CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT (this "Agreement") is made this
29th day of September 1999, by and between CORRECTIONAL SERVICES
CORPORATION., a Delaware corporation ("CSC"), and XXXXX X. XXXXXXXX
(hereinafter the "Employee").
WHEREAS, CSC is engaged in the business of developing and
operating adult and juvenile correctional facilities;
WHEREAS, the Employee has certain expertise and acumen and is
entering into an Employment Agreement of even date herewith providing for
the continued employment of the Employee by CSC (the "Employment
Agreement"); and
WHEREAS, CSC and the Employee desire to enter into this Agreement
to establish certain rights and obligations of the parties in the event the
employment relationship ends under the circumstances described herein.
NOW, THEREFORE, in consideration of the mutual promises and
covenants contained herein, and in the Employment Agreement, the parties
hereto agree as follows:
I.DEFINITIONS. For purposes of this Agreement, the following
terms shall have the meanings set forth opposite such terms. All other
capitalized terms used in this Agreement shall have the meanings given them
in this Agreement, or if no definition is provided herein, the meanings
given such terms in the Employment Agreement.
(a) CAUSE. "Cause" shall have the meaning given such term in
the Employee's Employment Agreement.
(b) CHANGE IN CONTROL. A "Change in Control" (i) shall mean
a change in control of the Company of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), whether or not the Company is in fact required to comply
therewith at the time of such change in control, and (ii) without
limitation by the foregoing, shall be deemed to have occurred if:
(A)for any period of two consecutive years beginning on
any date from and after the date hereof, if the Board of Directors at any
time during or at the end of such period is not comprised so that a
majority of the directors are either (1) individuals who constitute the
Board of Directors at the beginning of such period or (2) individuals who
joined the Board during such period who were elected or nominated for
election pursuant to a vote of at least two-thirds of the directors then
still in office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved (but
not including, for purposes of (1) or (2), a director designated by a
person who has entered into an agreement with the Company to effect a
transaction described in clause (B) or (C) of this Subsection 1(a);
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(B) the stockholders of the Company approve a merger,
recapitalization, reorganization, share exchange, consolidation or similar
transaction; in each case, with respect to which all or substantially all
of the persons who were respective beneficial owners of the outstanding
shares of capital stock of the Company immediately prior to such merger,
recapitalization, reorganization, share exchange, consolidation or similar
transaction, beneficially own, directly or indirectly, less than 50% of the
combined voting power of the then outstanding shares of capital stock of
the Company resulting from such merger, recapitalization, reorganization,
share exchange, consolidation or similar transaction;
(C) the stockholders of the Company approve any
transaction (or if no such approval is required, upon the occurrence of any
transaction), the result of which is that the Common Stock of the Company
shall no longer be required to be registered under Section 12 of the
Securities Exchange Act of 1934, as amended, and that the holders of shares
of Common Stock of the Company do not receive common stock of the person
surviving such transaction that is required to be registered under Section
12 of the Securities Exchange Act of 1934, as amended; or
(D) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all the Company's
assets.
(c) COMPANY. "Company" shall mean Correctional Services
Corporation and any successor, whether direct or indirect, by purchase,
merger, share exchange, consolidation or otherwise, whether by operation of
law or otherwise, to all or substantially all of the business and/or assets
of the Company.
(d) DATE OF TERMINATION. The "Date of Termination" shall be
the date specified in the written Notice of Termination which in no event
shall be later than 60 days after the date the written Notice of
Termination is given.
(e) NOTICE OF TERMINATION. "Notice of Termination" shall
mean a written notice from the party terminating the Employee's employment.
The Employee shall have the right in his sole discretion to give such
Notice of Termination at any time upon the occurrence of a Change in
Control or following a Change in Control. Notwithstanding any provision in
the Employment Agreement to the contrary, a Notice of Termination given by
the Employee hereunder shall not be deemed a breach by the Employee of the
Employment Agreement or any provision thereof.
2. SEVERANCE RESULTING FROM CHANGE IN CONTROL OF THE COMPANY. In
the event the Employee's employment is terminated in contemplation of, upon
the occurrence of or following a Change in Control for any reason or in the
event the Employee terminates his employment upon the occurrence of or
following a Change in Control, the Employee shall be provided with the
following benefits:
(a)The Company shall pay the Employee his full base salary
through the Date of Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which the Employee is
entitled under any compensation plan of the Company in which the Employee
is participating at the time of termination, payable at the time such
payments are due, except as otherwise provided below.
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(b) In lieu of any further salary payments to the Employee
for periods subsequent to the Date of Termination, the Company shall pay as
severance pay to the Employee a lump sum severance payment (together with
the payments provided in clause (c) of this Subsection, the "Severance
Payments") equal to three times the sum of (i) the Employee's annual base
salary and incentive bonus earned by the Employee, whether paid to the
Employee by the Company or due to the Employee from the Company, for the
calendar year immediately preceding the Notice of Termination and (ii) any
and all additional monetary compensation earned by the Employee, whether
paid to the Employee by the Company or due to the Employee from the
Company, during such calendar year. In addition, the Company shall pay to
the Employee a lump sum payment equal to One Million Dollars ($1,000,000)
as payment for the Employee's agreement to extend his non-competition and
non-solicitation covenants in Section 7(a) of his Employment Agreement to
four (4) years following the date of termination.
(c) The Company shall pay to the Employee any deferred
compensation allocated or credited to the Employee or his account as of the
date of termination.
(d) The Company shall also pay to the Employee all legal fees
and expenses incurred by the Employee as a result of such termination
(including all such fees and expenses, if any, incurred in contesting or
disputing any such termination or in seeking to obtain or enforce any right
or benefit provided by this Agreement or in connection with any tax audit
or proceeding to the extent attributable to the application of Section 4999
of the Code to any payment or benefit provided hereunder).
(e) If the payments provided under Subsections (b) and/or (c)
above (the "Contract Payments") or any other portion of the Total Payments
(as defined below) will be subject to the tax imposed by Section 4999 of
the Code (the "Excise Tax"), the Company shall pay to the Employee at the
time specified in subsection (f) below, an additional amount (the "Gross-Up
Payment") such that the net amount retained by the Employee, after
deduction of any Excise Tax on the Contract Payments and such other Total
Payments and any federal and state and local income tax and Excise Tax upon
the payment provided for by this clause, shall be equal to the Contract
Payments and such other Total Payments. For purposes of determining
whether any of the payments will be subject to the Excise Tax and the
amount of such Excise Tax, (i) any other payments or benefits received or
to be received by the Employee in connection with a Change in Control of
the Company or the Employee's termination of employment (whether payable
pursuant to the terms of this Agreement or any other plan, arrangement or
agreement with the Company, its successors, any person whose actions result
in a Change in Control of the Company or any corporation affiliated (or
which, as a result of the completion of a transaction causing a Change in
Control of the Company, will become affiliated) with the Company within the
meaning of Section 1504 of the Code) (together with the Contract Payments,
the "Total Payments") shall be treated as "parachute payments" within the
meaning of Section 280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of Section 280G(b)(1) shall be treated as
subject to the Excise Tax, unless in the opinion of tax counsel selected by
the Company's independent auditors and acceptable to the Employee the Total
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Payments (in whole or in part) do not constitute parachute payments, or
such excess parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered within the meaning of Section
280G(b)(4)(B) of the Code either to the extent such reasonable compensation
is in excess of the base amount within the meaning of Section 280G(b)(3) of
the Code, or are otherwise not subject to the Excise Tax, (ii) the amount
of the Total Payments that shall be treated as subject to the Excise Tax
shall be equal to the lesser of (A) the total amount of the Total Payments
or (B) the amount of excess parachute payments within the meaning of
Section 280G(b)(1) (after applying clause (i), above), and (iii) the value
of any non-cash benefits or any deferred payment or benefit shall be
determined by the Company's independent auditors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, the Employee shall be
deemed to pay federal income taxes at the highest marginal rate of federal
income taxation in the calendar year in which the Gross-Up Payment is to be
made and state and local income taxes at the highest marginal rate of
taxation in the state and locality of the Employee's residence on the Date
of Termination, net of the maximum reduction in federal income taxes which
could be obtained from deduction of such state and local taxes. In the
event that the Excise Tax is subsequently determined to be less than the
amount taken into account hereunder at the time of termination of the
Employee's employment, the Employee shall repay to the Company at the time
that the amount of such reduction in Excise Tax is finally determined the
portion of the Gross-Up Payment attributable to such reduction (plus the
portion of the Gross-Up Payment attributable to the Excise Tax and federal
and state and local income tax imposed on the Gross-Up Payment being repaid
by the Employee if such repayment results in a reduction in Excise Tax
and/or a federal and state and local income tax deduction) plus interest on
the amount of such repayment at the rate provided in Section 1274(d) of the
Code. In the event that the Excise Tax is determined to exceed the amount
taken into account hereunder at the time of the termination of the
Employee's employment (including by reason of any payment the existence or
amount of which cannot be determined at the time of the Gross-Up Payment),
the Company shall make an additional Gross-Up Payment in respect of such
excess (plus any interest payable with respect to such excess) at the time
that the amount of such excess is finally determined.
(f) The payments provided for in Subsections (b), (c), and
(e) above, shall be made not later than the fifth day following the Date of
Termination, provided, however, that if the amounts of such payments cannot
be finally determined on or before such day, the Company shall pay to the
Employee on such day an estimate, as determined in good faith by the
Company, of the minimum amount of such payments and shall pay the remainder
of such payments (together with interest at a rate equal to 120% of the
rate provided in Section 1274(d) of the Code) as soon as the amount thereof
can be determined but in no event later than the thirtieth day after the
Date of Termination. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to the Employee payable on
the fifth day after demand by the Company (together with interest at a rate
equal to 120% of the rate provided in Section 1274(d) of the Code).
(g) Any options held by the Employee to purchase any
securities of the Company which are not exercisable as of the Date of
Termination, notwithstanding any other provision of the option or any plan
under which it was granted or issued regarding vesting or exercisability or
otherwise, shall become fully vested and exercisable as of the Date of
Termination and all options held by the Employee (including those already
exercisable and those that become exercisable pursuant to this Subsection
(g)), shall remain exercisable for the balance of their respective terms
and all other terms of the options shall remain in full force and effect.
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(h) The Company shall arrange to provide the Employee, for a
period of 36 months from and after the Date of Termination, with life,
disability, accident and health insurance benefits substantially similar to
those that the Employee was receiving immediately prior to the Notice of
Termination. Benefits otherwise receivable by the Employee pursuant to
this Subsection shall be reduced to the extent comparable benefits are
actually received by the Employee during the 36-month period following the
Employee's termination, and any such benefits actually received by the
Employee shall be reported to the Company.
(i) In addition to all other amounts payable to the Employee,
the Employee shall be entitled to receive all benefits payable to the
Employee under any applicable retirement, thrift, and incentive plans as
well as any other plan or agreement sponsored by the Company or any of its
subsidiaries relating to retirement benefits.
3. NOTICE OF TERMINATION. Any purported termination of the
Employee's employment by the Company or by the Employee shall be
communicated by written Notice of Termination to the other party hereto in
accordance with Section 8 of this Agreement.
4. NO MITIGATION. The Employee shall not be required to mitigate
the amount of any payment provided for in this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment or benefit
provided for in this Agreement be reduced by any compensation earned by the
Employee as the result of employment by another employer, by retirement
benefits, by offset against any amount claimed to be owed by the Employee
to the Company, or otherwise except as specifically provided in Subsection
2(h).
5. TERMINATION IN CONTEMPLATION OF CHANGE IN CONTROL. In
connection with a termination of Employee's employment in contemplation of
a Change in Control, any reference in this Agreement with regard to any
measurement date or time or the parameters of any time period that
references the time or date of the Change in Control shall be deemed to
mean either (a) the date or time of the occurrence constituting the Date of
Termination by the Company, or (b) the date or time of the Change in
Control, as the context would require to effectuate the intent of the
provisions of this Agreement.
6. DEATH. If the Employee should die while any amount would
still be payable to the Employee hereunder if the Employee had continued to
live, all such amounts, unless otherwise provided herein, shall be paid to
the Employee's legatee or other designee or, if there is no such designee,
to the Employee's estate.
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7. SUCCESSORS; BINDING AGREEMENT.
(a) The Company shall require any successor (whether direct
or indirect, by purchase, merger, share exchange, consolidation or
otherwise and whether by operation of law or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and to agree to perform the obligations of the Company under this
Agreement. Failure of the Company to obtain such assumption and agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Employee to compensation from the Company
in the same amount and on the same terms as the Employee would be entitled
to hereunder as if the Employee terminated the Employee's employment
following a Change in Control of the Company, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Employee's personal or legal representatives, executors,
administrators, heirs, distributees and legatees.
(c) In the event that the Employee is employed by a
subsidiary of the Company wherever in this Agreement reference is made to
the "Company," unless the context otherwise requires, such reference shall
also include such subsidiary. The Company shall cause such subsidiary to
carry out the terms of this Agreement insofar as they relate to the
employment relationship between the Employee and such subsidiary, and the
Company shall indemnify the Employee and save the Employee harmless from
and against all liability and damage the Employee may suffer as a
consequence of such subsidiary's failure to perform and carry out such
terms. Wherever reference is made to any benefit program of the Company,
such reference shall include, where appropriate, the corresponding benefit
program of such subsidiary if the Employee was a participant in such
benefit program on the date a Change in Control of the Company has
occurred.
8. NOTICES. Any notice required or permitted to be given under
this Agreement shall be given in writing, and shall be delivered by hand or
by certified mail, postage prepaid and return receipt requested, addressed
as set forth below:
If to the Company:
Correctional Services Corporation
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, Xxxxxxx 00000
Attention:
If to the Employee:
Xxxxx X. Xxxxxxxx
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxx 00000
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All notices delivered by certified mail shall be deemed delivered
on the second day (not including Sundays or holidays observed by the U.S.
postal service) after mailing. Notices delivered by hand to the Employee
must be delivered in person to the Employee. Notices delivered by hand to
the Company must be delivered to a person at the offices of the Company or
in person to the Chief Executive Officer. Any change of address by either
the Company or the Employee must be promptly communicated in writing and
delivered in accordance with this Section 8.
9. WAIVER. The waiver by any party hereto of a breach of any
provision of this Agreement by any other party hereto shall not operate or
be construed as a waiver of any subsequent breach by the breaching party.
10. BINDING EFFECT. Except as otherwise expressly provided
herein, the rights and obligations of the Company under this Agreement
shall inure to the benefit of and shall be binding upon its successors and
assigns. The Company has agreed to enter into this Agreement with Employee
in connection with his employment by the Company. Accordingly, the
Employee may not assign any of his rights or delegate any of his duties or
obligations under this Agreement except as otherwise provided herein.
11. ENTIRE AGREEMENT. This Agreement and the Employment
Agreement constitutes the entire understanding of the Employee and the
Company in respect of the subject matter hereof and supersedes any and all
prior understandings and agreements, written or oral, relating to such
subject matter of this Agreement. This Agreement and the provisions hereof
may not be changed, waived or canceled orally, but may be changed, waived,
or canceled only by an instrument in writing signed by the parties hereto.
12. SECTION HEADINGS. The section headings of this Agreement are
for convenience of reference only and shall not limit or otherwise affect
any of the provisions of this Agreement.
13. VALIDITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement, which shall remain in full force and
effect.
14. SURVIVAL. The parties understand and agree that this
Agreement in its entirety survives the termination or expiration of the
Employee's employment.
15. LAW AND INTERPRETATION. This Agreement shall be governed by
the laws of the State of Florida, and the invalidity or unenforceability of
any provisions hereof shall in no way affect the validity of enforceability
of any other provisions.
16. ARBITRATION. Any dispute or controversy arising under this
Agreement or relating in any way to the Employee's employment with the
Company shall be settled exclusively by arbitration in the State of Florida
in accordance with the rules of the American Arbitration Association then
in effect. The parties hereto agree that except as otherwise provided
herein, each of them shall bear their own costs, including attorney's fees,
incurred in any such arbitration and further agree that the cost of the
arbitrator shall be shared equally between them. The parties further agree
that judgment may be entered on the arbitrator's award in any court having
jurisdiction.
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IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement under seal as of the date first above written.
ATTEST: CORRECTIONAL SERVICES CORPORATION
/s/ Xxxx Xxxxxx By: /s/ Xxxxx X. Xxxxxxxx (SEAL)
________________________ ____________________________
Name: Xxxx Xxxxxx Name: Xxxxx X. Xxxxxxxx
Title: President & CEO
WITNESS:
/s/ Xxxx Xxxxxx /s/ Xxxxx X. Xxxxxxxx
________________________ ____________________________
Name: Xxxx Xxxxxx Name: Xxxxx X. Xxxxxxxx
Approved by a majority of the members of the Compensation Committee at
a duly convened meeting of that committee held on September 29, 1999.
/s/ Xxxxxx X. Xxxxx
________________________
Xxxxxx X. Xxxxx
/s/ Xxxxxx X.Xxxxxx
________________________
Xxxxxx X. Xxxxxx
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