<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 6, 1997.
REGISTRATION NO. 333-21771
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
POST-EFFECTIVE
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
YOUTH SERVICES INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND
(STATE OR OTHER JURISDICTION OF
INCORPORATION ORGANIZATION)
52-1715690
(I.R.S. EMPLOYER
OR IDENTIFICATION NO.)
2 PARK CENTER COURT, SUITE 200
OWINGS MILLS, MARYLAND 21117
(410) 356-8600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------
WILLIAM P. MOONEY
CHIEF FINANCIAL OFFICER
YOUTH SERVICES INTERNATIONAL, INC.
2 PARK CENTER COURT, SUITE 200
OWINGS MILLS, MARYLAND 21117
(410) 356-8600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------
COPIES TO:
MARK S. DEMILIO, ESQUIRE
MILES & STOCKBRIDGE, A PROFESSIONAL CORPORATION
10 LIGHT STREET
BALTIMORE, MARYLAND 21202
(410) 727-6464
------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable.
------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are being offered on
a delayed or continuous basis, pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
PROSPECTUS
YOUTH SERVICES INTERNATIONAL, INC.
1,500,000 SHARES OF COMMON STOCK
This Prospectus relates to the resale of up to 1,500,000 shares of the
common stock, par value $.01 per share (the "Common Stock"), of Youth Services
International, Inc., a Maryland corporation ("YSI" or the "Company"), by certain
shareholders thereof named herein (the "Selling Shareholders").
The shares registered hereby (the "Shares") will be sold by the Selling
Shareholders directly to purchasers. The Selling Shareholders will receive all
of the net proceeds from the sale of the Shares and will pay the expenses of
registration of the Shares and all underwriting discounts and selling
commissions (other than those paid by the purchasers), if any, applicable to the
sale of the Shares.
The Selling Shareholders and any broker-dealers, agents or underwriters
that participate in the distribution of the Shares may be deemed to be
"underwriters," as such term is defined under Section 2(11) of the Securities
Act, and any commission or profit received by them in connection with the resale
of the Shares may be deemed to be underwriting commissions or discounts under
the Securities Act.
SEE "RISK FACTORS" COMMENCING ON PAGE 3 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN FACTORS RELEVANT TO AN INVESTMENT IN THE SHARES.
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
UNDERWRITING PROCEEDS TO
DISCOUNTS OR SELLING
PRICE TO PUBLIC COMMISSIONS(1) SHAREHOLDERS(2)
- ----------------------------------------------------------------------------------------------
Per Unit............................. $15.125 $0.125 $15.00
- ----------------------------------------------------------------------------------------------
Total................................ $22,687,500 $187,500 $22,500,000
==============================================================================================
</TABLE>
(1) The Shares will be placed with purchasers by Gilder Gagnon Howe & Co., as
placement agent, on a best efforts basis and will be open for thirty days,
without escrow.
(2) The Selling Shareholders will pay all expenses in connection with this
registration and the sale hereby, estimated to be approximately $46,875.
The date of this Prospectus is March , 1997.
<PAGE> 3
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following
regional offices of the Commission: Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, 13th
Floor, New York, New York 10048, and copies of such material can be obtained
from the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission also maintains a
site on the World Wide Web, the address of which is http:/www.sec.gov., that
contains reports, proxy and information statements and other information
regarding issuers, such as the Company, that file electronically with the
Commission. Such reports, proxy statements and other information concerning the
Company also may be inspected at the offices of the Nasdaq Stock Market, Reports
Section, at 1735 K Street, Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form
S-3 (hereinafter, together with all amendments and exhibits thereto, the
"Registration Statement") under the Securities Act with respect to the
securities covered by this Prospectus. This Prospectus does not contain all of
the information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission. For
further information pertaining to the Company and the securities covered by this
Prospectus, reference is made to the Registration Statement that is on file at
the offices of the Commission and may be obtained upon payment of the fee
prescribed by the Commission, may be examined without charge at the offices of
the Commission or may be obtained from the Commission's site on the World Wide
Web. Statements contained in this Prospectus as to the contents of any documents
referred to are not necessarily complete, and in each such incidence, are
qualified in all respects by reference to the applicable documents filed with
the Commission.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company hereby incorporates by reference in this Prospectus the
following documents filed with the Commission:
(a) the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1996;
(b) the Company's Current Reports on Form 8-K/A dated September 25,
1995; Form 8-K/A dated October 2, 1995; Form 8-K dated March 27, 1996 (as
filed with the SEC on April 10, 1996); and Form 8-K/A dated October 17,
1996;
(c) the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 1996;
(d) the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended December 31, 1996; and
(e) the description of the Company's Common Stock contained in the
section titled "Description of Capital Stock" in the Preliminary Prospectus
included as part of the Company's Registration Statement on Form SB-2 (Reg.
No. 33-71958) as filed with the Commission on November 19, 1993 and
thereafter amended and incorporated by reference in the Company's
Registration Statement on Form 8-A filed with the Commission pursuant to
Section 12 of the Exchange Act, and any amendment or report filed for the
purpose of updating such description.
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to
the termination of the offering of securities hereunder shall be deemed to be
incorporated herein by reference and to be a part hereof from the respective
dates of the filing of such documents. Any statement contained in a document
incorporated or deemed to be
2
<PAGE> 4
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document that also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company hereby undertakes to provide, without charge, to each person to
whom a copy of this Prospectus is delivered, upon written or oral request of
such person, a copy of any or all of the documents incorporated by reference
herein, other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference in such documents). Requests for such
copies should be directed to Youth Services International, Inc., 2 Park Center
Court, Suite 200, Owings Mills, Maryland 21117, Attention: Kendel S. Ehrlich,
Secretary, telephone: (410) 356-8600.
RISK FACTORS
In addition to the other information in this Prospectus, the following
information should be considered carefully by potential purchasers in evaluating
the Company and its business before making an investment in the securities
offered hereunder:
ALL SHARE AND PER SHARE AMOUNTS IN THIS PROSPECTUS HAVE BEEN ADJUSTED TO
REFLECT A 3-FOR-2 STOCK SPLIT (EFFECTED THROUGH A STOCK DIVIDEND OF ONE SHARE
FOR EVERY TWO SHARES OUTSTANDING OR RESERVED FOR ISSUANCE) EFFECTED MAY 24,
1996.
MANAGEMENT OF GROWTH
The Company has experienced significant growth since its inception and
expects to continue to grow in the foreseeable future. The Company's success
will depend in part on the ability of the Company to obtain and train qualified
personnel to handle the increasing number of youths in its care; to develop and
operate the information technology systems and financial controls to manage the
increased number of personnel, responsibilities and youths; to manage its
resources over a larger base of programs and activities; to integrate
efficiently and effectively the business and financial functions of any acquired
or other newly developed programs; and to integrate any acquired programs into
the Company's programmatic functions and philosophy. There can be no assurance
that the Company will be able to successfully accomplish such integration from
its historic acquisitions or that it will be able to do so on the larger scale
that may occur as the Company continues to grow.
CONTRACT REVENUES AND PROFIT
The Company's operations currently consist of programs that are based on
various contractual relationships. The Company's program revenues are generated
under the terms of these contracts that generally call for fixed per diem
payments that are based upon program occupancy. Such payments are recognized as
revenues for financial statement purposes as services are performed. One of the
Company's contracts contains a gross maximum price cost reimbursement provision
that results in the recognition of revenues as specific reimbursable costs are
incurred. The Company's ability to estimate and control its costs with respect
to all of these contracts is critical to its profitability.
DEPENDENCE UPON SIGNIFICANT CONTRACTS
Two of the Company's long-term contracts constituted, in the aggregate,
approximately 23.5% of the Company's revenues for the fiscal year ended June 30,
1996 (the contract to operate The Charles H. Hickey, Jr. School (15%) which
expires on June 30, 1998, and the contract to operate the Victor Cullen Academy
(8.5%) which expires on August 31, 1997). These contracts, will be subject to
competitive bidding when they expire. The Company's ability to maintain
profitable operations will be dependent upon, among other factors, the
successful continuance of its existing contracts and programs. There can be no
assurance that such contracts will be renewed or extended or that they will be
renewed or extended on terms favorable to the
3
<PAGE> 5
Company, that such programs will be continued or that the Company will be able
to maintain profitable operations.
POSSIBLE TERMINATION OF CONTRACTS AT THE DISCRETION OF GOVERNMENT AGENCIES
The terms of a number of the contracts with government agencies pursuant to
which the Company operates its programs provide that such contracts (i) are
subject to the ongoing appropriation by state legislatures and authorities of
sufficient funds, and (ii) may be terminated for any reason by providing the
Company notice of termination immediately or within specified periods of time
(ranging from 10 to 90 days) or otherwise at the "convenience" of the state and
local authorities. These terms give state and local authorities significant
discretion in terminating or modifying their contractual arrangements with the
Company. A number of state and local governments have experienced fiscal
pressures associated with a reduced tax base and other factors. Accordingly, the
Company's operations could be materially adversely affected by the termination
or modification of an agreement or agreements at any time for reasons that may
be outside of the Company's control.
GOVERNMENT CONTRACTS AND CONTRACTING PROCESS
Many of the Company's contracts are with government agencies. Government
contracts generally are subject to audits and investigations by government
agencies. These audits and investigations involve a review of the contractor's
performance on its contracts, as well as its pricing practices, its cost
structure and its compliance with applicable laws, regulations and standards. If
any costs are improperly charged to a contract, the costs are not reimbursable
and, if already reimbursed, will have to be refunded to the government agency.
Furthermore, if improper or illegal activities are discovered in the course of
any audits or investigations, the contractor may be subject to various civil and
criminal penalties and administrative sanctions, which may include termination
of contracts, forfeitures of profits, suspension of payments, fines and
suspension or debarment from doing business with the government agency.
Typically, the Company must invest significant time and resources to
prepare detailed analyses and proposals addressing the needs of a government
authority with which it seeks to do business. Such proposals must be reviewed by
appropriate government authorities before the contract is awarded. Accordingly,
new contracts tend to have long lead times from initiation of marketing efforts
to execution and are subject to significant uncertainty regarding successful
conclusion at all times during the process. There can be no assurance that
additional contracts will be obtained by the Company or continued once they are
obtained.
NOT-FOR-PROFIT ORGANIZATIONS
The Company has conducted and will conduct a portion of its business
pursuant to subcontracts or similar relationships with not-for- profit entities
organized under Section 501(c)(3) of the Internal Revenue Code of 1986, as
amended (the "Code"), that have obtained status as organizations exempt from
federal income taxation under Section 501(a) of the Code. State governments,
agencies or licensing authorities that contract with the not-for-profit
organizations are eligible to receive matching funds from the federal government
as a partial reimbursement for certain program expenses charged by the Company.
If the exempt status of any of these not-for-profit organizations is revoked,
the state governments, agencies or licensing authorities may be denied federal
matching funds and may reduce their placement of students with, or the use of,
such organization, causing a loss of gross revenues to the Company. In addition,
in such event, these organizations would be taxed on their net income, if any,
which could adversely affect their ability to pay the Company pursuant to their
subcontracts.
GOVERNMENTAL LIMITATIONS AND REGULATIONS
The industry in which the Company operates is subject to extensive federal,
state and local regulation including stringent licensing requirements. Failure
to comply with any applicable laws, rules or regulations or to maintain its
licenses could have a material adverse effect on the Company's business,
financial condition and results of operations. Furthermore, the current and
future operations of the Company may be subject to
4
<PAGE> 6
additional regulations as a result of, among other factors, new statutes and
regulations and changes in the manner in which existing statutes and regulations
are or may be interpreted or applied. Any such additional regulations may have a
material adverse effect on the Company's business, financial condition and
results of operations.
In the course of the Company's business, licensing authorities may place
certain provisions on program operations that are required to be resolved in
order to maintain a license. During such provisional period, the Company may not
be able to obtain approvals for increases in licensed capacity and may
experience other limitations.
The Company's ability to implement its business strategy may be
significantly affected by the legal power and structures of the state and local
governments with which the Company does or seeks to do business. The Company
believes that the laws of many states neither specifically authorize nor
prohibit governments from entering into contracts with private sector companies
for the types of services offered by the Company. It is possible that a third
party could challenge a government's decision to award a contract to the Company
in such a situation. In certain jurisdictions, governments may be altogether
precluded by law from entering into management contracts with private sector
companies. Also, while privatization of services has been used in one form or
another by many states, there can be no assurance that state and local
governments will continue to utilize private vendors to manage facilities and/or
programs for juvenile offenders. In addition, many state and local governments
are required to enter into a competitive bidding procedure before awarding
contracts for products or services. The laws of certain jurisdictions may also
require the Company to award subcontracts on a competitive basis and to
subcontract to varying degrees with businesses owned by women or minorities. It
is possible that a third party could challenge sole-source awards to the Company
or the Company's subcontracts as inconsistent with competitive bidding or
minority contracting requirements.
The health care industry is subject to extensive regulation by federal,
state and local governments, including regulations under Medicare, Medicaid and
Civilian Health and Medical Program of the Uniformed Services ("CHAMPUS")
programs. Certain of the Company's programs, including its RTC's, are subject to
such regulation. Failure to comply with such laws and regulations can cause
fines and other penalties to the Company and can cause expulsion from Medicare,
Medicaid, CHAMPUS or other program involvement which sanctions could have a
material adverse affect on the Company. Government-imposed limitations on
Medicare and Medicaid reimbursement have placed downward pressures on rates
charged under these programs and have caused the private sector to bear a
greater share of increasing health care costs. As a result of the continued
escalation of health care costs and the inability of many individuals to obtain
health insurance, numerous proposals have been or may be considered in the
United States Congress and various state legislatures relating to health care
reform. Certain measures, if adopted, could affect the rates charged by the
Company for certain of its services, could affect the manner in which care must
be provided or could otherwise have a material adverse affect on the Company's
business.
The Company believes it is in compliance in all material respects with all
applicable rules and regulations.
POTENTIAL THIRD-PARTY LIABILITY
Many aspects of the Company's operations involve risks of liability,
including potential third-party claims by students or other persons for personal
injury or other damage resulting from contact with the Company's facilities,
programs, personnel or students (including students who leave the Company's
facilities without Company authorization and cause bodily injury or property
damage). Furthermore, the Company's contracts often require the Company to
indemnify and hold the respective government agency harmless from and against
any damages to which the government agency may become subject by reason of the
Company's operations. The Company carries general liability insurance that
provides coverage for certain liability risks faced by the Company, including
accident and personal injury (including bodily injury or property damage to a
third party where the Company is found to be negligent in its supervision
practices). There can be no assurance, however, that the Company's insurance
will be adequate to cover any potential third-party claims.
Committed offenders often seek redress in federal courts pursuant to
federal civil rights statutes for alleged violations of their constitutional
rights caused by the overall condition of their confinement or by
5
<PAGE> 7
specific conditions or incidents. The Company may be subject to liability if any
such claim or proceeding is made or instituted against the Company or the state
with which the Company contracts or subcontracts.
The operation of the Company's business also exposes it to a greater than
average risk of charges by employees of age or race discrimination filed with
the Equal Employment Opportunity Commission and equivalent state agencies and
related civil litigation. While the Company's management believes that these
claims and charges represent matters that arise in the ordinary course of
business for companies engaged in its industry, the defense of these claims can
be labor intensive and expensive.
PUBLIC SCRUTINY
The business of the Company is highly visible to the public and,
consequently, negative public reaction to the Company's policies or actions, or
to the statements or actions of juveniles in its care could adversely affect the
Company's ability to obtain additional programs or expand existing programs or
could otherwise adversely affect the Company's business. It is also possible
that, even absent such negative reaction to the Company, communities may object
to facilities such as the Company's which objections could materially, adversely
affect the ability of the Company to establish new programs or expand existing
programs.
ABILITY TO ATTRACT KEY PERSONNEL
The Company's operations depend to a great extent upon the efforts of its
executive officers, program directors and certain other key personnel to obtain
contracts, to operate and develop programs and to administer the Company's
business. In addition, the Company's ability to perform under new contracts will
depend, in part, on its ability to attract or retain additional qualified
personnel. There is significant competition for qualified teachers, counselors,
health care providers, program managers, administrators and other key personnel,
and there can be no assurance that the Company will be successful in recruiting
or training a sufficient number of employees of the requisite caliber to enable
the Company to operate its business and implement its strategy as planned.
ANTITAKEOVER AND CHANGE-IN-CONTROL PROVISIONS
Pursuant to the Company's Charter, the Company's Board of Directors has the
authority to issue shares of preferred stock and to determine the rights,
preferences, privileges and restrictions of such shares without any further vote
or action by the stockholders. The issuance of preferred stock under certain
circumstances could have the effect of delaying or preventing a change in
control of the Company. In addition, the Maryland General Corporation Law
establishes special requirements with respect to "business combinations" between
Maryland corporations and "interested stockholders" unless exemptions are
applicable. Among other things, the law prohibits, for a period of five years,
after the date on which a stockholder becomes an "interested stockholder," a
merger and other transactions between a company and an interested stockholder
and requires a supermajority vote for such transactions after the end of such
five-year period. In this regard, the Board of Directors of the Company has
exempted Gilder Gagnon Howe & Co. (see "Plan of Distribution") and its
affiliates, to the extent any of them shall become "interested stockholders,"
from the prohibitions of this law. The Maryland General Corporation Law also
imposes limitations on the voting rights of shares of capital stock acquired by
stockholders in a "control share acquisition." These provisions of the Maryland
General Corporation Law could have the effect of delaying or preventing a change
in control of the Company.
In addition, the Exchange Offer Debentures provide the holders thereof the
right to cause the Company to redeem such debentures upon the occurrence of a
Change in Control (as defined in the Indenture). Such provision may make more
difficult and have the effect of delaying or preventing a change in control of
the Company.
VOLATILITY OF STOCK PRICE
The market price of the Company's Common Stock has been volatile. There
also have been periods of extreme fluctuation in the stock market that, in many
cases, were unrelated to the operating performance of, or announcements
concerning, the issuers of the affected securities. Securities of issuers having
relatively
6
<PAGE> 8
limited capitalization or securities recently issued in a public offering are
particularly susceptible to change based on the short-term trading strategies of
certain investors. The trading price of the Common Stock could be subject to
wide fluctuation resulting from quarter-to-quarter variations in operating
results, new announcements, legislative developments, trading volume, general
market trends and other factors. There can be no assurance that the price of the
Company's Common Stock will be maintained at its current level.
SHARES ELIGIBLE FOR FUTURE SALE
A sale of a substantial amount of the Company's Common Stock in the public
market, including "restricted" shares held by Company stockholders, could
adversely affect the market price of the Common Stock. Except for the Shares,
substantially all of the Company's issued and outstanding shares as of January
31, 1997 are freely tradable, subject, in certain circumstances, to Rule 144
under the Securities Act of 1933. Upon the effectiveness of the Registration
Statement of which this Prospectus is part, the Shares will become issuable and
tradable pursuant to this Prospectus. In addition, a registration statement is
currently in effect with respect to up to 2,534,082 shares of Common Stock
issuable upon conversion of the Company's 7% Convertible Subordinated Debentures
Due 2006 (the "Conversion Shares"). No prediction can be made as to the effect,
if any, that future sales of additional shares of Common Stock (including the
Shares and the Conversion Shares) or the availability of such shares for sale
will have on the market price of the Common Stock prevailing from time to time.
Nevertheless, the possibility that substantial amounts of Common Stock may be
sold in the public market may adversely affect prevailing market prices for the
Common Stock and could impair the ability of the Company to raise capital
through the sale of its equity securities.
USE OF PROCEEDS
The Selling Shareholders will receive all of the net proceeds from the
resales of the Shares, and the Company will not receive any of the proceeds from
such sales.
THE COMPANY
Youth Services International, Inc. (the "Company" or "YSI") is a leading
national provider of private educational, developmental and rehabilitative
programs which are designed to impact dramatically the thinking and behavior of
troubled youth. The Company's programs focus on troubled youths who either have
been adjudicated as delinquents or suffer from behavioral problems with the
objective of effectively preparing them to become responsible self-sufficient
taxpayers. The Company develops and operates a wide range of programs designed
to promote accountability, respect and discipline through highly structured,
physically demanding, intensely scheduled and intellectually challenging
activities. In conjunction with these programs, the Company offers troubled
youth a broad range of residential programs including juvenile justice
academies, residential treatment centers, boot camps, group homes and foster
homes, as well as non-residential services including aftercare, tracking,
counseling, partial care and day treatment services.
Initially, the Company was established to capitalize on emerging
opportunities in the privatization of juvenile justice programs by state and
local governments. Management believes that increasing cost containment
pressures at all levels of government coupled with the inability of many
government agencies to deliver economic and effective programs to a rapidly
increasing number of juvenile offenders will continue to accelerate the
privatization of juvenile justice services within the youth care industry. In
response to increasing demand for additional youth care services from both state
and local governments as well as managed care and insurance companies, the
Company has expanded and diversified its range of service offerings to include
behavioral health programs thereby further broadening its continuum of care.
7
<PAGE> 9
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital consists of 70,000,000 shares of Common
Stock, par value $.01 per share (the "Common Stock"). As of January 31, 1997,
there were issued and outstanding 9,379,614 shares of Common Stock that were
held of record by 419 persons.
SELLING SECURITY HOLDERS
The following table sets forth, as of January 31, 1997, (i) the name of
each Selling Shareholder, (ii) the number (and percentage) of shares of Common
Stock beneficially owned by each Selling Shareholder, (iii) the number of Shares
offered for resale hereunder by each Selling Shareholder, and (iv) the number
(and percentage) of shares of Common Stock to be held by each Selling
Shareholder after the completion of such resales.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO SALES AFTER SALES
------------------------- SHARES TO -----------------------
SELLING SHAREHOLDER SHARES PERCENT BE SOLD SHARES PERCENT
- ----------------------------- --------- ------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
W. James Hindman............. 2,162,943(1) 21.9% 1,250,000 912,943 9.3%
Henry D. Felton.............. 564,135(2) 6.0% 250,000 314,135 3.3%
</TABLE>
- ---------------
(1) Includes 480,000 shares issuable pursuant to options granted to Mr. Hindman
that are exercisable within 60 days. Mr. Hindman subsequently exercised all
of his options, at an aggregate exercise price of $1,000,000, on February
27, 1997. Excludes 105,000 shares that are beneficially owned by Mr.
Hindman's wife, and 34,785 shares issuable upon exercise of a warrant issued
to Mrs. Hindman. Mr. Hindman is the Chairman of the Board of the Company and
served as its Chief Executive Officer until August, 1996.
(2) Includes 94,100 shares issuable pursuant to options granted to Mr. Felton
that are exercisable within 60 days. Mr. Felton subsequently exercised all
of his options, at an aggregate exercise price of approximately $64,500, on
February 27, 1997. Mr. Felton is a director of the Company and served as its
President and Chief Operating Officer until November, 1996.
Mr. Hindman has informed the Company that upon completion of the sale of
his Shares pursuant hereto that he will resign as Chairman of the Board of the
Company (but will remain as director and Chairman of the Executive Committee).
The Board of Directors has elected Timothy P. Cole to be Chairman of the Board.
The directors also appointed Mr. Hindman Chairman Emeritus.
PLAN OF DISTRIBUTION
The Shares will be sold to purchasers directly by the Selling Shareholders.
The sales will be placed by Gilder Gagnon Howe & Co., registered broker-dealers,
("Gilder"), as placement agent for the Selling Shareholders. The Selling
Shareholders, Gilder and any underwriters, broker-dealers or agents that
participate in the distribution of the Shares may be deemed to be
"underwriters," as such term is defined in Section 2(11) of the Securities Act
and any profit on the sale of the Shares by them and any discounts, commissions,
concessions or other compensation received by any such underwriter,
broker-dealer or agent may be deemed to be underwriting discounts and
commissions under the Securities Act.
The Shares will be sold by the Selling Shareholders and placed by Gilder
pursuant to a Placement Agreement among the Selling Shareholders and Gilder (the
"Placement Agreement") at a price of $15.125 per Share. Under the Placement
Agreement the Selling Shareholders will pay Gilder a placement fee of $0.125 per
Share. Gilder will charge commissions to the purchasers that will not exceed
normal brokers commissions. Among the factors considered in the negotiation of
such price were the market price of the stock at the time of such negotiations,
an assessment of the Company's management and prospects, the difficulty of
selling or purchasing such a large number of shares otherwise then pursuant to
this offering and other factors.
At the time the offering of the Shares is made, if required, a prospectus
supplement will be distributed that will set forth the names of the Selling
Shareholders, the aggregate amount of the Shares, the number of such securities
owned prior to and after the completion of any such offering, and, to the extent
required, the terms of the offering, including the name or names of any
underwriters, broker-dealers or agents, any discounts, commissions and other
terms constituting compensation from the Selling Shareholders and any discounts,
commissions or concessions allowed or reallowed or paid to broker-dealers.
8
<PAGE> 10
To comply with the securities laws of certain jurisdictions, if applicable,
the Shares will be offered or sold in such jurisdictions only through registered
or licensed broker-dealers. In addition, in certain jurisdictions, the Shares
may not be offered or sold unless they have been registered or qualified for
sale in such jurisdictions or an exemption from registration or qualification is
available and is complied therewith.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the Shares may be limited in its ability to engage
in market activities with respect to such Shares. In addition, without
limitation on the foregoing, each Selling Shareholder will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, which provisions may limit the timing of purchases and sales by the
Selling Shareholders of any of the Shares. All of the foregoing may affect the
marketability of the Shares.
All expenses of the registration of the Shares will be paid by the Selling
Shareholders, including, without limitation, Commission filing fees and expenses
of compliance with state securities or "blue sky" laws; and all underwriting
discounts and selling commissions, if any. The Selling Shareholders provide
certain representations and warranties and indemnification to Gilder in the
Placement Agreement, including indemnification against certain liabilities under
the Securities Act of 1933, as amended.
LEGAL MATTERS
The validity of the Shares will be passed upon for the Company by Miles &
Stockbridge, A Professional Corporation, 10 Light Street, Baltimore, Maryland
21202.
EXPERTS
The consolidated financial statements of the Company incorporated by
reference herein from the Company's Annual Report on Form 10-K as of June 30,
1996 for each of the years ended June 30, 1994, 1995 and 1996 have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
report thereon included therein and incorporated herein by reference. Such
financial statements have been incorporated herein by reference in reliance upon
the reports of such firm and upon the authority of such firm as experts in
accounting and auditing.
The financial statements of Introspect Healthcare, Corporation as of and
for the year ended June 30, 1996 incorporated by reference herein from the
Company's Current Report on Form 8-K/A dated October 17, 1996 have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
report thereon included therein and incorporated herein by reference. Such
financial statements have been incorporated herein by reference in reliance upon
the reports of such firm and upon the authority of such firm as experts in
accounting and auditing.
The financial statements of Tampa Bay Academy, Ltd. and the financial
statements of American Residential Centers, Inc. as of and for the years ended
December 31, 1993, 1994 and 1995 incorporated by reference herein from the
Company's Current Report on Form 8-K dated March 27, 1996 (as filed with the SEC
on April 10, 1996) have been audited by Bair, Rupp, Simpson & Zorger, Inc.,
independent public accountants, as indicated in their report thereon included
therein and incorporated herein by reference in reliance upon the reports of
such firm and upon the authority of such firm as experts in accounting and
auditing.
The financial statements of Desert Hills Center for Youth and Families of
New Mexico, Inc. as of and for the year ended June 30, 1995 incorporated by
reference herein from the Company's Current Report on Form 8-K/A dated September
25, 1995, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report thereon included therein and
incorporated herein by reference in reliance upon the reports of such firm and
upon the authority of such firm as experts in accounting and auditing. The
financial statements of Desert Hills Center for Youth and Families of New
Mexico, Inc. as of and for the years ended June 30, 1993 and 1994 incorporated
by reference herein from the Company's Current Report on Form 8-K/A dated
September 25, 1995, have been audited by Addison, Roberts and Ludwig, P.C.,
independent public accountants, as indicated in their report thereon included
therein and incorporated herein by reference in reliance upon the reports of
such firm and upon the authority of such firm as experts in accounting and
auditing.
9
<PAGE> 11
- ------------------------------------------------------
------------------------------------------------------
- ------------------------------------------------------
------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY OF ITS AGENTS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE AS OF
WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH SOLICITATION.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 2
Incorporation of Certain Information
by Reference........................ 2
Risk Factors.......................... 3
Use of Proceeds....................... 7
The Company........................... 7
Description of Capital Stock.......... 7
Selling Shareholders.................. 8
Plan of Distribution.................. 8
Legal Matters......................... 9
Experts............................... 9
</TABLE>
YOUTH SERVICES
INTERNATIONAL, INC.
1,500,000 SHARES
OF
COMMON STOCK
------------------------
PROSPECTUS
------------------------
DATED MARCH , 1997
- ------------------------------------------------------
------------------------------------------------------
- ------------------------------------------------------
------------------------------------------------------
<PAGE> 12
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses expected to be incurred in
connection with the offering described in this Registration Statement. All of
these expenses will be paid in full (or reimbursed to the Company in full) by
the Selling Shareholders. There are no underwriting discounts or commissions
payable by the Company in connection with the offering described in this
Registration Statement. All amounts are estimated except the Securities and
Exchange Commission registration fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................ $ 6,875
Legal fees and expenses............................................ 20,000
Accounting fees and expenses....................................... 10,000
Printing and engraving fees and expenses........................... 5,000
Miscellaneous...................................................... 5,000
-------
$46,875
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Charter and Bylaws of the Company provide that, among other matters, to
the fullest extent permitted by the Maryland General Corporation Law as it may
be amended from time to time, current and former directors, officers, employees
and agents of the Company, and those persons who serve or have served, at the
Company's request, as a director, officer, partner, trustee, employee or agent
of another entity or enterprise shall be indemnified against any and all
liabilities and expenses incurred in connection with their services in such
capacities. Other provisions of the Charter and Bylaws provide that the Company
shall advance expenses to its officers and directors and other persons to the
same extent it shall indemnify such persons.
Furthermore, the Charter of the Company provides that, to the fullest
extent permitted by the Maryland General Corporation Law as it may be amended
from time to time, no director or officer of the Company shall be liable to the
Company or its stockholders for monetary damages arising out of events occurring
at the time such person is serving as a director or officer, regardless of
whether such person is a director or officer at the time of a proceeding in
which liability is asserted. Under current Maryland law, the effect of this
provision is to eliminate the rights of the Company and its stockholders to
recover monetary damages from a director or officer except (i) to the extent
that it is proved that the director or officer actually received an improper
personal benefit in money, property or services, or (ii) to the extent that a
judgment or other final adjudication adverse to the person is entered in a
proceeding based on a finding in the proceeding that the person's action, or
failure to act, was the result of active and deliberate dishonesty and was
material to the cause of action adjudicated in the proceeding. In situations to
which the Charter provision applies, the remedies available to the Company or a
stockholder are limited to equitable remedies such as injunction or rescission.
The Company currently maintains director and officer liability insurance
coverage for officers and directors.
ITEM 16. EXHIBITS.
<TABLE>
<C> <S>
1 Placement Agreement among W. James Hindman and Henry D. Felton (the "Selling
Shareholders") and Gilder Gaynon Howe & Co. dated February 25, 1997.
5 Opinion of Miles & Stockbridge, A Professional Corporation.*
23(a)(1) Consent of Arthur Andersen LLP with respect to the Consolidated Financial
Statements of the Company.*
23(a)(2) Consent of Arthur Andersen LLP with respect to the financial statements of Desert
Hills Center for Youth and Families, Inc.*
</TABLE>
II-1
<PAGE> 13
<TABLE>
<C> <S>
23(b) Consent of Addison, Roberts & Ludwig, P.C. with respect to the financial
statements of Desert Hills Center for Youth and Families, Inc.*
23(c) Consent of Bair, Rupp, Simpson & Zorger, Inc. with respect to the financial
statements of Tampa Bay Academy, Ltd. and American Residential Centers, Inc.
23(d) Consent of Arthur Andersen LLP with respect to the financial statements of
Introspect Healthcare Corporation.*
23(e) Consent of Miles & Stockbridge, A Professional Corporation (included in Exhibit
5).
</TABLE>
- ---------------
* Previously filed.
ITEM 17. UNDERTAKINGS.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions of the Placement Agreement or other
agreements, or otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(i) The undersigned registrant hereby undertakes:
(1) For determining any liability under the Securities Act of 1933,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE> 14
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS POST-EFFECTIVE
AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BALTIMORE, STATE OF
MARYLAND, AS OF THE 6TH DAY OF MARCH, 1997.
YOUTH SERVICES INTERNATIONAL, INC.
By: /s/ TIMOTHY P. COLE
------------------------------------
TIMOTHY P. COLE
CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
POST-EFFECTIVE AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY
THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<S> <C> <C>
/s/ W. JAMES HINDMAN Chairman of the Board March 6, 1997
- ---------------------------------------------
W. JAMES HINDMAN
/s/ TIMOTHY P. COLE Vice Chairman of the Board March 6, 1997
- --------------------------------------------- and Chief Executive Officer
TIMOTHY P. COLE (Principal Executive Officer)
/s/ WILLIAM P. MOONEY Chief Financial Officer & March 6, 1997
- --------------------------------------------- Treasurer (Principal
WILLIAM P. MOONEY Financial Officer and
Principal
Accounting Officer)
/s/ HENRY D. FELTON Director March 6, 1997
- ---------------------------------------------
HENRY D. FELTON
Director March 6, 1997
- ---------------------------------------------
J. DONALD BLACK
/s/ MAYER KANTER Director March 6, 1997
- ---------------------------------------------
MAYER KANTER
/s/ CYNTHIA K. HINDMAN, M.D. Director March 6, 1997
- ---------------------------------------------
CYNTHIA K. HINDMAN, M.D.
/s/ MARTIN V. MARSHALL Director March 6, 1997
- ---------------------------------------------
MARTIN V. MARSHALL
/s/ JACQUES T. SCHLENGER Director March 6, 1997
- ---------------------------------------------
JACQUES T. SCHLENGER
Director March 6, 1997
- ---------------------------------------------
ALAN J. ANDREINI
</TABLE>
II-3
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. ITEM NO.
- -------- ---------------------------------------------------------------------------- -----
<C> <S> <C>
1 Placement Agreement among W. James Hindman and Henry D. Felton (the "Selling
Shareholders") and Gilder Gaynon Howe & Co. dated February 25, 1997.
5 Opinion of Miles & Stockbridge, A Professional Corporation.*................
23(a)(1) Consent of Arthur Andersen LLP with respect to the Consolidated Financial
Statements of the Company.*.................................................
23(a)(2) Consent of Arthur Andersen LLP with respect to the financial statements of
Desert Hills Center for Youth and Families, Inc.*...........................
23(b) Consent of Addison, Roberts & Ludwig, P.C. with respect to the financial
statements of Desert Hills Center for Youth and Families, Inc.*.............
23(c) Consent of Bair, Rupp, Simpson & Zorger, Inc. with respect to the financial
statements of Tampa Bay Academy, Ltd. and American Residential Centers,
Inc. .......................................................................
23(d) Consent of Arthur Andersen LLP with respect to the financial statements of
Introspect Healthcare Corporation.*.........................................
23(e) Consent of Miles & Stockbridge, A Professional Corporation (included in
Exhibit 5). ................................................................
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
Gilder, Gagnon, Howe & Company
1775 Broadway
26th Floor
New York, New York 10019
PLACEMENT AGREEMENT
February 26, 1997
Mr. W. James Hindman
2322 Nicodemus Road
Westminister, Maryland 21157
Mr. Henry D. Felton
13001 Dover Road
Reisterstown, Maryland 21136
Gentlemen:
This letter will set forth the terms and conditions upon which Gilder,
Gagnon, Howe & Company will act as the exclusive placement agent for the sale
by W. James Hindman and Henry D. Felton (together, the "Sellers") of 1,250,000
and 250,000 shares (together, the "Shares"), respectively, of the common
stock, par value $.01 per share (the "Common Stock"), of Youth Services
International, Inc., a Maryland corporation (the "Company").
1. Appointment of Placement Agent. The Sellers hereby appoint Gilder,
Gagnon, Howe & Company to act as their exclusive placement agent (the
"Placement Agent") for the Shares and acknowledge that the Placement Agent
shall have the exclusive right to assist the Sellers in the placement of the
Shares. The Placement Agent agrees to place the Shares to purchasers
identified by the Placement Agent on behalf of the Sellers on an "all-or-none"
basis at a per Share price equal to $15.125. The "Purchase Price", as used
herein, shall mean the product of (i) the number of Shares placed by the
Placement Agent and sold by the Sellers pursuant to this Agreement and (ii)
the per Share price.
In placing the Shares pursuant to this Agreement, the Placement
Agent shall act solely as agent for the Sellers and not as principal, and the
Placement Agent shall not have any obligation to purchase, as principal,
Shares from the Sellers under any circumstances.
<PAGE> 2
The Sellers and the Placement Agent agree that any Shares the
placement of which the Placement Agent arranges shall be placed by the
Placement Agent in reliance upon the representations, warranties, covenants
and agreement of the Sellers contained herein and on the terms and conditions
and in the manner provided herein.
2. Representations and Warranties of the Sellers.
(a) Each Seller jointly and severally represents and warrants to,
and agrees with, the Placement Agent that:
(i) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement, and may have filed an
amendment or amendments thereto, on Form S-3 (Commission No. 333-21771), for
the registration of the Shares under the Securities Act of 1933, as amended
(the "Act"). Such registration statement, including the prospectus, financial
statements and schedules, exhibits and all other documents filed as a part
thereof, including, without limitation, all filings of the Company
incorporated therein by reference, as amended at the time of effectiveness of
the registration statement, and including any information deemed to be a part
thereof as of the time of effectiveness pursuant to paragraph (b) of Rule 430A
of the Rules and Regulations of the Commission under the Act (the
"Regulations"), is herein called the "Registration Statement" and the
prospectus, in the form first filed with the Commission pursuant to Rule
424(b) of the Regulations or filed as part of the Registration Statement at
the time of effectiveness if no Rule 424(b) filing is required, is herein
called the "Prospectus". The term "preliminary prospectus" as used herein
means a preliminary prospectus as described in Rule 430 of the Regulations.
Any reference herein to the Registration Statement, any preliminary prospectus
or the Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 which were
filed under the Securities Exchange Act of 1934, as amended (the "Exchange
Act") on or before the effective date of the Registration Statement, the date
of such preliminary prospectus or the date of the Prospectus, as the case may
be, and any reference herein to the terms "amend", "amendment" or "supplement"
with respect to the Registration Statement, any preliminary prospectus or the
Prospectus shall be deemed to refer to and include (A) the filing of any
document under the Exchange Act after the effective date of the Registration
Statement, the date of such preliminary prospectus or the date of the
Prospectus, as the case may be, which is incorporated therein by reference and
(B) any such document so filed.
(ii) At the time of the effectiveness of the Registration
Statement or the effectiveness of any post-effective amendment to the
Registration Statement, when the Prospectus is first filed with the Commission
pursuant to Rule 424(b) of the
2
<PAGE> 3
Regulations, when any supplement to or amendment of the Prospectus is filed
with the Commission, when any document filed under the Exchange Act is filed
and at the Closing Date (as hereinafter defined), the Registration Statement
and the Prospectus and any amendments thereof and supplements thereto complied
or will comply in all material respects with the applicable provisions of the
Act and the Regulations and the Exchange Act and the respective rules and
regulations thereunder and does not or will not contain an untrue statement of
a material fact and does not or will not omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein (a) in the case of the Registration Statement, not misleading and
(b) in the case of the Prospectus, in light of the circumstances under which
they were made, not misleading. When any related preliminary prospectus was
first filed with the Commission (whether filed as part of the registration
statement for the registration of the Shares or any amendment thereto or
pursuant to Rule 424(a) of the Regulations) and when any amendment thereof or
supplement thereto was first filed with the Commission, such preliminary
prospectus and any amendments thereof and supplements thereto complied in all
material respects with the applicable provisions of the Act and the
Regulations and the Exchange Act and the respective rules and regulations
thereunder and did not contain an untrue statement of a material fact and did
not omit to state any material fact required to be stated therein or necessary
in order to make the statements therein in light of the circumstances under
which they were made not misleading. No representation and warranty is made
in this subsection (ii), however, with respect to any information contained in
or omitted from the Registration Statement or the Prospectus or any related
preliminary prospectus or any amendment thereof or supplement thereto in
reliance upon and in conformity with information furnished in writing to the
Company by or on behalf of the Placement Agent expressly for use in connection
with the preparation thereof.
(iii) The Registration Statement has become effective under
the Act, and to the best of the knowledge of the Sellers, no stop order
suspending the effectiveness of the Registration Statement has been issued
under the Act or proceedings therefor initiated or threatened by the
Commission.
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus, except
as set forth in the Registration Statement and the Prospectus, there has been
no material adverse change or any development involving a prospective material
adverse change in the business, prospects, properties, operations, condition
(financial or other) or results of operations of the Company and its
subsidiaries taken as a whole, whether or not arising from transactions in the
ordinary course of business, and since the date of the latest balance sheet
presented in the Registration Statement and the Prospectus, neither the
Company nor any of its
3
<PAGE> 4
subsidiaries has incurred or undertaken any liabilities or obligations, direct
or contingent, which are material to the Company and its subsidiaries taken as
a whole, except for liabilities or obligations which are reflected in the
Registration Statement and the Prospectus.
(v) This Agreement and the transactions contemplated herein
have been duly and validly authorized by the Sellers and this Agreement has
been duly and validly executed and delivered by the Sellers.
(vi) The Shares, when delivered and sold in accordance with
this Agreement, will be duly and validly issued and outstanding, fully paid
and nonassessable, and will not have been issued in violation of or be subject
to any preemptive rights.
(vii) The Company is in compliance in all material respects
with all the requirements of, and has made all required filings under, the
Act, the Regulations, the Exchange Act and the regulations promulgated
thereunder and the rules of The Nasdaq Stock Market.
(viii) The financial statements, including the notes thereto,
and supporting schedules included or incorporated by reference or deemed
incorporated by reference in the Registration Statement and the Prospectus
present fairly the financial position of the Company as of the dates indicated
and the results of its operations for the periods specified; except as
otherwise stated in the Registration Statement, said financial statements have
been prepared in conformity with generally accepted accounting principles
applied on a consistent basis; and the supporting schedules included or
incorporated by reference in the Registration Statement present fairly the
information required to be stated therein.
(ix) The documents incorporated or deemed to be incorporated
by reference in the Prospectus, at the time they were or hereafter are filed
with the Commission, complied and will comply in all material respects with
the requirements of the Exchange Act and the rules and regulations of the
Commission under the Exchange Act, and, when read together with the other
information in the Prospectus, at the time the Registration Statement and any
amendments thereto become effective and at the Closing Date, will not contain
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
(x) The Common Stock is, and upon the delivery and sale of the
Shares, the Shares will be, listed on The Nasdaq National Market System.
4
<PAGE> 5
(xi) The Board of Directors of the Company has approved
resolutions exempting from the Maryland General Corporation Law any business
combination with the Placement Agent, its existing or future affiliates or any
"group" (within the meaning of Section 13(d)(3) of the Exchange Act) that may
become "interested stockholders" of the Company or any existing or future
affiliate of any of the foregoing, and said resolutions (A) have not been,
and, on the Closing Date, will not have been, modified or rescinded since
their adoption, and (B) are, and on the Closing Date will be, in full force
and effect.
(b) Each Seller, severally and not jointly, represents and warrants
to, and agrees with, the Placement Agent that:
(i) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated will not result in a
breach by such Seller of, or constitute a default by such Seller under, any
material indenture, deed of trust, contract or other material agreement or
instrument or any decree, judgment or order to which such Seller is a party or
by which such Seller may be bound.
(ii) Each Seller has and will have, at the Closing Date, good
and marketable title to the Shares to be sold by such Seller hereunder, free
and clear of any pledge, lien, security interest, encumbrance, claim or
equity, created by or arising through the Seller other than pursuant to this
Agreement; such Seller has full right, power and authority to sell, transfer
and deliver the Shares to be sold by such Seller hereunder; and upon delivery
of the Shares to be sold by such Seller hereunder and payment of the purchase
price therefor as herein contemplated, each party to whom such Shares were
sold will receive good and marketable title to the Shares purchased by it from
such Seller, free and clear of any pledge, lien, security interest,
encumbrance, claim or equity.
(iii) All authorizations, approvals and consents necessary for
the execution and delivery by each Seller of this Agreement and the sale and
delivery of the Shares by such Seller (other than, at the time of the
execution hereof, such authorizations, approvals or consents as may be
necessary under state securities laws), have been obtained and are in full
force and effect; each Seller has the full right, power and authority to
execute and deliver this Agreement and to sell, transfer and deliver the
Shares to be sold by such Seller.
(iv) Each Seller has not taken, and will not take, directly or
indirectly, any action which is designed to or which has constituted or which
might reasonably be expected to cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate the
sale or exercise of the Shares.
5
<PAGE> 6
3. Purchase, Sale and Delivery of the Shares; Payment of Commissions.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein
set forth, the Sellers agree to deliver the Shares to the Placement Agent for
the account of any purchaser and the Placement Agent agrees to deliver to the
Sellers on behalf of the purchasers their proportionate share of the Purchase
Price. The term "proportionate share", as used herein, shall mean, with
respect to each Seller, the proportion of Shares owned by such Seller.
(b) Payment of the Purchase Price for, and delivery of certificates
for, the Shares shall be made at the offices of Rosenman & Colin, 575 Madison
Avenue, New York, New York 10022, or at such other place as shall be agreed
upon by the Placement Agent and the Sellers, at 10:00 A.M. on March 14, 1997
or such other time not later than three business days after such date as shall
be agreed upon by the Sellers and the Placement Agent (such time and date of
payment and delivery being herein called the "Closing Date"). Payment of the
Purchase Price shall be made by the Placement Agent to the Sellers by wire
transfer in immediately available funds, against delivery to the Placement
Agent for the respective accounts of the purchasers of certificates for the
Shares to be purchased by the purchasers identified by the Placement Agent.
Certificates for the Shares shall be delivered to the Placement Agent on or
prior to the Closing Date accompanied by a stock power duly endorsed in blank
and with stock transfer stamps affixed and cancelled at the Seller's expense.
(c) As compensation for the services of the Placement Agent
provided to the Sellers hereunder, the Sellers shall pay the Placement Agent a
commission equal to $0.125 for each Share sold, or an aggregate of $187,500 if
all of the Shares are sold. Each of the Sellers shall pay their proportionate
share of such commission to the Placement Agent on the Closing Date by, at the
Placement Agent's option, (i) certified or official bank checks drawn in New
York Clearing House funds or similar next day funds payable to the order of
the Placement Agent or (ii) by the Placement Agent withholding such amount
from the Purchase Price.
4. Payment of Expenses. Whether or not the transactions contemplated in
this Agreement are consummated or this Agreement is terminated, each of the
Sellers hereby agrees to pay their proportionate share of all costs and
expenses incident to the performance of the obligations of the Sellers and the
Placement Agent hereunder, including those in connection with (i) preparing,
printing, duplicating, filing and distributing the Registration Statement, as
originally filed and all amendments thereof (including all exhibits thereto),
any preliminary prospectus, the Prospectus and any amendments or supplements
6
<PAGE> 7
thereto (including, without limitation, fees and expenses of the Company's
accountants (except, that, with respect to the accountant's letter to be
delivered pursuant to Section 5(d) herein, such fees and expenses shall be
borne solely by Mr. Hindman and the Company) and counsel), this Agreement and
all other documents related to the placement of the Shares, (ii) the issuance,
transfer and delivery of the Shares to the purchasers identified by the
Placement Agent, including any transfer or other taxes payable thereon, (iii)
the qualification of the Shares under state or foreign securities or Blue Sky
laws, including the costs of printing and mailing a preliminary and final
"Blue Sky Survey" and the fees of counsel for the Placement Agent and such
counsel's disbursements in relation thereto, (iv) listing the Shares on The
Nasdaq National Market, (v) filing fees of the Commission and the National
Association of Securities Dealers, Inc., (vi) the cost of printing
certificates representing the Shares and (vii) the cost and charges of any
transfer agent or registrar.
5. Conditions of Placement Agent's Obligations. The obligations of the
Placement Agent to place the Shares and pay the Purchase Price, as provided
herein, shall be subject to the accuracy of the representations and warranties
of the Sellers herein contained, as of the date hereof and as of the Closing
Date, to the absence from any certificates, opinions, written statements or
letters furnished to the Placement Agent pursuant to this Section 5 of any
misstatement or omission, to the performance by the Sellers of their
obligations hereunder, and to the following additional conditions:
(a) At or prior to the Closing Date no stop order suspending the
effectiveness of the Registration Statement or any post-effective amendment
thereof shall have been issued and no proceedings therefor shall have been
initiated or threatened by the Commission.
(b) At the Closing Date the Placement Agent shall have received the
opinion of either Piper & Marbury or Miles & Stockbridge dated the Closing
Date and addressed to the Placement Agent, to the effect that:
(i) All of the Shares are owned of record by the Sellers; and
(ii) This Agreement has been duly authorized and validly
executed by the Sellers and is the legally valid and binding
obligation of the Sellers, enforceable against the Sellers in
accordance with its terms, subject to the effect of bankruptcy,
insolvency, reorganization, moratorium and other laws of general
application relating to or affecting the enforcement of creditors'
rights and the application of equitable principles whether in a suit
at law or in equity.
7
<PAGE> 8
(c) At the Closing Date the Placement Agent shall have received a
certificate of the Sellers, dated the Closing Date, to the effect that, (i) as
of the date hereof and as of the Closing Date the representations and
warranties of the Sellers set forth in Section 2 hereof are accurate, (ii) as
of the Closing Date the obligations of the Sellers to be performed hereunder
on or prior thereto have been duly performed and (iii) subsequent to the
respective dates as of which information is given in the Registration
Statement and the Prospectus, the Company and its subsidiaries have not
sustained any material loss or interference with their respective businesses
or properties from fire, flood, hurricane, accident or other calamity, whether
or not covered by insurance, or from any labor dispute or any legal or
governmental proceeding, and there has not been any material adverse change,
or any development involving a material adverse change, in the business
prospects, properties, operations, condition (financial or otherwise), or
results of operations of the Company and its subsidiaries taken as a whole,
except in each case as described in or contemplated by the Prospectus.
(d) Within ten business days of the date of this Agreement, the
Placement Agent shall have received from the accountants for the Company a
letter addressed to the Placement Agent in form and substance reasonably
satisfactory to the Placement Agent with respect to the financial statements
and certain financial information contained in or incorporated by reference in
the Registration Statement and the Prospectus.
(e) Prior to the Closing Date the Sellers shall have furnished to
the Placement Agent, upon the reasonable request of the Placement Agent, such
further information, certificates and documents which are necessary to
consummate the transactions contemplated hereby and are requested by a third
party.
(f) At the Closing Date, the Shares shall have been approved for
listing on The Nasdaq National Market upon notice of issuance and all
necessary approvals of the National Association of Securities Dealers, Inc.
shall have been received.
If any of the conditions specified in this Section 5 shall not have
been fulfilled when and as required by this Agreement, or if any of the
certificates, opinions, written statements or letters furnished to the
Placement Agent or to the Placement Agent's Counsel pursuant to this Section 5
shall not be in all material respects reasonably satisfactory in form and
substance to the Placement Agent and to the Placement Agent's Counsel, all
obligations of the Placement Agent hereunder may be cancelled by the Placement
Agent at, or at any time prior to, the Closing Date. Notice of such
cancellation shall be given to the Sellers in writing, or by telephone, telex
or telegraph, confirmed in writing.
8
<PAGE> 9
6. Indemnification.
(a) The Sellers agree to indemnify and hold harmless the Placement
Agent, its directors, officer and employees, and each person, if any, who
controls the Placement Agent within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, against any and all losses, liabilities,
claims, damages and expenses whatsoever as incurred (including but not limited
to attorneys' fees and any and all expenses whatsoever incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in
settlement of any claim or litigation), joint or several, to which they or any
of them may become subject under the Act, the Exchange Act or otherwise,
insofar as such losses, liabilities, claims, damages or expenses (or actions
in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in the registration
statement for the registration of the Shares, as originally filed or any
amendment thereof, or any related preliminary prospectus or the Prospectus, or
in any supplement thereto or amendment thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading; provided, however, that the Sellers will not be liable in any such
case to the extent but only to the extent that any such loss, liability,
claim, damage or expense arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished
to the Company by or on behalf of the Placement Agent expressly for use
therein. This indemnity agreement will be in addition to any liability which
the Sellers may otherwise have including under this Agreement.
(b) The Placement Agent agrees to indemnify and hold harmless each
of the Sellers against any losses, liabilities, claims, damages and expenses
whatsoever as incurred (including but not limited to attorneys' fees and any
and all expenses whatsoever incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any claim whatsoever, and
any and all amounts paid in settlement of any claim or litigation), jointly or
several, to which they may become subject under the Act, the Exchange Act or
otherwise, insofar as such losses, liabilities, claims, damages or expenses
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement for the registration of the Shares, as originally filed
or any amendment thereof, or any related preliminary prospectus or the
Prospectus, or in any amendment thereof or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in each case to the
9
<PAGE> 10
extent, but only to the extent, that any such loss, liability, claim, damage
or expense arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of the Placement Agent expressly for use therein; provided, however,
that in no case shall the Placement Agent be liable or responsible for any
amount in excess of the commissions received by the Placement Agent hereunder.
This indemnity will be in addition to any liability which the Placement Agent
may otherwise have including under this Agreement. The Sellers acknowledge
that the statements set forth under the caption "Plan of Distribution" in the
Prospectus constitute the only information furnished in writing by or on
behalf of the Placement Agent expressly for use in the Registration Statement
relating to the Shares as originally filed or in any amendment thereof, any
related preliminary prospectus or the Prospectus or in any amendment thereof
or supplement thereto, as the case may be.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but
the failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 6). In case any such action is
brought against any indemnified party, and it notifies an indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate therein, and to the extent it may elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
satisfactory to such indemnified party. Notwithstanding the foregoing, the
indemnified party or parties shall have the right to employ its or their own
counsel in any such case, but the fees and expenses of such counsel shall be
at the expense of such indemnified party or parties unless (i) the employment
of such counsel shall have been authorized in writing by one of the
indemnifying parties in connection with the defense of such action, (ii) the
indemnifying parties shall not have employed counsel to have charge of the
defense of such action within a reasonable time after notice of commencement
of the action, or (iii) such indemnified party or parties shall have
reasonably concluded that there may be defenses available to it or them which
are different from or additional to those available to one or all of the
indemnifying parties (in which case the indemnifying parties shall not have
the right to direct the defense of such action on behalf of the indemnified
party or parties), in any of which events such fees and expenses shall be
borne by the indemnifying parties. Anything in this subsection to the
contrary notwithstanding, an indemnifying party shall not be liable for any
settlement of any
10
<PAGE> 11
claim or action effected without its written consent; provided, however, that
such consent was not unreasonably withheld.
7. Survival of Representations and Agreements. All representations and
warranties, covenants and agreements of the Placement Agent and the Sellers
contained in this Agreement, including the agreements contained in Section 4
and the indemnity agreements contained in Section 6 shall remain operative and
in full force and effect regardless of any investigation made by or on behalf
of the Placement Agent or any controlling person thereof or by or on behalf of
the Sellers, and shall survive delivery of and payment for the Shares to and
by the Placement Agent. The representations contained in Section 2 and the
agreements contained in Sections 4, 6 and 8(c) hereof shall survive the
termination of this Agreement, including termination pursuant to Section 8
hereof.
8. Termination.
(a) The Placement Agent shall have the right to terminate this
Agreement at any time after March 14, 1997 if the conditions set forth in
Section 5 shall not have been satisfied on or prior to March 14, 1997.
(b) Any notice of termination pursuant to this Section 8 shall be
by telephone, telex, or telegraph, confirmed in writing by letter.
(c) If this Agreement shall be terminated pursuant to this Section
8, each of the Sellers will, subject to demand by the Placement Agent,
reimburse the Placement Agent such Seller's proportionate share of all
out-of-pocket expenses (including the fees and expenses of their counsel)
incurred by the Placement Agent in connection herewith.
9. Notice. All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing and shall be mailed,
delivered, or telexed or telegraphed and confirmed in writing, to the intended
recipient as set forth below:
If to the Placement Agent:
Gilder, Gagnon, Howe & Company
1775 Broadway
26th Floor
New York, New York 10019
Attention: Mr. Walter Weadock
11
<PAGE> 12
with a copy to:
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
Attention: Howard Rothman, Esq.
If to the Sellers:
W. James Hindman
2322 Nicodemus Road
Westminister, Maryland 21157
and
Henry D. Felton
13001 Dover Road
Reisterstown, Maryland 21136
with a copy to:
Richard Tilghman, Jr., Esq.
36 South Charles Street
Charles Center South
Baltimore, Maryland 21201-3018.
10. Parties. This Agreement shall inure solely to the benefit of, and
shall be binding upon, the Placement Agent and the Sellers and the controlling
persons, directors, officers, employees and agents referred to in Section 6
and their respective successors and assigns, and no other person shall have or
be construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provision herein contained.
The term "successors and assigns" shall not include a purchaser, in its
capacity as such, of Shares from the Placement Agent.
11. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, BUT WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
12. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
12
<PAGE> 13
If the foregoing correctly sets forth the understanding between the
Placement Agent and the Sellers, please so indicate in the space provided
below for that purpose, whereupon this letter shall constitute a binding
agreement among us.
Very truly yours,
GILDER, GAGNON, HOWE & COMPANY
By /s/ WALTER J. WEADOCK
---------------------------
Name: Walter J. Weadock
Title: General Partner
Accepted as of the date first above written
By /s/ HENRY D. FELTON
-----------------------
Name:
By /s/ W. JAMES HINDMAN
-----------------------
Name:
13
<PAGE> 1
EXHIBIT 23(c)
[BAIR, RUPP, SIMPSON & ZORGER LETTERHEAD]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our reports dated February 22,
1996, and February 23, 1995 included in Youth Services International, Inc.'s
Form 8-K filed April 10, 1996, and to all references to our Firm included in
this registration statement.
/s/ BAIR, RUPP, SIMPSON & ZORGER, INC.
March 6, 1997 Bair, Rupp, Simpson & Zorger, Inc.
Fort Wayne, Indiana
