Form of Exchange Agent Agreement

EXHIBIT 10.113


FORM OF
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EXCHANGE AGENT AGREEMENT
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February ____, 1999


American Stock Transfer & Trust Company 40 Wall Street New York, New York 10005


Ladies and Gentlemen:


At the effective time (the "Effective Time") of the merger (the "Merger") of Palm Merger Corp. ("Merger Sub"), a wholly owned subsidiary of Correctional Services Corporation ("CSC"), with and into Youth Services International, Inc. ("YSI") pursuant to the Agreement and Plan of Merger dated as of September 23, 1998, as amended (the "Merger Agreement"), among CSC, YSI and Merger Sub, a copy of which has been previously furnished to you, each issued and outstanding share of common stock, par value $.01 per share, of YSI ("YSI Common Stock"), will be converted into the right to receive 0.375 shares of common stock, par value $.01 per share, of CSC ("CSC Common Stock") and cash (without interest) in lieu of fractional shares based on the average closing price of CSC Common Stock for the twenty trading days immediately preceding the day of the Effective Time. You will be notified of the Effective Time by no later than the first business day following the Effective Time.


YSI has delivered or will deliver to you a copy of the letter of transmittal (the "Letter of Transmittal") to be sent to holders of record of shares of YSI Common Stock ("YSI Stockholders"), (ii) copies of all other documents or materials, if any, to be forwarded to YSI Stockholders, (iii) a certified copy of resolutions adopted by the Board of Directors of YSI authorizing the Merger, (iv) a list showing the names and addresses of all YSI Stockholders as of the Effective Time and the number of shares of YSI Common Stock held by each YSI Stockholder immediately prior to the Effective Time and (v) a list of certificates (including certificate numbers) representing shares of YSI Common Stock that have been or are, as of such date, lost, stolen, destroyed or replaced or restricted as to transfer (noting the text of the restrictive legends applicable thereto) or with respect to which a stop transfer order has been noted (such lists being herein referred to as the "Lists").


As soon as practicable after the Effective Time, you (in your capacity as the Exchange Agent, defined below) will mail to each YSI Stockholder (a) a notice advising such holder of the effectiveness of the Merger and the applicable terms of the exchange effected thereby, (b) a Letter of Transmittal with instructions, (c) a self-addressed return envelope, (d) tax certification guidelines and (e) any other material deemed appropriate by YSI and CSC.


This will confirm the appointment by YSI and CSC of American Stock Transfer & Trust Company as the exchange agent (the "Exchange Agent") provided for in the Merger


Agreement and, in that capacity, the authorization of the Exchange Agent to act as agent for YSI Stockholders for the purpose of receiving from CSC the CSC Common Stock and cash to be issued in exchange for shares of YSI Common Stock and transmitting the same to the YSI Stockholders upon satisfaction of the conditions set forth herein. Your duties, liabilities and rights as Exchange Agent are as set forth herein and will be governed, in addition, by the applicable terms of the Merger Agreement.


In carrying out your duties as Exchange Agent, you are to act in accordance with the following:


1. Examination of Letter of Transmittal.
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You are to examine Letters of Transmittal, certificates representing shares of YSI Common Stock and other documents delivered or mailed to you by or for YSI stockholders to ascertain, to the extent reasonably determined by you, whether:


(a) the Letters of Transmittal appear to be duly executed and properly completed in accordance with the instructions set forth therein;


(b) the certificates for shares of YSI Common Stock appear to be properly surrendered and, if applicable, endorsed for transfer;


(c) the other documents, if any, used in the exchange appear to be duly executed and properly completed and in the proper form; and


(d) the certificates for shares of YSI Common Stock are free of restrictions on transfer or stop orders except as set forth on the Lists.


In the event you ascertain that any Letter of Transmittal or other document has been improperly completed or executed, that any of the certificates for shares of YSI Common Stock are not in proper form or some other irregularity exists, you shall attempt to resolve promptly the irregularity and may use your best efforts to contact the appropriate YSI Stockholder by whatever means of communication you deem most expedient to correct the irregularity and, upon consultation with CSC, shall endeavor to take such other reasonable action as may be necessary to cause such irregularity to be corrected, and the determination of any questions referred to CSC or its counsel by you as to the validity, form and eligibility, as well as the proper completion or execution of the Letters of Transmittal and other documents, shall be final and binding and you may rely thereon as provided in Section 12(a) hereof. Any costs of contacting YSI Stockholders reasonably incurred for the purpose of correcting irregularities shall be incurred for the account of CSC.


2. Exchange of Shares.
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As soon as practicable after the Effective Time and after surrender to you of all certificates for shares of YSI Common Stock registered to a particular record holder or holders (and only after surrender of all such
---- certificates) and the return of a properly completed and


2


signed Letter of Transmittal relating thereto, you shall cause to be issued and distributed to the holder(s) in whose name such certificates were registered (or such other person as shall have been specified pursuant to the terms hereof) (i) the whole number of shares of CSC Common Stock issuable pursuant to the Merger Agreement, registered in the name of such holder(s) and (ii) a check in lieu of any fractional share (the "Cash Amount"). CSC shall provide you the amount of cash sufficient to make all payments for fractional shares.


Until so surrendered, each certificate which immediately prior to the Effective Time represented outstanding shares of YSI Common Stock shall, at and after the Effective Time, entitle the holder(s) thereof only to receive, upon surrender of it and all other identically registered certificates, the certificates representing shares of CSC Common Stock and the Cash Amount contemplated by the preceding paragraph.


No dividends or other distributions otherwise payable after the Effective Time to a holder of record of certificates representing shares of CSC Common Stock shall be paid to such holder unless and until such holder shall have surrendered all certificates representing shares of YSI Common Stock registered to such holder. The Exchange Agent shall hold any such dividends or other distributions not paid to such holders pursuant to the requirements of the foregoing sentence and shall (subject to applicable escheat laws) pay such dividends and distributions to each holder of record entitled thereto after such holder shall have surrendered all certificates for shares of YSI Common Stock registered to such holder. No interest shall be payable to such holders on dividends or distributions held by the Exchange Agent.


If any certificates representing shares of CSC Common Stock are to be issued in, or a Cash Amount is to be paid to, a name other than that in which the certificate for shares of YSI Comm ...