CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT (this "Agreement") is made this
3rd day of May, 1999, by and between CORRECTIONAL SERVICES CORPORATION, a
Delaware corporation ("CSC") and Xxx X. Xxxxxx (thereinafter the
"Employee").
WHEREAS, Correctional Services Corporation is engaged in the
business of providing rehabilitative services for adults, youths and
criminally at risk youths;
WHEREAS, the Employee has certain expertise and acumen and is
entering into an Amended Employment Agreement of same 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:
1. 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 thc 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 (i) individuals who constitute the Board of Directors at
the beginning of such period or (ii) individuals who joined the board;
(B) the stockholders of the Company approve a
merger, share exchange or consolidation of the Company with or into any
other corporation wherein immediately following such merger, the
shareholders of the Company prior to the transaction own less than 51% of
the outstanding voting stock of the Company (if it is the survivor of the
transaction) or the surviving entity; or
(C) 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 Employee who shall have the right, at his sole
option, to give such notice upon a Change of Control. Notwithstanding
any provision in the Employment Agreement to the contrary, such Notice of
Termination shall not be deemed a breach by Employee of the Employment
Agreement or any provision thereof.
2. Severance Resulting From Change in Control of the Company. In
the event the Employee provides a Notice of Termination following a
Change in Control or if the Company terminates Employee in contemplation
of, upon the occurrence of or following a Change in Control without
Cause, 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 and benefits to which the
Employee is entitled under his Employment Agreement or pursuant to any
plan of the Company in which the Employee is participating at the time of
termination, including any compensation or bonus plan, payable at the
time such payments or benefits are due, except as otherwise provided
below.
(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 equal to the
sum of (A) 2.99 times the Employee's annual base salary in effect
immediately prior to the occurrence of the circumstance giving rise to
the Notice of Termination given in respect thereof and (B) $600,000 as
payment for the employee's agreement to extend his agreement not to
compete under his employment agreement to three 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) 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 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 as 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.
(e) The payments provided for in Subsections (b), (c), and
(d) 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 as soon as the amount thereof
can be determined but in no event later than the thirtieth day after the
Date of Termination.
(f) Any options held by the Employee to purchase any
securities of the Company which are not exercisable as of the Date of
Termination, shall become fully vested and exercisable as of the Date of
Termination. All other terms of the options shall remain in full force
and effect.
(g) The Company shall arrange to provide and pay the Employee
with life, disability, accident and health insurance benefits
substantially similar to those that the Employee was receiving
immediately prior to the Notice of Termination, for the period beginning
on the Date of Termination and ending on the earlier of (A) the end of
the 36th month after the Date of Termination or (B) the date the
Employee becomes eligible for such benefits under any plan offered by an
employer with which Employee is employed on a full-time basis.
(h) 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.
2. 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 7 of this Agreement.
3. 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 l(h).
4. Termination in Contemplation of Change in Control. In
connection with a termination of Employee's employment by the Company in
contemplation of, upon the occurrence of or after a Change in Control,
any reference in this Agreement with regard to any measurement date or
time that references the time or date of the Change in Control or the
Date of Termination shall be deemed to mean either (a) the date or time
of the occurrence constituting the Date of Termination by the Company, as
the case may be, 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 to provide Employee with the payments and benefits hereunder.
5. 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.
6. 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.
7. 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, XX 00000
If to the Employee: Xxx X. Xxxxxx
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000
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 7.
8. 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.
9. 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.
10. 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.
11. 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.
12. 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.
13. Survival. The parties understand and agree that this
Agreement in its entirety survives the termination or expiration of the
Employee's employment.
14. Law and Interpretation. This Agreement shall be governed by
the 1aws of the State of Florida, and the invalidity or unenforceability
of any provisions hereof shall in no way affect the validity or
enforceability of any other provisions.
15. 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.
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
By: /s/ Xxx X. Xxxxxx By: /s/ Xxxxx X. Xxxxxxxx
-------------------------------- ---------------------------- (SEAL)
Name: Xxx X. Xxxxxx Name: Xxxxx X. Xxxxxxxx
Title: Executive Vice President Title: President
