As filed with the Securities and Exchange Commission on November 21, 1996
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CORRECTIONAL SERVICES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 11-3182580
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1819 Main Street, Suite 1000
Sarasota, Florida 34236
(941) 953-9199
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
SIDNEY TODRES, ESQ.
Epstein Becker & Green, P.C.
250 Park Avenue
New York, New York 10177
(212) 351-4735
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Approximate date of proposed commencement of sale to the public:
As soon as practicable after this Registration Statement becomes effective.
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 to be 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. |x|
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. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===============================================================================================
Proposed Proposed
Maximum Maximum Amount of
Title of Securities Amount Offering Price Aggregate Registration
Being Registered Being Regitered Per Share(1) Offering Price(1) Fee
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Warrants to purchase
Common Stock
Common Stock, $.01 par
value, issuable upon 109,373 $13.50 $1,476,536 $447
exercise of Warrants
- -----------------------------------------------------------------------------------------------
Warrants to purchase
Common Stock
Common Stock, $.01 par
value, issuable upon 59,681 $13.50 $ 805,694 $244
exercise of Warrants
- -----------------------------------------------------------------------------------------------
Total............................................... $691
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee based
on the average of the high and low sale prices of the Common Stock on The Nasdaq
Stock Market's National Market on November 15, 1996, pursuant to Rule 457(g).
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
Subject to Completion
Preliminary Prospectus Dated November 21, 1996
PROSPECTUS
CORRECTIONAL SERVICES CORPORATION (formerly Esmor
Correctional Services, Inc.)
109,373 Warrants to Purchase Common Stock
59,681 Warrants to Purchase Common Stock
169,054 Shares of Common Stock
($.01 par value)
-------------
The 109,373 warrants (the "IPO Warrants"), the 59,681 warrants (the
"Placement Warrants" and, together with the IPO Warrants, the "Underwriter
Warrants") and/or the 169,054 shares of Common Stock issuable to the holders of
the Underwriter Warrants upon exercise thereof (the "Shares") to which this
Prospectus relates may be sold by the selling securityholders named herein (the
"Selling Securityholders") from time to time in transactions on The Nasdaq
National Stock Market's National Market ("The Nasdaq Stock Market") at prices
then prevailing, or in negotiated transactions at negotiated prices, or a
combination thereof. See "Selling Securityholders" and "Plan of Distribution."
The IPO Warrants entitle the holders thereof to purchase an aggregate of 109,373
shares of Common Stock at $5.43 per share through February 9, 1997, at $5.77 per
share thereafter and through February 9, 1998 and at $6.10 per share thereafter
and through February 9, 1999, the expiration date of the IPO Warrants. The
Placement Warrants entitle the holders thereof to purchase 59,681 shares of
Common Stock at $10.00 per share through September 15, 2000, the expiration date
of the Placement Warrants. See "Description of Securities - Warrants." The
Company will not receive any proceeds from the sale by the Selling
Securityholders of the Underwriter Warrants and/or the Shares.
Prior to this offering, there has been no public market for the Underwriter
Warrants and no such market is anticipated to develop. The Common Stock and the
Company's Series A Warrants are traded on The Nasdaq Stock Market under the
symbols "CSCQ" and "CSCQW", respectively. The closing sale price of the Common
Stock on November 20, 1996 and the Series A Warrants on November 18, 1996, as
reported by The Nasdaq Stock Market, was $13.00 per share and $7.00 per Series A
Warrant.
-------------
See "Risk Factors" for a discussion of certain factors that should be
considered by prospective purchasers of the Underwriter Warrants and/or the
Shares offered hereby.
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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.
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The date of this Prospectus is ___________________, 1996
<PAGE>
No dealer, salesman, or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offering herein contained and, if given or
made, such information or representations must not be relied upon as having been
authorized by the Company. This Prospectus does not constitute an offer to sell,
or a solicitation of an offer to buy, the securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make an offer or
solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create an implication that there has
been no change in the facts herein set forth since the date hereof.
-------------
AVAILABLE INFORMATION
The Company is subject to the information 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 material may be
inspected and copies made at the regional offices of the Commission at 7 World
Trade Center, Suite 1300, New York, New York 10048, and at Citicorp Center, 500
West Madison Street, Suite 1400, Chicago Illinois 60661-2511. This material may
also be inspected and copies made at and, upon written request copies obtained
at prescribed rates from, the Public Reference Section of the Commission at Room
1024 at its principal office, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. This material may also be accessed through the EDGAR
terminals in the Commission's Public Reference Rooms in Washington, Chicago and
New York or through the World Wide Web at http://www.sec.gov.
DOCUMENTS INCORPORATED BY REFERENCE
The Company's (i) Annual Report on Form 10-KSB (as amended) for the fiscal
year ended December 31, 1995, (ii) Quarterly Reports on Form 10-QSB (as amended)
for the periods ended March 31, 1996, June 30, 1996 and September 30, 1996,
(iii) Proxy Statement relating to the 1996 Annual Meeting of Stockholders held
on May 20, 1996, (iv) Information Statement relating to the August 1996
amendment of the Company's Certificate of Incorporation, (v) Report on Form 10-C
relating to the August 1996 change in name of the Company from Esmor
Correctional Services, Inc. to Correctional Services Corporation, and (vi)
Reports on Form 10-C relating to the increase in number of shares of Common
Stock outstanding resulting from the issuances by the Company of 2,070,000 and
367,500 shares of Common Stock on September 17, 1996 and October 16, 1996,
respectively, are incorporated in and made a constituent part of this Prospectus
by reference. All reports and proxy statements filed by the Company with the
Commission pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act
after the date of this Prospectus and prior to termination of the offering of
the Underwriter Warrants and/or Shares shall likewise be deemed incorporated
herein and made a constituent part hereof by reference from their respective
dates of filing.
Any statement contained in a document incorporated or deemed to be
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 is also incorporated by reference
herein modifies or replaces such statement. Any statements so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
Upon oral or written request, the Company will provide without charge a
copy of any document incorporated in this Prospectus by reference, exclusive of
exhibits, to each person to whom this Prospectus is delivered. Requests for such
documents should be directed to the Secretary of the Company, Suite 1000, 1819
Main Street, Sarasota, Florida 34236 (telephone no. 941-953-9199).
2
<PAGE>
THE COMPANY
Correctional Services Corporation (herein with its subsidiaries, the
"Company") is a leading developer and manager of privatized correctional and
detention facilities in the United States. Through its three divisions, Adult,
Juvenile and Community Corrections, the Company provides a diverse range of
services to local, state and federal governmental correctional agencies. The
Company currently has agreements to operate 17 correctional and detention
facilities in New York, Florida, Arizona, Texas and the State of Washington with
a total of 3,111 beds. The facilities managed are both secure and non-secure.
The Company's secure facilities include a detention and processing center for
illegal aliens, an adult prison, intermediate sanction facilities, driving while
intoxicated facilities, and military-style boot camps for juvenile offenders.
Its non-secure facilities include residential programs, such as community
correctional facilities for federal and state offenders serving the last six
months of their sentences, and non-residential supervision programs.
The Company was incorporated under the laws of the State of Delaware on
October 28, 1993 to acquire all of the outstanding capital stock of a number of
affiliated companies engaged in operating corrections or detention facilities.
The Company's executive offices are located at Suite 1000, 1819 Main St.,
Sarasota, Florida 34236 (telephone no. 941-953-9199).
Recent Events
In September and October 1996, the Company sold an aggregate of 2,437,500
shares of Common Stock and certain of its stockholders sold 380,000 shares of
Common Stock pursuant to an underwritten public offering registered with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Securities Act"). The net proceeds to the Company from such offering of
approximately $30.8 million are anticipated to be used to finance construction,
start-up and related costs of an Arizona and a Texas facility and the start-up
costs of two Florida facilities, to repay bank indebtedness and for general
corporate purposes.
RISK FACTORS
An investment in the Underwriter Warrants or the Shares offered hereby
involves a high degree of risk. Prospective investors should consider carefully
the following risk factors, in addition to the other information set forth in
this Prospectus, in evaluating an investment in the securities offered hereby.
Risks Associated With Internal Expansion
The Company's growth is generally dependent upon its ability to obtain
contracts to develop and manage new correctional and detention facilities. The
rate of such development depends on a number of factors, including crime rates
and sentencing patterns in various jurisdictions and the Company's ability to
integrate new facilities into its management structure. Certain jurisdictions
recently have required the successful bidders to make a significant capital
investment in connection with the financing of a particular project, a trend
which will require the Company to have sufficient capital resources in order to
compete effectively. In some cases, the Company may determine to construct and
own a facility without a contract award when it believes there is a significant
shortage of beds and a strong likelihood it will be awarded a contract; however,
there can be no assurance that any contract will, in fact, be awarded. Further,
there can be no assurance that the Company will be able to obtain contracts to
construct and/or manage new facilities or retain existing contracts upon their
expiration.
3
<PAGE>
Risks Associated with Acquisitions
The Company intends to grow thorough internal expansion and through
selective acquisitions. There can be no assurance that the Company will be able
to identify, acquire or profitably manage acquired operations or that operations
acquired will be profitable or achieve levels of profitability that justify the
related investment. Acquisitions involve a number of special risks, including
possible adverse short-term effects on the Company's operating results,
diversion of management's attention from existing business, dependence on
retaining, hiring and training key personnel, risks associated with
unanticipated problems or legal liabilities, and amortization of acquired
intangible assets, any of which could have a material adverse effect on the
Company's financial condition, results of operations and liquidity.
Resistance to Privatization of Correctional and Detention Facilities
Management of correctional and detention facilities by private entities is
a relatively new concept and has not achieved complete acceptance by either
governments or the public. The movement toward privatization of correctional and
detention facilities has also encountered resistance from certain groups, such
as labor unions, local sheriff's departments, and groups that believe that
correctional and detention facilities should be operated only by governmental
agencies. In addition, changes in the dominant political party in any market in
which the Company operates could result in significant changes to the previous
acceptance of privatization in such market. Further, some sectors of the federal
government and some state and local governments are not legally permitted to
delegate their traditional management responsibilities for correctional and
detention facilities to private companies.
Opposition to Facility Location
The Company's success in opening new facilities is dependent in part upon
its ability to obtain facility sites that can be leased or acquired on
economically favorable terms. Some locations may be in or near populous areas
and, therefore, may generate legal action or other forms of opposition from
residents in areas surrounding a proposed site. Certain facilities are already
located in or adjacent to such areas and, in one instance, the Company abandoned
its plans to expand a facility after consulting with community leaders who
raised concerns about the expansion. There can be no assurance the Company will
be able to open new facilities or expand existing facilities in any particular
location.
Construction Risks
When the Company is engaged to perform design and construction services for
a facility, the Company typically acts as the primary contractor and
subcontracts with other parties who act as the general contractors. As primary
contractor, the Company is subject to the various risks of construction
including, without limitation, shortages of labor and materials, work stoppages,
labor disputes and weather interference. The Company is also subject to the risk
that the general contractor will be unable to complete construction at the
budgeted costs or be unable to fund any excess construction costs. Under such
contracts, the Company is ultimately liable for all late delivery penalties and
cost overruns.
Short-Term Contracts
The Company's facility management contracts are typically short-term,
ranging from one to three years, with renewal or extension options in favor of
the contracting governmental agency. The Company has two contracts subject to
renewal in 1996, and there can be no assurance that these or any other contract
will be renewed. Additionally, the contracting governmental agency typically may
terminate a facility
4
<PAGE>
contract without cause by giving the Company adequate written notice. The
Company customarily incurs significant development and start-up costs in opening
new facilities and the termination or non-renewal of a contract would require an
immediate write-off of any unamortized costs associated with the contract, and
could have a material adverse effect upon the Company's financial condition,
results of operations and liquidity.
Contracts Subject to Governmental Funding
The Company's facility management contracts are subject to either annual or
bi-annual governmental appropriations. A failure by a governmental agency to
receive such appropriations could result in termination of the contract by such
agency or a reduction of the management fee payable to the Company. In addition,
even if funds are appropriated, delays in payments may occur which could have a
material adverse effect on the Company's financial condition, results of
operations and liquidity.
Uncertain Occupancy Level
The Company is dependent upon the governmental agency with which it has a
management contract to provide inmates for, and maintain the occupancy level of,
the managed facility. A substantial portion of the Company's revenues is
generated under facilities management contracts that specify a net rate per day
per inmate ("per diem rate"), with no minimum guaranteed occupancy levels,
whereas most of the Company's facilities' cost structures are relatively fixed.
Under such a per diem rate structure, a decrease in occupancy levels may have a
material adverse effect on the Company's financial condition, results of
operations and liquidity.
Facility Lease Liability
The Company currently leases five of the facilities that it manages. If a
management contract for a leased facility were terminated, the Company would
continue to be obligated to make lease payments until the lease expires.
Impact of Disturbance
An escape, riot or other disturbance at one of the Company's facilities
could have a material adverse effect on the Company's financial condition,
results of operations and liquidity. As a result of a disturbance on June 18,
1995 by detainees at the Company's Elizabeth, New Jersey facility which required
local police intervention, the facility was closed and all detainees were moved
by the Immigration and Naturalization Service (the "INS") to public detention
facilities. The disturbance received extensive media coverage which reported the
detainees' allegations of poor conditions and treatment and long delays prior to
their immigration hearings. The adverse publicity generated as a result of the
1995 disturbance could have a material adverse effect on the Company's ability
to obtain future contracts. However, in October 1995, the INS renewed the
Company's contract to manage an INS detention center in Seattle, Washington.
Thereafter, the Company signed a contract to manage a 100-bed facility in Eagle
Lake, Texas, was selected to own and manage a 600- bed adult prison in Florence,
Arizona, was re-awarded a contract to manage the 76-bed facility in Del Valle,
Texas and signed contracts to manage a 96-bed facility in Killeen, Texas, a
200-bed jail in Gollup, New Mexico and a 40-bed community correctional facility
in the Bronx, New York.
5
<PAGE>
In December 1995, the Company entered into an agreement to sell the assets
of the Elizabeth, New Jersey facility to an unaffiliated company that also
manages and operates detention centers. The closure of the facility and the
subsequent sale of assets resulted in charges to operations during 1995 of
$3,909,700, consisting of $416,201 to write-off the deferred development costs
and $3,493,499 to adjust the carrying value of the related assets. Following
approval by the INS of the transfer of the facility lease and management
contract, the sale closed in June 1996.
Potential Legal Liability
The Company's management of correctional and detention facilities exposes
it to potential third party claims or litigation by prisoners or other persons
for personal injury, property damage, or other damages, including damages
arising from a prisoner's escape or from a disturbance or riot at a
Company-managed facility. Currently, the Company is subject to actions initiated
by former employees, inmates and detainees alleging assault, sexual harassment,
personal injury, property damage, and other injuries. In addition, the Company's
management contracts generally require the Company to indemnify the governmental
agency against any damages to which the governmental agency may be subject in
connection with such claims or litigation. The Company maintains an insurance
program that provides coverage for certain liability risks faced by the Company,
including personal injury, bodily injury, death or property damage to a third
party where the Company is found to be negligent. There can be no assurance,
however, that the Company's insurance will be adequate to cover potential
third-party claims. In addition the Company is unable to secure insurance for
some unique business risks including, but not limited to, riot and civil
commotion or the acts of an escaped offender.
Regulation
The industry in which the Company operates is subject to a variety of
federal, state and local regulations, including education, health care and
safety regulations, which are administered by various regulatory authorities.
The Company's contracts typically include extensive reporting requirements and
supervision and on-site monitoring by representatives of the contracting
governmental agencies. Corrections officers customarily are required to meet
certain training standards and, in some instances, facility personnel are
required to be licensed and subject to background investigation. Certain
jurisdictions also require the Company to award subcontracts on a competitive
basis or to subcontract with businesses owned by members of minority groups. The
failure to comply with any applicable laws, rules or regulations and the loss of
any required license could have a material adverse effect on the Company's
financial condition, results of operations and liquidity. Further, current and
future operations of the Company may be subject to additional regulation as a
result of new statutes and regulations or changes in the manner in which
existing statutes and regulations are or may be interpreted or applied, which
could have a material adverse effect on the Company's financial condition,
results of operations and liquidity.
Competition
The Company competes on the basis of cost, quality and range of services
offered, its experience in managing facilities, the reputation of its personnel
and its ability to design, finance and construct new facilities. Some of the
Company's competitors have greater resources than the Company. There are few
barriers for companies seeking to enter into the management of correctional or
detention facilities. The Company also competes in some markets with local
companies that may have a better understanding of local conditions and a better
ability to gain political and public acceptance. In addition, the Company's
Community Corrections and Juvenile Divisions compete with governmental and
not-for-profit entities.
6
<PAGE>
Dependence Upon Executive Officers and Other Key Employees
The continued success of the Company is dependent to a significant degree
upon retaining its executive officers, the loss or unavailability of any of whom
could have an adverse effect on the Company. In addition, the private
correctional services industry has a high turnover rate for facility operational
employees and the Company's ability to retain existing contracts and obtain new
contracts is in part dependent upon its ability to hire and retain operational
employees.
Operating Loss
For the year ended December 31, 1995, the Company incurred an operating
loss of $2,027,689 as a result of a charge to operations of $3,909,700 resulting
from the closure of the Elizabeth, New Jersey facility. Since such date, the
Company realized an operating profit of $775,523 for the nine months ended
September 30, 1996.
Indebtedness
At September 30, 1996, the Company had total indebtedness of $3,912,680.
Additional indebtedness may be incurred thereafter to fund the construction and
ownership of correctional facilities. Interest payments on indebtedness are a
charge against the Company's earnings and repayments of indebtedness adversely
affect its cash flow and liquidity.
Anti-Takeover Provisions
The ability of the Board of Directors to establish the terms and provisions
of different series of preferred stock and the business combination provisions
of the Delaware General Corporation Law may discourage unsolicited takeover bids
by third parties. See "Description of Securities."
Affiliated Transactions
Prior to its initial public offering in February 1994, the Company entered
into leases and engaged in transactions with officers, directors and principal
stockholders and/or their affiliates which were not negotiated at arm's length;
two of such leases are still in effect providing for aggregate monthly payments
by the Company to the affiliated entities of approximately $90,000, inclusive of
real estate taxes and other charges with respect to one of the leases, plus such
charges with respect to the second. Since its initial public offering, the
Company has followed a policy that any such transactions must be approved by a
majority of the unaffiliated members of the Board of Directors and be on terms
no less favorable to the Company than could be obtained from unaffiliated third
parties.
Control by Management
Executive officers and directors of the Company and their immediate
families own approximately 19% of the shares of the Common Stock outstanding and
may thereby have significant influence on stockholder actions.
7
<PAGE>
No Cash Dividends
The Company does not anticipate paying cash dividends on its Common Stock
in the foreseeable future; in any event, the payment of any such dividends is
restricted under the Company's bank loan agreement.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Underwriter
Warrants and/or the Shares being offered hereby by the Selling Securityholders.
The proceeds to the Company from exercise of the Underwriter Warrants will be
added to the Company's working capital and will be available for general
corporate purposes.
SELLING SECURITYHOLDERS
The following table sets forth certain information with respect to the
Common Stock owned, and the Underwriter Warrants and the Shares being offered
hereby, by the Selling Securityholders:
Underwriter
Common Stock Warrants Common Stock
Beneficially and/or Beneficially
Owned Prior Shares Owned
Name to Offering Being Offered After Offering
---- ----------- ------------- --------------
Janney Montgomery Scott Inc.(1) 93,463 93,463 --
William J. Barrett(2) 128,817 32,343 96,474
Herbert M. Gardner(3) 60,576 32,342 28,234
Ira M. Cotler(4) 50,701 10,906 39,795
================================================================================
(1) Managing underwriter of the Company's initial public offering in February
1994 and placement agent for the Company's September 1995 private
placements. Ownership reflected consists of 58,623 IPO Warrants and 34,840
Placement Warrants. Does not include securities held on behalf of clients.
(2) Senior Vice President of Janney Montgomery Scott Inc. and director of the
Company from May 1994 through June 1996. Ownership reflected consists of
8,325 shares of Common Stock and 7,700 Series A Warrants owned by spouse,
as to which Mr. Barrett disclaims beneficial ownership, 11,718 shares of
Common Stock and 38,500 Series A Warrants owned by Mr. Barrett's individual
retirement account, 30,231 shares of Common Stock owned by Mr. Barrett's
KEOGH account, 22,422 IPO Warrants and 9,921 Placement Warrants.
(3) Senior Vice President of Janney Montgomery Scott Inc. Ownership reflected
consists of 1,468 shares of Common Stock and 2,080 Series A Warrants owned
by spouse, as to which Mr. Gardner disclaims beneficial ownership, 7,256
shares of Common Stock and 4,700 Series A Warrants owned by Mr. Gardner's
individual retirement account, 6,562 shares of Common Stock and 4,700
Series A Warrants owned by Mr. Gardner's KEOGH account, 1,468 shares of
Common Stock, 22,422 IPO Warrants and 9,920 Placement Warrants.
8
<PAGE>
(4) Executive Vice President-Finance of the Company since March 1996. Ownership
reflected consists of 2,612 shares of Common Stock owned by spouse, as to
which Mr. Cotler disclaims beneficial ownership, options to purchase 33,333
shares of Common Stock, 3,850 Series A Warrants, 5,906 IPO Warrants and
5,000 Placement Warrants. Does not include options to purchase 66,667
shares of Common Stock not exercisable within 60 days.
The Underwriter Warrants were issued as compensation for services rendered
in connection with the Company's initial public offering in February 1994 and
the Company's private placements in September 1995. As part of such
transactions, the Company agreed to register the Underwriter Warrants and the
Shares under the Securities Act at the Company's expense to enable each Selling
Securityholder to publicly sell the Underwriter Warrants and/or Shares. See
"Description of Securities - Warrants."
DESCRIPTION OF SECURITIES
The Company is authorized to issue 30,000,000 shares of Common Stock, par
value $.01 per share, and 1,000,000 shares of Preferred Stock, par value $.01
per share.
Common Stock
The holders of Common Stock are entitled to one vote per share held of
record on all matters to be voted on by stockholders. There is no cumulative
voting with respect to the election of directors, with the result that holders
of more than 50% of the shares voted for the election of directors can elect all
of the directors. The holders of Common Stock are entitled to receive dividends
when, as and if declared by the Board of Directors from sources available
therefor. In the event of liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, the holders of Common Stock are entitled to
share ratably in the assets of the Company available for distribution to
stockholders after payment of liabilities and after provision for each class of
stock, if any, having preference over the Common Stock. Holders of Common Stock
have no preemptive rights. All outstanding shares are, and all shares to be sold
and issued as contemplated hereby will be, fully paid and non-assessable and
legally issued. The Board of Directors is authorized to issue additional shares
of Common Stock within the limits authorized by the Company's charter and
without stockholder action.
Preferred Stock
The Preferred Stock may be issued from time to time without stockholder
approval in one or more classes or series, and the Board of Directors is
authorized to fix the dividend rights, dividend rates, any conversion rights or
rights of exchange, any voting rights, rights and terms of redemption (including
sinking fund provisions), the redemption price or prices, the liquidation
preferences and any other rights, preferences, privileges and restrictions of
any class or series of Preferred Stock, the number of shares constituting such
class or series and the designation thereof. The shares of any class or series
of Preferred Stock need not be identical. Depending upon the rights of such
Preferred Stock, the issuance of Preferred Stock could have an adverse effect on
holders of Common Stock by delaying or preventing a change in control of the
Company, making removal of the present management more difficult or resulting in
restrictions upon the payment of dividends and other distributions to the
holders of Common Stock. There are currently no shares of Preferred Stock
outstanding.
9
<PAGE>
Warrants
Series A Warrants
Each Series A Warrant entitles the registered holder to purchase one share
of Common Stock at $7.75 per share at any time through July 1, 1999, the
expiration date of the Series A Warrants, subject to adjustment in the event of
a stock split, recapitalization, stock dividend, combination, consolidation or
certain sales or issuances of Common Stock at less than market value. At
November 1, 1996, there were Series A Warrants outstanding to purchase 655,871
shares of Common Stock.
Underwriter Warrants
Each IPO Warrant entitles the registered holder to purchase one share of
Common Stock at $5.43 per share through February 9, 1997, at $5.77 per share
thereafter and through February 9, 1998 and at $6.10 per share thereafter and
through February 9, 1999, the expiration date of the IPO Warrants (after giving
effect to the Company's 5% stock dividend and five-for-four stock split),
subject to further adjustment in the event of a stock split, recapitalization,
stock dividend, combination, consolidation or certain sales or issuances of
Common Stock at less than market value. At November 1, 1996, there were IPO
Warrants outstanding to purchase 109,373 shares of Common Stock. See "Selling
Securityholders."
Each Placement Warrant entitles the registered holder to purchase one share
of Common Stock at $10.00 per share at any time through September 15, 2000, the
expiration date of the Placement Warrants, subject to adjustment in the event of
a stock split, recapitalization, stock dividend, combination, consolidation or
certain sales or issuances of Common Stock at less than market value. At
November 1, 1996, there were Placement Warrants outstanding to purchase 59,681
shares of Common Stock. See "Selling Securityholders."
Transfer Agent and Warrant Agent
The transfer agent for the Common Stock and the warrant agent for the
Series A Warrants is American Stock Transfer & Trust Co., New York, New York.
There is no warrant agent for the IPO Warrants or the Placement Warrants.
PLAN OF DISTRIBUTION
The Selling Securityholders may sell the Underwriter Warrants and the
Shares from time to time through dealers or brokers in transactions on The
Nasdaq Stock Market at prices then prevailing, or directly to one or more
purchasers in negotiated transactions at negotiated prices, or in a combination
thereof. The Selling Securityholders and any dealers or brokers that participate
in such distribution may be deemed "underwriters" within the meaning of the
Securities Act and any commissions or discounts received by any such dealer or
broker may be deemed "underwriting compensation".
The cost of registering the Underwriter Warrants and the Shares under the
Securities Act will be paid by the Company.
10
<PAGE>
LEGAL MATTERS
The validity of the Underwriter Warrants and the Shares offered hereby is
being passed upon for the Company by Epstein Becker & Green, P.C., New York, New
York. Stuart M. Gerson, a director of the Company, is a member of Epstein Becker
& Green, P.C. and members of the firm own, directly and indirectly, $195,000 of
the Company's 10% subordinated promissory notes, 3,400 shares of Common Stock
and Series A Warrants and options to purchase 65,615 shares of Common Stock.
EXPERTS
The financial statements incorporated in this Prospectus by reference to
the Company's Annual Report on Form 10-KSB for the year ended December 31, 1995
have been audited by Grant Thornton LLP, independent certified public
accountants, as stated in their report, which is incorporated herein by
reference, and has been so incorporated in reliance upon such report given upon
the authority of such firm as experts in accounting and auditing.
11
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The estimated expenses of this offering, all of which are to be paid by the
Company, are as follows:
S.E.C. Registration Fee............................. $ 691
Accounting Fees..................................... 2,000
Printing and Engraving.............................. 1,000
Legal Fees and Expenses............................. 15,000
Miscellaneous....................................... 1,309
--------
Total......................................... $ 20,000
========
Item 15. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law grants corporations the
power to indemnify their directors, officers, employees and agents in accordance
with the provisions thereof. Article Tenth of Registrant's Certificate of
Incorporation and Paragraph 11.6(a) of its By-Laws provide for indemnification
of Registrant's directors, officers, agents and employees to the fullest extent
permissible under Section 145 of the Delaware General Corporation Law.
Registrant presently maintains directors' and officers' liability insurance
coverage with an aggregate policy limit of $5,000,000 for each policy year.
Item 16. Exhibits.
*4.2 - Form of IPO Warrant.
**4.5 - Form of Placement Warrant.
5 - Opinion by Epstein Becker & Green, P.C.
23.1 - Consent of Grant Thornton LLP.
23.2 - Consent of Epstein Becker & Green, P.C. (included in Exhibit 5).
24 - Power of Attorney (included as part of Signature Page).
- --------
* Incorporated by reference to the exhibit of corresponding number filed with
the Company's Registration Statement on Form SB-2 (Registration No.
33-71314-NY)
** Incorporated by reference to the exhibit of corresponding number filed with
the Company's Registration Statement on Form S-1 (Registration No.
333-6457)
II-1
<PAGE>
Item 17. Undertakings.
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to include any
material information with respect to the plan of distribution not
previously disclosed in the Registration Statement or any material
change of such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment 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.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(4) 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.
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 its Certificate of Incorporation, its
By-Laws, the Delaware General Corporation Law, 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 of 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.
II-2
<PAGE>
POWER OF ATTORNEY TO SIGN AMENDMENTS
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below does hereby constitute and appoint James F. Slattery and Ira M. Cotler,
and each of them, with full power to act without the other, his true and lawful
attorney-in-fact and agent for him and in his name, place and stead, in any and
all capacities, to sign any or all amendments to this Registration Statement and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same as fully, to all intents
and purposes, as they or he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereof.
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 Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Sarasota, State of Florida, on the 20th day of
November 1996.
CORRECTIONAL SERVICES CORPORATION
By: /s/ James F. Slattery
---------------------------------
James F. Slattery
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ James F. Slattery President (Principal Executive November 20, 1996
- -------------------------- Officer) and Director
James F. Slattery
/s/ Aaron Speisman Vice President, Secretary and November 20, 1996
- -------------------------- Director
Aaron Speisman
/s/ Lee Levinson Chief Financial Officer November 20, 1996
- -------------------------- (Principal Financial and
Lee Levinson Accounting Officer)
/s/ Raymond S. Evans Director November 20, 1996
- ------------------------
Raymond S. Evans
/s/ Shimmie Horn Director November 20, 1996
- ------------------------
Shimmie Horn
II-3
<PAGE>
Signature Title Date
--------- ----- ----
/s/ Stuart M. Gerson Director November 20, 1996
- ------------------------
Stuart M. Gerson
/s/ Melvin T. Stith Director November 20, 1996
- ------------------------
Melvin T. Stith
/s/ Richard P. Staley Director November 20, 1996
- ------------------------
Richard P. Staley
II-4
<PAGE>
Exhibit Index
-------------
*4.2 - Form of IPO Warrant.
**4.5 - Form of Placement Warrant.
5 - Opinion by Epstein Becker & Green, P.C.
23.1 - Consent of Grant Thornton LLP.
23.2 - Consent of Epstein Becker & Green, P.C. (included in Exhibit 5).
24 - Power of attorney (included as part of Signature Page).
- ----------
* Incorporated by reference to the exhibit of corresponding number filed
with the Company's Registration Statement on Form SB-2 (Registration No.
33-71314-NY)
** Incorporated by reference to the exhibit of corresponding number filed
with the Company's Registration Statement on Form S-1 (Registration No.
333-6457)
(212) 351-4735
November 18, 1996
Correctional Services Corporation
Suite 1000
1819 Main Street
Sarasota, Florida 34236
Gentlemen:
We have acted as counsel to Correctional Services Corporation (the
"Company") in connection with its filing of a registration statement on Form S-3
(which registration statement, as amended at the time of its effectiveness is
hereinafter called the "Registration Statement") covering an aggregate of
169,054 warrants (the "Warrants"), each Warrant entitling the holder thereof to
purchase one share of the Company's common stock, $.01 par value (the "Common
Stock") and the 169,054 shares of Common Stock issuable upon exercise of the
Warrants (the "Shares").
As such counsel, we have examined original copies, or copies certified to
our satisfaction, of the corporate records of the Company, agreements and other
instruments, certificates of public officials and such other documents as we
deemed necessary as a basis for the opinion hereinafter set forth.
On the basis of the foregoing, we are of the opinion that:
<PAGE>
Correctional Services Corporation
November 18, 1996
Page 2
(i) the Warrants constitute legal, valid and binding obligations of
the Company; and
(ii) the Shares have been validly authorized and upon issuance and
payment therefor in accordance with the terms of the Warrants,
will be legally issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and the reference made to us under the caption "Legal
Matters" in the prospectus constituting part of such Registration Statement.
Very truly yours,
EPSTEIN BECKER & GREEN, P.C.
By: /s/ Sidney Todres
---------------------------------
Sidney Todres
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
We have issued our report dated March 1, 1996 (except for Notes L-1 and L-2, as
to which the dates are August 13, 1996 and March 6, 1996, respectively)
accompanying the consolidated financial statements of Correctional Services
Corporation and Subsidiaries included in the Annual Report on Form 10-KSB for
the year ended December 31, 1995, which is incorporated by reference in this
Registration Statement. We consent to the incorporation by reference in the
Registration Statement of the aforementioned report and to the use of our name
as it appears under the caption "Experts."
/S/ GRANT THORNTON LLP
New York, New York
November 19, 1996
