EXHIBIT 10.113
FORM OF
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EXCHANGE AGENT AGREEMENT
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February ____, 1999
American Stock Transfer &
Trust Company
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
At the effective time (the "Effective Time") of the merger (the
"Merger") of Palm Merger Corp. ("Merger Sub"), a wholly owned subsidiary of
Correctional Services Corporation ("CSC"), with and into Youth Services
International, Inc. ("YSI") pursuant to the Agreement and Plan of Merger dated
as of September 23, 1998, as amended (the "Merger Agreement"), among CSC, YSI
and Merger Sub, a copy of which has been previously furnished to you, each
issued and outstanding share of common stock, par value $.01 per share, of YSI
("YSI Common Stock"), will be converted into the right to receive 0.375 shares
of common stock, par value $.01 per share, of CSC ("CSC Common Stock") and cash
(without interest) in lieu of fractional shares based on the average closing
price of CSC Common Stock for the twenty trading days immediately preceding the
day of the Effective Time. You will be notified of the Effective Time by no
later than the first business day following the Effective Time.
YSI has delivered or will deliver to you a copy of the letter of
transmittal (the "Letter of Transmittal") to be sent to holders of record of
shares of YSI Common Stock ("YSI Stockholders"), (ii) copies of all other
documents or materials, if any, to be forwarded to YSI Stockholders, (iii) a
certified copy of resolutions adopted by the Board of Directors of YSI
authorizing the Merger, (iv) a list showing the names and addresses of all YSI
Stockholders as of the Effective Time and the number of shares of YSI Common
Stock held by each YSI Stockholder immediately prior to the Effective Time and
(v) a list of certificates (including certificate numbers) representing shares
of YSI Common Stock that have been or are, as of such date, lost, stolen,
destroyed or replaced or restricted as to transfer (noting the text of the
restrictive legends applicable thereto) or with respect to which a stop transfer
order has been noted (such lists being herein referred to as the "Lists").
As soon as practicable after the Effective Time, you (in your capacity
as the Exchange Agent, defined below) will mail to each YSI Stockholder (a) a
notice advising such holder of the effectiveness of the Merger and the
applicable terms of the exchange effected thereby, (b) a Letter of Transmittal
with instructions, (c) a self-addressed return envelope, (d) tax certification
guidelines and (e) any other material deemed appropriate by YSI and CSC.
This will confirm the appointment by YSI and CSC of American Stock
Transfer & Trust Company as the exchange agent (the "Exchange Agent") provided
for in the Merger
Agreement and, in that capacity, the authorization of the Exchange Agent to act
as agent for YSI Stockholders for the purpose of receiving from CSC the CSC
Common Stock and cash to be issued in exchange for shares of YSI Common Stock
and transmitting the same to the YSI Stockholders upon satisfaction of the
conditions set forth herein. Your duties, liabilities and rights as Exchange
Agent are as set forth herein and will be governed, in addition, by the
applicable terms of the Merger Agreement.
In carrying out your duties as Exchange Agent, you are to act in
accordance with the following:
1. Examination of Letter of Transmittal.
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You are to examine Letters of Transmittal, certificates representing
shares of YSI Common Stock and other documents delivered or mailed to you by or
for YSI stockholders to ascertain, to the extent reasonably determined by you,
whether:
(a) the Letters of Transmittal appear to be duly executed and properly
completed in accordance with the instructions set forth therein;
(b) the certificates for shares of YSI Common Stock appear to be
properly surrendered and, if applicable, endorsed for transfer;
(c) the other documents, if any, used in the exchange appear to be
duly executed and properly completed and in the proper form; and
(d) the certificates for shares of YSI Common Stock are free of
restrictions on transfer or stop orders except as set forth on the Lists.
In the event you ascertain that any Letter of Transmittal or other
document has been improperly completed or executed, that any of the certificates
for shares of YSI Common Stock are not in proper form or some other irregularity
exists, you shall attempt to resolve promptly the irregularity and may use your
best efforts to contact the appropriate YSI Stockholder by whatever means of
communication you deem most expedient to correct the irregularity and, upon
consultation with CSC, shall endeavor to take such other reasonable action as
may be necessary to cause such irregularity to be corrected, and the
determination of any questions referred to CSC or its counsel by you as to the
validity, form and eligibility, as well as the proper completion or execution of
the Letters of Transmittal and other documents, shall be final and binding and
you may rely thereon as provided in Section 12(a) hereof. Any costs of
contacting YSI Stockholders reasonably incurred for the purpose of correcting
irregularities shall be incurred for the account of CSC.
2. Exchange of Shares.
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As soon as practicable after the Effective Time and after surrender to
you of all certificates for shares of YSI Common Stock registered to a
particular record holder or holders (and only after surrender of all such
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certificates) and the return of a properly completed and
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signed Letter of Transmittal relating thereto, you shall cause to be issued and
distributed to the holder(s) in whose name such certificates were registered (or
such other person as shall have been specified pursuant to the terms hereof) (i)
the whole number of shares of CSC Common Stock issuable pursuant to the Merger
Agreement, registered in the name of such holder(s) and (ii) a check in lieu of
any fractional share (the "Cash Amount"). CSC shall provide you the amount of
cash sufficient to make all payments for fractional shares.
Until so surrendered, each certificate which immediately prior to the
Effective Time represented outstanding shares of YSI Common Stock shall, at and
after the Effective Time, entitle the holder(s) thereof only to receive, upon
surrender of it and all other identically registered certificates, the
certificates representing shares of CSC Common Stock and the Cash Amount
contemplated by the preceding paragraph.
No dividends or other distributions otherwise payable after the
Effective Time to a holder of record of certificates representing shares of CSC
Common Stock shall be paid to such holder unless and until such holder shall
have surrendered all certificates representing shares of YSI Common Stock
registered to such holder. The Exchange Agent shall hold any such dividends or
other distributions not paid to such holders pursuant to the requirements of the
foregoing sentence and shall (subject to applicable escheat laws) pay such
dividends and distributions to each holder of record entitled thereto after such
holder shall have surrendered all certificates for shares of YSI Common Stock
registered to such holder. No interest shall be payable to such holders on
dividends or distributions held by the Exchange Agent.
If any certificates representing shares of CSC Common Stock are to be
issued in, or a Cash Amount is to be paid to, a name other than that in which
the certificate for shares of YSI Common Stock surrendered in exchange therefor
is registered, it shall be a condition of the issuance or payment thereof that
the certificate so surrendered shall be properly endorsed and otherwise in
proper form for transfer and that the person requesting such exchange shall pay
to you any transfer or other taxes required or shall establish to your
satisfaction that such tax has been paid or is not payable.
Certificates to be delivered by mail shall be forwarded by first class
mail under the Exchange Agent's blanket surety bond. The Exchange Agent
represents that such surety bond protects YSI, CSC and the Exchange Agent from
loss or liability arising by virtue of the non-receipt or non-delivery of such
certificates. It is understood that the market value of securities in any one
shipment sent by first class mail under this procedure will not be in excess of
$250,000. In the event the market value shall exceed $250,000, the securities
shall be mailed by registered mail and shall be insured separately for the
replacement value thereof at the time of mailing.
3. Lost, Stolen or Destroyed Certificates.
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In the event that any YSI Stockholder claims that any certificate
representing shares of YSI Common Stock is lost, stolen or destroyed, the
Exchange Agent shall mail to such stockholder an affidavit of loss and an
indemnity bond, in form reasonably acceptable to CSC. The Exchange Agent shall
make the distribution of certificates representing shares of CSC
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Common Stock only upon receipt of the proper completion and execution of such
affidavit of loss and an indemnity bond.
4. Reports.
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The Exchange Agent shall furnish, until otherwise notified, monthly
(or more frequently if requested by YSI or CSC) reports to YSI and CSC showing
(for the current report period, any prior report periods and in total) the
number of shares of YSI Common Stock surrendered as well as the number of shares
of CSC Common Stock issued, and Cash Amount in lieu of fractional shares paid,
in exchange therefor.
5. IRS Filings.
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You shall arrange to comply with all requirements under the tax laws
of the United States, including those relating to missing Tax Identification
Numbers and withholding, and shall issue and file any appropriate Internal
Revenue Service ("IRS") reports and forms (e.g., Forms 1099 and 1099B). The
parties acknowledge that you may be required to withhold (and pay to the IRS)
certain amounts from cash paid in lieu of fractional shares and cash dividend
payments to holders who have not supplied their correct Taxpayer Identification
Number or required certification.
6. Restricted Certificates of YSI Common Stocks.
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As set forth above, YSI will deliver to you the Lists which will set
forth, among other things, certificates representing shares of YSI Common Stock
that have been or are, as of the date of such Lists, restricted as to transfer
(noting the text of the restrictive legends applicable thereto). The Lists
shall also set forth any legend or legends to be placed on certificates
representing CSC Common Stock to be issued in exchange for such certificates,
and you shall place such legends on such certificates as directed in the Lists.
In the event a certificate bearing a restrictive legend that is not included in
the Lists is presented, you are instructed to delay issuance of a certificate
representing shares of CSC Common Stock issuable in exchange therefor pending
instructions from CSC.
7. Restricted Certificates of CSC Common Stock.
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Each of the persons listed on Schedule A hereto may be deemed an
"affiliate" of YSI within the meaning of Rule 145 under the Securities Act of
1933, as amended, and applicable rules and regulations promulgated by the
Securities and Exchange Commission.
You are hereby authorized and instructed to place on the face of each
of the certificates representing shares of CSC Common Stock issued to each of
the aforesaid persons in exchange for the shares of YSI Common Stock held by
them a legend reading in its entirety as follows:
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"The shares represented by this certificate were received on
______________, 1999 in a transaction governed by Rule 145 under
the Securities Act of 1933, as amended, by a person who may be
deemed an "affiliate" as the term is used in Rule 145 and may not
be transferred otherwise than pursuant to the provisions of Rule
145 or as otherwise allowed by the provisions of the undertaking
given by such person to Correctional Services Corporation at such
time.
The shares represented by this certificate were received on
____________, 1999 in a merger expected to qualify as a pooling-
of-interests for accounting and financial reporting purposes by a
person who may be deemed an "affiliate" as the term is used in
Rule 145 of the Securities Act of 1933, as amended, and for
purposes of applicable interpretations regarding the pooling-of-
interests method of accounting and may not be transferred until
such time as financial results covering at least 30 days of
combined operations of Correctional Services Corporation and
Youth Services International, Inc. after the effective time of
the merger have been published."
8. Copies of Documents.
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You shall take such action, at CSC's expense, as CSC may reasonably
request from time to time with respect to the distribution of copies of the
Letter of Transmittal to persons designated by CSC.
9. Receipt or Disposal.
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Letters of Transmittal and telegrams, telexes, facsimile transmissions
and other materials submitted to you by YSI Stockholders shall be preserved by
you until delivered to or otherwise disposed of in accordance with CSC's
instructions at or prior to the termination hereof.
10. Maintenance of Records.
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You will keep and maintain complete and accurate ledgers showing all
shares of YSI Common Stock received by you, CSC Common Stock delivered by you
and Cash Amounts paid by you. You are authorized to cooperate with and furnish
information to any organization or its legal representatives designated from
time to time by YSI or CSC in any manner reasonably requested by any of them in
connection with the Merger.
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11. Delivery of Surrendered Shares of YSI Common Stock.
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All certificates for shares of YSI Common Stock surrendered to you
shall be retained by you and, following exchange thereof for CSC Common Stock
and any Cash Amount, shall be forwarded to CSC or elsewhere as directed by CSC.
12. Exchange Agent's Duties and Obligations.
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As Exchange Agent, you:
(a) will have no duties or obligations other than those specifically
set forth herein, or as may subsequently be agreed to in writing by you, CSC and
YSI;
(b) will be regarded as making no representations or warranties and
having no responsibilities regarding the validity, sufficiency, value or
genuineness of any certificates for shares of YSI Common Stock surrendered to
you or the shares of YSI Common Stock represented thereby; will not be required
or requested to make any representations as to the validity, value or
genuineness of certificates for CSC Common Stock or shares of CSC Common Stock
represented thereby; and will not be responsible in any manner whatsoever for
the correctness of the statements made in the Merger Agreement or in any related
prospectus or other document furnished to you by YSI or CSC;
(c) will not be obligated to institute or defend any third party
action, suit or legal proceeding in connection with the Merger, or your duties
hereunder, or take any other action which might in your judgment involve, or
result in, expense or liability to you, unless YSI or CSC shall first furnish
you an indemnity satisfactory to you;
(d) may rely on, and shall be protected in acting upon, any
certificate, instrument, opinion, representation, notice, letter, telegram or
other document delivered to you and believed by you in good faith to be genuine
and to have been signed by the proper party or parties;
(e) may rely on, and shall be protected in acting upon, written or
oral instructions given by any officer of, or any party authorized by, CSC with
respect, to any matter relating to your actions as Exchange Agent;
(f) may consult with counsel satisfactory to you (including counsel
for YSI or CSC), and the written advice or opinion of such counsel shall be full
and complete authorization and protection in respect of any action taken,
suffered or omitted by you hereunder in good faith and in accordance with such
advice or opinion of such counsel; and
(g) may retain an agent or agents of your choice to assist you in
performing your duties and obligations hereunder, at your cost and without
relieving you of any liability hereunder.
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13. Termination of Exchange Agent's Duties and Obligations.
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This agreement shall terminate upon demand by YSI or CSC at which time
all undistributed certificates representing shares of CSC Common Stock, cash to
be paid in lieu of fractional shares, and any dividends and distributions in
respect of CSC Common Stock shall be delivered by the Exchange Agent to CSC.
14. Indemnification of Exchange Agent.
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YSI and CSC hereby covenant and agree to reimburse, indemnify and hold
you harmless from and against any and all claims, actions, judgments, damages,
losses, liabilities, costs, transfer or other taxes, and expenses (including
without limitation reasonable attorneys' fees and expenses) incurred or suffered
by you, or to which you may become subject and not resulting from, any
negligence, bad faith or willful misconduct on your part, arising out of or
incident to this Agreement or the administration of your duties hereunder, or
arising out of or incident to your compliance with the instructions set forth
herein or with any instructions delivered to you pursuant hereto, or as a result
of defending yourself against any claim or liability resulting from your actions
as Exchange Agent, including any claim against you by any tendering YSI
Stockholder, which covenant and agreement shall survive the termination hereof.
You hereby represent that you will notify YSI and CSC by letter, or facsimile
confirmed by letter, of any receipt by you of a written assertion of a claim
against you, or any action commenced against you, within ten (10) business days
after your receipt of written notice of such assertion or your having been
served with the summons or other first legal process giving information as to
the nature and basis of action. However, your failure to so notify YSI and CSC
shall not operate in any manner whatsoever to relieve YSI and CSC from any
liability which they may have on account of this Section 14 if no prejudice
occurs. At their election, YSI and CSC may assume the conduct of your defense
in any such action or claim at their sole cost and expense. In the event that
YSI and CSC elect to assume the defense of any such action or claim and confirm
to you in writing that the indemnity provided for in this Section 14 applies to
such action or claim, YSI and CSC shall not be liable for the fees and expenses
of any counsel thereafter retained by you.
15. Compensation and Expenses.
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For services rendered as Exchange Agent hereunder, your fees are
approved as set forth in Schedule B to this agreement.
16. Modification.
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Subject to Section 12(a) hereof, (i) the instructions contained herein
may be modified or supplemented only by authorized representatives of each of
YSI and CSC and (ii) any inconsistency between this Agreement and the Merger
Agreement shall be resolved in favor of the Merger Agreement.
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17. Notices.
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Except as otherwise provided herein, no notice, instruction or other
communication by one party shall be binding upon the other party unless hand-
delivered or sent by certified mail, return receipt requested. Notice to you
shall be sent or delivered to your above-noted address or such other addresses
as you shall hereafter designate in writing in accordance herewith. Notice to
CSC and YSI shall be sent or delivered to the following address (or such other
address as designated by CSC or YSI, as the case may be, in writing in
accordance herewith):
If to CSC:
Correctional Services Corporation
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx
with a copy to:
Xxxxxxx Xxxxxx & Green, P.C.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxx, Esq.
Youth Services International, Inc.
0 Xxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxx Xxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxxx, Esq.
with a copy to:
Xxxxx & Xxxxxxx L.L.P.
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Silver, Esq.
18. Governing Law; Binding Upon Successors and Assigns.
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This agreement shall be construed and enforced in accordance with the
laws of the State of New York, without regard to the principles thereof
respecting conflicts of laws, and shall inure to the benefit of, and the
obligations created hereby shall be binding upon, the successors and assigns of
the parties hereto.
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CORRECTIONAL SERVICES CORPORATION
By:______________________________________
Name:
Title:
YOUTH SERVICES INTERNATIONAL, INC.
By:______________________________________
Name:
Title:
ACCEPTED AND AGREED:
AMERICAN STOCK TRANSFER &
TRUST COMPANY
By:__________________________________
Name:
Title:
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