training mentioned above. Tenant hereby
acknowledges that, subject to Landlord's obligations as set forth in this
Paragraph 4 and the items described on the Tenant's punch list dated July 10,
1997 attached hereto as SCHEDULE 1, which Landlord represents and agrees have
been or will be repaired or corrected within four (4) weeks from the execution
of this Amendment, Landlord has satisfied all construction obligations with
respect to the initial construction of the Core Building and Demised Premises
set forth in the Lease.
5. The Lease is hereby amended as follows:
(A) JANITORIAL RESPONSIBILITIES: Tenant has agreed to assume the
janitorial responsibilities heretofore performed by Landlord pursuant to
Paragraph 8C of the Lease until such time
<PAGE> 2
as Tenant elects, in its sole discretion, to return such responsibilities to
Landlord. While such arrangement is in effect, Tenant agrees to provide
janitorial services with respect to the Demised Premises at a level at least
equal to that heretofore provided by Landlord. In consideration thereof, Tenant
shall be given a reduction in annual minimum rent equal to $.65 per square foot
of space within the Demised Premises for which Tenant is obligated to pay rent
(Rentable Sq. Ft."), which as of the date hereof totals 91,759 sq. ft., but
which shall be automatically increased to reflect any Additional Space within
the Building hereafter leased by Tenant pursuant to Paragraph 39 of the Lease.
The above reduction shall remain in effect until such time as Tenant elects to
return to Landlord the janitorial responsibilities set forth in Paragraph 8C.
Tenant agrees to give Landlord at least 90 days advance written notice of its
election to return janitorial responsibilities to Landlord. Effective upon the
date specified in Tenant's notice for the return of janitorial responsibilities
to Landlord, the annual minimum rent payable by Tenant under the Lease shall be
increased by an amount equal to $.65 per Rentable Sq. Ft. and Landlord shall
again assume responsibility for janitorial services to the entire Demised
Premises in accordance with Paragraph 8C of the Lease except that if Tenant
desires additional janitorial services over and above those specified in
Paragraph 8C, the increased cost attributable thereto shall be billed separately
to the Tenant.
(B) ADJUSTMENT TO ANNUAL MINIMUM RENT. In consideration of the Landlord's
agreement to install, maintain and repair the additional air conditioning units
specified in Paragraph 4 hereinabove, Tenant agrees that annual minimum rent
shall be increased by $28,000 such that the annual minimum rent payable by
Tenant for the Demised Premises (after taking into account the reduction set
forth above for Tenant's assumption of janitorial responsibilities) shall be
$19.16 per square foot per annum commencing as of December 1, 1997. Annual
minimum rent commencing, December 1, 1997 shall be $1,758,102.44 or $146,508.54
per month (plus sales tax).
(C) PROPERTY MANAGEMENT, ADMINISTRATION AND MAINTENANCE RESPONSIBILITIES.
Tenant may elect, at any time and from time to time during the term of the
Lease, to assume all or a part of the property management, administration and
maintenance responsibilities performed by Landlord with respect to the Building
or the Demised Premises. Within thirty (30) days after written notice of
Tenant's intention to assume such responsibilities, Landlord will disclose to
Tenant its expenditures with respect thereto for the two (2) preceding years and
Tenant shall be given a reduction in minimum annual rent equal to the average
cost incurred by Landlord over such two (2) year period for the particular
responsibility(ies) Tenant elects to assume. Tenant may elect to return to
Landlord all or a part of the responsibilities assumed by Tenant pursuant to
this Paragraph upon at least 90 days advance written notice to Landlord, in
which event annual minimum rent shall be increased by an amount equal to the
reduction previously allowed for the particular item to be returned to Landlord.
"Maintenance" as used in this Paragraph means preventative maintenance services,
landscaping, elevator and air-conditioning repairs and other similar items and
is not intended to include structural repairs or capital repair and replacement
responsibilities, which shall at all times remain the obligation of Landlord
pursuant to the Lease. Tenant agrees to perform the responsibilities assumed
pursuant to this paragraph in a manner at least equal to the level of services
previously provided by the Landlord with respect thereto. Should the standard of
service fall below that previously provided by the Landlord, the Landlord, upon
at least thirty (30) days prior written notice, may re-assume responsibility for
such item
2
<PAGE> 3
of service and eliminate the corresponding credit given to the Tenant.
(D) EXPANSION OPTION. Provided Tenant is not in default at the time of
exercise or at the time of commencement of the expansion option referred to
hereinbelow, Tenant shall have the option to lease the entire premises known as
Building B, PGA Professional Center (the "Expansion Premises") as more
particularly described in the Amended and Restated Business Lease dated July 1,
1996, between Landlord and Catalfumo Construction, Ltd. (the "Catalfumo Lease").
To exercise the option, Tenant must give Landlord written notice of its
intention to exercise the option no later than October 30, 2000. If Tenant
elects to lease the Expansion Premises, then after such exercise and in any
event prior to April 20, 2001, Landlord and Tenant shall negotiate in good faith
and enter into an amendment to the Lease which shall incorporate the Expansion
Premises therein and which shall provide that (i) the minimum annual rent for
the Expansion Premises shall be the sum of $15.50 per sq. ft. plus operating
expenses and real estate taxes, (ii) the term of the lease of the Expansion
Space shall commence no later than June 30, 2001 (or such earlier or later date
as may be mutually agreed to in writing between the parties) and shall expire on
the same day as the lease expiration date stipulated in the Lease (as the same
may be extended by any renewal options exercised in accordance with Paragraph 40
of the Lease), (iii) the base year for determining Excess Operating Expenses for
the Expansion Premises shall be the year 2001, (iv) Tenant shall be allowed a 90
day period immediately following commencement to perform, install or construct,
at Tenant's expense, any desired improvements to the Expansion Premises ("Tenant
Improvements"), during which 90 day period no rent (which term shall include
pass-through expenses for taxes, insurance and operating expenses) shall accrue
or be payable by Tenant with respect to the Expansion Premises, and (v) all of
the remaining terms and conditions of the Lease shall be applicable to the
Expansion Premises, except that adjustments reflecting the increased total
square footage demised under the Lease shall be made to the Tenant's
Proportionate Share of Excess Operating Expenses, the number of additional
parking spaces available for the exclusive use of Tenant with respect to the
Expansion Premises shall be not less than ______ spaces, and the amount of any
rent reduction then in effect for janitorial or other responsibilities of
Landlord assumed by Tenant in accordance with Paragraphs 5A or 5C hereinabove.
(E) BUILDING REPAIR. In addition to and not in derogation of the
rights of Tenant under Paragraphs 8H and 18 of the Lease, Tenant shall have the
right (but not the obligation) to effect emergency repairs of the Building or
the Demised Premises for which Landlord is responsible under the Lease and to
deduct the reasonable cost of doing so from the next payment of rent if (i) a
reasonable likelihood exists that damage to person or property will result if
repairs are not effected immediately, and (ii) Tenant gives telephonic notice
thereof to Landlord prior to commencing such repairs (followed by concurrent
written notice via facsimile transmission or hand delivery) and Landlord fails
to take immediate action, (iii) Tenant utilizes, where practical under the
circumstances, the contractor(s) recommended by Landlord (provided, however,
that Tenant's inability to use the contractor(s) recommended by Landlord shall
not prejudice the Tenant's right to deduct the reasonable cost of such repairs
from the rent next coming due), and (iv) the cost of such repairs does not
exceed $20,000 in the aggregate per event, unless Landlord has failed to
undertake completion of such repairs immediately following the giving of a
second written notice thereof by Tenant in which event no such limitation shall
apply.
3
<PAGE> 4
6. Except as hereby modified, the Lease remains in full force and effect.
In the event of any conflict between the terms of the Lease and the terms of
this Amendment, the terms of this Amendment shall govern.
IN WITNESS WHEREOF, this Third Amendment to Office Lease has been executed
as of the 10 day of December, 1997.
LANDLORD:
PGA PROFESSIONAL CENTER, LTD.,
a Florida limited partnership
By: Jeffco Holdings International, Inc., a
Florida corporation, general partner
By: /s/ Dina Hashman
------------------------
Dina Hashman, President
TENANT:
THE WACKENHUT CORPORATION
By: /s/ Robert C. Kneip
--------------------
Robert C. Kneip
Senior Vice President
4
<PAGE> 1
Exhibit 10.11
SUMMARY DESCRIPTION OF THE AMENDMENT TO THE INCENTIVE PLAN
The following summarizes the material terms of the Amendment to the Incentive
Plan effective as of January 28, 1997.
INDIVIDUAL AWARD LIMIT. In order to possibly exempt future awards from the
tax deductibility limitations of Code Section 162(m), the Amendment to the
Incentive Plan provides that no more than one hundred thousand (100,000) shares
under Option may be granted to any participant in any one fiscal year and that
no more than fifty thousand (50,000) shares will be paid out under any
Performance Share or Performance Unit award in any one fiscal year, to any
Participant. This Amendment to the Incentive Plan does not authorize any
additional shares for issuance under the Incentive Plan. Further this Amendment
is not intended to increase future award sizes or otherwise alter the Nominating
Compensation Committee's (the "Committee's") general practices in determining
award sizes.
MINIMUM VESTING PERIOD. As a result of recent revisions to Section 16 of
the Securities Exchange Act of 1934, the minimum six-month vesting requirement
on Options, Restricted Stock Units, Performance Units, and Performance Shares
has been removed. Although removal of this provision is not intended to change
the Committee's practice in establishing vesting schedules of awards, this
provision will allow the Committee greater flexibility in designing future
awards.
PERFORMANCE MEASURES. The Performance Measures on which awards qualifying
for an exemption under Section 162(m) are based shall be chosen from among the
following: return on equity, earnings per share, operating cash flow, gross
revenue, income before taxes, net income, return on revenue, and stock price
appreciation. Although this provision is not intended to change the Committee's
practice in establishing certain performance vesting requirements, this
provision will allow the Committee flexibility in establishing performance goals
while maintaining an exemption to the tax deductibility limitations imposed by
Section 162(m).
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE CORPORATION
SUBSIDIARIES OF THE WACKENHUT CORPORATION
American Guard and Alert, Inc. (Alaska)
Titania Insurance Company of America (Vermont)
Tuhnekcaw, Inc. (Delaware)
Wackenhut Airline Services, Inc. (Florida)
Wackenhut Australia, Pty., Ltd. (Australia)
Wackenhut of Canada, LTD. (Canada)
Wackenhut Corrections Corporation (Florida)
Wackenhut Financial, Inc. (Delaware)
Wackenhut International, Incorporated (Florida)
Wackenhut of Nevada, Inc. (Nevada)
Wackenhut Resources, Inc. (Florida)
Wackenhut Services, Incorporated (Florida)
SUBSIDIARIES OF WACKENHUT INTERNATIONAL, INCORPORATED
Instituto Wackenhut, S.A. (Ecuador)
Peruana de Seguridad y Vigilancia, S.A. (PESEVISA) (Peru)
Seguridad Movil del Ecuador, S.A. (Ecuador)
Seguridad Wackenhut, S.A. de CV (Mexico)
Wackenhut A/O (Russia)
Wackenhut Belize Ltd. (Belize)
Wackenhut Bolivia, S.A. (Bolivia)
Wackenhut Cameroon, S.A. (Cameroon)
Wackenhut Central Europe GMBH (Germany)
Wackenhut Czech, SPOL, S.R.O. (Czech Republic)
Wackenhut de El Salvador, S.A. (El Salvador)
Wackenhut de Guatemala, S.A. (Guatemala)
Wackenhut de Honduras, S.A. (Honduras)
Wackenhut de Nicaragua, S.A. (Nicaragua)
Wackenhut de Venezuela, S.A. (Venezuela)
Wackenhut del Ecuador, S.A. (Ecuador)
Wackenhut Dominicana, S.A. (Dominican Republic)
Wackenhut France, S.A.R.L. (France)
Wackenhut Gambia, Ltd. (Gambia)
Wackenhut Pakistan (PVT) Limited (Pakistan)
Wackenhut Maghreb, S.A. (Morocco)
Wackenhut Mozambique Lda (Mozambique)
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, S.A. (Uruguay)
WII/Sound and Security Engineering Co. (Jordan)
SUBSIDIARY OF AMERICAN GUARD AND ALERT
Ahtna AGA Security, Inc. (Alaska)
<PAGE> 2
SUBSIDIARIES OF WACKENHUT CORRECTIONS CORPORATION
Atlantic Shores Healthcare,
Inc. Wackenhut Corrections (U.K.), Limited (United Kingdom)
Wackenhut Corrections Corporation Australia (Australia)
Wackenhut Corrections Canada, Inc.
WCC Development, Inc.
WCC Financial, Inc. (Delaware)
WCC RE Holdings, Inc. (Florida)
SUBSIDIARY OF WACKENHUT CORRECTIONS CORPORATION AUSTRALIA
Australasian Correctional Management PTY, Limited (Australia)
SUBSIDIARY OF WACKENHUT SERVICES, INCORPORATED
Wackenhut Services, LLC. (Colorado)
SUBSIDIARIES OF WACKENHUT RESOURCES, INC.
Oasis Outsourcing, Inc. (Florida)
King Staffing, Inc. (Florida)
Professional Employee Management, Inc. (Florida)
<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,
33-67158, 333-11833, 333-11837 and 333-46399.
ARTHUR ANDERSEN LLP
West Palm Beach, Florida,
March 17, 1998.
<PAGE> 1
POWER OF ATTORNEY
The undersigned member of the Board of Directors of The Wackenhut
Corporation hereby constitutes and appoints Philip L. Maslowe, James P. Rowan
and Juan D. Miyar and each of them severally, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution for him and in his name, place and stead, in any and all
capacities to sign any and all Reports of Form 10K (Annual Report pursuant to
the Securities Exchange Act of 1934) and any amendments thereto, and to file
the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Richard G. Capen, Jr. Date: March 6, 1998
- ----------------------------------
Richard G. Capen, Jr.
Director
<PAGE> 2
POWER OF ATTORNEY
The undersigned member of the Board of Directors of The Wackenhut
Corporation hereby constitutes and appoints Philip L. Maslowe, James P. Rowan
and Juan D. Miyar and each of them severally, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution for him and in his name, place and stead, in any and all
capacities to sign any and all Reports of Form 10K (Annual Report pursuant to
the Securities Exchange Act of 1934) and any amendments thereto, and to file
the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ George R. Wackenhut Date: March 9, 1998
- ----------------------------------
George R. Wackenhut
Director
<PAGE> 3
POWER OF ATTORNEY
The undersigned member of the Board of Directors of The Wackenhut
Corporation hereby constitutes and appoints Philip L. Maslowe, James P. Rowan
and Juan D. Miyar and each of them severally, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution for him and in his name, place and stead, in any and all
capacities to sign any and all Reports of Form 10K (Annual Report pursuant to
the Securities Exchange Act of 1934) and any amendments thereto, and to file
the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Paul X. Kelley Date: March 9, 1998
- ----------------------------------
Paul X. Kelley
Director
<PAGE> 4
POWER OF ATTORNEY
The undersigned member of the Board of Directors of The Wackenhut
Corporation hereby constitutes and appoints Philip L. Maslowe, James P. Rowan
and Juan D. Miyar and each of them severally, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution for him and in his name, place and stead, in any and all
capacities to sign any and all Reports of Form 10K (Annual Report pursuant to
the Securities Exchange Act of 1934) and any amendments thereto, and to file
the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Julius W. Becton, Jr. Date: March 7, 1998
- ----------------------------------
Julius W. Becton, Jr.
Director
<PAGE> 5
POWER OF ATTORNEY
The undersigned member of the Board of Directors of The Wackenhut
Corporation hereby constitutes and appoints Philip L. Maslowe, James P. Rowan
and Juan D. Miyar and each of them severally, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution for him and in his name, place and stead, in any and all
capacities to sign any and all Reports of Form 10K (Annual Report pursuant to
the Securities Exchange Act of 1934) and any amendments thereto, and to file
the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Richard R. Wackenhut Date: March 12, 1998
- ----------------------------------
Richard R. Wackenhut
Director
<PAGE> 6
POWER OF ATTORNEY
The undersigned member of the Board of Directors of The Wackenhut
Corporation hereby constitutes and appoints Philip L. Maslowe, James P. Rowan
and Juan D. Miyar and each of them severally, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution for him and in his name, place and stead, in any and all
capacities to sign any and all Reports of Form 10K (Annual Report pursuant to
the Securities Exchange Act of 1934) and any amendments thereto, and to file
the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Edward L. Hennessy, Jr. Date: March 13, 1998
- ----------------------------------
Edward L. Hennessy, Jr.
Director
<PAGE> 7
POWER OF ATTORNEY
The undersigned member of the Board of Directors of The Wackenhut
Corporation hereby constitutes and appoints Philip L. Maslowe, James P. Rowan
and Juan D. Miyar and each of them severally, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution for him and in his name, place and stead, in any and all
capacities to sign any and all Reports of Form 10K (Annual Report pursuant to
the Securities Exchange Act of 1934) and any amendments thereto, and to file
the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Nancy Reynolds Date: March 13, 1998
- ----------------------------------
Nancy Reynolds
Director
<PAGE> 8
POWER OF ATTORNEY
The undersigned member of the Board of Directors of The Wackenhut
Corporation hereby constitutes and appoints Philip L. Maslowe, James P. Rowan
and Juan D. Miyar and each of them severally, his true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him and in his name, place and stead, in any and all capacities to sign any
and all Reports of Form 10K (Annual Report pursuant to the Securities Exchange
Act of 1934) and any ammendments thereto, and to file the same, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or their or his substitute substitutes, may lawfully do or cause to be
done by virtue hereof.
/s/ Carroll A. Campbell, Jr. Date: March 9, 1998
- ----------------------------
Carroll A. Campbell, Jr.
Director
<PAGE> 9
POWER OF ATTORNEY
The undersigned member of the Board of Directors of The Wackenhut
Corporation hereby constitutes and appoints Philip L. Maslowe, James P. Rowan
and Juan D. Miyar and each of them severally, his true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him and in his name, place and stead, in any and all capacities to sign any
and all Reports of Form 10K (Annual Report pursuant to the Securities Exchange
Act of 1934) and any ammendments thereto, and to file the same, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or their or his substitute substitutes, may lawfully do or cause to be
done by virtue hereof.
/s/ Anne N. Foreman Date: March 11, 1998
- -------------------
Anne N. Foreman
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 YEAR ENDED DECEMBER 28, 1997.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-START> DEC-30-1996
<PERIOD-END> DEC-28-1997
<CASH> 45,168
<SECURITIES> 7,772<F1>
<RECEIVABLES> 174,086
<ALLOWANCES> 2,713
<INVENTORY> 10,270
<CURRENT-ASSETS> 251,927<F2>
<PP&E> 72,280
<DEPRECIATION> 15,810
<TOTAL-ASSETS> 404,442
<CURRENT-LIABILITIES> 135,018
<BONDS> 13,341
0
0
<COMMON> 1,495
<OTHER-SE> 145,344
<TOTAL-LIABILITY-AND-EQUITY> 404,442<F3>
<SALES> 0
<TOTAL-REVENUES> 1,126,802
<CGS> 0
<TOTAL-COSTS> 1,122,281<F4>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,249
<INTEREST-EXPENSE> 1,473
<INCOME-PRETAX> 6,029
<INCOME-TAX> 2,271
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 103<F5>
<EPS-PRIMARY> 0.01
<EPS-DILUTED> (0.01)
<FN>
<F1>MARKETABLE SECURITIES AND CERTIFICATES OF DEPOSIT ARE CLASSIFIED AS
NON-CURRENT ASSETS ON THE BALANCE SHEET.
<F2>INCLUDES $21,568 OF OTHER CURRENT ASSETS.
<F3>INCLUDES $45,786 RESERVE FOR LOSSES OF CASUALTY REINSURANCE SUBSIDIARY,
$47,930 MINORITY INTEREST, AND $15,528 OTHER LIABILITIES.
<F4>INCLUDES ONE TIME CHARGES AND IMPAIRMENT OF ASSETS OF $18,300.
<F5>INCLUDES MINORITY INTEREST AND EQUITY INCOME OF FOREIGN AFFILIATES-NET OF
INCOME TAXES OF $5,753 AND $(2,098) RESPECTIVELY.
</FN>
</TABLE>
