EXHIBIT 10.18
FIRST AMENDMENT TO
EMPLOYMENT AGREEMENT
THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT ("Amendment") is entered
into on February 19, 2002, by and between THE WACKENHUT CORPORATION, a Florida
corporation (the "Company"), and Xxxxxxx X. Xxxxxxxxx (the "Executive").
PRELIMINARY STATEMENTS
A. The parties previously entered into an Employment Agreement dated
March 17, 2000 (the "Original Agreement").
B. The parties wish to amend the Original Agreement as provided herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises, the mutual covenants
set forth herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Except as expressly amended herein, the Original Agreement that was
entered into as of March 17, 2000, remains in full force and effect. Without
limiting the foregoing, the anniversary date of the Original Agreement
contemplated in Section 1.b thereof shall remain March 17th. Unless otherwise
defined, capitalized terms used herein shall have the meanings given to them in
the Original Agreement.
2. Section 5 of the Original Agreement is hereby amended by deleting
the text therein in its entirety and replacing it with the following text:
"5. TERMINATION BY THE COMPANY. In the event the Company terminates
Executive's employment for any reason other than death, the Company
shall pay the Special Termination Payment (as defined in Section 8
below) to the Executive within ten days after said termination. In
addition, upon such termination, (i) the Company shall continue to
provide the Executive with the Executive Benefits at no cost the
Executive in no less than the same amounts and on the same terms and
conditions that would have applied had he remained employed by the
Company for the remainder of the Employment Term, (ii) all awards
granted pursuant to The Wackenhut Corporation Employee Long-Term
Incentive Stock Plan and any other unvested stock options or other
interests the Executive holds in the Company's stock or the stock of a
subsidiary of the Company shall become fully vested, all restrictions
on restricted stock units shall lapse, and all performance targets with
respect to performance units or shares will be deemed to have been met
as of the date the Executive's employment is terminated, (iii) the
Company shall transfer all of its interest in any automobile used by
the Executive pursuant to the Executive Automobile Policy and shall pay
the balance of any outstanding loans or leases on such automobile
(whether such obligations are those of the Executive or the Company) so
that the Executive owns the automobile outright (in the event such
automobile is leased, the Company shall pay the residual cost of such
lease), (iv) the Company shall pay to the Executive, within 10 days
after said termination, the present value of all cash payments pursuant
to the Amended and Restated Senior Officer Retirement/Deferred
Compensation Agreement entered into between the Company and the
Executive dated March 17, 2000 (the "Deferred Compensation Agreement")
as if the Executive had remained employed with the Company through the
Retirement Date defined therein (the "Deferred Compensation Payoff"),
in full satisfaction of the Company's obligations under the Deferred
Compensation Agreement (the present value represented by the Deferred
Compensation Payoff referred to above shall be calculated using a
discount rate equal to the lower of the rate provided for in Code
Section 280G(d)(4), or six and one-half percent (6.5%), and without
regard to any mortality factors or related probabilities), (v) the
Company shall pay to the Executive, within 10 days after said
termination, an amount equal to the sum of (a) the dollar value of
vacation time that would have been credited to the Executive pursuant
to the Company's Vacation Policy dated August 1, 1997, Number XX 000
(the "Vacation Policy") if the Executive had remained employed by the
Company through the "Anniversary Date" (as defined in the Vacation
Policy) immediately following his termination of employment, multiplied
by a fraction, the numerator of which is the number of days which
elapsed from the Executive's Anniversary Date immediately preceding the
date of termination through the date of such termination, and the
denominator of which is 365, plus (b) the dollar value of vacation time
which the Executive was entitled to have taken immediately prior to the
Executive's termination, which was not in fact taken by the Executive;
the dollar value of vacation time referred to above shall be equal to
the amount which would have been paid to the Executive by the Company
during such vacation time had the vacation time in fact been taken by
the Executive immediately prior to the Executive's termination, and
(vi) the Company shall pay to the Executive, within 10 days after said
termination, additional compensation in an amount equal to $670,000
(the "Special Consideration Payment").
2. Section 8.a of the Original Agreement is hereby amended by deleting
the text therein in its entirety and replacing it with the following text:
"a. EQUALIZATION PAYMENT. If any of the Special Termination Payment
will be subject to the tax (the "Excise Tax") imposed by Section 4999
of the Internal Revenue Code of 1986, as amended (the "Code") (or any
similar tax that may hereafter be imposed), the Company shall also pay
to the Executive in cash an additional amount (the "Excise Tax Gross-up
Payment") such that the net amount retained by the Executive after
deduction from the Special Termination Payment and the Excise Tax
Gross-up Payment of any Excise Tax imposed upon the Special Termination
Payment and any federal, state, local and other taxes (including income
taxes, payroll taxes, Excise Tax and any other taxes) imposed upon the
Excise Tax Gross-up Payment shall be equal to the original amount of
the Special Termination Payment, prior to deduction of any Excise Tax
imposed with respect to the Special Termination Payment. The Excise Tax
Gross-Up Payment is intended to place the Executive in the same
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economic position he would have been in if the Excise Tax did not
apply. The Excise Tax Gross-up Payment shall be paid to the Executive
in full, at the time the Special Termination Payment is paid pursuant
to this Agreement. For purposes of determining the Excise Tax Gross-up
Payment pursuant to this Section 8.a, the Special Termination Payment
shall also include any amounts which would be considered "Parachute
Payments" (within the meaning of Section 280G(b)(2) of the Code) to the
Executive, including, but not limited to, all items listed in Section 5
of this Agreement to the extent that they are considered to be
Parachute Payments such that the Company will absorb the full cost of
any Excise Tax thereon and all taxes relating to the Company's
absorption of any Excise Taxes."
3. Section 8.b of the Original Agreement is hereby amended by deleting
all references therein to "Gross-up Payment" and replacing all such references
with "Excise Tax Gross-up Payment."
4. Sections 8.c and 8.d of the Original Agreement are hereby amended by
deleting the text therein in its entirety and replacing it with the following
text:
"c. TAX CALCULATION. Simultaneously with the Company's payment of the
Special Termination Payment, the Company shall deliver to the Executive
a written statement specifying the total amount of all payments
provided for in this Agreement, together with all supporting
calculations. If the Executive disagrees with the Company's calculation
of any of said payments, the Executive shall submit to the Company, no
later than 30 days after receipt of the Company's calculations, a
written notice advising the Company of the disagreement and setting
forth his calculation of said payments. The Executive's failure to
submit such notice within such period shall be conclusively deemed to
be an agreement by the Executive as to the amount of said payments. If
the Company agrees with the Executive's calculations, it shall pay any
shortfall to the Executive within 20 days after receipt of such a
notice from the Executive, together with interest thereon accruing at
the rate of 18 percent per annum, compounded monthly, from the original
due date of the Special Termination Payment through the actual date of
payment of said shortfall. If the Company does not agree with the
Executive's calculations, it shall provide the Executive with a written
notice within 20 days after the receipt of the Executive's calculations
advising the Executive that the disagreement is to be referred to an
independent accounting firm for resolution. Such disagreement shall be
referred to an independent "Big 5" accounting firm which is not the
regular accounting firm of the Company and which is agreed to by the
Company and the Executive within 10 days after issuance of the
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Company's notice of disagreement (if the parties cannot agree on the
identity of the accounting firm which is to resolve the dispute, the
accounting firm shall be selected by means of a coin toss conducted in
Palm Beach County, Florida by counsel to the Executive on the first
business day after such 10 day period in such manner as such counsel
may specify). The accounting firm shall review all information provided
to it by the parties and submit a written report setting forth its
calculation of the amounts provided for in this Agreement within 15
days after submission of the matter to it, and such decision shall be
final and binding on all of the parties. The fees and expenses charged
by said accounting firm shall be paid by the Company. If the amount of
the payment actually paid by the Company was less than the amount
calculated by the accounting firm, the Company shall pay the shortfall
to the Executive within 5 days after the accounting firm submits its
written report, together with interest thereon accruing at the rate of
18 percent per annum, compounded monthly, from the original due date of
the Special Termination Payment through the actual date of payment of
said shortfall.
d. SUBSEQUENT RECALCULATION. In the event the Internal Revenue Service
imposes an Excise Tax that is greater than the Excise Tax assumed for
purposes of calculating the Excise Tax Gross-up Payment, the Company
shall reimburse the Executive for the full amount necessary to make the
Executive whole in accordance with the principles set forth above,
including any interest and penalties which may be imposed."
5. New Section 21 is hereby added to the Original Agreement as follows:
"21. NON-COMPETITION. In the event that Executive's employment is
terminated pursuant to Sections 5, 6 or 7 hereof and Executive timely
receives payment of the Special Termination Payment which is due to
him, the Special Consideration Payment and other amounts due to him
under this Agreement or otherwise, Executive agrees that for a period
of 12 months after such termination of employment he shall not,
directly or indirectly, own, manage, operate, control or participate in
the ownership, management operation or control of, or be connected as
an officer, employee, partner, director or otherwise with, or have any
financial interest in, or aid or assist anyone else in the conduct of,
any business (a "Competitive Operation") which competes with any
business conducted by the Company, or by any group, division or
subsidiary of the Company for which the Executive has had
responsibility, in any area where such business is being conducted at
the time of such termination. It is understood and agreed that, for the
purposes of the foregoing provisions of this Section 21, no business
which is conducted by the Company at the time of the Executive's
termination and which subsequently is sold or discontinued by the
Company shall be deemed to be a Competitive Operation within the
meaning of this Section 21. Ownership of an amount not to exceed five
percent (5%) of the voting stock of any publicly held corporation shall
not constitute a violation hereof. If Executive breaches this Section
21, the Company will be entitled to recover the Special Consideration
Payment from the Executive and any additional damages it may incur in
accordance with applicable law."
6. New Section 22 is hereby added to the Original Agreement as follows:
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"22. EXAMPLES. The operation of this Agreement is illustrated by the
example set forth in Exhibit A attached hereto. Said example is not
intended to limit the manner in which amounts payable hereunder are to
be calculated. If other tax rates, taxes or other charges are
applicable, the calculations shall be adjusted to achieve the same
economic result to the Executive such that the Executive receives all
payments under this Agreement free of costs represented by Excise Taxes
or any taxes relating to the absorption by the Company of Excise Taxes.
The assumptions set forth in said example are for illustrative purposes
only, and have no relationship to the actual amounts that may apply
under this Agreement."
7. Exhibit A attached hereto is added as Exhibit A to the Original
Agreement.
8. This Amendment, the Original Agreement and the documents referred to
herein and therein constitute the entire agreement of the parties and supersede
all other agreements, both oral and written, between the parties with respect to
the subject matter hereof and any previous understandings or modifications
relating to the foregoing documents, whether oral, written or otherwise.
[Signatures on Following Page]
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IN WITNESS WHEREOF, the parties have caused this Amendment to be
effective as of the date first written above.
THE WACKENHUT CORPORATION
By: /s/ G. R. Wackenhuut
-------------------------------------
Name: G. R. Wackenhuut
------------------------------------
Title: Chairman of the Board
-----------------------------------
EXECUTIVE
/s/ Xxxxxxx X. Xxxxxxxxx
-----------------------------------------
Xxxxxxx X. Xxxxxxxxx
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EXHIBIT A
PAGE 1 OF 2
This example assumes the following:
(i) the Executive receives payments under this Agreement (other than
the Deferred Compensation Payoff) and otherwise upon a termination equal to
$17,250,000;
(ii) the amount of the Deferred Compensation Payoff is $2,000,000;
(iii) the total amount properly allocable for federal tax purposes to
Executive's covenant not to compete is $3,000,000;
(iv) the foregoing payments, other than the amounts allocable to the
covenant not to compete, are "parachute payments" under Code Section
280G(b)(2)(A) and will require payment of an Excise Tax Gross-up Payment;
(v) the Executive's base amount under Code Section 280G(b)(3)(A) is
$1,350,000;
(vi) the present value of the deferred compensation payments due to the
Executive pursuant to the Deferred Compensation Agreement for purposes of Code
Section 280G is $1,400,000; and
(vii) payments made to the Executive under this Agreement are subject
to a maximum federal income tax rate under Code section 1 of 38.6%, a payroll
tax under Code section 3101 of 1.45%, and, to the extent of excess parachute
payments, an excise tax under Code section 4999 of 20%, and no other taxes are
applicable.
Under these assumptions, the Excise Tax Gross-up Payment is
$6,758,448.06. The calculation of this amount is set forth in the table set
forth on the following page 2 of this Exhibit A.
EXHIBIT A
PAGE 2 OF 2
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A B C D E
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1 BASE AMOUNT (GIVEN) TOTAL PAYMENTS AMOUNT ALLOCABLE TO INCREASED PV OF EXCISE TAX
RECEIVED OTHER THAN NON-COMPETE (GIVEN) DEFERRED GROSS-UP
DEFERRED COMPENSATION COMPENSATION FOR PAYMENT
PAYOFF (GIVEN) 280G PURPOSES ((B2-C2+D2
(B5-A5) -A2)XB12)
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2 1,350,000 17,250,000 3,000,000 600,000 6,758,448.06
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3
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4 PV OF PAYMENTS UNDER DEFERRED COMPENSATION
DEFERRED COMPENSATION PAYOFF AMOUNT (GIVEN)
AGREEMENT FOR 280G
PURPOSES (GIVEN)
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5 1,400,000 2,000,000
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7 INCOME TAX RATE 0.38600
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8 PAYROLL TAX RATE 0.01450
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9 TAX RATE W/O EXCISE 0.40050
TAX B7+B8
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10 EXCISE TAX RATE 0.20000
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11 TOTAL TAX RATE ON 0.60050
PARACHUTE PAYMENTS
B9+B10
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12 EXCISE TAX GROSS-UP 0.5006257822
MULTIPLIER B10/(1-B11)
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13 Note: references to
letters and numbers
(such as "B9") are to
cells in this table.
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