<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended July 3, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from ________ to _______
Commission file number 0-2514
------
The Wackenhut Corporation
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-0857245
- - --------------------------------------------------------------------------------
(State of incorporation ororganization) (I.R.S. Employer Identification No.)
1500 San Remo Avenue, Coral Gables, FL 33146
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (305) 666-5656
--------------
- - --------------------------------------------------------------------------------
FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT.
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 [ ]
At July 3, 1994, 3,858,885 shares of Series A and 3,864,287 shares of Series
B of the registrant's Common Stock were issued and outstanding.
1
<PAGE>
THE WACKENHUT CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following consolidated financial statements of the Corporation have been
prepared in accordance with the instructions to Form 10-Q and therefore, omit or
condense certain footnotes and other information normally included in financial
statements prepared in accordance with generally accepted accounting principles.
In the opinion of management, all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation of the financial
information for the interim periods reported have been made. Results of
operations for the twenty-six weeks ended July 3, 1994 are not necessarily
indicative of the results for the entire fiscal year ending January 1, 1995.
2
<PAGE>
THE WACKENHUT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THIRTEEN WEEKS ENDED
JULY 3, 1994 AND JULY 4, 1993
(In thousands except per share data)
(UNAUDITED)
<TABLE>
<CAPTION>
1994 1993
---------------------------------
<S> <C> <C>
REVENUES $ 180,462 $ 162,051
---------------------------------
OPERATING EXPENSES:
Payroll and related taxes 133,085 120,762
Other operating expenses 43,335 39,562
---------------------------------
176,420 160,324
---------------------------------
OPERATING INCOME 4,042 1,727
---------------------------------
OTHER INCOME (EXPENSE):
Interest expense (1,149) (1,076)
Interest and investment income 346 540
Equity income of foreign affiliates (3) 827
---------------------------------
(806) 291
---------------------------------
INCOME BEFORE INCOME TAXES 3,236 2,018
Provision for income taxes 1,133 619
Minority interest, net of income taxes 150 51
---------------------------------
NET INCOME $ 1,953 $ 1,348
---------------------------------
---------------------------------
EARNINGS PER SHARE: $ 0.25 $ 0.18
---------------------------------
---------------------------------
</TABLE>
See notes to Consolidated Financial Statements.
3
<PAGE>
THE WACKENHUT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE TWENTY-SIX WEEKS ENDED
JULY 3, 1994 AND JULY 4, 1993
(In thousands except per share data)
(UNAUDITED)
<TABLE>
<CAPTION>
1994 1993
--------------------------------
<S> <C> <C>
REVENUES $ 354,999 $ 324,163
--------------------------------
OPERATING EXPENSES:
Payroll and related taxes 261,383 240,443
Other operating expenses 86,371 78,912
--------------------------------
347,754 319,355
--------------------------------
OPERATING INCOME 7,245 4,808
--------------------------------
OTHER INCOME (EXPENSE):
Interest expense (2,044) (2,109)
Interest and investment income 772 1,251
Equity income of foreign affiliates 243 1,046
--------------------------------
(1,029) 188
--------------------------------
INCOME BEFORE INCOME TAXES 6,216 4,996
Provision for income taxes 2,175 1,675
Minority interest, net of income taxes 268 114
--------------------------------
NET INCOME $ 3,773 $ 3,207
--------------------------------
--------------------------------
EARNINGS PER SHARE: $ 0.49 $ 0.42
--------------------------------
--------------------------------
</TABLE>
See notes to Consolidated Financial Statements.
4
<PAGE>
THE WACKENHUT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JULY 3, 1994 AND JANUARY 2, 1994
(In thousands except share data)
(UNAUDITED)
<TABLE>
<CAPTION>
1994 1993
-----------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 7,769 $ 7,821
Accounts receivable, less allowance for doubtful
accounts of $1,178 in 1994 and $687 in 1993 89,515 94,937
Inventories, net 7,376 6,243
Other 18,029 14,760
-----------------------------
122,689 123,761
-----------------------------
NOTES RECEIVABLE 1,939 2,085
-----------------------------
MARKETABLE SECURITIES AND CERTIFICATES OF DEPOSIT
of casualty reinsurance subsidiary 24,758 24,843
-----------------------------
PROPERTY AND EQUIPMENT, at cost 52,886 51,497
Accumulated depreciation (13,789) (13,374)
-----------------------------
39,097 38,123
-----------------------------
DEFERRED TAX ASSET, NET 6,821 6,374
-----------------------------
OTHER ASSETS:
Investment in and advances to foreign affiliates,
at cost, including equity 5,646 5,742
Other 11,164 10,369
-----------------------------
16,810 16,111
-----------------------------
$ 212,114 $ 211,297
-----------------------------
-----------------------------
</TABLE>
See notes to Consolidated Financial Statements.
5
<PAGE>
THE WACKENHUT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JULY 3, 1994 AND JANUARY 2, 1994
(In thousands except share data)
(UNAUDITED)
<TABLE>
<CAPTION>
1994 1993
-------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 6,975 $ 10,456
Short-term notes payable 4,500 -
Accounts payable 11,598 16,711
Accrued payroll and related taxes 24,495 22,444
Accrued expenses 27,273 22,124
Deferred tax liability, net 496 -
-------------------------
75,337 71,735
-------------------------
RESERVES FOR LOSSES of casualty reinsurance
subsidiary 34,440 33,500
-------------------------
LONG-TERM DEBT 51,700 57,484
-------------------------
MINORITY INTEREST 1,484 1,216
-------------------------
SHAREHOLDERS' EQUITY:
Preferred stock, 10,000,000 shares authorized -- -
Common stock, $.10 par value, 20,000,000 shares
authorized;
Series A common stock, 3,858,885 issued 386 386
Series B common stock, 3,864,287 issued 386 386
Additional paid-in capital 26,234 26,234
Retained earnings 25,651 23,268
Cumulative translation adjustment (3,132) (3,058)
Unrealized gain (loss) on marketable securities (372) 146
-------------------------
49,153 47,362
-------------------------
$ 212,114 $ 211,297
-------------------------
-------------------------
</TABLE>
See notes to Consolidated Financial Statements.
6
<PAGE>
THE WACKENHUT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWENTY-SIX WEEKS ENDED JULY 3, 1994 AND JULY 4, 1993
(In thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
1994 1993
-------------------------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
Net Income $ 3,773 $ 3,207
Adjustments -
Depreciation expense 2,088 2,256
Amortization expense 2,724 2,574
Provision for bad debts 356 440
Equity income, net of dividends 290 (990)
Minority interests in net earnings 268 173
Other (74) (445)
Changes in assets and liabilities, net of effects of
purchase of controlling interest in foreign
subsidiaries and divestitures:
Decrease (increase) in assets:
Accounts receivable 5,147 3,515
Inventories (3,357) (2,643)
Other current assets (2,978) 733
Marketable securities and certificates of deposit (433) (402)
Other assets 1,840 1,681
Deferred tax asset (447) (489)
(Decrease) increase in liabilities:
Accounts payable and accrued expenses (2,253) (9,679)
Accrued payroll and related taxes 2,051 3,731
Deferred tax liability - current 496 315
Reserve for losses of casualty reinsurance
subsidiary 940 389
-------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 10,431 4,366
-------------------------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Payments on notes receivable 146 -
Payment for acquisitions, net of working capital (935) -
acquired
Investment in and advances to foreign affiliates (256) (1,803)
Capital expenditures (2,638) (1,603)
Deferred charge expenditures (645) -
-------------------------
NET CASH USED IN INVESTING ACTIVITIES (4,328) (3,406)
-------------------------
</TABLE>
(Continued)
7
<PAGE>
THE WACKENHUT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWENTY-SIX WEEKS ENDED JULY 3, 1994 AND JULY 4, 1993
(In thousands)
(UNAUDITED)
(Continued)
<TABLE>
<CAPTION>
1994 1993
-------------------------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Proceeds from issuance of debt 72,059 35,269
Payments on debt (76,824) (32,583)
Dividends paid (1,390) (1,390)
-------------------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (6,155) 1,296
-------------------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (52) 2,256
Cash and Cash Equivalents, at beginning of year 7,821 4,899
-------------------------
CASH AND CASH EQUIVALENTS, AT END OF YEAR $ 7,769 $ 7,155
-------------------------
-------------------------
SUPPLEMENTAL DISCLOSURES
CASH PAID DURING THE YEAR FOR:
Interest $ 1,973 $ 1,670
Income taxes $ 92 $ 1,336
</TABLE>
See notes to Consolidated Financial Statements.
8
<PAGE>
THE WACKENHUT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies followed for the quarterly financial reporting are the
same as those disclosed in Note 1 of the Notes to Consolidated Financial
Statements included in the Corporation's Annual Report on Form 10-K for the
fiscal year ended January 2, 1994. Certain prior year amounts have been
reclassified to conform with current year financial statement presentation.
2. LONG-TERM DEBT
Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
JULY 3, January 2,
1994 1994
------------------------------
<S> <C> <C>
Senior note payable - 10.2% $ 12,500 $ 25,000
Revolving loan - 5.6% in 1994 and 4.2% in 1993 28,000 26,150
First mortgage note on headquarters building -
5.4% in 1994 and 4.3% in 1993 16,425 16,790
Revolving line of credit
- Wackenhut Corrections Corporation
Australia PTY, Ltd. 5.6% in 1994 1,750 -
------------------------------
58,675 67,940
Less - Current portion of long-term debt (6,975) (10,456)
------------------------------
$ 51,700 $ 57,484
------------------------------
------------------------------
</TABLE>
9
<PAGE>
THE WACKENHUT CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FINANCIAL CONDITION
On August 2, 1994, Wackenhut Corrections Corporation, a subsidiary of the
Corporation (the "Subsidiary"), sold 1,900,000 (or 2,185,000 if oversubscribed)
shares of common stock at an offering price of $9.00 per share. Proceeds from
the offering were used in part by the Subsidiary to retire indebtedness to the
Corporation. The remainder of the proceeds will be used by the Subsidiary to
repay bank debt incurred to fund a special dividend to the Corporation and for
general corporate purposes, including working capital.
With proceeds from the retirement of debt from the Subsidiary and its revolving
credit facility, the Corporation prepaid $12,500,000 of its Senior Notes due
September 30, 2000, at a premium of approximately $1,344,000 on August 2, 1994.
Reference is made to Item 7, Part II of the Corporation's Annual Report on Form
10-K for the fiscal year ended January 2, 1994 for further discussion and
analysis of information pertaining to liquidity and capital resources.
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Corporation's consolidated financial statements and the notes thereto.
CONSOLIDATED STATEMENTS OF INCOME FOR THE THIRTEEN WEEKS:
Consolidated revenues increased $18,411,000 (11.4%) in the second quarter of
1994 compared to the same quarter last year. The increase was principally
attributable to the Security Services division of the Domestic Operations Group,
which contributed $7,800,000 to the increase in revenues in the second quarter
of 1994, principally as a result of several major national contracts obtained in
the second and third quarters of 1993.
Revenues of Australasian Correctional Management Pty., Ltd., (ACM) a
wholly-owned subsidiary of Wackenhut Corrections Corporation, which are being
consolidated for the first time this year, represented $5,100,000 in the second
quarter of 1994 and more than offset reductions in revenues of contracts with
the Department of Energy (DOE). The decrease in revenues attributable to DOE
contracts in the second quarter of 1994, compared to the same quarter in 1993,
was approximately $3,600,000.
Payroll and related taxes increased $12,323,000 (10.2%) and other operating
expenses increased $3,773,000 (9.5%) in the second quarter of 1994 verses the
second quarter last year. The increase can be attributed mainly to the
consolidation of ACM and to the increase in costs related to other increases in
revenues.
10
<PAGE>
Operating income was $2,315,000 (134%) higher in the second quarter of 1994 than
in the same quarter in 1993, principally as a result of profit margins of new
national and state contracts of the Security Services Division. In addition, a
significant portion of the increase in operating income can be attributed to the
consolidation of ACM. The Wackenhut Monitoring and Wackenhut Applied
Technologies Center divisions, which had combined operating losses of
approximately $405,000 in the second quarter of 1993, were sold or discontinued
late in 1993, and thus improved income from operations in the second quarter of
1994. As a result of quality improvements at certain DOE facilities, the
Wackenhut Services Inc. Division received better award fees from the Department
of Energy for the second quarter of 1994 than for the comparable period last
year.
Other expenses amounted to $806,000 for the second quarter of 1994, compared
with other income of $291,000 for the second quarter of 1993. The decrease was
due principally to the decrease in equity income of foreign affiliates in the
second quarter of 1994 when compared to the same quarter last year, which
included equity income of ACM. ACM is being consolidated for the first time in
1994. In addition, interest and investment income of the captive reinsurance
subsidiary amounted to $346,000 in the second quarter of 1994, whereas they
amounted to $540,000 for the second quarter of 1993. The decrease in interest
and investment income was attributable to a realignment of the investment
portfolio of the captive reinsurance subsidiary, which should better position
the subsidiary for future gains.
Income before provision for income taxes was $1,218,000 (60.4%) higher in the
second quarter of 1994 than in the second quarter of 1993. The effective income
tax rate was lower than the combined Federal and state corporate tax rates for
both, the second quarter of 1994 and the second quarter of 1993 due to targeted
job tax credits, tax exempt interest income and capital loss carryforwards. In
addition, the effective income tax rate for the second quarter of 1993 was
further reduced by a favorable IRS audit adjustment.
Minority interest, net of income taxes, increased $99,000 during the second
quarter of 1994 verses the second quarter of 1993 due to an increase in profits
from foreign subsidiaries, which was partially due to the consolidation of the
subsidiary in Russia.
Net income increased $605,000 (45%) during the second quarter of 1994 compared
with net income for the same quarter in 1993 due to the factors described
above..
CONSOLIDATED STATEMENTS OF INCOME FOR THE TWENTY SIX WEEKS:
Consolidated revenues of $354,999,000 increased $30,836,000 (9.5%) in the first
half of 1994 compared to $324,163,000 in the first half of 1993. The Security
Services Division of the Domestic Operations Group contributed $21,853,000 to
the increase in revenues in the first half of 1994. This increase in revenues
was attributable to several new national contracts obtained in the second and
third quarters of 1993. These revenue gains were complemented by increases in
the Nuclear Division of $562,000 and the Food Service Division of $975,000. The
increase in revenue of the Food Service Division was the result of new contracts
at correctional facilities.
Revenues of the Government Services Group were $6,484,000 higher in the second
half of 1994 than in the second half of last year as a result of an increase of
$14,047,000 in revenues generated by the Corrections Division. The
consolidation of ACM since the beginning of the year has increased revenues of
the Corrections Division by $10,097,000 through the end of the second half of
1994.
11
<PAGE>
This increase was partially offset by a $6,632,000 decrease in revenues related
to DOE government contracts.
Payroll and related taxes increased $20,940,000 (8.7%) and other operating
expenses increased $7,459,000 (9.5%) in the first half of 1994 compared to the
first half of 1993. These increases in costs resulted from the growth of
business from new security contracts and the consolidation of payroll and
operating expenses of ACM.
Operating income increased to $7,245,000 from $4,808,000 or $2,437,000 (50.7%)
in the first half of 1994 compared to the same period last year. The Security
Services Division was able to capitalize on higher revenues and lower start up
costs associated with prior year new contracts. The Government Services Group
benefited from the sale and discontinuation of non-core businesses which
incurred $892,000 in operating losses in the first half of 1993. In addition, a
significant portion of the increase in operating income can be attributed to the
consolidation of ACM.
Other expenses amounted to $1,029,000 for the first half of 1994 compared to
other income of $188,000 for the first half of 1993. The decrease was due
principally to the decrease of $803,000 in equity income of affiliates, which
included equity income of ACM in the first half of 1993, whereas ACM is being
consolidated for the first time in 1994. In addition, interest and investment
income declined $479,000 in the first half of 1994 from $1,251,000 recorded for
the comparable period in 1993, principally as a result of a realignment of the
investment portfolio of the reinsurance subsidiary, which should better position
the subsidiary for future gains.
Income before provision for income taxes was $1,220,000 (24.4%) higher for the
first half of 1994 than for the first half of 1993. The provision for income
taxes was lower than the combined Federal and state corporate tax rates for
both, the first half of 1994 and the comparable period in 1993 due to targeted
jobs tax credits, tax exempt interest income and capital loss carryforwards. In
addition, the effective Federal income tax rate for the first half of 1993 had
been reduced by a favorable IRS audit adjustment.
Minority interest expense net of income taxes increased $154,000 in the first
half of this year in comparison to the same period last year due to an increase
in profits from foreign subsidiaries.
Net Income was $3,773,000 in the first half of 1994 compared to $3,207,000 in
the same period last year. The increase of $566,000 (17.6%) was attributable to
the factors described above.
12
<PAGE>
THE WACKENHUT CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The nature of the Corporation's business results in claims or litigation
alleging that the Corporation is liable for damages arising from the conduct of
its employees or others.
Reference is made to Item 1 of the Corporation's Quarterly Report on Form 10-K
for the quarterly period ended April 3, 1994.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBIT 1
Waiver Amendment, Prepayment and Right of First Offer Agreement between The
Wackenhut Corporation and The Principal Mutual Life Insurance Company dated July
1, 1994.
EXHIBIT 2
Amendment No. 1 to Amended and Restated Revolving Credit and Reimbursement
Agreement between The Wackenhut Corporation and NationsBank of Florida dated May
18, 1994.
The Corporation did not file a Form 8-K during the second quarter of 1994.
13
<PAGE>
THE WACKENHUT CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE WACKENHUT CORPORATION
DATE: August 12, 1994 /s/ RICHARD C. DECOOK
------------------------------------------
Richard C. DeCook, Senior Vice President -
Finance and Chief Financial Officer
DATE: August 12, 1994 /s/ JUAN D. MIYAR
------------------------------------------
Juan D. Miyar, Vice President - Accounting
Services and Corporate Controller
14
<PAGE>
EXHIBIT 1
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
THE WACKENHUT CORPORATION
WAIVER, AMENDMENT, PREPAYMENT AND RIGHT OF FIRST OFFER
AGREEMENT DATED AS OF JULY 1, 1994
Re: 10.20% Senior Notes
Due September 30, 2000
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<PAGE>
WAIVER, AMENDMENT, PREPAYMENT AND RIGHT OF FIRST OFFER AGREEMENT dated as
of July 1, 1994 between THE WACKENHUT CORPORATION, a Florida corporation (the
"COMPANY") and PRINCIPAL MUTUAL LIFE INSURANCE COMPANY (the "NOTEHOLDER").
RECITALS:
A. The Company has heretofore entered into separate and several Note
Agreements, each dated as of September 30, 1990 (collectively, the "NOTE
AGREEMENTS") with each of the institutions identified in Schedule I thereto. The
Noteholder is the holder of 100% of the outstanding 10.20% Senior Notes due
September 30, 2000 (the "Notes") of the Company issued and sold under and
pursuant to the Note Agreements. The Note Agreement to which the Noteholder was
a signatory is hereby defined as the "NOTE AGREEMENT."
B. The Company proposes (i) to cause to be sold in the public market
approximately 425,000 shares of Common Stock, par value $.01 per share, of
Wackenhut Corrections Corporation, a wholly-owned subsidiary of the Company
("WCC"), which shares are owned by the Company on the date hereof, and (ii) to
cause WCC to cause to be issued and sold in the public market between 1,700,000
and 2,018,750 additional shares of such Common Stock. The shares of Common
Stock to be sold as contemplated in this Recital B are, or are to be, registered
with the Securities and Exchange Commission pursuant to that certain draft Form
S-1 Registration Statement initially filed by WCC with said Commission on May
24, 1994. The sales of Common Stock described in this Recital B are hereinafter
collectively referred to as the "WCC STOCK SALES".
C. The consummation of the WCC Stock Sales are prohibited under the
provisions of the Note Agreement, as in effect on the date hereof.
D. In consideration of the agreement by the Company provided below to
prepay all amounts of principal of, and interest on, the Notes upon the terms
and with the prepayment premium hereinafter set forth, and certain other
agreements of the Company contained herein, the Noteholder has agreed to waive
certain provisions of the Note Agreement in order to permit the consummation of
the WCC Stock Sales and to amend certain other provisions of the Note Agreement.
E. Capitalized terms used herein but not otherwise defined shall have the
meanings assigned thereto in the Note Agreement.
F. The parties hereto intend that this Agreement shall be effective as of
July 1, 1994 (the "EFFECTIVE DATE").
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
of the parties hereto contained below, said parties hereby agree as follows:
<PAGE>
SECTION 1. WAIVERS.
SECTION 1.1. The Noteholder hereby waives compliance by the Company with
the provisions of Sections 5.14(b) and 5.14(c) of the Note Agreement to the
extent necessary to permit the consummation of the WCC Stock Sales; PROVIDED,
HOWEVER, that the waiver provided for in this Section 1.1 shall be of no further
force or effect after August 25, 1994 in the event that the WCC Stock Sales
shall not have been duly consummated on or prior to said date.
SECTION 1.2. The Noteholder hereby waives all Defaults and Events of
Default resulting from the incurrence by WCC prior to the date hereof of
indebtedness under that certain $4,500,000 short-term credit facility identified
on page 21 of the Registration Statement referred to in Recital B hereof, the
incurrence of which indebtedness constitutes a violation of Section 5.9(b) of
the Note Agreement.
SECTION 1.3. The Noteholder hereby further waives all Defaults and Events
of Default resulting from the issuance by WCC prior to the date hereof to
certain individuals of options to purchase Common Stock of WCC, which options
are described on pages 37 and 38 of the Registration Statement referred to in
Recital B hereof and the granting of which options constitutes a violation of
Section 5.14(b) of the Note Agreement; PROVIDED, HOWEVER, that (i) the waiver
provided for in this Section 1.3 shall extend only to the granting of the said
options, and not to the issuance of shares of Common Stock of WCC upon the
exercise, if any, of said options by the holders thereof, and (ii) the waiver
provided for in this Section 1.3 shall be of no further force or effect after
August 25, 1994.
SECTION 2. AMENDMENTS.
SECTION 2.1. Section 5.9(b) of the Note Agreement is hereby amended in
its entirety so that the same shall henceforth read as follows:
"(b) The Company will not permit any Restricted Subsidiary
to, at any time, issue, incur, assume, be or become liable in
respect of any Indebtedness other than (i) Indebtedness
outstanding on the Closing Date, (ii) Indebtedness of a
Restricted Subsidiary to the Company or to another Restricted
Subsidiary and (iii) Indebtedness (other than Indebtedness
incurred pursuant to clauses (i) and (ii)), in an amount not
greater than the Designated Amount less an amount equal to that
amount by which the principal amount of the Funded Debt being
issued for any refinancing or refunding of the type referred to
in the following sentence exceeds the principal amount of Funded
Debt of The Atrium At Coral Gables, Ltd. and Wackenhut
Properties, Inc. outstanding as of the Closing Date which is being
refinanced or refunded. Any Restricted Subsidiary may issue Funded
Debt for the purpose of refinancing or refunding the Funded Debt of
The Atrium At Coral Gables, Ltd. and Wackenhut Properties, Inc.,
which was issued and outstanding as of
-2-
<PAGE>
the Closing Date and which was originally issued for the purpose of
financing the Company's headquarters building located at 1500 San
Remo Avenue, Coral Gables, Florida PROVIDED that, (1) the principal
amount of the Funded Debt being issued does not exceed $21,000,000
and (2) the "cost" (determined in good faith by the Board of Directors
of the Company or such Restricted Subsidiary in accordance with sound
financial practice and taking into consideration the increase in
principal amount, interest rate, payment terms, amortization and any
other relevant factors) of such new Funded Debt is not greater than
that of the Funded Debt so being refinanced or refunded. As used
herein, the term "DESIGNATED AMOUNT" shall mean $5,000,000; PROVIDED,
HOWEVER, that until the earlier to occur of the Specified Stock
Sales or August 25, 1994, such term shall mean $9,500,000.
SECTION 2.2. Section 8.1 of the Note Agreement shall be amended by the
addition of the following definition in appropriate alphabetical position:
'SPECIFIED STOCK SALES' shall mean the sale of between
2,125,000 and 2,443,750 shares of Common Stock, par value $.01
per share, of Wackenhut Corrections Corporation, which shares
are, or are to be, registered with the Securities and Exchange
Commission pursuant to that certain Form S-1 Registration
Statement, a draft of which was filed with said Commission on May
24, 1994."
SECTION 3. AGREEMENT TO PREPAY NOTES.
In consideration of the agreements of the Noteholder contained in this
Agreement, the Company hereby agrees that,upon the consummation of the WCC Stock
Sales, the Company will prepay, and there shall become due and payable, the
entire principal amount of all Notes then outstanding, which payment shall be
made together with (i) interest accrued with respect to the Notes to the date of
such prepayment and (ii) a prepayment premium equal to the Make-Whole Premium
Amount payable under Section 2.2 of the Note Agreement in connection with an
optional prepayment of the Notes on such date of prepayment; PROVIDED, HOWEVER,
that for purposes of this Section 3, (x) the references to the "Treasury Rate"
contained in said Section 2.2 shall be deemed to refer to the Treasury Rate, as
defined in said Section 2.2, PLUS 37-1/2 basis points, and (y) the Treasury Rate
shall be determined as of July 22, 1994 (or, in the event that the entire
principal amount of the Notes shall not be paid pursuant to this Section 3 on or
prior to August 5, 1994, such other date as the parties hereto shall mutually
agree) at 12:00 Noon (New York time) by reference to the yield or yields
reported on the displays designated as pages PX2 through PX8 in the Bloomberg
Financial Markets Service for actively-traded "Off The Run" United States
Treasury Securities.
-3-
<PAGE>
In furtherance of the provisions of this Section 3, the Company shall
irrevocably direct the underwriter retained in connection with the WCC Stock
Sales, and/or shall cause WCC to irrevocably direct said underwriter, to pay to
the Noteholder, out of amounts otherwise payable by said underwriter to the
Company and/or WCC in connection with the WCC Stock Sales, an amount equal to
the amount payable by the Company pursuant to this Section 3. In the event that,
for any reason, the amount so paid to the Noteholder by said underwriter shall
be less than the amount required to be paid by the Company pursuant to this
Section 3, the Company shall immediately pay to the Noteholder the full amount
of any such shortfall.
The Company hereby acknowledges and agrees that a violation of this Section
3 shall constitute an Event of Default under Section 6.1 of the Note Agreement.
SECTION 4. RIGHT OF FIRST OFFER.
In the event that the Company shall determine to obtain long-term debt
financing or refinancing (whether by means of the issuance of indebtedness, the
entering into of a sale-leaseback transaction or otherwise) of the Company's
headquarters located at 1500 San Remo Avenue, Coral Gables, Florida (any such
financing or refinancing being hereinafter referred to as a "HEADQUARTERS
FINANCING"), the Company will make a written offer (an "OFFER") to the
Noteholder inviting the Noteholder to provide the Headquarters Financing prior
to inviting any other institution to provide such Financing. Each Offer shall
make reference to this Section 4 and shall set forth in reasonable detail
customary for institutional private placements the terms the Company proposes in
respect of the Headquarters Financing, subject to negotiation of definitive
documentation and other customary conditions. The Noteholder may elect, by
giving notice of such election within 14 days following its receipt of an Offer,
to provide all or part (but not less than 50% in principal amount) of the
Headquarters Financing. The failure of the Noteholder to give notice of such
election within said 14-day period shall be deemed to constitute an election by
the Noteholder to not provide any portion of the Headquarters Financing. Any
portion of the Headquarters Financing which the Noteholder shall have elected
not to provide in accordance with the provisions of this Section 4 may be
offered to one or more institutional investors (or, if the Noteholder elects not
to provide any portion of the Headquarters Financing, then to any Person) upon
terms and conditions no more advantageous to the proposed provider or providers
of the Headquarters Financing than those made available to the Noteholder.
The agreement of the Company contained in this Section 4 shall expire on
August 25, 1995 and shall survive any prior payment or prepayment of amounts
outstanding with respect to the Notes and any termination of the Note Agreement.
Nothing contained in this Section 4 shall be deemed to permit the Company or any
Restricted Subsidiary to incur any indebtedness not permitted by any provision
of the Note Agreement, to the extent that the Note Agreement shall remain in
effect.
-4-
<PAGE>
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to you that all of the
representations and warranties set forth in Exhibit A attached hereto are true
and correct as of the Effective Date and are incorporated herein by reference
with the same force and effect as though herein set forth in full.
SECTION 6. MISCELLANEOUS.
SECTION 6.1. This Agreement shall become effective and binding upon the
Company and the Noteholder on the Effective Date upon the acceptance hereof by
the Noteholder in the space below and upon the satisfaction in full of the
following conditions:
(a) The Noteholder shall have received, in form and substance
reasonably satisfactory to the Noteholder and its special counsel, such
documents and evidence with respect to the Company as the Noteholder may
reasonably request in order to establish the existence and good standing of
the Company and the authorization of the transactions contemplated by this
Agreement;
(b) Any consents or approvals from any holder or holders of any
outstanding Security of the Company and any amendments of agreements
pursuant to which any Securities may have been issued which shall be
necessary to permit the consummation of the transactions contemplated
hereby shall have been obtained and all such consents or amendments shall
be reasonably satisfactory in form and substance to the Noteholder and its
special counsel; and
(c) The Company shall have paid all reasonable fees and expenses of
special counsel to the Noteholder in connection with the execution and
delivery of this Agreement and the transactions contemplated hereby on or
prior to the date of the consummation of the WCC Stock Sales.
SECTION 6.2. Whenever in any certificate, letter, notice or other
instrument, reference is made to the Note Agreement, such reference without more
shall include reference to this Agreement.
SECTION 6.3. Except as modified and expressly amended by this Agreement,
the Note Agreement is in all respects ratified, confirmed and approved and all
of the terms, provisions and conditions thereof shall be and remain in full
force and effect.
SECTION 6.4. Without limiting the provisions of Section 6.1(c), the
Company agrees to pay all reasonable fees and expenses of the Noteholder and its
special counsel in connection with the preparation of this Agreement.
SECTION 6.5. This Agreement may be executed and delivered in any number
of counterparts, each of such counterparts constituting an original, but all
together only one Agreement.
-5-
<PAGE>
SECTION 6.6. All communications provided for hereunder shall be in
writing and, if to the Noteholder, delivered or mailed prepaid by registered or
certified mail or overnight air courier, addressed to the Noteholder at 711 High
Street, Des Moines, Iowa 50392-0800, Attention: Investment Department-Securities
Division, Attention: Dave Albright, or such other address as the Noteholder may
designate to the Company in writing, or by facsimile communication at (515)
248-2490 confirmed by registered or certified mail or overnight air carrier, and
if to the Company, delivered or mailed by registered or certified mail or
overnight air courier, to the Company at 1500 San Remo Avenue, Coral Gables,
Florida 33146-3009, Attention: Richard C. DeCook, or to such other address as
the Company may in writing designate to the Noteholder or by facsimile
communication at (305) 662-7313 confirmed by registered or certified mail or
overnight air carrier; PROVIDED, HOWEVER, that a notice to the Noteholder by
overnight air courier shall only be effective if delivered to such Noteholder at
a street address designated for such purpose in accordance with this Section
6.6, and a notice to such Noteholder by facsimile communication shall only be
effective if made by confirmed transmission to such Noteholder at a telephone
number designated for such purpose in accordance with this Section 6.6, or in
either case, as the Noteholder may designate to the Company in writing.
-6-
<PAGE>
THE WACKENHUT CORPORATION
By /s/ Richard C. DeCook
--------------------------------
Its Sr. VP/CFO
Agreed to and accepted:
PRINCIPAL MUTUAL LIFE INSURANCE
COMPANY
By /s/ James C. Fifield
--------------------------------
Its Counsel
By /s/ Warren Shank
--------------------------------
Its Counsel
The foregoing Agreement is hereby acknowledged this 18 day of July, 1994.
WACKENHUT CORRECTIONS CORPORATION
By /s/ Richard C. DeCook
--------------------------------
Its Ass't Treasurer
-7-
<PAGE>
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to you as follows:
1. TRANSACTIONS LEGAL AND AUTHORIZED. The execution and delivery of the
foregoing Agreement --
(a) are within the corporate powers of the Company;
(b) will not violate any material 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 Company or any loan agreement, indenture or other agreement or
instrument to which the Company will be a party or by which it may be
bound; and
(c) have been duly authorized by proper corporate action on the part
of the Company (no action by the stockholders of the Company being required
by law, by the Articles of Incorporation or the By-laws of the Company or
otherwise), have been executed and delivered by the Company and the
foregoing Agreement constitutes the legal, valid and binding obligation,
contract and agreement of the Company enforceable in accordance with its
terms.
2. NO DEFAULTS. Other than those Defaults and Events of Default waived
pursuant to the foregoing Agreement, no Default or Event of Default exists under
the Agreement and the Company is not in default under any instrument or
instruments or agreements under and subject to which any Indebtedness for
borrowed money 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.
3. CONSENTS. 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 Company of the foregoing Agreement or
compliance by the Company with any of the provisions thereof. All approvals and
consents required from any other Person for the due execution and delivery by
the Company of the foregoing Agreement and compliance by the Company with any of
the provisions thereof have been obtained and are in full force and effect.
4. FULL DISCLOSURE. Neither the foregoing Agreement nor any other
written statement furnished by the Company to you in connection with the
negotiation of the foregoing Agreement, contains any untrue statement of a
material fact or omits a material fact necessary to make the statements
contained therein or herein not misleading. There is no fact peculiar to the
Company which the Company has not disclosed to you in writing which materially
affects adversely nor, so far as the Company can now foresee, will
EXHIBIT A
(to Waiver, Amendment, Prepayment and Right of First Offer Agreement)
<PAGE>
materially affect adversely the ability of the Company to enter into and perform
the foregoing Agreement.
A-2
<PAGE>
EXHIBIT 2
AMENDMENT NO. 1 TO
AMENDED AND RESTATED
REVOLVING CREDIT AND REIMBURSEMENT AGREEMENT
THIS AMENDMENT NO. 1 TO AMENDED AND RESTATED REVOLVING CREDIT AND
REIMBURSEMENT AGREEMENT (the "Amendment Agreement") is made and entered into
this 18 day of May, 1994 by and among THE WACKENHUT CORPORATION, a Florida
corporation having its principal place of business in Coral Gables, Florida (the
"Borrower"), and NATIONSBANK OF FLORIDA, NATIONAL ASSOCIATION, a national
banking association in its capacity as agent (the "Agent") for each of the
lenders (the "Lenders") party to the Credit Agreement (as defined below).
Unless the context otherwise requires, all terms used herein without definition
shall have the definition provided therefor in the Credit Agreement.
W I T N E S S E T H:
WHEREAS, the Borrower, the Agent and the Lenders have entered into the
Amended and Restated Revolving Credit and Reimbursement Agreement dated July 1,
1993 whereby the Lenders have made loans and advances to, and issued letters of
credit for the benefit of, the Borrower, as at any time hereafter amended,
restated, modified or supplemented, the "Credit Agreement"; and
WHEREAS, the Borrower, the Lenders and the Agent have agreed that the
Credit Agreement shall be amended in the manner set forth herein;
NOW, THEREFORE, in consideration of the premises and conditions herein set
forth, it is hereby agreed as follows:
1. AMENDMENT. Subject to the conditions hereof, the Credit Agreement is
hereby amended, effective as of the date hereof, as follows:
(a) Section 1.01 thereof is hereby amended as follows:
(i) to include, immediately preceding the definition of "Business
Day," the following definition:
"'Bridge Note' means the $4,500,000 Term Note of Wackenhut
Corrections Corporation dated May __, 1994 and payable to the
order of NationsBank, as the same may be extended, modified,
substituted or replaced;"
(ii) the definition of "Total Revolving Loan Commitment" is hereby
amended in its entirety to read as follows:
"'Total Revolving Loan Commitment' means (i) for the period from
the Closing Date to September 30, 1994, $60,000,000 less the
<PAGE>
greater of (a) $20,000,000 if the Company shall sell any of its
capital stock, or (b) the net proceeds received by the Company
from any other financing permitted under this Agreement (other
than a refinancing of Indebtedness of The Atrium at Coral Gables,
Ltd., so long as the proceeds of such financing are applied to
pay such Indebtedness and the balance, if any, to reduce the
Total Revolving Loan Commitment), and (ii) after September 30,
1994, $40,000,000, as reduced pursuant to Section 2.10 hereof;
PROVIDED, HOWEVER, that the Total Revolving Loan Commitment as
determined above shall be further reduced by an amount equal to
the principal outstanding under the Bridge Note as of the date of
such determination;"
(b) Section 7.09(b)(i) thereof is hereby amended in its entirety to
read as follows:
"(i) Indebtedness arising under this Agreement and the Bridge
Note,"
(c) Section 8.01 thereof is hereby amended to add a new paragraph (l)
as follows and to renumber existing paragraph (l) as paragraph (m):
"(l) Any Default or Event of Default (as defined therein) shall
have occurred under the Bridge Note; or"
2. REPRESENTATIONS AND WARRANTIES. In order to induce the Agent and the
Lenders to enter into this Amendment Agreement, the Borrower hereby represents
and warrants that the Credit Agreement has been re-examined by the Borrower and
that except as disclosed by the Borrower in writing to the Lenders as of the
date hereof:
(a) The representations and warranties made by the Borrower in
Article VI thereof are true on and as of the date hereof;
(b) There has been no material change in the condition, financial or
otherwise, of the Borrower and its Subsidiaries since April 4, 1993 other
than changes in the ordinary course of business, none of which has been a
material adverse change;
(c) The business and properties of the Borrower and its Subsidiaries
are not, and since April 4, 1993 have not been, adversely affected in any
substantial way as the result of any fire, explosion, earthquake, accident,
strike, lockout, combination of workers, flood, embargo, riot, activities
of
2
<PAGE>
armed forces, war or acts of God or the public enemy, or cancellation or
loss of any major contracts; and
(d) After giving effect to this Amendment Agreement no condition
exists which, upon the effectiveness of the amendment contemplated hereby,
would constitute a Default or an Event of Default on the part of the
Borrower under the Credit Agreement or the Notes, either immediately or
with the lapse of time or the giving of notice, or both.
3. CONSENT TO SALE OF CAPITAL STOCK. The Agent and the Lenders hereby
consent to the issuance and sale of up to 31% (as determined on the date of such
sale) of the outstanding capital stock of Wackenhut Corrections Corporation to a
Person other than the Borrower or a Wholly-Owned Restricted Subsidiary.
4. CONDITIONS PRECEDENT. The effectiveness of this Amendment Agreement is
subject to the receipt by the Agent of the following:
(i) four counterparts of this Amendment Agreement duly executed
by all signatories hereto;
(ii) opinion of counsel for the Borrower as to the
authorization, execution and delivery of this Amendment Agreement and
the enforceability of the same against the Borrower in accordance with
its terms;
(iii) an amount equal to the aggregate legal fees incurred by the
Agent in connection with the negotiation, review and execution of this
Amendment Agreement; and
(iv) copies of all additional agreements, instruments and
documents which the Agent may reasonably request, such documents, when
appropriate, to be certified by appropriate governmental authorities.
All proceedings of the Borrower relating to the matters provided for herein
shall be satisfactory to the Lenders, the Agent and their counsel.
5. ENTIRE AGREEMENT. This Amendment Agreement sets forth the entire
understanding and agreement of the parties hereto in relation to the subject
matter hereof and supersedes any prior negotiations and agreements among the
parties relative to such subject matter. No promise, condition, representation
or warranty, express or implied, not herein set forth shall bind any party
hereto, and no one of them has relied on any such promise, condition,
representation or warranty. Each of the parties hereto acknowledges that,
except as in this Amendment Agreement otherwise expressly stated, no
representations, warranties or commitments, express or implied, have been made
by any party to the other. None of the terms or conditions of this Amendment
Agreement may be
3
<PAGE>
changed, modified, waived or canceled orally or otherwise, except by writing,
signed by all the parties hereto, specifying such change, modification, waiver
or cancellation of such terms or conditions, or of any proceeding or succeeding
breach thereof.
6. FULL FORCE AND EFFECT OF AGREEMENT. Except as hereby specifically
amended, modified or supplemented, the Credit Agreement and all other Loan
Documents are hereby confirmed and ratified in all respects and shall remain in
full force and effect according to their respective terms.
7. COUNTERPARTS. This Amendment Agreement may be executed in any number
of counterparts, each of which shall be deemed an original as against any party
whose signature appears thereon, and all of which shall together constitute one
and the same instrument.
8. GOVERNING LAW. THIS AMENDMENT AGREEMENT SHALL IN ALL RESPECTS BE
GOVERNED BY THE LAW OF THE STATE OF FLORIDA, WITHOUT REGARD TO ANY OTHERWISE
APPLICABLE PRINCIPLES OF CONFLICT OF LAWS. THE BORROWER HEREBY (i) SUBMITS TO
THE JURISDICTION AND VENUE OF THE STATE AND FEDERAL COURTS OF FLORIDA FOR THE
PURPOSES OF RESOLVING DISPUTES HEREUNDER OR UNDER ANY OF THE OTHER LOAN
DOCUMENTS TO WHICH IT IS A PARTY OR FOR PURPOSES OF COLLECTION AND (ii) WAIVES
TRIAL BY JURY IN CONNECTION WITH ANY SUCH LITIGATION.
9. ENFORCEABILITY. Should any one or more of the provisions of this
Amendment Agreement be determined to be illegal or unenforceable as to one or
more of the parties hereto, all other provisions nevertheless shall remain
effective and binding on the parties hereto.
10. CREDIT AGREEMENT. All references in any of the Loan Documents to the
Credit Agreement shall mean and include the Credit Agreement as amended hereby.
11. SUCCESSORS AND ASSIGNS. This Amendment Agreement shall be binding
upon and inure to the benefit of each of the Borrower, the Lenders, the Agent
and their respective successors, assigns and legal representatives; PROVIDED,
however, that the Borrower, without the prior consent of the Lenders, may not
assign any rights, powers, duties or obligations hereunder.
[Remainder of page intentionally left blank.]
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment Agreement
to be duly executed by their duly authorized officers, all as of the day and
year first above written.
BORROWER:
(CORPORATE SEAL) THE WACKENHUT CORPORATION
ATTEST: By: /s/ Richard C. DeCook
----------------------------------
Name: Richard C. DeCook
----------------------------
Title: SR. V.P.
- - ----------------------------- ---------------------------
Asst. Secretary
Signature Page 1 of 2
<PAGE>
NATIONSBANK OF FLORIDA, NATIONAL
ASSOCIATION, as Agent for the
Lenders
By: /s/ John A. Miller
----------------------------------
Name: John A. Miller
---------------------------
Title: Vice President
-------
NATIONSBANK OF FLORIDA, NATIONAL
ASSOCIATION, as Lender
By: /s/ John A. Miller
----------------------------------
Name: John A. Miller
Title: Vice President
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Signature Page 2 of 2
