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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
March 2, 1999
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Date of Report (Date of earliest event reported)
Youth Services International, Inc.
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(Exact name of registrant as specified in its charter)
Maryland 0-23284 52-1715690
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File No.) Identification No.)
2 Park Center Court, Suite 200, Owings Mills, Maryland 21117
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(410) 356-8600
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Not applicable
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(Former name or former address, if changed since last report)
Exhibit Index on Page 4
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Item 5. Other Events.
On March 2, 1999, Youth Services International, Inc. ("YSI") and
Correctional Services Corporation ("CSC") executed a Second Amendment (the
"Second Amendment") to their Agreement and Plan of Merger dated as of September
23, 1998 (the "Merger Agreement"), as amended by the First Amendment to the
Agreement and Plan of Merger, dated as of January 12, 1999. The Second Amendment
amends the Merger Agreement to provide that each outstanding share of YSI common
stock will be converted into the right to receive .275 shares of CSC common
stock.
The Second Amendment also effects other changes to the Merger
Agreement.
The joint press release issued by YSI and CSC with respect to the
announcement of the Second Amendment is included as Exhibit 99.1 hereto.
In addition, on March 2, 1999, YSI announced preliminary results
for the fourth quarter of 1998. The press release issued by YSI with respect to
the announcement of preliminary fourth quarter results is included as Exhibit
99.2 hereto.
The foregoing description of and reference to all of the
above-mentioned agreements and documents are qualified in their entirety by
reference to the complete texts of the agreements and documents, which are filed
as exhibits to this Current Report on Form 8-K.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
2.1. Second Amendment, dated as of March 2, 1999, to the
Agreement and Plan of Merger, dated as of September 23, 1998, among YSI, CSC and
Palm Merger Corp.
99.1 Joint Press Release, dated March 2, 1999.
99.2 Press Release, dated March 2, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned thereunto duly authorized.
Youth Services International, Inc.
Date: March 2, 1999 By: /s/ Mark S. Demilio
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Mark S. Demilio
Senior Vice President, General Counsel
and Acting Chief Financial Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
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<S> <C>
2.1 Second Amendment, dated as of March 2, 1999 to the
Agreement and Plan of Merger, dated as of September 23,
1998, among YSI, CSC and Palm Merger Corp.
99.1 Joint Press Release, dated March 2, 1999.
99.2 Press Release, dated March 2, 1999.
</TABLE>
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EXHIBIT 2.1
SECOND AMENDMENT
TO AGREEMENT AND PLAN OF MERGER
This Second Amendment ("Amendment") to the Agreement and Plan of Merger
dated as of September 23, 1998 by and among Youth Services International, Inc.,
Correctional Services Corporation and Palm Merger Corp., as amended by the First
Amendment thereto dated as of January 12, 1999 (as so amended, the "Merger
Agreement"), is entered into as of this 2nd day of March, 1999.
WHEREAS, the parties desire to amend the Merger Agreement to address
certain issues;
NOW, THEREFORE, in consideration of the covenants and agreements
contained herein, the Merger Agreement is hereby amended as set forth below.
1. SECTION 3.1.(a). The reference to ".375 shares" in Section 3.1.(a)
shall be deleted and replaced with a reference to ".275 shares."
2. SECTION 7.4. A new Section 7.4. shall be added as follows:
"7.4. Limitation on Conditions to Each Party's Obligation to
Effect the Merger.
(a) Notwithstanding the provisions of SECTION 7.1. and
SECTION 7.2., no event or circumstance of which either Parent or
Merger Subsidiary had actual knowledge at the time of execution
of the Second Amendment to the Agreement and Plan of Merger,
dated as of March 2, 1999, by and among the Company, Parent and
Merger Subsidiary (the "Second Amendment") shall constitute a
permissible basis to relieve Parent or Merger Subsidiary from
their obligations to effect the Merger pursuant to any condition
set forth in SECTION 7.1. or SECTION 7.2., including but not
limited to the condition set forth in SECTION 7.1.(g) (if an
event or circumstance of which either Parent or Merger Subsidiary
had actual knowledge at the time of execution of the Second
Amendment forms the basis for a failure of J.C. Bradford to
render a fairness opinion to Parent), provided that the
limitation in this SECTION 7.4.(a) shall not apply to the
condition to Parent's and Merger Subsidiary's obligation to
effect the Merger set forth in SECTION 7.1.(a) (relating to a
failure by the holders of Shares or the holders of Parent Common
Stock to approve the Merger).
(b) Notwithstanding the provisions of SECTION 7.1. and
SECTION 7.3., no event or circumstance of which the Company had
actual knowledge at the time of execution of the Second Amendment
shall constitute a permissible basis to relieve the Company from
its obligation to effect the Merger pursuant to any condition set
forth in SECTION 7.1. or SECTION 7.3., including but not limited
to the condition set forth in SECTION 7.1.(f) (if an event or
circumstance of which the Company had actual knowledge at the
time of execution of the Second Amendment forms the basis for a
failure of SunTrust Equitable Securities to render a fairness
opinion to the Company), provided that the limitation in this
SECTION 7.4.(b) shall not apply to the condition to the Company's
obligation to
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effect the Merger set forth in SECTION 7.1.(a)(relating to a
failure by the holders of Shares or the holders of Parent Common
Stock to approve the Merger)."
3. SECTION 8.1.(d). The reference to "March 31, 1999" in Section 8.1.(d)
shall be deleted and replaced with a reference to "April 30, 1999."
4. SECTION 8.1.(e). Section 8.1.(e) is hereby amended and restated to
read in its entirety as follows:
"(e) By Parent after April 30, 1999, if any of the
conditions set forth in ARTICLE VII hereof, to which the Parent
and the Merger Subsidiary's obligations are subject, have not
been fulfilled or waived, unless such fulfillment has been
frustrated or made impossible by any act or failure to act of
Parent or the Merger Subsidiary;"
5. COUNTERPARTS. This Amendment may be executed in counterparts, each of
which shall constitute one agreement, binding on the parties, and each party
hereby covenants and agrees to execute all duplicates or replacement
counterparts of this Amendment as may be required.
6. MERGER AGREEMENT. The terms and provisions of the Merger Agreement, as
amended hereby, shall remain in full force and effect. All references to the
Merger Agreement contained therein shall refer to the Merger Agreement as
amended hereby.
IN WITNESS WHEREOF, this Amendment has been duly executed and delivered
by the duly authorized officers of the parties hereto as of the date first
written above.
YOUTH SERVICES INTERNATIONAL, INC.
By: /s/ Mark S. Demilio
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Name: Mark S. Demilio
Title: Sr. Vice President
CORRECTIONAL SERVICES CORPORATION
By: /s/ Ira Cotler
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Name: Ira Cotler
Title: Chief Financial Officer
PALM MERGER CORP.
By: /s/ Ira Cotler
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Name: Ira Cotler
Title: Treasurer
2
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EXHIBIT 99.1
NEWS
For Immediate Release
COMPANY CONTACTS:
IRA COTLER (CORRECTIONAL SERVICES CORPORATION)
EXECUTIVE VICE PRESIDENT-FINANCE
(941) 953-9199
MARK DEMILIO (YOUTH SERVICES INTERNATIONAL)
CHIEF FINANCIAL OFFICER
(410) 356-8600
MARCH 2, 1999
CORRECTIONAL SERVICES CORPORATION
AND YOUTH SERVICES INTERNATIONAL
ADJUST MERGER TERMS
Sarasota, Florida and Owings Mills, Maryland-- Correctional Services
Corporation ("CSC") (NASDAQ NMS:CSCQ) and Youth Services International, Inc.
("YSI") (NASDAQ NMS: YSII) announced today the terms of the previously announced
merger will be adjusted. Youth Services shareholders will now receive .275
shares of Correctional Services stock for each share of Youth Services' stock,
rather than the .375 previously announced. The Board of Directors of each
company has approved the adjusted terms and unanimously recommends its approval
to its shareholders.
Although Youth Services has been generating increasing revenues and
population levels, the companies agreed to reduce the exchange ratio to reflect
reductions in Youth Services' operating margins.
"Since the signing of the Merger Agreement, we have been working with
Youth Services' management and certain clients to explore growth opportunities
and areas for margin improvement", stated James F. Slattery, CEO and President
of Correctional Services. "However, in light of Youth Services' reduced
operating margins and recent balance sheet adjustments, we felt compelled to
reevaluate the deal's terms for all shareholders. CSC has developed a detailed
integration plan that addresses these issues and achieves our synergy goals,
which we are ready to implement as soon as the transaction is completed."
Correctional Services Corporation is a leading developer and manager of
privatized correctional and detention facilities in the United States. The
Company provides a diverse range of Adult and Juvenile programs and services to
local, state, and federal governmental agencies. The Company has 37 contracts to
manage facilities in twelve (12) states and Puerto Rico with an aggregate of
9,790 beds.
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YSI currently operates 27 residential juvenile justice facilities and
conducts non-residential programs in a total of thirteen (13) states serving a
total of approximately 3,200 youth.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995
This press release contains forward-looking statements involving various risks
and uncertainties. There can be no assurance that the merger will be
consummated. Even if consummated, actual results, including the level of
earnings of both CSC and YSI, and the success of the proposed merger, could
differ materially from those projected due to factors which may include
difficulties in the assimilation of operations, diversification of management's
attention from other business concerns, other acquisition risks, population
fluctuations, market and industry conditions, government funding and
availability of financing. These and other risk factors are outlined in the
reports filed by the Company with the Securities and Exchange Commission.
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EXHIBIT 99.2
For Immediate Release: For More Information:
March 2,1999 Mark S. Demilio
Senior Vice President
Chief Financial Officer
(410) 356-8600
YSI ANNOUNCES ANTICIPATED
FOURTH QUARTER RESULTS
OWINGS MILLS, MD -- MARCH 2, 1999 -- Youth Services International, Inc.
(Nasdaq: YSII) announced today that it anticipates that it will report a loss
for the fourth quarter ended December 31, 1998 of approximately $5.9 million to
$6.5 million, or $0.52 to $0.57 per share, inclusive of charges. YSI announced
that included in the anticipated loss will be approximately $4.2 million of
charges and costs incurred primarily in connection with the collectibility of
accounts receivable; increases in the medical claims under YSI's self-insured
employee health plan, and pending audits by third parties responsible for
reimbursement of certain program expenses under cost reimbursement contracts
and other cost-based reimbursement or funding.
YSI announces that also included in the anticipated loss will be
approximately $1.2 million in connection with buying out a contract with a
training subcontractor and approximately $0.3 million of costs incurred in the
fourth quarter in connection with the merger with Correctional Services
Corporation (Nasdaq: CSCQ).
YSI currently operates 27 residential juvenile justice facilities and
conducts non-residential programs in a total of 13 states serving a total of
approximately 3,200 youth.
YSI is headquartered in Owings Mills, Maryland. For more information on
YSII at no cost via facsimile, please dial 1-800-PRO-INFO and enter code 125 or
stock ticker YSII. You may also visit us on the internet at WWW.YSII.COM.
This press release contains certain forward-looking statements which involve
known and unknown risks, uncertainties or other factors not under the Company's
control which may cause actual results, performance or achievements of the
Company to be materially different from the result, performance, or other
expectations implied by these forward-looking statements. For further
information about the Company, investors are encouraged to review the Company's
most recent SEC filings.
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