As filed with the Securities and Exchange Commission on December 22, 2009

Registration Statement No. [•]

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form S-4

 

 

REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933

 

The GEO Group, Inc.

(Exact name of registrant as specified in its charter)

 

 

*and the Subsidiary Guarantors listed on Schedule A hereto

(Exact name of registrants as specified in their charters)

 

 

Copy to:

 

Jose Gordo, Esq.

Akerman Senterfitt

One S.E. Third Avenue, 25th Floor

Miami, Florida 33131

(305) 374-5600

Facsimile: (305) 374-5095

 

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this Registration Statement becomes effective.

 

 

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, please check the following box.  o

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) 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.  o

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) 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.  o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

 

CALCULATION OF REGISTRATION FEE

 

 

 

Each Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until each 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.

 

 

Schedule A — Table of Subsidiary Guarantors

 

 

 

 

SUBJECT TO COMPLETION DATED DECEMBER 22, 2009

 

Prospectus

 

$250,000,000

 

 

Offer to Exchange
Up to $250,000,000 aggregate principal amount
of our 73/4% Senior Notes Due 2017
(which we refer to as the new notes)
and the guaranties thereof which have been registered
under the Securities Act of 1933, as amended,
for a like amount of our outstanding
73/4% Senior Notes Due 2017
(which we refer to as the old notes)
and the guaranties thereof.

 

 

The New Notes:

 

 

Terms of the Exchange Offer:

 

 

Investing in the notes involves risks. See “Risk Factors,” beginning on page [•].

 

 

Neither the Securities and Exchange Commission nor any other federal or state securities commission has approved or disapproved of the notes or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

 

 

The date of this prospectus is [    l    ], 2009.

 

TABLE OF CONTENTS

 

 

 

This prospectus incorporates important business and financial information about us that is not included in or delivered with this prospectus. This information is available without charge to security holders upon written or oral request to The GEO Group, Inc., 621 NW 53rd Street, Suite 700, Boca Raton, Florida 33487, Attention: Investor Relations, Telephone: (561) 893-0101.

 

In order to obtain timely delivery, you must request the information no later than [    l    ], 2009, which is five business days before the expiration of the exchange offer.

 

Each broker-dealer that receives new notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of the new notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act of 1933, as amended, or the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of new notes received in exchange for old notes where the old notes were acquired by the broker-dealer as a result of market-making activities or other trading activities. We have agreed that, for a period of 180 days after the consummation of the exchange offer, we will make this prospectus available to any broker-dealer for use in connection with any such resale. See “Plan of Distribution.”

 

Neither the Securities and Exchange Commission nor any other federal or state securities commission has approved or disapproved of the notes or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

The prospectus and the documents incorporated by reference herein contain “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. “Forward-looking statements” are any statements that are not based on historical information. Statements other than statements of historical facts included in this prospectus, including, without limitation, statements regarding our future financial position and results of operations, business strategy, budgets, projected costs and plans and objectives of management for future operations, are “forward-looking statements.” Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may, “will,” “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate” or “continue” or the negative of such words or variations of such words and similar expressions. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements and we can give no assurance that such forward-looking statements will prove to be correct. Important factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements, or “cautionary statements,” include, but are not limited to:

 

 

 

SUMMARY

Issuer		The GEO Group, Inc.
Notes Offered		$250,000,000 aggregate principal amount of 73/4% Senior Notes due 2017.
Maturity Date		October 15, 2017.
Interest Payment Dates		April 15 and October 15, commencing April 15, 2010.
Subsidiary Guarantees		On the issue date, each of our restricted subsidiaries that guarantees our senior credit facility will guarantee the notes. The notes may be guaranteed by additional subsidiaries in the future under certain circumstances. See “Description of the Notes — Certain Covenants — Additional Note Guarantees.” GEO and the initial guarantors generated approximately 80.9% of our consolidated revenues and 88.8% of our consolidated EBITDA for the fifty-two weeks ended September 27, 2009 and held approximately 81.1% of our consolidated assets as of September 27, 2009.
Ranking		The new notes and the guarantees will be unsecured, unsubordinated obligations of The GEO Group, Inc. and the guarantors and will rank:
		• pari passu with any unsecured, unsubordinated indebtedness of GEO and the guarantors;
		• senior to any future indebtedness of GEO and the guarantors that is expressly subordinated to the notes and the guarantees;
		• effectively junior to any secured indebtedness of GEO and the guarantors, including indebtedness under our senior credit facility, to the extent of the value of the assets securing such indebtedness; and
		• effectively junior to all obligations of our subsidiaries that are not guarantors.
Optional Redemption		On or after October 15, 2013, we may redeem some or all of the notes at any time at the redemption prices specified under “Description of Notes — Optional Redemption.”
		Before October 15, 2013, we may redeem some or all of the notes at a redemption price equal to 100% of the principal amount of each note to be redeemed plus a make-whole premium described under “Description of Notes — Optional Redemption” together with accrued and unpaid interest.
		In addition, at any time prior to October 15, 2012, we may redeem up to 35% of the notes with the net cash proceeds from specified equity offerings at a redemption price equal to 107.750% of the principal amount of each note to be redeemed, plus accrued and unpaid interest, if any, to the date of redemption.

Change of Control		Upon a change of control (as defined in “Description of Notes — Certain Definitions”), we must offer to repurchase the notes at 101% of the principal amount, plus accrued interest to the purchase date.
Certain Covenants		The indenture governing the notes will contain certain covenants, including limitations and restrictions on our and our restricted subsidiaries’ ability to:
		• incur additional indebtedness or issue preferred stock;
		• make dividend payments or other restricted payments;
		• create liens;
		• sell assets;
		• enter into transactions with affiliates; and
		• enter into mergers, consolidations, or sales of all or substantially all of our assets.
		As of the date of the indenture, all of our subsidiaries, other than CSC of Tacoma, LLC, GEO International Holdings, Inc., certain dormant domestic subsidiaries and all foreign subsidiaries in existence on the date of the indenture, will be restricted subsidiaries. Our unrestricted subsidiaries will not be subject to any of the restrictive covenants in the indenture. The restrictive covenants set forth in the indenture are subject to important exceptions and qualifications. In addition, most of the covenants will be suspended while the notes are rated investment grade by Moody’s Investment Services, Inc. or Standard & Poor’s Rating Services. See “Description of Notes — Certain Covenants.”
Risk Factors		Potential investors in the notes should carefully consider the matters set forth under the caption “Risk Factors” prior to making an investment decision with respect to the notes.

The Exchange Offer		We are offering to exchange new notes for old notes.
Expiration Date		The exchange offer will expire at 5:00 p.m., New York City time, on [•], 2009, unless extended.
Condition to the Exchange Offer		The registration rights agreement does not require us to accept old notes for exchange if the exchange offer or the making of any exchange by a holder of the old notes would violate any applicable law or interpretation of the staff of the Securities and Exchange Commission. A minimum aggregate principal amount of old notes being tendered is not a condition to the exchange offer.
Procedures for Tendering Old Notes		To participate in the exchange offer, you must complete, sign and date the letter of transmittal, or a facsimile of the letter of transmittal, and transmit it together with all other documents required in the letter of transmittal, including the old notes that you wish to exchange, to Wells Fargo Bank, N.A., as exchange agent, at the address indicated on the cover page of the letter of transmittal. In the alternative, you can tender your old notes by following the procedures for book-entry transfer described in this prospectus.
		If your old notes are held through The Depository Trust Company and you wish to participate in the exchange offer, you may do so through the automated tender offer program of The Depository Trust Company. If you tender under this program, you will agree to be bound by the letter of transmittal that we are providing with this prospectus as though you had signed the letter of transmittal.
		If a broker, dealer, commercial bank, trust company or other nominee is the registered holder of your old notes, we urge you to contact that person promptly to tender your old notes in the exchange offer.
		For more information on tendering your old notes, please refer to the sections in this prospectus entitled “Exchange Offer — Terms of the Exchange Offer,” “— Procedures for Tendering” and “— Book-Entry Transfer.”
Guaranteed Delivery Procedures		If you wish to tender your old notes and you cannot get your required documents to the exchange agent on time, you may tender your old notes according to the guaranteed delivery procedures described in “Exchange Offer — Guaranteed Delivery Procedures.”
Withdrawal of Tenders		You may withdraw your tender of old notes under the exchange offer at any time prior to the expiration date. To withdraw, you must have delivered a written or facsimile transmission notice of withdrawal to the exchange agent at its address indicated on the cover page of the letter of transmittal before 5:00 p.m. New York City time on the expiration date of the exchange offer.

Acceptance of Old Notes and Delivery of New Notes		If you fulfill all conditions required for proper acceptance of old notes, we will accept any and all old notes that you properly tender in the exchange offer on or before 5:00 p.m. New York City time on the expiration date. We will return any old notes that we do not accept for exchange to you without expense promptly after the expiration date. We will deliver the new notes promptly after the expiration date and acceptance of the old notes for exchange. Please refer to the section in this prospectus entitled “Exchange Offer — Terms of the Exchange Offer.”
Fees and Expenses		We will bear all expenses related to the exchange offer. Please refer to the section in this prospectus entitled “Exchange Offer — Fees and Expenses.”
Use of Proceeds		We will not receive any proceeds from the issuance of the new notes. We are making this exchange offer solely to satisfy our obligations under our registration rights agreement.
Appraisal Rights		Holders of old notes will not have dissenters rights or appraisal rights in connection with the exchange offer.
Resale of New Notes		Based on an interpretation by the Commission set forth in no-action letters issued to third parties, we believe that you may resell or otherwise transfer new notes issued in the exchange offer in exchange for old notes without restrictions under the federal securities laws if:
		• you are not our “affiliate”;
		• you acquire the new notes in the ordinary course of your business; and
		• you do not intend to participate in a distribution of the new notes.
		If you tender in the exchange offer with the intention of participating in any manner in a distribution of the new notes, you
		• cannot rely on such interpretations by the staff of the Commission; and
		• must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction.
		Only broker-dealers that acquired the old notes as a result of market-making activities or other trading activities may participate in the exchange offer. Each broker-dealer that receives new notes for its own account in exchange for old notes, where such old notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must deliver a prospectus in connection with any resale of the new notes.
Consequences of Failure to Exchange Old Notes		If you do not exchange your old notes in the exchange offer, you will no longer be able to require us to register the old notes under the Securities Act of 1933, except in the limited circumstances provided under our registration rights agreement. In addition, you will

		not be able to resell, offer to resell or otherwise transfer the old notes unless we have registered the old notes under the Securities Act of 1933, or unless you resell, offer to resell or otherwise transfer them under an exemption from the registration requirements of, or in a transaction not subject to, the Securities Act of 1933.
U.S. Federal Income Tax Considerations		The exchange of the new notes for the old notes in the exchange offer should not be taxable events for U.S. federal income tax purposes. Please read “Material U.S. Federal Income Tax Considerations.”
Exchange Agent		We have appointed Wells Fargo Bank, N.A., as exchange agent for the exchange offer. You should direct questions and requests for assistance, requests for additional copies of this prospectus or the letter of transmittal and requests for the notice of guaranteed delivery to the exchange agent addressed as follows: [•]. Eligible institutions may make requests by facsimile at [•].

																						Thirty-nine Weeks								Fifty-two Weeks
		Fiscal Year Ended																				Ended								Ended
		2004				2005				2006				2007				2008				9/28/2008				9/27/2009				9/27/2009
Consolidated Statement of Operations:
Revenues		$	565.5			$	580.4			$	818.4			$	976.3			$	1,043.0			$	786.5			$	830.3			$	1,086.8
Operating costs and expenses
Operating expenses			469.0				510.1				680.0				788.5				822.7				628.3				655.6				850.0
Depreciation and amortization			13.8				15.6				21.7				33.2				37.4				27.5				29.1				39.0
General and administrative expenses			45.9				49.0				56.3				64.5				69.1				51.8				49.9				67.2
Total operating costs and expenses		$	528.7			$	574.7			$	758.0			$	886.2			$	929.2			$	707.6			$	734.6			$	956.2
Operating income			36.8				5.7				60.4				90.1				113.8				78.9				95.7				130.6
Interest income			9.5				9.1				10.7				8.7				7.0				5.6				3.5				4.9
Interest expense(1)			(22.1	)			(23.0	)			(28.2	)			(36.1	)			(30.2	)			(21.7	)			(20.5	)			(29.0	)
Write-off of deferred financing fees from extinguishment of debt			(0.3	)			(1.3	)			(1.3	)			(4.8	)			0.0				0.0				0.0				0.0
Income before income taxes		$	23.9			$	(9.5	)		$	41.6			$	57.9			$	90.6			$	62.8			$	78.7			$	106.5
Provision for income taxes			7.4				(12.6	)			15.1				22.0				33.8				23.6				30.3				40.5
Equity in earnings of affiliates, net of income tax			0.0				2.1				1.5				2.2				4.6				2.0				2.4				5.0
Income from continuing operations			16.5				5.2				28.0				38.1				61.4				41.2				50.8				71.0
Income (loss) from discontinued operations, net of tax			0.3				1.8				2.0				3.7				(2.5	)			1.3				(0.3	)			(4.1	)
Net income		$	16.8			$	7.0			$	30.0			$	41.8			$	58.9			$	42.5			$	50.5			$	66.9

																						Thirty-nine Weeks								Fifty-two Weeks
		Fiscal Year Ended																				Ended								Ended
		2004				2005				2006				2007				2008				9/28/2008				9/27/2009				9/27/2009
Selected Business Segment Data:
Revenues:
U.S. corrections		$	427.5			$	441.0			$	574.1			$	629.3			$	711.0			$	520.0			$	576.6			$	767.6
International services			91.0				98.8				103.1				128.0				128.7				102.9				92.2				118.0
GEO Care			31.7				32.4				67.0				110.2				117.4				89.1				84.2				112.5
Facility construction and design			15.3				8.2				74.2				108.8				85.9				74.5				77.3				88.7
Total revenues		$	565.5			$	580.4			$	818.4			$	976.3			$	1,043.0			$	786.5			$	830.3			$	1,086.8
Operating income (loss):
U.S. Corrections		$	69.3			$	43.0			$	103.6			$	134.3			$	160.1			$	113.2			$	130.8			$	177.7
International services			12.4				9.5				8.4				10.4				10.1				7.9				5.6				7.8
GEO Care			0.6				2.3				5.2				10.1				12.4				9.3				9.0				12.1
Facility construction and design			0.3				(0.1	)			(0.5	)			(0.2	)			0.3				0.3				0.2				0.2
Unallocated G&A expenses			45.8				49.0				56.3				64.5				69.1				51.8				49.9				67.2
Total operating income		$	36.8			$	5.7			$	60.4			$	90.1			$	113.8			$	78.9			$	95.7			$	130.6
Selected Balance Sheet Data (at period end):
Cash and cash equivalents (unrestricted)		$	92.0			$	57.1			$	111.5			$	44.4			$	31.7			$	26.6			$	24.3			$	24.3
Restricted cash			3.9				26.4				33.7				34.1				32.7				34.0				35.0				35.0
Accounts receivable, net			85.0				120.3				152.0				164.8				199.7				187.6				224.6				224.6
Property, plant and equipment, net			190.8				280.0				285.4				783.4				878.6				852.2				969.2				969.2
Total assets			480.3				639.5				743.5				1,192.6				1,288.6				1,253.6				1,401.1				1,401.1
Total debt			242.9				376.0				306.0				463.9				512.1				494.2				544.8				544.8
Total Shareholders’ equity			100.9				110.4				249.9				529.3				579.6				572.6				642.0				642.0
Other Financial Data:
Net cash provided by operating activities		$	45.5			$	34.8			$	46.0			$	78.9			$	71.3			$	49.2			$	79.3			$	101.4
Net cash provided by (used in) investing activities			42.1				(93.0	)			(16.9	)			(518.9	)			(131.6	)			(97.8	)			(115.1	)			(148.9	)
Net cash provided by (used in) financing activities			(47.1	)			24.6				21.7				372.3				53.7				31.3				24.2				46.6
Capital expenditures			10.2				31.5				43.2				115.2				131.0				98.8				113.7				145.9
Depreciation and amortization expense			13.8				15.6				21.7				33.2				37.4				27.5				29.1				39.0
EBITDA(2)			50.6				23.9				84.3				124.4				153.3				109.7				126.9				170.5
Total debt(3)			242.9				376.0				306.0				463.9				512.1				494.2				544.8				544.8
Total net debt(4)			150.9				318.9				194.5				419.5				480.4				467.6				520.5				520.5
Selected Financial Ratios:
Ratio of earnings to fixed charges(5)			1.7	x			0.8	x			1.9	x			2.1	x			3.0	x			2.9	x			3.6	x			3.6	x
Ratio of total debt to EBITDA(2),(3)			4.8	x			15.7	x			3.6	x			3.7	x			3.3	x			—				—				3.2	x
Ratio of net debt to EBITDA(2),(4)			3.0	x			13.3	x			2.3	x			3.4	x			3.1	x			—				—				3.1	x
Ratio of EBITDA to interest expense			2.3	x			1.0	x			3.0	x			3.4	x			5.1	x			5.1	x			6.2	x			5.9x
Selected Pro Forma Financial Data:
Cash and cash equivalents (unrestricted)																														$	24.3
Pro forma total debt(6)																														$	558.5
Pro forma net debt(7)																														$	534.2
Ratio of total debt to EBITDA																															3.3	x
Ratio of net debt to EBITDA																															3.1	x

																						Thirty-nine Weeks								Fifty-two Weeks
		Fiscal Year Ended																				Ended								Ended
		2004				2005				2006				2007				2008				9/28/2008				9/27/2009				9/27/2009
Selected Business Segment Operational Data:
Compensated Mandays (in millions)(8)
U.S. corrections			8.8				8.8				11.5				12.5				13.3				9.8				10.7				14.2
International services			2.0				2.0				2.0				2.0				2.1				1.6				1.6				2.1
GEO Care			0.1				0.1				0.3				0.5				0.5				0.4				0.4				0.5
Total Compensated Mandays			10.9				10.9				13.8				15.0				15.9				11.8				12.7				16.8
Revenue Producing Beds (in thousands) (end of period)(9)
U.S. corrections			24.0				31.6				35.9				36.3				42.1				39.6				42.1				42.1
International services			5.4				5.4				5.6				5.8				5.8				5.8				6.0				6.0
GEO Care			0.3				0.5				1.2				1.5				1.5				1.5				1.5				1.5
Total Revenue Producing Beds			29.7				37.5				42.7				43.6				49.4				46.9				49.6				49.6
Average Occupancy(10)
U.S. corrections			99.1	%			97.5	%			97.0	%			96.1	%			95.7	%			95.9	%			94.0	%			94.2	%
International services			100.0	%			100.0	%			100.0	%			100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
GEO Care			100.0	%			99.7	%			100.0	%			100.0	%			100.0	%			100.0	%			96.7	%			97.5	%
Total Average Occupancy			99.3	%			98.0	%			97.5	%			96.7	%			96.4	%			96.6	%			94.8	%			95.0	%
Operational Data:
Facilities in operation (end of period)			39				53				56				57				59				57				58				58
Design capacity of facilities (in thousands)(11)			33.1				42.1				46.5				47.9				53.4				50.3				53.4				53.4

(1)		Interest expense excludes the following capitalized interest amounts for the periods presented (in millions):

														Fifty-two Weeks
Fiscal Year Ended										Thirty-nine Weeks Ended				Ended
January 2,		January 1,		December 31,		December 30,		December 28,		September 28,		September 27,		September 27,
2005		2006		2006		2007		2008		2008		2009		2009
—		—		$0.2		$2.9		$4.3		$4.0		$3.0		$3.4

(2)		We define EBITDA as income before interest expense, interest income, income tax provision and depreciation and amortization expense. We use EBITDA to monitor and evaluate our operating performance and to facilitate internal and external comparisons of the historical operating performance of our business. However, other companies may calculate differently than we do. EBITDA is not a measure of performance under GAAP, and it should not be considered as an alternative to cash flow from operating activities as a measure of liquidity or as alternatives to net income as an indicator of our operating performance or any other measure of performance derived in accordance with GAAP. This data should be read in conjunction with our consolidated financial statements and related notes incorporated by reference in this prospectus. A reconciliation of EBITDA to net income computed in accordance with GAAP is as follows:

																														Fifty-two Weeks
		Fiscal Year Ended																				Thirty-nine Weeks Ended								Ended
		January 2,				January 1,				December 31,				December 30,				December 28,				September 28,				September 27,				September 27,
		2005				2006				2006				2007				2008				2008				2009				2009
Net income		$	16.8			$	7.0			$	30.0			$	41.8			$	58.9			$	42.5			$	50.5			$	66.9
Add (subtract)
Income tax provision		$	7.4			$	(12.6	)		$	15.1			$	22.0			$	33.8			$	23.6			$	30.3			$	40.5
Interest income			(9.5	)			(9.1	)			(10.7	)			(8.7	)			(7.0	)			(5.6	)			(3.5	)			(4.9	)
Interest expense			22.1				23.0				28.2				36.1				30.2				21.7				20.5				29.0
Depreciation and amortization expense			13.8				15.6				21.7				33.2				37.4				27.5				29.1				39.0
EBITDA(a)		$	50.6			$	23.9			$	84.3			$	124.4			$	153.3			$	109.7			$	126.9			$	170.5

		EBITDA includes the operating results of the entities for which there is principal and interest associated with non-recourse debt. In calculating EBITDA, all consolidated interest expense, including interest expense related to non-recourse debt, is added back.
		EBITDA has important limitations as an analytical tool. These limitations include the following:

	•	it does not reflect our capital expenditures, future requirements for capital expenditures or contractual commitments;
	•	it does not reflect the interest expense or the cash requirements necessary to service principal or interest payments on our debt;
	•	although depreciation and amortization are non-cash charges, the assets that we currently depreciate and amortize will likely have to be replaced in the future, and EBITDA does not reflect the cash required to fund such replacements; and
	•	it does not reflect the effect on earnings of charges resulting from matters that our management does not consider to be indicative of our ongoing operations. However, some of these charges have recurred and may re-occur in the future.

(3)		Total debt consists of our total consolidated indebtedness, including the current portion and our non-recourse debt.
		Our non-recourse debt at the end of each of the periods presented is as follows:

														Fifty-two Weeks
Fiscal Year Ended										Thirty-nine Weeks Ended				Ended
January 2,		January 1,		December 31,		December 30,		December 28,		September 28,		September 27,		September 27,
2005		2006		2006		2007		2008		2008		2009		2009
$44.9		$138.0		$143.6		$138.0		$114.2		$128.6		$117.2		$117.2

(4)		Total net debt consists of our total debt as discussed in note (3) above, offset by cash and cash equivalents held at each respective period end. Total net debt is not a measure presented under accounting principles generally accepted in the United States, or GAAP, and may not be comparable to similarly titled measures used by other companies and should be considered in addition to, but not as a substitute for, the information contained in our balance sheets.

(5)		For purposes of calculating the ratio of earnings to fixed charges, earnings consists of income before income taxes and equity in earnings of affiliates plus fixed charges, excluding capitalized interest, and fixed charges consist of interest expense (including the interest element of rental expense), whether expensed or capitalized, and amortization of deferred financing fees.
(6)		Pro forma total debt consists of total debt as discussed in note (3) above, after giving effect to the net proceeds from the offering of the Original Notes and the application of a portion of the proceeds therefrom to purchase our 2013 notes. As of November 20, 2009, all outstanding 2013 notes had been tendered and the remaining net proceeds were used repay a portion of the indebtedness outstanding under our revolving credit facility.
(7)		Pro forma net debt consists of total net debt as discussed in note (4) above, after giving effect to the net proceeds from the offering of the Original Notes and the application of a portion of the proceeds therefrom to purchase our 2013 notes. As of November 20, 2009, all outstanding 2013 notes had been tendered and the remaining net proceeds were used repay a portion of the indebtedness outstanding under our revolving credit facility.
(8)		Compensated mandays are calculated as follows: (a) for per diem rate facilities — the number of beds occupied by residents on a daily basis during the period; and (b) for fixed rate facilities — the design capacity of the facility multiplied by the number of days the facility was in operation during the period.
(9)		Revenue producing beds are available beds under contract, excluding facilities under development, idle facilities and discontinued operations.
(10)		The average occupancy is calculated by taking compensated mandays as a percentage of capacity, excluding mandays and capacity of our idle facilities, facilities under development and discontinued operations.
(11)		Design capacity of facilities is defined as the total available beds, excluding facilities under development, idle facilities and discontinued operations.

 

You should carefully consider the risk factors set forth below, as well as the other information contained in this prospectus, before deciding whether to invest in the notes. Any of these risks could materially adversely affect our business, financial condition, or results of operations. These risks could also cause our actual results to differ materially from those indicated in the forward-looking statements contained herein and elsewhere. The risks described below are not the only risks we face. Additional risks not currently known to us or those we currently deem to be immaterial may also materially and adversely affect our business operations.

 

Risks Related to the Exchange Offer

 

If you fail to follow the exchange offer procedures, your original notes will not be accepted for exchange.

 

We will not accept your old notes for exchange if you do not follow the exchange offer procedures. We will issue new notes as part of this exchange offer only after timely receipt of your old notes, properly completed and duly executed letter of transmittal and all other required documents. Therefore, if you want to tender your old notes, please allow sufficient time to ensure timely delivery. If we do not receive your old notes, letter of transmittal, and all other required documents by the expiration date of the exchange offer, or you do not otherwise comply with the guaranteed delivery procedures for tendering your old notes, we will not accept your old notes for exchange. We are under no duty to give notification of defects or irregularities with respect to the tenders of old notes for exchange. If there are defects or irregularities with respect to your tender of old notes, we will not accept your old notes for exchange unless we decide in our sole discretion to waive such defects or irregularities.

 

If you fail to exchange your original notes for exchange notes, they will continue to be subject to the existing transfer restrictions and you may not be able to sell them.

 

We did not register the old notes, nor do we intend to do so following the exchange offer. Old notes that are not tendered will therefore continue to be subject to the existing transfer restrictions and may be transferred only in limited circumstances under the securities laws. As a result, if you hold old notes after the exchange offer, you may not be able to sell them. To the extent any old notes are tendered and accepted in the exchange offer, the trading market, if any, for the old notes that remain outstanding after the exchange offer may be adversely affected due to a reduction in market liquidity.

 

Because there is no public market for the exchange notes, you may not be able to resell them.

 

The new notes will be registered under the Securities Act but will constitute a new issue of securities with no established trading market, and there can be no assurance as to the liquidity of any trading market that may develop; the ability of holders to sell their new notes; or the price at which the holders will be able to sell their new notes.

 

We understand that certain of the initial purchasers presently intend to make a market in the new notes. However, they are not obligated to do so, and any market-making activity with respect to the new notes may be discontinued at any time without notice. In addition, any market-making activity will be subject to the limits imposed by the Securities Act and the Securities Exchange Act of 1934 and may be limited during the exchange offer or the pendency of an applicable shelf registration statement. There can be no assurance that an active market will exist for the new notes or that any trading market that does develop will be liquid.

 

Risks Related to Our High Level of Indebtedness

 

We are incurring significant indebtedness in connection with substantial ongoing capital expenditures, which may require us to access additional borrowings under the accordion feature of our senior credit facility or refinance our senior secured debt entirely. Such financing may not be available to us on satisfactory terms, or at all.

 

As of September 27, 2009, we were in the process of constructing or expanding four correctional and detention facilities representing 4,870 total beds. We are providing the financing for three of the four facilities,

representing 2,870 beds. Total capital expenditures related to these three projects is expected to be $172.3 million, of which $127.7 million was completed through the thirty-nine weeks ended September 27, 2009 and $44.6 million is expected to be completed through February 2010. We expect to fund our capital expenditures from operating cash flows and additional borrowings under the $240.0 million revolving credit facility. As of September 27, 2009, we had $47.4 million outstanding in letters of credit and $107.0 million in borrowings under the revolving credit facility. Consequently, we had the ability to borrow an additional $85.6 million under our revolving credit facility, subject to our satisfying the relevant borrowing conditions. In addition, we have an ability to borrow $200.0 million under the accordion feature of our senior credit facility, as amended, subject to lender demand and prevailing market conditions. While we believe we currently have adequate borrowing capacity under our senior credit facility to fund all of our committed capital expenditure projects, we will need additional borrowings or financing from other sources in order to complete potential capital expenditures related to new projects. We cannot assure you that such borrowings or financing will be made available to us on satisfactory terms, or at all. In addition, the large capital commitments that these projects will require over the next 9-12 month period may materially strain our liquidity and our borrowing capacity for other purposes. Capital constraints caused by these projects may also cause us to have to entirely refinance our existing indebtedness or incur more indebtedness. Such financing may have terms less favorable than those we currently have in place, or not be available to us at all.

 

Our significant level of indebtedness could adversely affect our financial condition and prevent us from fulfilling our debt service obligations.

 

We have a significant amount of indebtedness. Our total consolidated long-term indebtedness as of September 27, 2009 was $408.6 million, excluding the current portion of $19.2 million and excluding long-term non-recourse debt of $102.4 million and capital lease liability balances of $14.6 million. In addition, as of September 27, 2009, we had $47.4 million outstanding in letters of credit under our revolving credit facility. As a result, as of that date, we would have had the ability to borrow an additional approximately $85.6 million under our revolving credit facility, subject to our satisfying the relevant borrowing conditions under the senior credit facility with respect to the incurrence of additional indebtedness.

 

Our substantial indebtedness could have important consequences. For example, it could:

 

 

If we are unable to meet our debt service obligations, we may need to reduce capital expenditures, restructure or refinance our indebtedness, obtain additional equity financing or sell assets. We may be unable to restructure or refinance our indebtedness, obtain additional equity financing or sell assets on satisfactory terms or at all. In addition, our ability to incur additional indebtedness will be restricted by the terms of our senior credit facility and the indenture governing the notes.

 

Despite current indebtedness levels, we may still incur more indebtedness, which could further exacerbate the risks described above.

 

The terms of the indenture governing the notes and our senior credit facility restrict our ability to incur but do not prohibit us from incurring significant additional indebtedness in the future. As of September 27, 2009, we had had the ability to borrow an additional $85.6 million under our revolving credit facility, subject to our satisfying the relevant borrowing conditions under the senior credit facility. We also have the ability to

increase borrowing capacity by $200.0 million under the accordion feature of our senior credit facility, as amended, subject to lender demand and market conditions. Also, we may refinance all or a portion of our indebtedness, including borrowings under our senior credit facility and/or the notes. The terms of such refinancing may be less restrictive and permit us to incur more indebtedness than we can now. If new indebtedness is added to our and our subsidiaries’ current debt levels, the related risks that we and they now face related to our significant level of indebtedness could intensify.

 

The covenants in the indenture governing the notes and our senior credit facility impose significant operating and financial restrictions which may adversely affect our ability to operate our business.

 

The indenture governing the notes and our senior credit facility impose significant operating and financial restrictions on us and certain of our subsidiaries, which we refer to as restricted subsidiaries. These restrictions limit our ability to, among other things:

 

 

These restrictions could limit our ability to finance our future operations or capital needs, make acquisitions or pursue available business opportunities. In addition, our senior credit facility requires us to maintain specified financial ratios and satisfy certain financial covenants, including maintaining maximum senior secured leverage ratio and total leverage ratios, a minimum interest coverage ratio and a limit on the amount of our annual capital expenditures. Some of these financial ratios become more restrictive over the life of the senior credit facility. We may be required to take action to reduce our indebtedness or to act in a manner contrary to our business objectives to meet these ratios and satisfy these covenants. We could also incur additional indebtedness having even more restrictive covenants. Our failure to comply with any of the covenants under our senior credit facility, the indenture governing the notes or any other indebtedness could prevent us from being able to draw on our revolving credit facility, cause an event of default under such documents and result in an acceleration of all of our outstanding indebtedness. If all of our outstanding indebtedness were to be accelerated, we likely would not be able to simultaneously satisfy all of our obligations under such indebtedness, which would materially adversely affect our financial condition and results of operations.

 

Servicing our indebtedness will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control.

 

Our ability to make payments on our indebtedness and to fund planned capital expenditures will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

Our business may not be able to generate sufficient cash flow from operations or future borrowings may not be available to us under our senior credit facility or otherwise in an amount sufficient to enable us to pay our indebtedness or new debt securities, including the notes, or to fund our other liquidity needs. We may need to refinance all or a portion of our indebtedness on or before maturity. However, we may not be able to complete such refinancing on commercially reasonable terms or at all.

 

Because portions of our senior indebtedness have floating interest rates, a general increase in interest rates will adversely affect cash flows.

 

Borrowings under our senior credit facility bear interest at a variable rate. As a result, to the extent our exposure to increases in interest rates is not eliminated through interest rate protection agreements, such increases will result in higher debt service costs which will adversely affect our cash flows. We do not currently have any interest rate protection agreements in place to protect against interest rate fluctuations related to our senior credit facility. Based on borrowings of $262.9 million outstanding under the senior credit facility as of September 27, 2009, a one percent increase in the interest rate applicable to the senior credit facility, would increase our annual interest expense by $2.6 million.

 

We depend on distributions from our subsidiaries to make payments on our indebtedness. These distributions may not be made.

 

We generate a substantial portion of our revenues from distributions on the equity interests we hold in our subsidiaries. Therefore, our ability to meet our payment obligations on our indebtedness is substantially dependent on the earnings of our subsidiaries and the payment of funds to us by our subsidiaries as dividends, loans, advances or other payments. Our subsidiaries are separate and distinct legal entities and, unless they expressly guarantee any indebtedness of ours, they are not obligated to make payments on such indebtedness nor are any of our subsidiaries obligated to make funds available for payment of any of our indebtedness in the form of loans, distributions or otherwise. Our subsidiaries’ ability to make any such loans, distributions or other payments to us will depend on their earnings, business results, the terms of their existing and any future indebtedness, tax considerations and legal or contractual restrictions to which they may be subject. If our subsidiaries do not make such payments to us, our ability to repay our indebtedness may be materially adversely affected. For the thirty-nine weeks ended September 27, 2009, our subsidiaries accounted for 49.8% of our consolidated revenue and 67.7% of our consolidated EBITDA, and, as of September 27, 2009, our subsidiaries accounted for 65.8% of our total assets.

 

Risks Related to the Notes

 

The notes and the related guarantees are effectively subordinated to our and the subsidiary guarantors’ senior secured indebtedness and the indebtedness of our subsidiaries that do not guarantee the notes.

 

The new notes and the related guarantees are unsecured and therefore will be effectively subordinated to our secured indebtedness, including borrowings under our senior credit facility, to the extent of the value of the assets securing such indebtedness. As of September 27, 2009, borrowings under our senior credit facility were $262.9 million. In addition, the indenture governing the notes will allow us and the subsidiary guarantors to incur a significant amount of additional indebtedness and to secure indebtedness, including any indebtedness incurred under credit facilities. In the event we or the guarantors become the subject of a bankruptcy, liquidation, dissolution, reorganization or similar proceeding, our assets and the assets of the guarantors securing indebtedness could not be used to pay you until after all secured claims against us and the guarantors have been fully paid.

 

In addition, the notes and the related guarantees will be effectively subordinated to all existing and future liabilities of our subsidiaries that do not guarantee the notes, including the trade payables. For the fiscal year ended December 28, 2008 and the thirty-nine weeks ended September 27, 2009, our non-guarantor subsidiaries accounted for 20.6% and 20.5% of our consolidated revenues, respectively, and 14.3% and 11.6% of our consolidated EBITDA, respectively, and, as of December 28, 2008 and September 27, 2009, our non-guarantor subsidiaries accounted for 15.1% and 18.9% of our total consolidated assets, respectively.

There is no public market for the new notes.

 

The new notes are a new issue of securities for which there is currently no trading market. Although the initial purchasers have advised us that they currently intend to make a market in the notes following completion of this offering, they have no obligation to do so and may discontinue such activity at any time without notice. We cannot be sure that an active trading market will develop for the new notes. Moreover, if a market were to develop, the new notes could trade at prices that may be lower than their initial offering price because of many factors, including, but not limited to:

 

 

We may not be able to repurchase the new notes in the event of a change of control because the terms of our indebtedness or lack of funds may prevent us from doing so.

 

Upon a change of control, each holder of the new notes will have the right to require us to repurchase their new notes at 101% of their principal amount, plus accrued and unpaid interest, and, liquidated damages, if any, to the date of repurchase. The terms of the senior credit facility limit our ability to repurchase the new notes in the event of a change of control. Any future agreement governing any of our indebtedness may contain similar restrictions and provisions. Accordingly, it is possible that restrictions in the senior credit facility or other indebtedness that may be incurred in the future will not allow the required repurchase of new notes upon a change of control. Even if such repurchase is permitted by the terms of our then existing indebtedness, we may not have sufficient funds available to satisfy our repurchase obligations.

 

Fraudulent conveyance laws may permit courts to void the subsidiary guarantees of the new notes in specific circumstances, which would interfere with the payment of the subsidiary guarantees.

 

Under the federal bankruptcy laws and comparable provisions of state fraudulent transfer laws, any guarantee made by any of our subsidiaries could be voided, or claims under the guarantee made by any of our subsidiaries could be subordinated to all other obligations of any such subsidiary, if the subsidiary, at the time it incurred the obligations under any guarantee:

 

 

(1) was insolvent or rendered insolvent by reason of that incurrence;

 

(2) was engaged in a business or transaction for which the subsidiary’s remaining assets constituted unreasonably small capital; or

 

(3) intended to incur, or believed that it would incur, debts beyond its ability to pay those debts as they mature.

 

In addition, any payment by that guarantor pursuant to its guarantee could be voided and required to be returned to the guarantor, or to a fund for the benefit of the creditors of the guarantor. In any such case, your right to receive payments in respect of the notes from any such guarantor would be effectively subordinated to all indebtedness and other liabilities of that guarantor.

 

A legal challenge to the obligations under any guarantee on fraudulent conveyance grounds could focus on any benefits received in exchange for the incurrence of those obligations. We believe that each of our subsidiaries making a guarantee received reasonably equivalent value for incurring the guarantee, but a court may disagree with our conclusion or elect to apply a different standard in making its determination.

The measures of insolvency for purposes of the fraudulent transfer laws vary depending on the law applied in the proceeding to determine whether a fraudulent transfer has occurred. Generally, however, an entity would be considered insolvent if:

 

 

We cannot assure you, however, as to what standard a court would apply in making these determinations. If a guarantee of the notes is voided as a fraudulent conveyance or is found to be unenforceable for any other reason, you will not have a claim against the guarantor.

 

Risks Related to Our Business and Industry

 

We are currently using significant capital to build or expand several facilities that we do not have corresponding management contracts with clients to operate. We cannot assure you that such contracts will be obtained.

 

We are currently in the process of building or expanding two facilities that we do not have corresponding management contracts with clients to operate these additional beds. These projects will, upon completion, represent an aggregate of 2,325 potential new beds. We estimate that the total costs for the completion of these projects will be $124.9 million, of which $97.0 million was completed through the thirty-nine weeks ended September 27, 2009, and $27.9 million is expected to be completed through February 2010. We intend to finance these projects using our own funds, including cash on hand, cash flow from operations and borrowings under our senior credit facility. The large capital commitments that these projects will require over the next 9-12 month period may materially strain our liquidity and our borrowing capacity for other purposes. Capital constraints caused by these projects may also cause us to have to refinance our existing indebtedness or incur more indebtedness on terms less favorable than those we currently have in place.

 

In addition, the concurrent development of these various large capital projects exposes us to material risks. For example, we may not complete some or all of the projects on time or on budget, which could cause us to absorb any losses associated with any delays. We do not have management contracts in place for the two projects under development. While we are working diligently with a number of different customers for the use of these remaining beds and believe that the overall demand for bed space in our industry remains strong, we cannot in fact assure you that contracts for the beds will be secured on a timely basis, or at all. Any failure to secure management contracts for these projects could have a material adverse impact on our financial condition, results of operations and/or cash flows.

 

The prevailing negative conditions in the capital markets could prevent us from obtaining financing, which could materially harm our business.

 

Our ability to obtain additional financing is highly dependent on the conditions of the capital markets, among other things. The capital and credit markets have recently been experiencing significant volatility and disruption. The recent downturn in the equity and debt markets, the tightening of the credit markets, the general economic slowdown and other macroeconomic conditions, such as the current global recession could prevent us from raising additional capital or obtaining additional financing on satisfactory terms, or at all. If we need but cannot obtain adequate capital as a result of negative conditions in the capital markets or otherwise, our business, results of operations and financial condition could be materially adversely affected. Additionally, such inability to obtain capital could prevent us from pursuing attractive business development opportunities, including new facility constructions or expansions of existing facilities, and business or asset acquisitions.

We are subject to the loss of our facility management contracts, due to terminations, non-renewals or competitive re-bids, which could adversely affect our results of operations and liquidity, including our ability to secure new facility management contracts from other government customers.

 

We are exposed to the risk that we may lose our facility management contracts primarily due to one of three reasons: the termination by a government customer with or without cause at any time; the failure by a customer to exercise its unilateral option to renew a contract with us upon the expiration of the then current term; or our failure to win the right to continue to operate under a contract that has been competitively re-bid in a procurement process upon its termination or expiration. Our facility management contracts typically allow a contracting governmental agency to terminate a contract with or without cause at any time by giving us written notice ranging from 30 to 180 days. If government agencies were to use these provisions to terminate, or renegotiate the terms of their agreements with us, our financial condition and results of operations could be materially adversely affected.

 

Aside from our customers’ unilateral right to terminate our facility management contracts with them at any time for any reason, there are two points during the typical lifecycle of a contract which may result in the loss by us of a facility management contract with our customers. We refer to these points as contract “renewals” and contract “re-bids.” Many of our facility management contracts with our government customers have an initial fixed term and subsequent renewal rights for one or more additional periods at the unilateral option of the customer. We count each government customer’s right to renew a particular facility management contract for an additional period as a separate “renewal.” For example, a five-year initial fixed term contract with customer options to renew for five separate additional one-year periods would, if fully exercised, be counted as five separate renewals, with one renewal coming in each of the five years following the initial term. As of September 27, 2009, three of our facility management contracts representing 462 beds are scheduled to expire on or before December 31, 2009, unless renewed by the customer at its sole option. These contracts represented 2.0% of our consolidated revenues for the thirty-nine weeks ended September 27, 2009. Subsequent to September 27, 2009, two of these contracts representing 240 beds have been renewed. We undertake substantial efforts to renew our facility management contracts. Our historical facility management contract renewal rate exceeds 90%. However, given their unilateral nature, we cannot assure you that our customers will in fact exercise their renewal options under existing contracts. In addition, in connection with contract renewals, either we or the contracting government agency have typically requested changes or adjustments to contractual terms. As a result, contract renewals may be made on terms that are more or less favorable to us than those in existence prior to the renewals.

 

We define competitive re-bids as contracts currently under our management which we believe, based on our experience with the customer and the facility involved, will be re-bid to us and other potential service providers in a competitive procurement process upon the expiration or termination of our contract, assuming all renewal options are exercised. Our determination of which contracts we believe will be competitively re-bid may in some cases be subjective and judgmental, based largely on our knowledge of the dynamics involving a particular contract, the customer and the facility involved. Competitive re-bids may result from the expiration of the term of a contract, including the initial fixed term plus any renewal periods, or the early termination of a contract by a customer. Competitive re-bids are often required by applicable federal or state procurement laws periodically in order to further competitive pricing and other terms for the government customer. Potential bidders in competitive re-bid situations include us, other private operators and other government entities. As of September 27, 2009, one of our facility management contracts representing 3.2% and $26.7 million of our consolidated revenues for the thirty-nine weeks ended September 27, 2009 was subject to competitive re-bid and we were subsequently awarded the contract in the fourth quarter of 2009. While we are pleased with our historical win rate on competitive re-bids and are committed to continuing to bid competitively on appropriate future competitive re-bid opportunities, we cannot in fact assure you that we will prevail in future re-bid situations. Also, we cannot assure you that any competitive re-bids we win will be on terms more favorable to us than those in existence with respect to the expiring contract.

 

For additional information on facility management contracts that we currently believe will be competitively re-bid during each of the next five years and thereafter, please see “Business — Government Contracts — Terminations, Renewals and Re-bids”. The loss by us of facility management contracts due to

terminations, non-renewals or competitive re-bids could materially adversely affect our financial condition, results of operations and liquidity, including our ability to secure new facility management contracts from other government customers.

 

Our growth depends on our ability to secure contracts to develop and manage new correctional, detention and mental health facilities, the demand for which is outside our control.

 

Our growth is generally dependent upon our ability to obtain new contracts to develop and manage new correctional, detention and mental health facilities, because contracts to manage existing public facilities have not to date typically been offered to private operators. Public sector demand for new privatized facilities in our areas of operation lines may decrease and our potential for growth will depend on a number of factors we cannot control, including overall economic conditions, governmental and public acceptance of the concept of privatization, government budgetary constraints, and the number of facilities available for privatization.

 

In particular, the demand for our correctional and detention facilities and services could be adversely affected by changes in existing criminal or immigration laws, crime rates in jurisdictions in which we operate, the relaxation of criminal or immigration enforcement efforts, leniency in conviction, sentencing or deportation practices, and the decriminalization of certain activities that are currently proscribed by criminal laws or the loosening of immigration laws. For example, any changes with respect to the decriminalization of drugs and controlled substances could affect the number of persons arrested, convicted, sentenced and incarcerated, thereby potentially reducing demand for correctional facilities to house them. Similarly, reductions in crime rates could lead to reductions in arrests, convictions and sentences requiring incarceration at correctional facilities. Immigration reform laws which are currently a focus for legislators and politicians at the federal, state and local level also could materially adversely impact us. Various factors outside our control could adversely impact the growth our GEO Care business, including government customer resistance to the privatization of mental health or residential treatment facilities, and changes to Medicare and Medicaid reimbursement programs.

 

We may not be able to meet state requirements for capital investment or locate land for the development of new facilities, which could adversely affect our results of operations and future growth.

 

Certain jurisdictions, including California, where we have a significant amount of operations, have in the past required successful bidders to make a significant capital investment in connection with the financing of a particular project. If this trend were to continue in the future, we may not be able to obtain sufficient capital resources when needed to compete effectively for facility management contacts. Additionally, our success in obtaining new awards and contracts may depend, in part, upon our ability to locate land that can be leased or acquired under favorable terms. Otherwise desirable locations may be in or near populated areas and, therefore, may generate legal action or other forms of opposition from residents in areas surrounding a proposed site. Our inability to secure financing and desirable locations for new facilities could adversely affect our results of operations and future growth.

 

We depend on a limited number of governmental customers for a significant portion of our revenues. The loss of, or a significant decrease in business from, these customers could seriously harm our financial condition and results of operations.

 

We currently derive, and expect to continue to derive, a significant portion of our revenues from a limited number of governmental agencies. Of our 45 domestic governmental clients, five customers accounted for over 50% of our consolidated revenues for the thirty-nine weeks ended September 27, 2009. Three federal governmental agencies with correctional and detention responsibilities, the Bureau of Prisons, U.S. Immigration and Customs Enforcement, which we refer to as ICE, and the U.S. Marshals Service, accounted for 30.9% of our total consolidated revenues for the thirty-nine weeks ended September 27, 2009 with the Bureau of Prisons accounting for 5.3% of our total consolidated revenues for such period, ICE accounting for 11.7% of our total consolidated revenues for such period, and the U.S. Marshals Service accounting for 13.9% of our total consolidated revenues for such period. Government agencies from the State of Florida and the State of Texas accounted for 16.1% and 4.3% of our total consolidated revenues for the thirty-nine weeks ended

September 27, 2009, respectively. The loss of, or a significant decrease in, business from the Bureau of Prisons, ICE, U.S. Marshals Service, the State of Florida or any other significant customers could seriously harm our financial condition and results of operations. We expect to continue to depend upon these federal and state agencies and a relatively small group of other governmental customers for a significant percentage of our revenues.

 

A decrease in occupancy levels could cause a decrease in revenues and profitability.

 

While a substantial portion of our cost structure is generally fixed, most of our revenues are generated under facility management contracts which provide for per diem payments based upon daily occupancy. Several of these contracts provide minimum revenue guarantees for us, regardless of occupancy levels, up to a specified maximum occupancy percentage. However, many of our contracts have no minimum revenue guarantees and simply provide for a fixed per diem payment for each inmate/detainee/patient actually housed. As a result, with respect to our contracts that have no minimum revenue guarantees and those that guarantee revenues only up to a certain specified occupancy percentage, we are highly dependent upon the governmental agencies with which we have contracts to provide inmates, detainees and patients for our managed facilities. Recently, in the State of California, a three Federal judge panel issued a tentative ruling recommending the early release of inmates over a two to three year period to relieve overcrowding conditions. California has indicated strong opposition to the ruling and has stated it will appeal this ruling to the United States Supreme Court. Under a per diem rate structure, a decrease in our occupancy rates could cause a decrease in revenues and profitability. When combined with relatively fixed costs for operating each facility, regardless of the occupancy level, a material decrease in occupancy levels at one or more of our facilities could have a material adverse effect on our revenues and profitability, and consequently, on our financial condition and results of operations.

 

State budgetary constraints may have a material adverse impact on us.

 

According to the Center on Budget and Policy Priorities, the imbalance between available revenues and the funding needed for services led most states to face budget gaps in fiscal year 2009. The vast majority of states also faced or is facing additional shortfalls in fiscal year 2010. The Center on Budget and Policy Priorities reports that at least 41 states have enacted cuts in major spending areas including health care, services to the elderly and disabled, K-12 education, higher education, and other areas. At September 27, 2009, we had ten state correctional clients: Florida, Mississippi, Louisiana, Virginia, Indiana, Texas, Oklahoma, New Mexico, Arizona, and California. In response to the budget crisis, the State of California issued payment deferrals or promissory notes to pay its vendors, creditors, and employees. During fiscal 2009, we received payment deferrals from the State of California that totaled approximately $7.0 million. Although these deferrals were paid to us in full, if state budgetary constraints persist or intensify, our ten state customers’ ability to pay us may be impaired. Additionally, we may be forced to renegotiate our management contracts with those customers on less favorable terms and our financial condition, results of operations or cash flows could be materially adversely impacted. In addition, budgetary constraints at states that are not our current customers could prevent those states from outsourcing correctional, detention or mental health service opportunities that we otherwise could have pursued.

 

Competition for inmates may adversely affect the profitability of our business.

 

We compete with government entities and other private operators on the basis of cost, quality and range of services offered, experience in managing facilities, and reputation of management and personnel. Barriers to entering the market for the management of correctional and detention facilities may not be sufficient to limit additional competition in our industry. In addition, our government customers may assume the management of a facility currently managed by us upon the termination of the corresponding management contract or, if such customers have capacity at the facilities which they operate, they may take inmates currently housed in our facilities and transfer them to government operated facilities. Since we are paid on a per diem basis with no minimum guaranteed occupancy under many of our contracts, the loss of such inmates and resulting decrease in occupancy could cause a decrease in both our revenues and our profitability.

We are dependent on government appropriations, which may not be made on a timely basis or at all and may be adversely impacted by budgetary constraints at the federal, state and local levels.

 

Our cash flow is subject to the receipt of sufficient funding of and timely payment by contracting governmental entities. If the contracting governmental agency does not receive sufficient appropriations to cover its contractual obligations, it may terminate our contract or delay or reduce payment to us. Any delays in payment, or the termination of a contract, could have a material adverse effect on our cash flow and financial condition, which may make it difficult to satisfy our payment obligations on our indebtedness, including the notes and the senior credit facility, in a timely manner. In addition, as a result of, among other things, recent economic developments, federal, state and local governments have encountered, and may continue to encounter, unusual budgetary constraints. As a result, a number of state and local governments are under pressure to control additional spending or reduce current levels of spending which could limit or eliminate appropriations for the facilities that we operate. Additionally, as a result of these factors, we may be requested in the future to reduce our existing per diem contract rates or forego prospective increases to those rates. Budgetary limitations may also make it more difficult for us to renew our existing contracts on favorable terms or at all. Further, a number of states in which we operate are experiencing significant budget deficits for fiscal year 2009. We cannot assure that these deficits will not result in reductions in per diems, delays in payment for services rendered or unilateral termination of contracts. In 2009, the State of California issued IOUs to vendors providing services to the state. During fiscal 2009, we received IOUs of $7.0 million from the State of California and subsequently received payment for all of these IOUs. However, we cannot assure you that IOUs received in the future will be paid timely or at all.

 

Public resistance to privatization of correctional, detention, mental health and residential facilities could result in our inability to obtain new contracts or the loss of existing contracts, which could have a material adverse effect on our business, financial condition and results of operations.

 

The management and operation of correctional, detention, mental health and residential facilities by private entities has not achieved complete acceptance by either government agencies or the public. Some governmental agencies have limitations on their ability to delegate their traditional management responsibilities for such facilities to private companies and additional legislative changes or prohibitions could occur that further increase these limitations. In addition, the movement toward privatization of such facilities has encountered resistance from groups, such as labor unions, that believe that correctional, detention, mental health and residential facilities should only be operated by governmental agencies. Changes in dominant political parties could also result in significant changes to previously established views of privatization. Increased public resistance to such privatization in any of the markets in which we operate, as a result of these or other factors, could have a material adverse effect on our business, financial condition and results of operations.

 

Our GEO Care business, which has become a material part of our consolidated revenues, poses unique risks not associated with our other businesses.

 

Our wholly-owned subsidiary, GEO Care, Inc., operates our mental health and residential treatment services division. This business primarily involves the delivery of quality care, innovative programming and active patient treatment at privatized state mental health facilities, jails, sexually violent offender facilities and long-term care facilities. GEO Care’s business has increased substantially over the last few years, both in general and as a percentage of our overall business. For the thirty-nine weeks ended September 27, 2009, GEO Care generated approximately $84.2 million in revenues, representing 10.1% of our consolidated revenues from continuing operations. GEO Care’s business poses several material risks unique to the operation of privatized mental health facilities and the delivery of mental health and residential treatment services that do not exist in our core business of correctional and detention facilities management, including, but not limited to, the following:

 

 

 

Adverse publicity may negatively impact our ability to retain existing contracts and obtain new contracts.

 

Any negative publicity about an escape, riot or other disturbance or perceived poor conditions or medical mistreatment at a privately managed facility may result in publicity adverse to us and our industry in general. Any of these occurrences or continued trends may make it more difficult for us to renew existing contracts or to obtain new contracts or could result in the termination of an existing contract or the closure of one or more of our facilities, which could have a material adverse effect on our business.

 

We may incur significant start-up and operating costs on new contracts before receiving related revenues, which may impact our cash flows and not be recouped.

 

When we are awarded a contract to manage a facility, we may incur significant start-up and operating expenses, including the cost of constructing the facility, purchasing equipment and staffing the facility, before we receive any payments under the contract. These expenditures could result in a significant reduction in our cash reserves and may make it more difficult for us to meet other cash obligations, including our payment obligations on the notes and the senior credit facility. In addition, a contract may be terminated prior to its scheduled expiration and as a result we may not recover these expenditures or realize any return on our investment.

 

Failure to comply with extensive government regulation and applicable contractual requirements could have a material adverse effect on our business, financial condition or results of operations.

 

The industry in which we operate is subject to extensive federal, state and local regulation, including educational, environmental, health care and safety laws, rules and regulations, which are administered by many regulatory authorities. Some of the regulations are unique to the corrections industry, and the combination of regulations affects all areas of our operations. Corrections officers and juvenile care workers are customarily required to meet certain training standards and, in some instances, facility personnel are required to be licensed and are subject to background investigations. Certain jurisdictions also require us to award subcontracts on a competitive basis or to subcontract with businesses owned by members of minority groups. We may not always successfully comply with these and other regulations to which we are subject and failure to comply can result in material penalties or the non-renewal or termination of facility management contracts. In addition, changes in existing regulations could require us to substantially modify the manner in which we conduct our business and, therefore, could have a material adverse effect on us.

 

In addition, private prison managers are increasingly subject to government legislation and regulation attempting to restrict the ability of private prison managers to house certain types of inmates, such as inmates from other jurisdictions or inmates at medium or higher security levels. Legislation has been enacted in several states, and has previously been proposed in the United States House of Representatives, containing such restrictions. Although we do not believe that existing legislation will have a material adverse effect on us, future legislation may have such an effect on us.

Governmental agencies may investigate and audit our contracts and, if any improprieties are found, we may be required to refund amounts we have received, to forego anticipated revenues and we may be subject to penalties and sanctions, including prohibitions on our bidding in response to Requests for Proposals, or RFPs, from governmental agencies to manage correctional facilities. Governmental agencies we contract with have the authority to audit and investigate our contracts with them. As part of that process, governmental agencies may review our performance of the contract, our pricing practices, our cost structure and our compliance with applicable laws, regulations and standards. For contracts that actually or effectively provide for certain reimbursement of expenses, if an agency determines that we have improperly allocated costs to a specific contract, we may not be reimbursed for those costs, and we could be required to refund the amount of any such costs that have been reimbursed. If a government audit asserts improper or illegal activities by us, we may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeitures of profits, suspension of payments, fines and suspension or disqualification from doing business with certain governmental entities. Any adverse determination could adversely impact our ability to bid in response to RFPs in one or more jurisdictions.

 

In addition to compliance with applicable laws and regulations, our facility management contracts typically have numerous requirements addressing all aspects of our operations which we may not all be able to satisfy. For example, our contracts require us to maintain certain levels of coverage for general liability, workers’ compensation, vehicle liability, and property loss or damage. If we do not maintain the required categories and levels of coverage, the contracting governmental agency may be permitted to terminate the contract. In addition, we are required under our contracts to indemnify the contracting governmental agency for all claims and costs arising out of our management of facilities and, in some instances, we are required to maintain performance bonds relating to the construction, development and operation of facilities. Facility management contracts also typically include reporting requirements, supervision and on-site monitoring by representatives of the contracting governmental agencies. Failure to properly adhere to the various terms of our customer contracts could expose us to liability for damages relating to any breaches as well as the loss of such contracts, which could materially adversely impact us.

 

We may face community opposition to facility location, which may adversely affect our ability to obtain new contracts.

 

Our success in obtaining new awards and contracts sometimes depends, in part, upon our ability to locate land that can be leased or acquired, on economically favorable terms, by us or other entities working with us in conjunction with our proposal to construct and/or manage a facility. 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. When we select the intended project site, we attempt to conduct business in communities where local leaders and residents generally support the establishment of a privatized correctional or detention facility. Future efforts to find suitable host communities may not be successful. In many cases, the site selection is made by the contracting governmental entity. In such cases, site selection may be made for reasons related to political and/or economic development interests and may lead to the selection of sites that have less favorable environments.

 

Our business operations expose us to various liabilities for which we may not have adequate insurance.

 

The nature of our business exposes us to various types of third-party legal claims, including, but not limited to, civil rights claims relating to conditions of confinement and/or mistreatment, sexual misconduct claims brought by prisoners or detainees, medical malpractice claims, claims relating to employment matters (including, but not limited to, employment discrimination claims, union grievances and wage and hour claims), property loss claims, environmental claims, automobile liability claims, contractual claims and claims for personal injury or other damages resulting from contact with our facilities, programs, personnel or prisoners, including damages arising from a prisoner’s escape or from a disturbance or riot at a facility. In addition, our management contracts generally require us to indemnify the governmental agency against any damages to which the governmental agency may be subject in connection with such claims or litigation. We maintain insurance coverage for these general types of claims, except for claims relating to employment matters, for

which we carry no insurance. However, we generally have high deductible payment requirements on our primary insurance policies, including our general liability insurance, and there are also varying limits on the maximum amount of our overall coverage. As a result, the insurance we maintain to cover the various liabilities to which we are exposed may not be adequate. Any losses relating to matters for which we are either uninsured or for which we do not have adequate insurance could have a material adverse effect on our business, financial condition or results of operations. In addition, any losses relating to employment matters could have a material adverse effect on our business, financial condition or results of operations.

 

We may not be able to obtain or maintain the insurance levels required by our government contracts.

 

Our government contracts require us to obtain and maintain specified insurance levels. The occurrence of any events specific to our company or to our industry, or a general rise in insurance rates, could substantially increase our costs of obtaining or maintaining the levels of insurance required under our government contracts, or prevent us from obtaining or maintaining such insurance altogether. If we are unable to obtain or maintain the required insurance levels, our ability to win new government contracts, renew government contracts that have expired and retain existing government contracts could be significantly impaired, which could have a material adverse affect on our business, financial condition and results of operations.

 

Our international operations expose us to risks which could materially adversely affect our financial condition and results of operations.

 

For the thirty-nine weeks ended September 27, 2009, our international operations accounted for approximately 11.1% of our consolidated revenues from continuing operations. We face risks associated with our operations outside the U.S. These risks include, among others, political and economic instability, exchange rate fluctuations, taxes, duties and the laws or regulations in those foreign jurisdictions in which we operate. In the event that we experience any difficulties arising from our operations in foreign markets, our business, financial condition and results of operations may be materially adversely affected.

 

We conduct certain of our operations through joint ventures, which may lead to disagreements with our joint venture partners and adversely affect our interest in the joint ventures.

 

We conduct our operations in South Africa through our consolidated joint venture, South African Custodial Management Services Pty. Limited (“SACM”) and through our 50% owned joint venture South African Custodial Services Pty. Limited (“SACS”). We may enter into additional joint ventures in the future. Although we have the majority vote in our consolidated joint venture, SACM, through our ownership of 62.5% of the voting shares, we share equal voting control on all significant matters to come before SACS. These joint venture partners, as well as any future partners, may have interests that are different from ours which may result in conflicting views as to the conduct of the business of the joint venture. In the event that we have a disagreement with a joint venture partner as to the resolution of a particular issue to come before the joint venture, or as to the management or conduct of the business of the joint venture in general, we may not be able to resolve such disagreement in our favor and such disagreement could have a material adverse effect on our interest in the joint venture or the business of the joint venture in general.

 

We are dependent upon our senior management and our ability to attract and retain sufficient qualified personnel.

 

We are dependent upon the continued service of each member of our senior management team, including George C. Zoley, our Chairman and Chief Executive Officer, Wayne H. Calabrese, our Vice Chairman and President, and Brian R. Evans, our Chief Financial Officer. The unexpected loss of Dr. Zoley, Mr. Calabrese or Mr. Evans could materially adversely affect our business, financial condition or results of operations.

 

In addition, the services we provide are labor-intensive. When we are awarded a facility management contract or open a new facility, depending on the service we have been contracted to provide, we may need to hire operating management, correctional officers, security staff, physicians, nurses and other qualified personnel. The success of our business requires that we attract, develop and retain these personnel. Our

inability to hire sufficient qualified personnel on a timely basis or the loss of significant numbers of personnel at existing facilities could have a material effect on our business, financial condition or results of operations.

 

Our profitability may be materially adversely affected by inflation.

 

Many of our facility management contracts provide for fixed management fees or fees that increase by only small amounts during their terms. While a substantial portion of our cost structure is generally fixed, if, due to inflation or other causes, our operating expenses, such as costs relating to personnel, utilities, insurance, medical and food, increase at rates faster than increases, if any, in our facility management fees, then our profitability could be materially adversely affected.

 

Various risks associated with the ownership of real estate may increase costs, expose us to uninsured losses and adversely affect our financial condition and results of operations.

 

Our ownership of correctional and detention facilities subjects us to risks typically associated with investments in real estate. Investments in real estate, and in particular, correctional and detention facilities, are relatively illiquid and, therefore, our ability to divest ourselves of one or more of our facilities promptly in response to changed conditions is limited. Investments in correctional and detention facilities, in particular, subject us to risks involving potential exposure to environmental liability and uninsured loss. Our operating costs may be affected by the obligation to pay for the cost of complying with existing environmental laws, ordinances and regulations, as well as the cost of complying with future legislation. In addition, although we maintain insurance for many types of losses, there are certain types of losses, such as losses from earthquakes, riots and acts of terrorism, which may be either uninsurable or for which it may not be economically feasible to obtain insurance coverage, in light of the substantial costs associated with such insurance. As a result, we could lose both our capital invested in, and anticipated profits from, one or more of the facilities we own. Further, even if we have insurance for a particular loss, we may experience losses that may exceed the limits of our coverage.

 

Risks related to facility construction and development activities may increase our costs related to such activities.

 

When we are engaged to perform construction and design services for a facility, we typically act as the primary contractor and subcontract with other companies who act as the general contractors. As primary contractor, we are subject to the various risks associated with construction (including, without limitation, shortages of labor and materials, work stoppages, labor disputes and weather interference) which could cause construction delays. In addition, we are 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, even though we typically require general contractors to post construction bonds and insurance. Under such contracts, we are ultimately liable for all late delivery penalties and cost overruns.

 

The rising cost and increasing difficulty of obtaining adequate levels of surety credit on favorable terms could adversely affect our operating results.

 

We are often required to post performance bonds issued by a surety company as a condition to bidding on or being awarded a facility development contract. Availability and pricing of these surety commitments is subject to general market and industry conditions, among other factors. Recent events in the economy have caused the surety market to become unsettled, causing many reinsurers and sureties to reevaluate their commitment levels and required returns. As a result, surety bond premiums generally are increasing. If we are unable to effectively pass along the higher surety costs to our customers, any increase in surety costs could adversely affect our operating results. In addition, we may not continue to have access to surety credit or be able to secure bonds economically, without additional collateral, or at the levels required for any potential facility development or contract bids. If we are unable to obtain adequate levels of surety credit on favorable terms, we would have to rely upon letters of credit under our senior credit facility, which would entail higher costs even if such borrowing capacity was available when desired, and our ability to bid for or obtain new contracts could be impaired.

We may not be able to successfully identify, consummate or integrate acquisitions.

 

We have an active acquisition program, the objective of which is to identify suitable acquisition targets that will enhance our growth. The pursuit of acquisitions may pose certain risks to us. We may not be able to identify acquisition candidates that fit our criteria for growth and profitability. Even if we are able to identify such candidates, we may not be able to acquire them on terms satisfactory to us. We will incur expenses and dedicate attention and resources associated with the review of acquisition opportunities, whether or not we consummate such acquisitions. Additionally, even if we are able to acquire suitable targets on agreeable terms, we may not be able to successfully integrate their operations with ours. We may also assume liabilities in connection with acquisitions that we would otherwise not be exposed to.

 

Adverse developments in our relationship with our employees could adversely affect our business, financial condition or results of operations.

 

At September 27, 2009, approximately 16% of our workforce was covered by collective bargaining agreements and, as of such date, collective bargaining agreements with approximately less than one percent of our employees were set to expire in less than one year. While only approximately 16% of our workforce schedule is covered by collective bargaining agreements, increases in organizational activity or any future work stoppages could have a material adverse effect on our business, financial condition, or results of operations.

 

Purpose and Effect of the Exchange Offer

 

We entered into a registration rights agreement with respect to the old notes. Under the registration rights agreement, we agreed, for the benefit of the holders of the old notes that we will, (a) not later than 75 days after the date of original issuance of the notes, file a registration statement for the old notes with the Commission with respect to a registered offer to exchange the old notes for new notes of the Company having terms substantially identical in all material respects to such old notes (except that the new notes will generally not contain terms with respect to transfer restrictions) and (b) use our best efforts to cause the registration statement provided for under the registration rights agreement to be declared effective under the Securities Act not later than 180 days after the date of original issuance of the old notes. We will keep the exchange offer for the old notes open for not less than 20 business days (or longer if required by applicable law) after the date notice of the exchange offer is mailed to the holders of the old notes eligible to participate in the exchange offer.

 

For each old note surrendered to us pursuant to the exchange offer, the holder of the old note will receive a new note having a principal amount equal to that of the surrendered old note. Interest on each new note will accrue from the last interest payment date on which interest was paid on the old note surrendered in exchange thereof or, if no interest has been paid on such outstanding note, from the date of its original issue.

 

Under existing Commission interpretations, new notes acquired in a registered exchange offer by holders of old notes are freely transferable without further registration under the Securities Act if the holder of the new notes represents that it is acquiring the new notes in the ordinary course of its business, that it has no arrangement or understanding to participate in the distribution of the new notes and that it is not an affiliate of the Company, as such terms are interpreted by the Commission, provided that broker-dealers (“participating broker-dealers”) receiving new notes in a registered exchange offer will have a prospectus delivery requirement with respect to resales of such new notes. The Commission has taken the position that participating broker-dealers may fulfill their prospectus delivery requirements with respect to new notes (other than a resale of an unsold allotment from the original sale of the old notes) with the prospectus contained in the exchange offer registration statement relating to such new notes.

 

Under the registration rights agreement, we are required to allow participating broker-dealers and other Persons, if any, with similar prospectus delivery requirements to use the prospectus contained in the exchange offer registration statement in connection with the resale of such new notes for 180 days following the effective date of such exchange offer registration statement (or such shorter period during which participating broker-dealers are required by law to deliver such prospectus).

 

A holder of old notes who wishes to exchange its old notes for new notes in the exchange offer will be required to represent in the letter of transmittal that any new notes to be received by it will be acquired in the ordinary course of its business and that at the time of the commencement of the exchange offer it has no arrangement or understanding with any Person to participate in the distribution (within the meaning of the Securities Act) of the new notes and that it is not an “affiliate” of the Company, as defined in Rule 405 of the Securities Act, or if it is an affiliate, that it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable.

 

Resale of New Notes

 

Based on no action letters of the Commission staff issued to third parties, we believe that new notes received in the exchange offer may be offered for resale, resold and otherwise transferred by you without further compliance with the registration and prospectus delivery provisions of the Securities Act if:

 

 

The Commission, however, has not considered the exchange offer for the new notes in the context of a specific no action letter, and the Commission may not make a similar determination as in the no action letters issued to these third parties.

 

If you tender in the exchange offer with the intention of participating in any manner in a distribution of the related new notes, you

 

 

This prospectus may be used for an offer to resell, resale or other retransfer of new notes only as specifically described in this prospectus. Only broker-dealers that acquired the old notes as a result of market-making activities or other trading activities may participate in the exchange offer. Each broker-dealer that receives new notes for its own account in exchange for old notes, where such old notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge in the letter of transmittal that it will deliver a prospectus in connection with any resale of the new notes. Please read the section captioned “Plan of Distribution” for more details regarding the transfer of new notes.

 

Terms of the Exchange Offer

 

Subject to the terms and conditions described in this prospectus and in the letter of transmittal, we will accept for exchange any old notes properly tendered and not withdrawn prior to 5:00 p.m. New York City time on the expiration date. We will issue new notes in principal amount equal to the principal amount of old notes surrendered under the exchange offer. Old notes may be tendered only for new notes and only in integral multiples of $1,000.

 

The exchange offer is not conditioned upon any minimum aggregate principal amount of old notes being tendered for exchange.

 

As of the date of this prospectus, $250,000,000 in aggregate principal amount of the Notes are outstanding. This prospectus and the letter of transmittal are being sent to all registered holders of old notes. There will be no fixed record date for determining registered holders of old notes entitled to participate in the exchange offer.

 

We intend to conduct the exchange offer in accordance with the provisions of the registration rights agreement, the applicable requirements of the Securities Act and the Securities Exchange Act of 1934 and the rules and regulations of the Commission. Old notes that the holders thereof do not tender for exchange in the exchange offer will remain outstanding and continue to accrue interest. These old notes will be entitled to the rights and benefits such holders have under the indenture relating to the Notes and the registration rights agreement.

 

We will be deemed to have accepted for exchange properly tendered old notes when we have given oral or written notice of the acceptance to the exchange agent and complied with the provisions of the registration rights agreement. The exchange agent will act as agent for the tendering holders for the purposes of receiving the new notes from us.

 

If you tender old notes in an exchange offer, you will not be required to pay brokerage commissions or fees or, subject to the letter of transmittal, transfer taxes with respect to the exchange of old notes. We will pay all charges and expenses, other than certain applicable taxes described below, in connection with the exchange offer. It is important that you read the section labeled “— Fees and Expenses” for more details regarding fees and expenses incurred in the exchange offer.

 

We will return any old notes that we do not accept for exchange for any reason without expense to their tendering holder promptly after the expiration or termination of the exchange offer.

Expiration Date

 

The exchange offer will expire at 5:00 p.m., New York City time, unless, in our sole discretion, we extend it.

 

Extensions, Delays in Acceptance, Termination or Amendment

 

We expressly reserve the right, at any time or various times, to extend the period of time during which the exchange offer is open. We may delay acceptance of any old notes by giving oral or written notice of such extension to their holders. During any such extensions, all old notes previously tendered will remain subject to the exchange offer, and we may accept them for exchange.

 

In order to extend the exchange offer, we will notify the exchange agent orally or in writing of any extension. We will notify the registered holders of old notes that are subject to the exchange offer of the extension no later than 9:00 a.m., New York City time, on the business day after the previously scheduled expiration date.

 

If any of the conditions described below under “— Conditions to the Exchange Offer” have not been satisfied in relation to the exchange offer, we reserve the right, in our sole discretion

 

 

by giving oral or written notice of such delay, extension or termination to the exchange agent. Subject to the terms of the registration rights agreement, we also reserve the right to amend the terms of the exchange offer in any manner.

 

Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by oral or written notice thereof to the registered holders of old notes that are subject to the exchange offer. If we amend the exchange offer in a manner that we determine to constitute a material change, we will promptly disclose such amendment by means of a prospectus supplement. The supplement will be distributed to the registered holders of the old notes that are subject to the exchange offer. Depending upon the significance of the amendment and the manner of disclosure to the registered holders, we will extend the exchange offer if it would otherwise expire during such period. We are generally required to extend the exchange offer for any material amendment so that at least five business days remain in the exchange offer after the amendment.

 

Conditions to the Exchange Offer

 

We will not be required to accept for exchange, or exchange any new notes for, any old notes if the exchange offer, or the making of any exchange by a holder of old notes, would violate applicable law or any applicable interpretation of the staff of the Commission. Similarly, we may terminate the exchange offer as provided in this prospectus before the expiration date in the event of such a potential violation.

 

In addition, we will not be obligated to accept for exchange the old notes of any holder that has not made to us the representations described under “— Purpose and Effect of the Exchange Offer,” “— Procedures for Tendering” and “Plan of Distribution” and such other representations as may be reasonably necessary under applicable Commission rules, regulations or interpretations to allow us to use an appropriate form to register the new notes under the Securities Act.

 

We expressly reserve the right to amend or terminate the exchange offer, and to reject for exchange any old notes not previously accepted for exchange, upon the occurrence of any of the conditions to the exchange offer specified above. We will give oral or written notice of any extension, amendment, non-acceptance or termination to the holders of the old notes as promptly as practicable.

These conditions are for our sole benefit, and we may assert them or waive them in whole or in part at any time or at various times in our sole discretion before the expiration of the exchange offer. If we fail at any time to exercise any of these rights, this failure will not mean that we have waived our rights. Each such right will be deemed an ongoing right that we may assert at any time or at various times, provided that all conditions to the exchange offer must be satisfied or waived before the expiration of the exchange offer.

 

In addition, we will not accept for exchange any old notes tendered, and will not issue new notes in exchange for any such old notes, if at such time any stop order has been threatened or is in effect with respect to the registration statement of which this prospectus constitutes a part or the qualification of the indenture relating to the Notes under the Trust Indenture Act of 1939.

 

Procedures for Tendering

 

How to Tender Generally

 

Only a holder of old notes may tender such old notes in the exchange offer. To tender in the exchange offer, a holder must:

 

 

In addition, either:

 

 

To be tendered effectively, the exchange agent must receive any physical delivery of the letter of transmittal and other required documents at its address indicated on the cover page of the letter of transmittal. The exchange agent must receive such documents prior to 5:00 p.m. New York City time on the expiration date.

 

The tender by a holder that is not withdrawn prior to 5:00 p.m. New York City time on the expiration date will constitute an agreement between the holder and us in accordance with the terms and subject to the conditions described in this prospectus and in the letter of transmittal.

 

The method of delivery of old notes, the letters of transmittal and all other required documents to the exchange agent is at your election and risk. Rather than mail these items, we recommend that you use an overnight or hand delivery service. In all cases, you should allow sufficient time to assure delivery to the exchange agent before 5:00 p.m. New York City time on the expiration date. You should not send the letters of transmittal or old notes to us. You may request your brokers, dealers, commercial banks, trust companies or other nominees to effect the above transactions for you.

 

How to Tender if You Are a Beneficial Owner

 

If you beneficially own old notes that are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and you wish to tender those notes, you should contact the registered holder promptly and instruct it to tender on your behalf. If you are a beneficial owner and wish to tender on your

own behalf, you must, prior to completing and executing the letter of transmittal and delivering your old notes, either:

 

 

The transfer of registered ownership, if permitted under the indenture for the Notes, may take considerable time and may not be completed prior to the expiration date.

 

Signatures and Signature Guarantees

 

You must have signatures on a letter of transmittal or a notice of withdrawal (as described below) guaranteed by a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States, or an “eligible guarantor institution” within the meaning of Rule 17Ad-15 under the Securities Exchange Act. In addition, such entity must be a member of one of the recognized signature guarantee programs identified in the letter of transmittal. Signature guarantees are not required, however, if the notes are tendered:

 

 

When You Need Endorsements or Bond Powers

 

If a letter of transmittal is signed by a person other than the registered holder of any old notes, the old notes must be endorsed or accompanied by a properly completed bond power. The bond power must be signed by the registered holder as the registered holder’s name appears on the old notes. A member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States, or an eligible guarantor institution must guarantee the signature on the bond power.

 

If a letter of transmittal or any old notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, those persons should so indicate when signing. Unless waived by us, they should also submit evidence satisfactory to us of their authority to deliver the letter of transmittal.

 

Tendering Through DTC’s Automated Tender Offer Program

 

The exchange agent and DTC have confirmed that any financial institution that is a participant in DTC’s system may use DTC’s automated tender offer program to tender. Participants in the program may, instead of physically completing and signing a letter of transmittal and delivering it to the exchange agent, transmit their acceptance of the exchange offer electronically. They may do so by causing DTC to transfer the old notes to the exchange agent in accordance with its procedures for transfer. DTC will then send an agent’s message to the exchange agent.

 

The term “agent’s message” means a message transmitted by DTC, received by the exchange agent and forming part of the book-entry confirmation, to the effect that:

 

 

 

Determinations Under the Exchange Offer

 

We will determine in our sole discretion all questions as to the validity, form, eligibility, time of receipt, acceptance of tendered old notes and withdrawal of tendered old notes in the exchange offer. Our determination will be final and binding. We reserve the absolute right to reject any old notes not properly tendered or any old notes our acceptance of which would, in the opinion of our counsel, be unlawful. We also reserve the right to waive any defect, irregularities or conditions of tender as to particular old notes, provided that we will apply any such waiver equally to all holders of old notes. Our interpretation of the terms and conditions of the exchange offer, including the instructions in the letter of transmittal, will be final and binding on all parties. Unless waived, all defects or irregularities in connection with tenders of old notes must be cured within such time as we shall determine. Although we intend to notify holders of defects or irregularities with respect to tenders of old notes, neither we, the exchange agent nor any other person will incur any liability for failure to give such notification. Tenders of old notes will not be deemed made until such defects or irregularities have been cured or waived. Any old notes received by the exchange agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned to the tendering holder, unless otherwise provided in the letter of transmittal, as soon as practicable following the expiration date.

 

When We Will Issue New Notes

 

In all cases, we will issue new notes for old notes that we have accepted for exchange under an exchange offer only after the exchange agent timely receives:

 

 

Return of Old Notes Not Accepted or Exchanged

 

If we do not accept any tendered old notes for exchange or if old notes are submitted for a greater principal amount than the holder desires to exchange, the unaccepted or non-exchanged old notes will be returned without expense to their tendering holder. In the case of old notes tendered by book-entry transfer in the exchange agent’s account at DTC according to the procedures described below, such non-exchanged old notes will be credited to an account maintained with DTC. These actions will occur promptly after the expiration or termination of the exchange offer.

 

Your Representations to Us

 

By signing or agreeing to be bound by the letter of transmittal, you will represent to us that, among other things:

 

 

Book-Entry Transfer

 

The exchange agent will establish an account with respect to the old notes at DTC for purposes of the exchange offer promptly after the date of this prospectus. Any financial institution participating in DTC’s system may make book-entry delivery of old notes by causing DTC to transfer such old notes into the exchange agent’s account at DTC in accordance with DTC’s procedures for transfer. Holders of old notes who are unable to deliver confirmation of the book-entry tender of their old notes into the exchange agent’s account at DTC or all other documents required by the letter of transmittal to the exchange agent on or prior to 5:00 p.m. New York City time on the expiration date must tender their old notes according to the guaranteed delivery procedures described below.

 

Guaranteed Delivery Procedures

 

If you wish to tender your old notes but your old notes are not immediately available or you cannot deliver your old notes, the letter of transmittal or any other required documents to the exchange agent or comply with the applicable procedures under DTC’s automated tender offer program prior to the expiration date, you may tender if:

 

 

 

 

Upon request to the exchange agent, a notice of guaranteed delivery will be sent you if you wish to tender your old notes according to the guaranteed delivery procedures described above.

 

Withdrawal of Tenders

 

Except as otherwise provided in this prospectus, you may withdraw your tender under the exchange offer at any time prior to 5:00 p.m. New York City time on the expiration date.

 

For a withdrawal to be effective:

 

 

Any notice of withdrawal must:

 

 

If old notes have been tendered under the procedure for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at DTC to be credited with withdrawn old notes and otherwise comply with the procedures of DTC.

 

We will determine all questions as to the validity, form, eligibility and time of receipt of notices of withdrawal. Our determination shall be final and binding on all parties. We will deem any old notes so withdrawn not to have been validly tendered for exchange for purposes of the exchange offer.

 

Any old notes that have been tendered for exchange but that are not exchanged for any reason will be returned to their holder without cost to the holder. In the case of old notes tendered by book-entry transfer into the exchange agent’s account at DTC according to the procedures described above, such old notes will be credited to an account maintained with DTC for the old notes. This return or crediting will take place as soon as practicable after withdrawal, rejection of tender or termination of the exchange offer. You may retender properly withdrawn old notes by following one of the procedures described under “— Procedures for Tendering” above at any time on or prior to the expiration date.

 

Fees and Expenses

 

We will bear the expenses of soliciting tenders with respect to the exchange offer. The principal solicitation is being made by mail; however, we may make additional solicitation by telegraph, telephone or in person by our officers and regular employees and those of our affiliates.

 

We have not retained any dealer-manager in connection with the exchange offer and will not make any payments to broker-dealers or others soliciting acceptances of the exchange offer. We will, however, pay the exchange agent reasonable and customary fees for its services and reimburse it for its related reasonable out-of-pocket expenses.

 

We will pay the cash expenses to be incurred in connection with the exchange offer. They include:

 

 

Transfer Taxes

 

We will pay all transfer taxes, if any, applicable to the exchange of old notes under the exchange offer. The tendering holder, however, will be required to pay any transfer taxes, whether imposed on the registered holder or any other person, if:

 

 

If satisfactory evidence of payment of any transfer taxes payable by a note holder is not submitted with the letter of transmittal, the amount of such transfer taxes will be billed directly to that tendering holder.

Consequences of Failure to Exchange

 

If you do not exchange your old notes for new notes under the exchange offer, you will remain subject to the existing restrictions on transfer of the old notes. In general, you may not offer or sell the old notes unless they are registered under the Securities Act, or if the offer or sale is exempt from the registration under the Securities Act and applicable state securities laws. Except as required by the registration rights agreement, we do not intend to register resales of the old notes under the Securities Act.

 

Accounting Treatment

 

We will record the new notes in our accounting records at the same carrying values as the old notes. For each issue of the old notes, this carrying value is the aggregate principal amount of the old notes less any applicable original issue discount, as reflected in our accounting records on the date of exchange. Accordingly, we will not recognize any gain or loss for accounting purposes in connection with the exchange offer.

 

Other

 

Participation in the exchange offer is voluntary, and you should carefully consider whether to accept. You are urged to consult your financial and tax advisors in making your own decision on what action to take.

 

We may in the future seek to acquire untendered old notes in open market or privately negotiated transactions, through subsequent exchange offers or otherwise. We have no present plans to acquire any old notes that are not tendered in the exchange offer or to file a registration statement to permit resales of any untendered old notes.

 

This exchange offer is intended to satisfy our obligations under the Registration Rights Agreement. We will not receive any proceeds from the exchange offer. You will receive, in exchange for old notes tendered by you and accepted by us in the exchange offer, new notes in the same principal amount. The old notes surrendered in exchange for the new notes will be retired and cancelled and cannot be reissued. Accordingly, the issuance of the new notes will not result in any increase of our indebtedness.

 

The following is a description of our senior credit facility. The summary is not complete and is subject and is qualified in its entirety by reference to the terms of the senior credit facility.

 

As of September 27, 2009, our senior credit facility consisted of a $365.0 million, seven-year term loan which matures January 24, 2014 and a $240.0 million, five-year revolving credit facility which, prior to the execution of Amendment No. 6, was set to expire September 14, 2010. The revolving credit facility contains a $97.5 million sublimit for the issuance of standby letters of credit. As of September 27, 2009, the interest rate for the term loan portion of the facility was LIBOR plus 1.50% (the weighted average rate on outstanding borrowings under the term loan portion of the facility as of September 27, 2009 was 1.85%). As of September 27, 2009, the revolving credit facility bore interest at LIBOR plus 2.00% or at the base rate (prime rate) plus 1.00%. The weighted average interest rate on outstanding borrowings under our senior credit facility was 2.07% as of September 27, 2009.

 

As of September 27, 2009, we had $155.9 million outstanding under the term loan portion of our senior credit facility and our $240.0 million revolving credit facility had $107.0 million outstanding in loans, $47.4 million outstanding in letters of credit and $85.6 million available for borrowings.

 

On October 5, 2009, on October 15, 2009, and again on December 4, 2009 we completed amendments to our senior credit facility through the execution of Amendment Nos. 5, 6 and 7, respectively, to the Amended and Restated Credit Agreement (“Amendment No. 5,” “Amendment No. 6” and/ or “Amendment No. 7”) between us, as Borrower, certain of our subsidiaries, as Guarantors, and BNP Paribas, as Lender and as Administrative Agent. Amendment No. 5 to the Credit Agreement among other things, effectively permitted us to issue up to $300.0 million of unsecured debt without having to repay outstanding borrowings on our senior credit facility. Amendment No. 6 to the Credit Agreement, among other things, modified the aggregate size of the credit facility from $240.0 million to $330.0 million, extended the maturity of the Revolver to 2012, modified the permitted maximum total leverage and maximum senior secured leverage financial ratios and eliminated the annual capital expenditures limitation. With this amendment, as of November 30, 2009, our senior secured credit facility is comprised of a $155.0 million Term Loan bearing interest at LIBOR plus 2.00% and maturing in January 2014 and the $330.0 million Revolver which currently bears interest at LIBOR plus 3.25% and matures in September 2012. As of November 30, 2009, we had the ability to borrow an incremental of approximately $217 million from the excess capacity on the Revolver after considering our current borrowings and debt covenants. Upon the execution of Amendment No. 6, we also had the ability to increase our borrowing capacity under the senior credit facility by another $200.0 million subject to lender demand, market conditions and existing borrowings. Amendment No. 7 to the Credit Agreement made revisions to certain definitions therein.

 

All of the obligations under our senior credit facility are unconditionally guaranteed by our material domestic subsidiaries that are restricted subsidiaries under the senior credit facility. GEO and these restricted subsidiaries generated approximately 80.9% of our consolidated revenues and 88.8% of our consolidated EBITDA for the fifty-two weeks ended September 27, 2009 and held approximately 81.1% of our consolidated assets as of September 27, 2009. The senior credit facility and the related guarantees are secured by substantially all of our present and future tangible and intangible assets and all present and future tangible and intangible assets of each guarantor, including but not limited to (i) a first-priority pledge of all of the outstanding capital stock owned by us and by each guarantor (other than 35% of the voting stock of foreign subsidiaries) and (ii) perfected first-priority security interests in all of our present and future tangible and intangible assets and the present and future tangible and intangible assets of each guarantor.

 

Our senior credit facility contains certain customary representations and warranties and customary covenants that restrict our ability to, among other things (i) create, incur or assume any indebtedness, (ii) incur liens, (iii) make loans and investments, (iv) engage in mergers, acquisitions and asset sales, (v) sell our assets, (vi) make certain restricted payments, including declaring any cash dividends or redeeming or repurchasing capital stock, except as otherwise permitted, (vii) transact with affiliates, (viii) amend or modify the terms of any subordinated indebtedness, (ix) enter into debt agreements that contain negative pledges on our assets or covenants more restrictive than contained in our senior credit facility, (x) alter the business we conduct, and

(xi) materially impair our lenders’ security interests in the collateral for our loans. Our senior credit facility also requires us to comply with certain specified financial and affirmative covenants, including compliance with maximum senior secured and total leverage ratios and a minimum interest coverage ratio.

 

Events of default under our senior credit facility agreement include, but are not limited to, (i) our failure to pay principal or interest when due, (ii) our material breach of any representations or warranty, (iii) covenant defaults, (iv) bankruptcy, (v) cross default to certain other material indebtedness, (vi) unsatisfied final judgments over a threshold, (vii) material environmental claims which are asserted against us, and (viii) a change of control.

 

Voluntary prepayments and commitment reductions of our loans are permitted in whole or in part, subject to minimum prepayment or reduction requirements. Such voluntary prepayments and commitment reductions may be made without premium or penalty.

 

General

 

You can find the definitions of certain terms used in this description under the subheading “— Certain Definitions.” In this description, references to “we,” “us,” “our,” and the “Company” refer to The GEO Group, Inc. and not to any of its Subsidiaries and references to the “Notes” refer to the 73/4% Senior Notes due 2017 offered by this prospectus and any additional notes issued under the Indenture in accordance with the terms of the Indenture.

 

The old notes were issued and the new notes will be issued under an indenture dated as of October 20, 2009 (the “Indenture”) between us, the Initial Guarantors and Wells Fargo Bank, N.A., as trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended, which we refer to as the Trust Indenture Act.

 

The following description is a summary of the material provisions of the Indenture. It does not restate the Indenture in its entirety. We urge you to read the Indenture because it, and not this description, defines your rights as a holder of the Notes. A copy of the Indenture is available from us at The GEO Group, Inc., One Park Place, 621 NW 53rd Street, Suite 700, Boca Raton, Florida, 33487, Attn: Chief Financial Officer. Certain defined terms used in this description but not defined below under “— Certain Definitions” have the meanings assigned to them in the Indenture or the registration rights agreement.

 

The registered Holder of a Note will be treated as the owner of it for all purposes. Only registered Holders will have rights under the Indenture.

 

The Notes

 

The Notes will be:

 

 

As of the date of the Indenture, all of our Subsidiaries, other than CSC of Tacoma, LLC, GEO International Holdings, Inc., certain dormant Domestic Subsidiaries and all Foreign Subsidiaries in existence as of the date of the Indenture, will be Restricted Subsidiaries, and each of our Subsidiaries that has guaranteed our obligations under the Credit Agreement will guarantee the Notes. However, under the circumstances described below under the subheading ‘— Certain Covenants — Designation of Restricted and Unrestricted Subsidiaries,” we will be permitted to designate other Subsidiaries, as “Unrestricted Subsidiaries.” Unrestricted Subsidiaries will not be subject to the restrictive covenants in the Indenture and will not guarantee the Notes. The Unrestricted Subsidiaries generated approximately 19.1% of our consolidated revenues and 11.2% of our consolidated EBITDA for the fifty-two weeks ended September 27, 2009 and held approximately 18.9% of our consolidated assets as of September 27, 2009.

 

The Note Guarantees

 

The Notes will initially be fully and unconditionally guaranteed by each of our Restricted Subsidiaries that has guaranteed our obligations under the Credit Agreement (collectively, the “Initial Guarantors”) and

may be guaranteed by additional Subsidiaries of ours as described below under “Certain covenants — Additional Note Guarantees.” Each Note Guarantee of a Guarantor will be:

 

 

The obligations of each Guarantor under its Note Guarantee will be limited as necessary to prevent that Note Guarantee from constituting a fraudulent conveyance under applicable law. See “Risk Factors — Fraudulent conveyance laws may permit courts to void the guarantees of the notes in specific circumstances.”

 

Not all of our Subsidiaries will guarantee the Notes. We and the Initial Guarantors generated approximately 80.9% of our consolidated revenues and 88.8% of our consolidated EBITDA for the fifty-two weeks ended September 27, 2009 and held approximately 81.1% of our consolidated assets as of September 27, 2009.

 

The Note Guarantee of a Guarantor may be released in certain circumstances. See “— Certain Covenants — Additional Note Guarantees.”

 

Principal, Maturity and Interest

 

The Notes will be unlimited in aggregate principal amount, with $250.0 million aggregate principal amount to be issued in this offering, and will mature on October 15, 2017. We may issue additional Notes from time to time, subject to the covenant described below under the subheading “— Certain Covenants — Incurrence of Indebtedness and Issuance of Preferred Stock.” The Notes and any additional Notes subsequently issued under the Indenture will be treated as a single class for all purposes under the Indenture, including, without limitation, redemptions of Notes, offers to purchase Notes and the percentage of Notes required to consent to waivers of provisions of, and amendments to, the Indenture. We will issue Notes only in denominations of $2,000 and integral multiples of $1,000 in excess thereof

 

Interest on the Notes will accrue at the rate of 73/4% per annum and will be payable semi-annually in arrears on April 15 and October 15, commencing on April 15, 2010. We will make each interest payment to the Holders of record on the close of business on the immediately preceding April 1 and October 1. Interest on the Notes will accrue from the date of original issuance or, if interest has already been paid, from the date it was most recently paid. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months.

 

Methods of Receiving Payments on the Notes

 

If a Holder has given wire transfer instructions to us, we will pay all principal, interest and premium and Liquidated Damages, if any, on that Holder’s Notes in accordance with those instructions. All other payments on the Notes will be made at the office or agency of the paying agent and registrar within the City and State of New York unless we elect to make interest payments by check mailed to the Holders at their address set forth in the register of Holders.

 

Paying Agent and Registrar for the Notes

 

The trustee will initially act as paying agent and registrar for the Notes. We may change the paying agent or registrar without prior notice to the Holders of the Notes, and we or any of our Subsidiaries may act as paying agent or registrar.

Transfer and Exchange

 

A Holder may transfer or exchange Notes in accordance with the Indenture. The registrar and the trustee may require a Holder to furnish appropriate endorsements and transfer documents in connection with a transfer of Notes. Holders will be required to pay all taxes due on transfer. We are not required to transfer or exchange any Note selected for redemption. Also, we are not required to transfer or exchange any Note for a period of 15 days before a selection of Notes to be redeemed.

 

Ranking

 

The Notes and the Note Guarantees will be our and the Guarantors’ unsecured, general obligations and the indebtedness evidenced by the Notes and the Note Guarantees will rank equal in right of payment to all of our and the Guarantor’s other existing and future unsecured general obligations and senior in right of payment to all of our and the Guarantors’ future obligations expressly subordinated in right of payment to the Notes and the Note Guarantees. The Notes and the Note Guarantees, however, will be effectively subordinated to our and the Guarantors’ secured indebtedness with respect to the assets securing such obligations, including indebtedness under the Credit Agreement, which is secured by liens on substantially all of our and our Domestic Subsidiaries’ tangible and intangible assets as specified in the Credit Agreement. We conduct some of our business through our Subsidiaries and joint ventures. The Notes will be effectively subordinated to all existing and future liabilities of our Subsidiaries that do not guarantee the Notes and joint ventures, including trade payables.

 

As of September 27, 2009, we had a total of $412.3 million of consolidated debt outstanding, excluding $117.2 million of non-recourse debt and capital lease liability balances of $15.3 million. As of September 27, 2009, we also had outstanding six letters of guarantee totaling $6.4 million under separate international credit facilities. We also have the ability to increase borrowing capacity by $200.0 million under the accordion feature of our Senior Credit Facility, as amended, subject to lender demand and market conditions. In addition, as of September 27, 2009, our non-guarantor Subsidiaries had $102.4 million of indebtedness, which is non-recourse to us and the Guarantors.

 

Optional Redemption

 

At any time on or prior to October 15, 2012, we may on any one or more occasions redeem up to 35% of the aggregate principal amount of outstanding Notes issued under the Indenture at a redemption price of 107.750% of their principal amount, plus accrued and unpaid interest and Liquidated Damages, if any, to the redemption date, with the net cash proceeds of one or more Equity Offerings; provided, that: (1) at least 65% of the aggregate principal amount of Notes issued under the Indenture remains outstanding immediately after the occurrence of such redemption (excluding Notes held by us and our Subsidiaries); and (2) the redemption occurs within 90 days of the date of the closing of such Equity Offering.

 

At any time prior to October 15, 2013, we may, at our option, redeem all or a part of the Notes upon not less than 30 nor more than 60 days’ prior notice at a redemption price equal to the sum of (i) 100% of the principal amount thereof, plus (ii) the Applicable Premium as of the date of redemption, plus (iii) accrued and unpaid interest and Liquidated Damages, if any, to the date of redemption.

 

After October 15, 2013, we may, at our option, redeem all or a part of the Notes upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest and Liquidated Damages, if any, on the Notes redeemed, to the applicable redemption date, if redeemed during the 12-month period beginning on October 15 of the years indicated below:

 

For a description of the procedures applicable to a redemption of all or part of the Notes pursuant to the provisions of the Indenture described in this section, see “— Selection and Notice.”

 

Mandatory Redemption

 

We are not required to make mandatory redemption or sinking fund payments with respect to the Notes.

 

Repurchase at the Option of Holders

 

Change of Control

 

If a Change of Control occurs, each Holder of Notes will have the right to require us to repurchase all or any part (equal to $2,000 or an integral multiple of $1,000 in excess thereof) of that Holder’s Notes pursuant to a Change of Control Offer on the terms set forth in the Indenture. In the Change of Control Offer, we will offer a Change of Control Payment in cash equal to 101% of the aggregate principal amount of Notes repurchased, plus accrued and unpaid interest and Liquidated Damages, if any, on the Notes repurchased, to the date of purchase. Within 30 days following any Change of Control, we will mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes on the Change of Control Payment Date specified in the notice, which date will be no earlier than 30 days and no later than 60 days from the date such notice is mailed, pursuant to the procedures required by the Indenture and described in such notice. We will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control provisions of the Indenture, we will comply with the applicable securities laws and regulations and will not be deemed to have breached our obligations under the Change of Control provisions of the Indenture by virtue of such conflict.

 

On the Change of Control Payment Date, we will, to the extent lawful:

 

(1) accept for payment all Notes or portions of Notes properly tendered pursuant to the Change of Control Offer;

 

(2) deposit with the paying agent an amount equal to the Change of Control Payment in respect of all Notes or portions of Notes properly tendered; and

 

(3) deliver or cause to be delivered to the trustee the Notes properly accepted together with an Officers’ Certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by us.

 

The paying agent will promptly deliver to each Holder of Notes properly tendered the Change of Control Payment for such Notes, and the trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each new Note will be in a principal amount of $2,000 or an integral multiple of $1,000 in excess thereof.

 

We will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.

 

The provisions described above that require us to make a Change of Control Offer following a Change of Control will be applicable whether or not any other provisions of the Indenture are applicable. Except as described above with respect to a Change of Control, the Indenture does not contain provisions that permit the Holders of the Notes to require that we repurchase or redeem the Notes in the event of a takeover, recapitalization or similar transaction.

 

We will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by us and purchases all Notes properly tendered and not withdrawn under the Change of Control Offer.

The definition of Change of Control includes a phrase relating to the direct or indirect sale, lease, transfer, conveyance or other disposition of “all or substantially all” of the properties or assets of the Company and its Subsidiaries taken as a whole. Although there is a limited body of case law interpreting the phrase “substantially all,” there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a Holder of Notes to require us to repurchase the Notes as a result of a sale, lease, transfer, conveyance or other disposition of less than all of the assets of the Company and its Subsidiaries taken as a whole to another Person or group may be uncertain. In addition, Holders of the Notes may not be entitled to require the Company to repurchase their Notes in certain circumstances involving a significant change in the composition of the Company’s Board of Directors, including, in connection with the proxy contest where the Company’s Board of Directors does not endorse a dissident slate of directors but approves them as Continuing Directors. In this regard, a recent decision of the Delaware Chancery Court (not involving the Company or its securities) considered a change of control redemption provision of an indenture governing publicly traded debt securities substantially similar to the change of control event described in clause (5) of the definition of “Change of Control.” In its decision, the court noted that a board of directors may “approve” a dissident shareholder’s nominees solely for purposes of such an indenture, provided the board of directors determines in good faith that the election of the dissident nominees would not be materially adverse to the interests of the corporation or its stockholders (without taking into consideration the interests of the holders of debt securities in making this determination).

 

The Credit Agreement contains, and other indebtedness of the Company may contain, prohibitions on the occurrence of events that would constitute a Change of Control or require that indebtedness be repurchased upon a Change of Control. A Change of Control will constitute an event of default under the Credit Agreement and, unless the Company were able to obtain a waiver from the lenders under the Credit Agreement, the terms of the Credit Agreement would prohibit our purchase of the Notes in the event we are required to make a Change of Control Offer. There can be no assurance that the Company would be able to obtain a waiver from the lender under the Credit Agreement to purchase the Notes in connection with a Change of Control. In addition, if a Change of Control Offer occurs, there can be no assurance that we will have available funds sufficient to make the Change of Control Payment for all of the Notes that might be delivered by Holders seeking to accept the Change of Control Offer. In the event we are required to purchase outstanding Notes pursuant to a Change of Control Offer, we expect that we would seek third-party financing to the extent we do not have available funds to meet our purchase obligations and any other obligations in respect of our other indebtedness. However, there can be no assurance that we would be able to obtain the necessary financing. See “Risk Factors — Risks Related to the Notes. We may not be able to repurchase the Notes in the event of a change of control because the terms of our indebtedness or lack of funds may prevent us from doing so.”

 

Asset Sales

 

We will not, and we will not permit any of our Restricted Subsidiaries to, directly or indirectly, consummate an Asset Sale unless:

 

(1) we (or the Restricted Subsidiary, as the case may be) receive consideration at the time of the Asset Sale at least equal to the fair market value of the assets or Equity Interests issued or sold or otherwise disposed of (except in respect of Designated Assets sold pursuant to a Designated Asset Contract);

 

(2) the fair market value or Designated Asset Value, as applicable, in the case of any Asset Sales or series of related Asset Sales having a fair market value of $25.0 million or more, is determined by our Board of Directors and evidenced by a resolution of our Board of Directors set forth in an Officers’ Certificate delivered to the trustee; and