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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the quarterly period ended June 30, 1997.
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition period.
COMMISSION FILE NUMBER: 0-20372
RES-CARE, INC.
(Exact name of Registrant as specified in its charter)
KENTUCKY 61-0875371
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10140 LINN STATION ROAD
LOUISVILLE, KENTUCKY 40223
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (502) 394-2100
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- ----
The number of shares outstanding of the Registrant's common stock, no par value,
on June 30, 1997 was 12,197,108.
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RES-CARE, INC.
INDEX
PAGE
PART I. FINANCIAL INFORMATION NUMBER
<S> <C> <C>
Item 1. Condensed Consolidated Financial Statements (Unaudited) 3
Condensed Consolidated Balance Sheets at June 30, 1997 and 3
December 31, 1996
Condensed Consolidated Statements of Income for the three months 4
ended June 30, 1997 and 1996, and the six months ended June 30,
1997 and 1996
Condensed Consolidated Statements of Cash Flows for the six 5
months ended June 30, 1997 and 1996
Notes to Condensed Consolidated Financial Statements -- June 30, 6
1997
Item 2. Management's Discussion and Analysis of Financial Condition and 7
Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 17
Item 6. Exhibits and Reports on 8-K 17
Index to Exhibits 19
Signatures 20
</TABLE>
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<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION
ITEM I
RES-CARE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31,
1997 1996
-------- --------
(UNAUDITED) (NOTE)
(in thousands)
<S> <C> <C>
Assets:
Current assets:
Cash and cash equivalents $ 9,603 $ 7,932
Accounts and notes receivable, less allowance
for contractual adjustments of $2,570 in
1997 and $1,945 in 1996 40,950 33,996
Inventories 690 656
Deferred income taxes 2,995 2,498
Other current assets 1,686 1,961
-------- --------
Total current assets 55,924 47,043
Property and equipment, less accumulated
depreciation of $8,530 in 1997 and
$7,568 in 1996 50,310 43,581
Deferred start-up cost less accumulated
amortization of $3,455 in 1997 and
$3,123 in 1996 3,843 3,456
Excess of acquisition costs over net assets acquired,
less accumulated amortization of $999 in 1997
and $633 in 1996 20,950 14,558
Licenses costs less accumulated amortization of
$210 in 1997 and $158 in 1996 2,985 3,013
Long-term receivables and advances to managed facilities 1,114 1,102
Long-term deferred income taxes 626 --
Other assets 4,224 2,559
======== ========
Total Assets $139,976 $115,312
======== ========
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities:
Notes payable $ 125 $ 369
Trade accounts payable 7,088 5,241
Accrued expenses 18,264 16,059
Accrued income taxes 1,040 2,021
-------- --------
Total current liabilities 26,517 23,690
-------- --------
Long-term liabilities 1,714 1,421
Long-term debt 17,316 30,672
Long-term deferred income taxes 38 1,361
-------- --------
Total liabilities 45,585 57,144
-------- --------
Minority interest in equity of
consolidated subsidiary 153 73
-------- --------
Shareholders' equity:
Preferred shares, no par value, authorized
1,000 shares, no shares issued
or outstanding -- --
Common stock, no par value, authorized
40,000 shares, issued 15,722 shares
in 1997 and 13,838 shares in 1996 41,731 15,535
Additional paid in capital 8,444 4,035
Retained earnings 47,574 42,314
-------- --------
97,749 61,884
-------- --------
Less cost of common shares in treasury
(3,525 shares in 1997 and 3,804
shares in 1996) 3,511 3,789
-------- --------
Total shareholders' equity 94,238 58,095
-------- --------
Total liabilities and shareholders' equity $139,976 $115,312
======== ========
</TABLE>
See notes to condensed consolidated financial statements
Note: The condensed consolidated balance sheet at December 31, 1996
has been derived from the audited supplemental balance sheet at that
date. (see note 3).
3
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RES-CARE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net revenues $ 69,990 $ 54,156 $ 134,857 $ 108,222
Operating expenses:
Facility and program expenses 61,309 47,368 117,430 95,044
Corporate general and administrative 2,250 2,326 4,815 4,711
Depreciation and amortization 1,376 837 2,555 1,626
Nonrecurring acquisition related expenses 0 -- 149
------------ ------------ ------------ ------------
Total operating expenses 64,935 50,531 124,949 101,381
------------ ------------ ------------ ------------
Operating income 5,055 3,625 9,908 6,841
Other expenses (income):
(Gain) Loss from sale of assets (11) 6 (26) (9)
Interest expense 354 302 916 572
Interest income (162) (110) (278) (216)
------------ ------------ ------------ ------------
Total other expenses, net 181 198 612 347
Minority Interest in (income) loss of
consolidated subsidiary (36) 11 (80) 21
------------ ------------ ------------ ------------
Income before income taxes 4,838 3,438 9,216 6,515
Income taxes 1,951 1,266 3,722 2,422
------------ ------------ ------------ ------------
Net income 2,887 2,172 5,494 4,093
============ ============ =========== ===========
Income data:
Income per share $0.24 $0.21 $0.49 $0.39
============ ============ =========== ===========
Weighted average shares used in per share
calculation 12,000,234 10,567,300 11,263,700 10,506,490
</TABLE>
See notes to condensed consolidated financial statments.
4
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<TABLE>
<CAPTION>
RES-CARE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
Six Months Ended
June 30,
----------------------
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,494 $ 4,093
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 2,555 1,627
Provision for contractual adjustments 645 400
Deferred income taxes - net (160) 370
Provision for compensation - stock options -- 4
Gain from sale of assets (26) (9)
Income (loss) applicable to minority interest of
consolidated subsidiary 80 (21)
Changes in operating assets and liabilities
Increase in accounts and notes receivable (7,917) (3,342)
Increase in inventories (36) (89)
Decrease in other current assets 433 333
(Increase) decrease in other assets (187) 21
Increase (decrease) in trade accounts payable 2,774 (130)
Increase in accrued expenses 2,057 1,267
Increase (decrease) in accrued income taxes 306 (163)
Decrease in long-term liabilities (410) (75)
-------- --------
Net cash provided by operating activities 5,608 4,286
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (5,667) (2,600)
Proceeds from sale of assets 1 --
Acquisition of businesses (9,201) --
Payments received on notes from sale of assets 19 19
Deferred start-up costs (653) (1,117)
Increase in goodwill (189) (180)
(Increase) decrease in other assets (555) 15
-------- --------
Net cash used in investing activities (16,245) (3,863)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (14,733) (1,600)
Proceeds from sale of common stock, net of expenses of $559 26,196 --
Proceeds from exercise of stock options 1,081 1,093
Partnership distributions (235) (351)
Purchase of treasury stock (1) (1)
-------- --------
Net cash provided by (used in) financing activities 12,308 (859)
-------- --------
Increase (decrease) in cash and cash equivalents 1,671 (436)
Cash and cash equivalents at beginning of period 7,932 7,461
-------- --------
Cash and cash equivalents at end of period $ 9,603 $ 7,025
======== ========
</TABLE>
See notes to condensed consolidated financial statements
5
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Res-Care, Inc.
Notes to Condensed Consolidated Financial Statements
NOTE 1. Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the six-month period
ended June 30, 1997 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1997. For further information, refer
to the consolidated financial statements and footnotes thereto in the Company's
annual report on Form 10-K for the year ended December 31, 1996.
NOTE 2. Long-term Debt
On June 23, 1997, the Company amended its revolving credit
facility with its banks: PNC Bank, Kentucky, Inc.; National City Bank of
Kentucky; SunTrust Bank, Nashville, N.A.; Bank One, Kentucky, N.A.; and Wachovia
Bank, NA. The facility provides for maximum borrowings of $100 million,
including up to $10 million in letters of credit. It expires and is due at
maturity in December 2001, subject to extension. The credit facility is secured
by all accounts receivable and general intangibles of the Company. As of June
30, 1997, letters of credit in the amount of $5.0 million were outstanding.
Under the facility, the Company is provided a cash management system in which
accounts are replenished daily for checks clearing the previous day. Account
replenishments are applied against the outstanding borrowing.
As of June 30, 1997, uncleared checks in the amount of $4.4
million were outstanding and are reflected in long-term debt. The agreement
contains certain covenants pertaining to net worth, current ratio, debt service
coverage ratios and ratio of total indebtedness to cash flow from operations.
The Company was in compliance with all covenants as of June 30, 1997.
NOTE 3.
Effective January 1, 1997, the Company acquired all of the
partnership interests in Premier Rehabilitation Centers in exchange for 409,250
shares of the Company's common stock in a business combination accounted for as
a pooling-of-interests. Historical financial information presented in this and
future consolidated financial statements is restated to include Premier
Rehabilitation Centers.
6
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ITEM 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
I. Results of operations
Three months ended June 30, 1997 compared to June 30, 1996
Revenues
Total net revenues for the second quarter of 1997 increased
by 29.2%, or $15.8 million, to $70.0 million compared to $54.2 million for the
second quarter of 1996. Of the increase, 83.8% resulted from increased
disabilities services revenues. Disabilities services net revenues increased by
30.1%, or $13.2 million, to $57.0 million in the second quarter of 1997 compared
to $43.8 million in the second quarter of 1996. Revenues increased primarily as
a result of acquisitions and certain cost-of-living and other rate adjustments
providing reimbursement for payroll and other expenses incurred in the period.
Average revenue per census day increased to $123.33 in the second quarter of
1997 compared to $111.93 for the same period in 1996, an increase of 10.1%
primarily due to rate increases in various states and retroactive rate
adjustments in Indiana. Average disabilities services facility and program
occupancy rates for the second quarter of 1997 remained relatively unchanged at
98.0% compared to 97.7% for the second quarter of 1996.
In May 1996, legislation was passed in Florida that would
have significantly reduced rates effective September 1, 1996 for the operations
that the Company manages in that state. A preliminary injunction has been
granted in a lawsuit by individual consumers which requires the State to
continue full funding of certain intermediate care facilities and services for
persons with developmental disabilities. In Tennessee, new regulations which
could adversely affect the management fees of the Company under its management
contracts with not-for-profit providers for group homes were withdrawn and
regulations have been proposed, but not yet enacted, that are acceptable to
providers and managers. The Company is unable, at this time, to determine the
extent of the effect of such reimbursement changes on revenues and profit
contributions.
In March 1997, certain small providers brought an action
against the Texas Department of Mental Health and Mental Retardation seeking to
enjoin the implementation of a provision (not applicable to the Company) of a
new reimbursement system implemented in Texas effective January 1, 1997. The new
reimbursement system was the result of a settlement of litigation brought by a
provider association challenging prior rate structures. The new reimbursement
system has favorably affected the Company's second quarter results, and Texas
has been paying under the
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new rates during the second quarter notwithstanding the pendency of the
litigation. The plaintiffs continue to seek a temporary injunction restraining
implementation of the challenged provision. A hearing on the temporary
injunction was concluded on April 30, 1997 and the parties await the judge's
ruling. While management of the Company, after consultation with counsel
participating in the litigation on behalf of the provider association, believes
that it is not likely that the ultimate effect of the litigation (and any
administrative actions that may follow) will result in the new Texas
reimbursement system being set aside, an adverse ruling in the proceedings could
affect period to period comparisons.
The budget legislation recently enacted includes a repeal of
Section 1396a(a)(13)(A) of the Medicaid Act, also known as the Boren Amendment,
which provides that reimbursement rates for health care providers must be
reasonable and adequate to meet the economically and efficiently incurred costs
of providing care to Medicaid recipients. With the repeal of the Boren
Amendment, provider payments will be determined by the states with no federal
right of action for providers effective October 1, 1997. The repeal of the Boren
Amendment could in the future have a material adverse effect on the Company's
business and results of operations.
In July 1997, the Company acquired all of the outstanding
stock of Communications Network Consultants, Inc. ("CNC"), a privately-owned
provider of supported living services to approximately 1,000 persons with
disabilities, including mental retardation, in North Carolina. CNC has current
annualized revenue of $15 million.
Youth services net revenues for the second quarter of 1997
increased by 24.0%, or $2.5 million, to $12.9 million compared to $10.4 million
during the second quarter of 1996. The increase resulted primarily from an
acquisition by and a new contract awarded to the Company's Youthtrack subsidiary
and acquisitions by its Alternative Youth Services subsidiary made during the
last half of 1996 and the first half of 1997.
Facility and Program Expenses
Facility and program expenses in the second quarter of 1997
increased 29.4%, or $13.9 million, compared to the second quarter of 1996. Of
this increase, $10.8 million, or 77.7% was due to payroll and payroll-related
expenses. These expenses reflect additional personnel as well as other costs
associated with new facilities and programs in disabilities services and youth
services. Facility and program expenses as a percentage of total net revenues in
the second quarter of 1997 were 87.5%, virtually unchanged as compared to the
same period of 1996.
Disabilities Services. Facility and program expenses in the
second quarter of 1997 increased
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30.4%, or $11.6 million, to $49.7 million compared to $38.1 million during the
second quarter of 1996. Payroll and payroll-related expenses represented 73.5%
of the increase due primarily to the additional personnel as well as other costs
associated with the new facilities and programs that were operational in the
second quarter of 1997 as compared to 1996. Disabilities services facility and
program expenses as a percentage of total revenues in the second quarter of 1997
were 87.1%, virtually unchanged as compared to the same period in 1996.
Youth Services. Facility and program expenses in the second quarter of
1997 increased 24.7%, or $2.3 million to $11.6 million compared to $9.3 million
during the second quarter of 1996. Payroll and payroll-related expenses
represented 81.7% of the increase due primarily to the additional facilities and
programs that were operational during the second quarter of 1997 compared to the
same period in 1996. As a percentage of net revenues for youth services,
facility and program expenses increased slightly to 89.9% in the second quarter
of 1997 from 89.4% for the second quarter of 1996. This increase was due
primarily to new acquisitions during 1997.
Operating Expenses
Corporate general and administrative expenses decreased 3.3%
in the second quarter of 1997 compared to the second quarter of 1996. This
reduction is primarily the result of an increase in direct charge allocations to
the operations and to certain expenses charged to the Company's April 15, 1997
secondary offering. Corporate general and administrative expenses in the second
quarter of 1997 decreased as a percentage of total net revenues to 3.2% from
4.3% for the same period in 1996.
Depreciation and amortization expenses in the first quarter of
1997 increased 75.0%, or $600,000, to $1.4 million compared to $800,000 during
the second quarter of 1996. The increase reflects primarily the purchase of real
property and intangible assets since July 1996.
Net interest expense of $192,000 in the second quarter of
1997 did not materially change compared to the second quarter of 1996.
II. Results of operations
Six months ended June 30, 1997 compared to June 30, 1996
Revenues
Total net revenues for the six months of 1997 increased by
24.7%, or $26.7 million,
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to $134.9 million compared to the six months of 1996. Of the increase, 82.3% was
a result of growth in disabilities services.
Disabilities Services. For the first six months of 1997, net
revenues increased by 25.0%, or $21.9 million, to $109.6 million compared to
$87.7 million during the first six months of 1996. Increased revenues resulted
primarily from the acquisitions and development of new operations and
reimbursement for general cost-of-living increases in staff and other facility
and program expenses. Average revenue per census day increased to $121.78 in the
first six months of 1997 compared to $115.11 in the first six months of 1996.
The increase of 6.0% is due primarily to rate increases in some states. Facility
occupancy rates for the first six months of 1997 were virtually unchanged at
98.0% compared to 97.9% for the first six months of 1996.
Youth Services. Revenues for the first six months of 1997
increased by 23.4%, or $4.8 million, to $25.3 million compared to $20.5 million
during the first six months of 1996. This increase was primarily a result of
acquisitions in both Youthtrack and Alternative Youth Services and a new
contract awarded Youthtrack that were operational in the first six months of
1997 compared to the same period of 1996.
Facility and Program Expenses
Facility and program expenses in the first six months of 1997
increased 23.6%, or $22.4 million, compared to the first six months of 1996. Of
this increase, $18.0 million, or 80.4% was due to payroll and payroll-related
expenses. These expenses reflect the additional personnel as well as other costs
associated with new facilities and programs in disabilities services and youth
services. Facility and program expenses in the first six of 1997 decreased as a
percentage of total revenues to 87.1% from 87.8% for the same period of 1996.
Disabilities Services. Facility and program expenses in the first six
months of 1997 increased 23.9%, or $18.3 million, to $95.0 million compared to
$76.7 million during the first six months of 1996. Payroll and payroll-related
expenses represented 80.3% of the increase due primarily to the additional
personnel and other costs associated with new facilities and programs that were
operational in the first six months of 1997 as compared to 1996. As a percentage
of net revenues, disabilities services facility and program expenses in the
first six months of 1997 decreased to 86.7% from 87.4% for the same period of
1996.
Youth Services. Facility and program expenses in the first six months
of 1997 increased 23.0%, or $4.2 million, to $22.5 million compared to $18.3
million during the same period of 1996. Payroll and payroll-related expenses
represented 80.5% of the increase due primarily to the
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additional facilities and programs that were operational during the first six
months of 1997 compared to the same period in 1996. As a percentage of net
revenues, youth services facility and program expenses decreased to 88.9% in the
first six months of 1997 from 89.5% for the first six months of 1996. The
decrease was due primarily to Youthtrack revenues which commenced in July 1996.
Other Operating Expenses
Corporate general and administrative expenses increased 2.2%,
or $104,000, in the first six months of 1997 compared to the first six months of
1996. Payroll and payroll-related expenses represented substantially all of the
increase due primarily to the addition of support staff and increase in staff
salaries. Corporate general and administrative expenses in the first six months
of 1997 decreased as a percentage of total net revenues to 3.6% from 4.4% for
the same period of 1996. This reduction is due primarily to an increase in
direct charge allocations to the operations as well as certain expenses related
to the secondary offering.
Depreciation and amortization expenses in the first six months
of 1997 increased 57.1%, or $1.0 million, to $2.6 million compared to $1.6
million for the first six months of 1996. The increase resulted primarily from
the purchase of real property and intangible assets since July 1996.
Net interest expense in the first six months of 1997 increased
$282,000 to $638,000 compared to $356,000 for the first six months of 1996. The
increase resulted primarily from the increased utilization of the Company's
credit facility for acquisitions made during the past year.
Liquidity and Capital Resources
For the first six months of 1997, net cash provided by
operating activities was $5.6 million compared to $4.3 million for the first six
months of 1996, an increase of $1.3 million. The increase was due primarily to
the increase in net income, depreciation and amortization, trade payables and
accrued expenses, offset in part by the increase in accounts and notes
receivables.
During the first six months of 1997, net cash used in
investing activities was $16.2 million compared to $3.9 million for the first
six months of 1996, an increase of $12.3 million, due primarily to the purchase
of property and equipment and the acquisition of businesses.
For the first six months of 1997, net cash provided by
financing activities was $12.3 million compared to $900,000 net cash used in
financing activities for the first six months of 1996. The increase of $13.2
million was due primarily to proceeds from sale of common stock offset in
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part by the repayment of long-term debt.
On April 15, 1997, the Company completed a secondary offering
of its common stock generating proceeds of $26.8 million before offering
expenses. The proceeds were used to repay borrowings on the Company's line-of
credit.
On June 23, 1997, the Company amended its revolving line-of-
credit facility with its banks: PNC Bank, Kentucky, Inc., National City Bank of
Kentucky, SunTrust Bank Nashville, N.A., Bank One Kentucky, N.A. and Wachovia
Bank. The facility provides for maximum borrowings of $100 million, including up
to $10 million in letters of credit.
As of June 30, 1997, the Company had $82.0 million available
on its line-of-credit and $9.6 million in cash and cash equivalents. Outstanding
at that date were irrevocable standby letters of credit in the principal amount
of $5.0 million issued in connection with workers' compensation insurance and
certain facility leases.
Subsequent to June 30, 1997, the Company purchased all of the
outstanding stock of CNC for a purchase price of $28,000,000 comprised of
$16,500,000 in cash and $11,500,000 in two promissory notes of $2,500,000 and
$9,000,000. The $9,000,000 note is subject to reduction based on future
earnings of CNC.
Risks Associated with Forward Looking Statements
In response to the "safe harbor" provisions contained in the
Private Securities Litigation Reform Act of 1995, the Company is including the
following cautionary statements that are intended to identify certain important
factors that could cause the Company's actual results to differ materially from
those projected in forward-looking statements concerning the Company made by or
on behalf of the Company, whether contained herein or elsewhere.
The Company's growth in revenues and earnings per share has
been directly related to a considerable increase in the number of individuals
served in its Division for Persons with Disabilities and its Division for Youth
Services. This growth is largely dependent upon development-driven activities,
including the acquisition of other businesses or facilities or of management
contract rights to operate facilities, the award of contracts to open new
facilities or start new operations or to assume management of facilities
previously operated by governmental agencies or not-for-profit organizations and
the extension or renewal of contracts previously awarded to the Company. The
Company often makes forward-looking statements regarding its development
activities.
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Changes in the Company's future revenues depend significantly
upon the success of these development activities, and in particular on the
Company's ability to obtain additional contracts and other rights to provide
services to the consumer bases it serves, whether through acquisitions, awards
in response to requests for proposals for new facilities or programs or for
facilities being privatized by governmental agencies, or other development
activities. Future revenues also depend on the Company's ability to maintain and
renew its existing services contracts and its existing leases. The Company
actively seeks acquisitions of other companies, facilities and other assets as a
means of increasing the number of consumers served, and changes in the market
for such acquisition prospects, including increasing competition for and
increasing pricing of such acquisition prospects, could also adversely affect
the timing and/or viability of future development activities.
Revenues of the Company's Division for Persons with
Disabilities are highly dependent on reimbursement under federal and state
Medicaid programs. Generally, each state has its own Medicaid reimbursement
regulations and formulae. The Company's revenues and operating profitability are
dependent upon the Company's ability to maintain its existing reimbursement
levels and to obtain periodic increases in reimbursement rates. Changes in the
manner in which Medicaid reimbursement rates are established in one or more of
the states in which the Company conducts its operations, such as those described
herein, could adversely affect revenues and profitability. Other changes in the
manner in which federal and state reimbursement programs are operated, including
changes implemented through state and federal regulation and in the manner in
which billings/costs are reviewed and audited, could also affect revenues and
operating profitability.
The Company's cost structure and ultimate operating
profitability are significantly dependent on its labor costs and the
availability and utilization of its labor force and thus may be affected by a
variety of factors, including local competitive forces, changes in minimum wages
or other direct personnel costs, the Company's effectiveness in managing its
direct service staff, and changes in consumer services models, such as the
trends toward supported living and managed care.
Additionally, the Company's continued expansion of its
existing operations, and its ability to expand into providing services to other
populations utilizing the Company's core competencies are dependent upon
continuation of trends toward downsizing, privatization and consolidation, the
Company's ability to tailor its services to meet the specific needs of these
different populations, and its success in operating in a changing reimbursement
environment. The continuation of such trends and the nature of its operating
environment are subject to a variety of political, economic, social and legal
pressures, including desires of governmental agencies to reduce costs and
increase levels of services, federal, state and local budgetary constraints and
actions brought by advocacy groups and the courts to change existing service
delivery systems. Material
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changes resulting from these trends and pressures could adversely affect the
demand for and reimbursement of the Company's services and its operating
flexibility, and ultimately its revenues and profitability.
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II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is a party to legal and/or administrative
proceedings involving state program administrators and others, that, in the
event of unfavorable outcomes, may affect revenues and period-to-period
comparisons. In Indiana, the Company and another provider are in litigation with
the State over the rate-setting methodology for large facilities. There has
been no decision in the case. If the State is ultimately successful on all
issues, it could result in a reduction of net revenues to the Company of
approximately $1.3 million for the thirty-six months ended June 30, 1997. Any
reduction would be recorded against the Company's allowance for contractual
adjustments and/or net revenues, as appropriate, in the period in which the
issues are resolved. The Company is unable to predict whether it will prevail on
the merits of all issues in the litigation but the opinion of its legal counsel
in the case is that there is a significant likelihood that the Company will
ultimately prevail on the merits of the principal issues involved, in which case
the Company believes that the ultimate net effect on the results of its
operations, cash flow or financial condition will not be material.
The Company is also involved in litigation against the
landlord of four of the Company's large facilities in Indiana. The parties have
agreed to suspend the litigation pending the outcome of the Indiana rate
litigation, and the Company is unable at this time to determine whether it will
ultimately prevail in the matter. The Company subleased three other large
facilities in Indiana from the same landlord. The sublease, which did not
include a renegotiation provision, expired July 31, 1996 and the parties entered
into a new lease, on essentially the same terms and conditions as the previous
sublease, which has recently been extended until December 31, 1997. These three
facilities account for approximately $6.0 million annual revenues. As a result
of these matters, the Company may be compelled or may elect ultimately to reduce
certain of its facility-based operations in Indiana.
The Kentucky Department of Medicaid Services ("Kentucky") has
notified the provider of record of a large facility managed by the Company of
certain adjustments to the facility cost report for the 1991 fiscal year as a
result of the completion of its audit for that year. Kentucky has also audited
the facility for fiscal years 1992 through 1995, but has not yet issued its
audit reports with respect to these years. The provider has filed an action for
declaratory judgement and injunctive relief against Kentucky. The provider and
the Company, in the opinion of their respective counsel for this matter, believe
that there is a significant likelihood that the provider will ultimately prevail
on the merits of its argument that improper legal standards have been applied in
the adjustments. The Company believes that upon application of the appropriate
legal standards, the ultimate net effect of the adjustments on the results of
its operations, cash flow or financial condition will not be material. However,
if Kentucky ultimately prevails in the litigation and requires similar
adjustments for the subsequent years under audit (fiscal years 1992 through
1995), up to $3.4 million of the provider's costs in the aggregate could be
disallowed. The Company is unable at this time to
15
<PAGE> 16
determine the effect on the provider and/or the Company if Kentucky should
prevail.
In addition, the Company is a party to various other legal
proceedings encountered in the ordinary course of business. The Company believes
that many of such lawsuits are without merit. Further, such claims are generally
covered by insurance. The Company does not believe the results of such
litigation will have a material adverse effect on its consolidated financial
condition or results of operation.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The regular annual meeting of stockholders of Res-Care,
Inc. was held in Louisville, Kentucky on May 13, 1997. Represented at the
meeting, either in person or by proxy, were 8,052,423 voting shares out of a
total of 10,059,093 voting shares outstanding. The matters voted upon at the
meeting are described in (c) below.
(b) Proxies for the meeting were solicited pursuant to Section
14(a) of the Securities Exchange Act of 1934 and there was no solicitation in
opposition to management's nominees as listed in the proxy statement.
(c) Three proposals were submitted to a vote of stockholders
as follows:
1. The stockholders approved the election of the following
persons as directors of the Company:
NAME FOR WITHHELD
---- --- --------
James R. Fornear 8,036,218 16,205
Ronald G. Geary 8,036,918 15,505
E. Halsey Sandford 8,036,218 16,205
Spiro B. Mitsos 8,035,918 16,505
Seymour L. Bryson 8,036,768 15,655
W. Bruce Lunsford 8,035,868 16,555
There were no votes against or broker non-votes with respect to the
election of any nominee named above.
16
<PAGE> 17
2. To amend the Company's Articles of Incorporation to
increase the Company's authorized common stock to 40,000,000 shares of common
stock.
Votes for Proposal 7,962,107
Votes Against Proposal 82,182
Votes Abstaining 8,134
Broker Non-Votes 0
3. To approve the proposal to ratify the selection of KPMG
Peat Marwick, LLP, as the Company's independent auditors for the fiscal year
ending December 31, 1997:
Votes for Proposal 8,039,138
Votes Against Proposal 3,099
Votes Abstaining 10,186
Broker Non-Votes 0
Item 5. Other Information
The Company has entered into an employment agreement with
Pamela M. Spaniac, Executive Vice President of Finance and Administration,
effective August 15, 1997.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.2. Employment Agreement dated April 13, 1997 between the
Company and Paul G. Dunn. Exhibit 10.2 to the Company's Report on Form 10-Q for
the quarter ending March 31, 1997 is hereby incorporated by reference.
10.3. Amendment to the Employment Agreement between the
Company and Jeffrey M. Cross dated August 4, 1997.
10.4. Amendment to the Employment Agreement between the
Company and Paul G. Dunn dated August 4, 1997.
10.5. Employment Agreement between the Company and Pamela M.
Spaniac dated July 10, 1997.
10.6. First Amendment to Loan Instruments by and between PNC
Bank, Kentucky, Inc.; National City Bank of Kentucky; SunTrust Bank, Nashville,
N.A.; Bank One, Kentucky, NA; Wachovia Bank, NA; and Res-Care, Inc. and
Subsidiaries dated June 17, 1997.
10.7. Stock Purchase Agreement by and among Res-Care, Inc.
and Richard
17
<PAGE> 18
Greer, Robert Greer and Alicia Greer Austin dated July 31, 1997. Exhibit 2-1 to
the Company's Report of Form 8-K dated July 31, 1997 is hereby incorporated by
reference.
27. Financial Data Schedule.
18
<PAGE> 19
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
SEQUENTIALLY
NUMBERED
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT PAGE NUMBER
-------------- ----------------------- -----------
<S> <C> <C>
Exhibit 10.2. Employment Agreement dated April 13, 1997 between the
Company and Paul G. Dunn. Exhibit 10.2 to the
Company's Report on Form 10-Q for the quarter ending
March 31, 1997 is hereby incorporated by reference.
Exhibit 10.3. Amendment to the Employment Agreement between the
Company and Jeffrey M. Cross dated August 4, 1997.
Exhibit 10.4. Amendment to the Employment Agreement between the
Company and Paul G. Dunn dated August 4, 1997.
Exhibit 10.5. Employment Agreement between the Company and
Pamela M. Spaniac dated July 10, 1997.
Exhibit 10.6. First Amendment to Loan Instruments by and
between PNC Bank, Kentucky, Inc.; National City Bank
of Kentucky; SunTrust Bank, Nashville, N.A.; Bank One,
Kentucky, NA; Wachovia Bank, NA; and Res-Care, Inc.
and Subsidiaries dated June 17, 1997.
Exhibit 10.7. Stock Purchase Agreement by and among Res-Care, Inc.
and Richard Greer, Robert Greer and Alicia Greer Austin
dated July 31, 1997. Exhibit 2-1 to the Company's Report
of Form 8-K dated July 31, 1997 is hereby incorporated
by reference.
Exhibit 27. Financial Data Schedule.
</TABLE>
19
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RES-CARE, INC.
Registrant
Date: August 14, 1997 By: /s/ RONALD G. GEARY
--------------------------- ---------------------------
Ronald G. Geary
President and Chief Executive Officer
Date: August 14, 1997 By: /s/ R. DAN BRICE
--------------------------- ----------------------------
R. Dan Brice
Acting Vice President of Finance/
Administration
20
<PAGE> 1
Exhibit 10.3
AMENDMENT TO
------------
EMPLOYMENT AGREEMENT
--------------------
THIS AMENDMENT TO EMPLOYMENT AGREEMENT ("Amendment") is made this 4th
day of August, 1997, between RES-CARE, INC., a Kentucky corporation (the
"Company"), and JEFFREY M. CROSS (the "Employee").
RECITALS:
---------
WHEREAS, the Company and the Employee executed that certain Employment
Agreement dated as of January 1, 1997 (the "Employment Agreement"); and
WHEREAS, the Board of Directors of the Company recognizes that the
Employee's contribution to the growth and success of the Company has been
substantial and wishes to modify the Employment Agreement to accelerate the
granting of certain options to purchase shares of Company common stock.
AGREEMENT:
----------
NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth herein, the parties agree as follows:
1. Section 3(d) of the Employment Agreement is deleted in its entirety
and the following is substituted therefor:
(d) PARTICIPATION IN STOCK OPTION PLAN. Employee shall be entitled
to participate in the Company stock option plan which is
applicable to its managerial employees. On August 15, 1997, Em
ployee shall be granted options to purchase 25,000 shares of
Company common stock, which options shall vest and be
exercisable on August 15, 1998 if Employee is then employed
hereunder. Provided Em ployee continues to be employed
hereunder, on August 15, 1998, Employee shall be granted
options to purchase 50,000 shares of Company common stock, and
provided Employee continues to be employed hereunder, 25,000
of such options shall vest and be exercisable on August 15,
1999 and the remaining 25,000 of such options shall vest and
be exercisable on August 15, 2000. Any stock options granted
to Employee pursuant to this paragraph (d) shall have an
exercise price based upon the closing sale price of Company
common stock as reported on the NASDAQ National Market System
on the respective date of grant and the number of shares which
are subject to such options shall be
<PAGE> 2
equitably adjusted for stock splits, stock dividends,
recapitalizations and the like occurring after the date
hereof.
2. Except as otherwise specifically set forth in this Amendment, the
Employment Agreement shall be unamended and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment on
the day and year set forth above.
RES-CARE, INC.
By:
-----------------------------------------
Ronald G. Geary
President and Chief Executive Officer
---------------------------------------------
Jeffrey M. Cross
2
<PAGE> 1
Exhibit 10.4
AMENDMENT TO
------------
EMPLOYMENT AGREEMENT
--------------------
THIS AMENDMENT TO EMPLOYMENT AGREEMENT ("Amendment") is made this 4th
day of August, 1997, between RES-CARE, INC., a Kentucky corporation (the
"Company"), and PAUL G. DUNN (the "Employee").
RECITALS:
---------
WHEREAS, the Company and the Employee executed that certain Employment
Agreement dated April 13, 1997 (the "Employment Agreement"); and
WHEREAS, the Board of Directors of the Company recognizes that the
Employee's contribution to the growth and success of the Company has been
substantial and wishes to modify the Employment Agreement to accelerate the
granting of certain options to purchase shares of Company common stock.
AGREEMENT:
----------
NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth herein, the parties agree as follows:
1. Section 3(d) of the Employment Agreement is deleted in its entirety
and the following is substituted therefor:
(d) PARTICIPATION IN STOCK OPTION PLAN. Employee shall be entitled
to participate in the Company stock option plan which is
applicable to its managerial employees. On August 15, 1997, Em
ployee shall be granted options to purchase 25,000 shares of
Company common stock, which options shall vest and be
exercisable on August 15, 1998 if Employee is then employed
hereunder. Provided Em ployee continues to be employed
hereunder, on August 15, 1998, Employee shall be granted
options to purchase 50,000 shares of Company common stock, and
provided Employee continues to be employed hereunder, 25,000
of such options shall vest and be exercisable on August 15,
1999 and the remaining 25,000 of such options shall vest and
be exercisable on August 15, 2000. Any stock options granted
to Employee pursuant to this paragraph (d) shall have an
exercise price based upon the closing sale price of Company
common stock as reported on the NASDAQ National Market System
on the respective date of grant and the number of shares which
are subject to such options shall be
<PAGE> 2
equitably adjusted for stock splits, stock dividends,
recapitalizations and the like occurring after the date
hereof.
2. Except as otherwise specifically set forth in this Amendment, the
Employment Agreement shall be unamended and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment on
the day and year set forth above.
RES-CARE, INC.
By:
----------------------------------------
Ronald G. Geary
President and Chief Executive Officer
--------------------------------------------
Paul G. Dunn
2
<PAGE> 1
Exhibit 10.5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Employment Agreement") is made and entered
into this 10th day of July, 1997, between RES-CARE, INC., a Kentucky corporation
(the "Company"), and PAMELA MANDEL SPANIAC (the "Employee").
RECITALS:
---------
WHEREAS, the Company has a need for an individual to provide services
to the Company as Executive Vice President of Finance and Administration/Chief
Financial Officer;
WHEREAS, the Employee has substantial experience in accounting and
financial matters in the health care field; and
WHEREAS, the Company and the Employee have reached agreement on the
terms and conditions under which Employee will perform services for the Company.
AGREEMENT:
----------
NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth herein, the parties agree as follows:
1. EMPLOYMENT AND TERM. The Company hereby employs the Employee, and
the Employee accepts such employment, upon the terms and conditions herein set
forth for an initial term commencing on August 15, 1997, and ending on August
14, 2000, subject to earlier termination only in accordance with the express
provisions of this Employment Agreement ("Initial Term"). This Employment
Agreement shall be automatically extended on a year-to-year basis (August 15
through August 14 of each successive year), unless sooner terminated in
accordance with the express provisions of this Employment Agreement ("Additional
Terms"), upon the expiration of the Initial Term or any Additional Term, unless
prior to the commencement of a sixty (60) day period expiring at the end of such
Initial Term or any Additional Term, the Company or the Employee shall have
given written notice to the other stating that the term of this Employment
Agreement shall not be extended. For purposes of this Employment Agreement, the
term "Term" shall mean the Initial Term plus all Additional Terms.
2. DUTIES.
(a) EMPLOYMENT AS EXECUTIVE VICE PRESIDENT OF FINANCE AND
ADMINISTRATION/CHIEF FINANCIAL OFFICER. During the Term, the Employee shall
serve as the Executive Vice President of Finance and Administration/Chief
Financial Officer of the Company. The Employee
1
<PAGE> 2
subject to the supervision and control of the President and Chief
Executive Officer of the Company (the "President") and the Board of Directors of
the Company (the "Board"), be responsible for oversight and supervision of the
following departments of the Company: Corporate Accounting and Division for
Youth Services Accounting, Division for Persons with Disabilities Accounting,
Human Resources, Reimbursement, Information Technology and Taxation. The
Employee shall also perform such additional duties as may be prescribed from
time to time by the President or the Board, including, without limitation,
serving as an officer of one or more subsidiaries or affiliates of the Company,
if elected to such positions, without any further salary or other compensation.
(b) TIME AND EFFORT. The Employee shall devote all of her business
time, energies and talents exclusively to the business of the Company and to no
other business during the Term of this Employment Agreement; provided, however,
that subject to the restrictions in Section 7 hereof, the Employee may (i)
invest her personal assets in such form or manner as will not require her
services in the operation of the affairs of the entities in which such
investments are made and (ii) subject to satisfactory performance of the duties
described in Section 2(a) hereof, devote such time as may be reasonably required
for her to continue to maintain her current level of participation in various
civic and charitable activities.
3. COMPENSATION.
(a) BASE SALARY. The Company shall pay to the Employee during the
Term a fixed, annual salary (the "Base Salary"), which initially shall be
$150,000. The Base Salary shall be due and payable in substantially equal
bi-weekly installments or in such other installments as may be necessary to
comport with the Company's normal pay periods for all employees.
Provided that this Employment Agreement or Employee's employment
hereunder shall not have been terminated for any reason, the Base Salary shall
be increased, effective as of the first day of each year of the Term, in
proportion to the increase in the Consumer Price Index "All-Items" category, as
published by the Bureau of Labor Statistics (the "CPI") established for the
month of July immediately preceding the date on which the adjustment is to be
made over that established for the month of July 1997. If the Bureau of Labor
Statistics suspends or terminates its publication of the CPI, the parties agree
that a reasonably comparable price index shall be substituted for the CPI.
(b) ANNUAL BONUS PLAN. The Employee shall participate with the other
executive officers of the Company in the Annual Bonus Plan established by the
Board, and in connection therewith shall be eligible for an annual bonus of up
to twenty-five percent (25%) of her Base Salary (as adjusted by the CPI for the
year of the Term for which the bonus is determined and prorated to reflect the
difference between the annual periods of this Agreement and the calendar year
basis of the Annual Bonus Plan), in accordance with and based upon the mutually
agreeable performance goals established for the Employee by the President and
the Employee and as such Annual Bonus Plan shall be modified by the Board from
time to time.
-2-
<PAGE> 3
(c) PARTICIPATION IN BENEFIT, INSURANCE, VACATION AND SICK LEAVE
PLANS. Employee shall be entitled to participate in the standard Company benefit
package which is to be implemented generally as reflected in Company's Flex-Care
Employee guide currently in effect, as modified by the Company from time to
time, subject to any eligibility, coverage, qualification or other limitations
or restrictions applicable to such benefits. Employee acknowledges that the
Company is in the process of modifying its Flex-Care Plan. During the Initial
Term and each Additional Term, Employee will be entitled to three (3) weeks of
vacation, which vacation may be utilized as earned. Employee will accrue ten
(10) days of sick leave for each year of employment. The Employer reserves the
right to amend or modify in their entirety or any of the above-mentioned fringe
benefit programs.
(d) PARTICIPATION IN STOCK OPTION PLAN. Employee shall be entitled
to participate in the Company stock option plan which is applicable to its
managerial employees. On the first day of the Initial Term (August 15, 1997),
Employee shall be granted options to purchase 25,000 shares of Company common
stock, which options shall vest and be exercisable on August 15, 1998 if
Employee is then employed hereunder. Provided Employee continues to be employed
hereunder, on August 15, 1998, Employee shall be granted options to purchase
50,000 shares of Company common stock, and provided Employee continues to be
employed hereunder, 25,000 of such options shall vest and be exercisable on
August 15, 1999 and the remaining 25,000 of such options shall vest and be
exercisable on August 15, 2000. Any stock options granted to Employee pursuant
to this paragraph (d) shall have an exercise price based upon the closing sale
price of Company common stock as reported on the NASDAQ National Market System
on the respective date of grant and the number of shares which are subject to
such options shall be equitably adjusted for stock splits, stock dividends,
recapitalizations and the like occurring after the date hereof.
(e) PARTICIPATION IN RETIREMENT AND PROFIT SHARING PLANS. Employee
shall be eligible to participate in any retirement and/or profit sharing plans
applicable to the Company's managerial employees, as modified by the Company
from time to time, subject to customary vesting and waiting periods.
(f) MOVING EXPENSES. Employee will promptly move her residence from
the Denver, Colorado area to the Louisville, Kentucky metropolitan area.
Employee will be reimbursed by the Company for her reasonable and necessary
expenses in connection with the relocation of her residence pursuant to the
Company's standard relocation policy except that (i) the $5,000 cap on expense
reimbursement in such policy shall be waived by the Company, (ii) Employee shall
be reimbursed by the Company for up to two (2) "house-hunting" trips (the first
of which trip is scheduled for the period July 16-20, 1997) and (iii) Employee
shall be reimbursed for her cost of temporary housing in Louisville, Kentucky
for a reasonable period to be mutually agreed upon by Employee and the Company.
The Company shall also pay the customary closing costs of Employee in connection
with the sale of the Employee's existing residence in Denver, Colorado (the
"Existing Residence"), which closing costs shall consist of any reasonable and
customary title examination and/or survey expenses, sellers' agent's commission,
and escrow and
-3-
<PAGE> 4
document preparation fees. The Company shall also pay the customary closing
costs of Employee in connection with her purchase of a new residence in the
Louisville, Kentucky metropolitan area, which closing costs shall consist of any
reasonable and customary title examination and/or survey expenses and escrow and
document preparation fees, but shall specifically exclude any amount for
"points" or similar fees or costs. The Company shall also reimburse Employee for
the actual federal, Kentucky and local income taxes paid by Employee on the
amounts paid by the Company to Employee pursuant to this paragraph (f), which
amount shall be computed after taking into account all available exclusions,
exemptions and deductions under applicable law.
(g) OUT-OF-POCKET EXPENSES. The Company shall promptly pay the
ordinary, necessary and reasonable expenses incurred by Employee in the
performance of Employee's duties hereunder (or if such expenses are paid
directly by Employee shall promptly reimburse her for such payment), consistent
with the reimbursement policies adopted by the Board from time-to-time.
Provided, however, such payment or reimbursement shall be subject to prior
written approval by the President.
(h) WITHHOLDING OF TAXES; INCOME TAX TREATMENT. If, upon the payment
of any compensation or benefit to the Employee under this Employment Agreement,
the Company deter mines in its discretion that it is required to withhold or
provide for the payment in any manner of taxes, including but not limited to,
federal income or social security taxes, state income taxes or local income
taxes, the Employee agrees that the Company may satisfy such requirement by:
(i) withholding an amount necessary to satisfy such
withholding requirement from the Employee's compensation or benefit; or
(ii) conditioning the payment or transfer of such
compensation or benefit upon the Employee's payment to the Company of
an amount sufficient to satisfy such withholding requirement.
The Employee agrees that she will treat all of the amounts payable pursuant to
this Employment Agreement as compensation for income tax purposes.
(i) TRANSITIONAL SERVICES FOR FORMER EMPLOYER. During the period
August 15, 1997 through November 15, 1997, Employee may, on a basis which is
mutually agreeable to Employee and the Company, perform certain services for her
former employer to assist in the transition of her successor at such employer
and other specific projects.
4. TERMINATION. The Employee's employment hereunder may be terminated
under this Employment Agreement as follows, subject to the Employee's rights
pursuant to Section 5 hereof:
(a) DEATH. The Employee's employment hereunder shall terminate upon
her death.
-4-
<PAGE> 5
(b) DISABILITY. If, as a result of the Employee's incapacity due to
physical or mental illness, the Employee shall have been absent from her duties
hereunder on a full-time basis for 180 consecutive calendar days, and within
thirty (30) days after written Notice of Termination is given (which may occur
no earlier than thirty (30) days before, but at any time after, the end of such
180-day period), the Employee shall not have returned to the performance of her
duties hereunder on a full-time basis, the Company may terminate the Employee's
employment hereunder.
(c) CAUSE. The Company may terminate the Employee's employment
hereunder for Cause. For purposes of this Employment Agreement, the Company
shall have "Cause" to terminate the Employee's employment because of the
Employee's personal dishonesty, intentional misconduct, breach of fiduciary duty
involving personal profit, failure to perform her duties hereunder, conviction
of, or plea of NOLO CONTENDERE to, any law, rule or regulation (other than
traffic violations or similar offenses) or breach of any provision of this
Employment Agreement.
(d) WITHOUT CAUSE. By appropriate action of the Board, the Company
shall have the right to terminate the Employee's employment under this
Employment Agreement at any time without Cause (as defined in Subsection 4(c)).
(e) VOLUNTARY TERMINATION. By not less than thirty (30) days prior
written notice to the President, Employee may voluntarily terminate her
employment hereunder.
(f) NOTICE OF TERMINATION. Any termination during the term of this
Employment Agreement of the Employee's employment hereunder (other than
termination pursuant to Section 4(a) above) shall be communicated by written
Notice of Termination to the Employee hereto (except in the case of termination
as described in Section 4(e) above written Notice of Termination shall be
delivered by the Employee). For purposes of this Employment Agreement, a "Notice
of Termination" shall mean a notice which shall indicate the specific
termination provision in this Employment Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Employee's employment under the provision so
indicated.
(g) DATE OF TERMINATION. The "Date of Termination" for purposes of
this Employment Agreement, mean: (i) if the Employee's employment is terminated
by her death, the date of her death; (ii) if the Employee's employment is
terminated on account of disability pursuant to Section 4(b) above, thirty (30)
days after Notice of Termination is given (provided that the Employee shall not,
during such 30-day period, have returned to the performance of her duties on a
full-time basis), (iii) if the Employee's employment is terminated by the
Company for Cause pursuant to Section 4(c) above, the date specified in the
Notice of Termination, (iv) if the Employee's employment is terminated by the
Employer without Cause, pursuant to Section 4(d) above, thirty (30) days after
Notice of Termination is given, (v) if the Employee's employment is terminated
voluntarily pursuant to Section 4(e) above, the date specified in the Notice of
-5-
<PAGE> 6
Termination, and (vi) if the Employee's employment is terminated by reason of an
election by either party not to extend the Term, the last day of the then
effective Term.
5. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
(a) DEATH. If the Employee's employment shall be terminated by
reason of her death, the Employee shall continue to receive her full Base Salary
until the date of her death and a Cash Bonus, prorated based upon the number of
full months that have elapsed from the immediately preceding August 1 until the
date of her death (plus any earned but unpaid Cash Bonus for a prior period).
(b) DISABILITY. During any period that the Employee fails to perform
her duties hereunder as a result of incapacity due to physical or mental
illness, the Employee shall continue to receive her full Base Salary until the
Date of Termination and shall be entitled to receive a Cash Bonus, prorated
based upon the number of full months that have elapsed from the immediately
preceding August 1 until the Date of Termination (plus any earned but unpaid
Cash Bonus for a prior period). Upon termination due to death prior to a
termination as specified in the preceding sentence, Section 5(a) above shall
apply.
(c) CAUSE. If the Employee's employment shall be terminated for
Cause, the Company through the Date of Termination, continue to pay the Employee
her full Base Salary but the Employee shall not be entitled to receive a Cash
Bonus (other than any earned but unpaid Cash Bonus for a prior period), and
shall not be eligible for any severance payment of any nature.
(d) WITHOUT CAUSE. If the Employee's employment shall be terminated
without Cause, and such Notice of Termination shall have been given after a
Change of Control (as defined below) shall be applicable to the Company, the
Employee shall continue to receive her full Base Salary until the Date of
Termination and for one (1) year after the Date of Termination. In all other
cases in which the Employee's employment shall be terminated without Cause, the
Employee shall continue to receive her full Base Salary until the Date of
Termination and for six (6) months after the Date of Termination. In all cases
in which Employee's employment shall be terminated without Cause, the Employee
shall also be entitled to receive a Cash Bonus, prorated based upon the number
of full months that have elapsed from the immediately preceding August 1 until
the Date of Termina tion (plus any earned but unpaid Cash Bonus for a prior
period). A "Change of Control" shall be applicable to the Company --
(i) if any person shall acquire more than fifty
percent (50%) of the common capital stock of the Company through a
tender offer, exchange offer or otherwise;
(ii) if the Company shall be a party to a binding
agreement to any merger, consolidation or reorganization in which any
person who on the date hereof does not own more than ten percent (10%)
of the issued and outstanding common capital stock
-6-
<PAGE> 7
of the Company acquires, beneficially or of record, more than fifty
percent (50%) of such stock; or
(iii) there shall be a sale of all or substantially
all of the assets of the Company.
(e) EXPIRATION OF TERM. If the Employee's employment shall be
terminated by reason of expiration of the Term (irrespective of which party
elected not to extend the Term), the Company through the Date of Termination,
continue to pay the Employee her full Base Salary and the Company shall pay the
Employee her Cash Bonus for the last year of the Term.
(f) VOLUNTARY TERMINATION. If the Employee's employment shall be
terminated pursuant to Section 4(e) hereof, the Company through the Date of
Termination, continue to pay the Employee her full Base Salary but the Employee
shall not be entitled to receive a Cash Bonus (other than any earned but unpaid
Cash Bonus for a period), and shall not be entitled to any severance payment of
any nature.
(g) NO FURTHER OBLIGATIONS AFTER PAYMENT. After all payments, if
any, have been made to the Employee pursuant to any of paragraphs (a) through
(f) of this Section 5, the Company shall have no further obligations to the
Employee under this Employment Agreement other than the provision of any
employee benefits required to be continued under applicable law.
6. DUTIES UPON TERMINATION. Upon the termination of Employee's
employment hereunder for any reason whatsoever (including but not limited to the
failure of the parties hereto to agree to the extension of this Employment
Agreement pursuant to Section 2 hereof), Employee shall promptly return to the
Company any Confidential Information (as defined in Section 7(c)(ii) hereof) and
whether or not constituting Confidential Information, any technical data,
performance information and reports, sales or marketing plans, documents or
other records, rolodexes, and any manuals, drawings, tape recordings, computer
programs, discs, and any other physical representations of any other information
relating to the Company, its subsidiaries or affiliates or to the Business (as
defined in Section 7(c)(iii) hereof) of the Company. Employee hereby
acknowledges that any and all of such documents, items, physical representations
and information area and shall remain at all times the exclusive property of the
Company.
7. RESTRICTIVE COVENANTS.
(a) ACKNOWLEDGMENTS. Employee acknowledges that (i) her services
hereunder are of a special, unique and extraordinary character and that her
position with the Company will place her in a position of confidence and trust
with the operations of the Company, its subsidiaries and affiliates
(collectively, the "Res-Care Companies") and will allow her access to
Confidential Information, (ii) the Company has provided Employee with a unique
opportunity as its Executive Vice President of Finance and Administration/Chief
Financial Officer, (iii) the nature and periods of the restrictions imposed by
the covenants contained in this Section 7 are fair, reasonable and
-7-
<PAGE> 8
necessary to protect and preserve for the Company the benefits of Employee's
employment hereunder, (iv) the Res-Care Companies would sustain great and
irreparable loss and damage if Employee were to breach any of such covenants,
(v) the Res-Care Companies conduct and are aggressively pursuing the conduct of
their business actively in and throughout the entire Territory (as defined in
paragraph (d)(i) of this Section 7), and (vi) the Territory is reasonably sized
because the current Business of the Res-Care Companies is conducted throughout
such geographical area, the Res-Care Companies are aggressively pursuing
expansion and new operations throughout such geographic area and the Res-Care
Companies require the entire Territory for profitable operations.
(b) CONFIDENTIALITY COVENANT. Having acknowledged the
foregoing, Employee covenants that without limitation as to time, she will not
directly or indirectly disclose or use or otherwise exploit for her own benefit,
or the benefit of any other person, except as may be necessary in the
performance of her duties hereunder, any Confidential Information.
(c) COVENANTS. Having acknowledged the statements in Section
7(a) hereof, Employee covenants and agrees with the Res-Care Companies that she
will not, directly or indirectly, from the date hereof until the Date of
Termination of Employee's employment hereunder, and for a period of one (1) year
thereafter, directly or indirectly (i) solicit, divert or appropriate to himself
or any other person, any business or services (similar in nature to the
Business) of any person who was an employee or an agent of any of the Res-Care
Companies at any time during the last twelve (12) months of Employee's
employment hereunder; or (ii) own, manage, operate, join, control, assist,
participate in or be connected with, directly or indirectly, as an officer,
director, shareholder, partner, proprietor, employee, agent, consultant,
independent contractor or otherwise, any person which is, at the time, directly
or indirectly, in competition within the Territory with the Business of the Res-
Care Companies.
(d) DEFINITIONS. For purposes of this Employment Agreement:
(i) For purposes of this Section 7, "termination of
Employee's employ ment" shall include any termination pursuant to
paragraphs (b), (c), (d) and (e) of Section 5 hereof, the termination
of such Employee's employment by reason of the failure of the parties
hereto to agree to the extension of this Agreement pursuant to Section
2 hereof or the voluntary termination of Employee's employment
hereunder.
(ii) The "Territory" shall mean the forty-eight (48)
contiguous states of the United States, the United States Virgin
Islands and Puerto Rico.
(iii) "Confidential Information" shall mean any
business information relating to the Res-Care Companies or to the
Business (whether or not constituting a trade secret), which has been
or is treated by any of the Res-Care Companies as proprietary and
confidential and which is not generally known or ascertainable through
proper means. Without limiting the generality of the foregoing, so long
as such information is not generally known or ascertainable by proper
means and is treated by the Res-Care
-8-
<PAGE> 9
Companies as proprietary and confidential, Confidential Information
shall include the following information regarding any of the Res-Care
Companies:
(1) any patent, patent application, copyright,
trademark, trade name, service mark,
service name, "know-how" or trade secrets;
(2) customer lists and information relating to
(i) any client of any of the Res-Care
Companies or (ii) any client of the
operations of any other person or entity
for which operations any of the Res-Care
Companies provides management services;
(3) supplier lists, pricing policies,
consulting contracts and competitive bid
information;
(4) records, operational methods and Company
policies and procedures, including manuals
and forms;
(5) marketing data, plans and strategies;
(6) business acquisition, development,
expansion or capital investment plan or
activities;
(7) software and any other confidential
technical programs;
(8) personnel information, employee payroll
and benefits data;
(9) accounts receivable and accounts payable;
(10) other financial information, including
financial statements, budgets,
projections, earnings and any unpublished
financial information; and
(11) correspondence and communications with
outside parties.
(iv) The "Business" of the Res-Care Companies shall
mean the business of providing juvenile treatment or services, services
to persons with mental retardation and other developmental
disabilities, including but not limited to persons who have been dually
diagnosed, services to persons with acquired brain injuries, training
services, or providing management and/or consulting services to third
parties relating to the foregoing.
-9-
<PAGE> 10
(v) The term "person" shall mean an individual, a
partnership, an association, a corporation, a trust, an unincorporated
organization, or any other business entity or enterprise.
(e) INJUNCTIVE RELIEF, INVALIDITY OF ANY PROVISION. Employee
acknowledges that her breach of any covenant contained in this Section 7 will
result in irreparable injury to the Res-Care Companies and that the remedy at
law of such parties for such a breach will be inadequate. Accordingly, Employee
agrees and consents that each of the Res-Care Companies in addition to all other
remedies available to them at law and in equity, shall be entitled to seek both
preliminary and permanent injunctions to prevent and/or halt a breach or
threatened breach by Employee of any covenant contained in this Section 7. If
any provision of this Section 7 is invalid in part or in whole, it shall be
deemed to have been amended, whether as to time, area covered, or otherwise, as
and to the extent required for its validity under applicable law and, as so
amended, shall be enforceable. The parties further agree to execute all
documents necessary to evidence such amendment.
8. ENTIRE AGREEMENT; MODIFICATION; WAIVER. This Employment Agreement
constitutes the entire agreement between the parties pertaining to the subject
matter contained in it and supersedes all prior and contemporaneous agreements,
representations, and understandings of the parties. No supplement, modification,
or amendment of this Employment Agreement shall be binding unless executed in
writing by all parties hereto (other than as provided in the next to last
sentence of Section 7(e) hereof). No waiver of any of the provisions of this
Employment Agreement will be deemed, or will constitute, a waiver of any other
provision, whether or not similar, nor will any waiver constitute a continuing
waiver. No waiver will be binding unless executed in writing by the party making
the waiver.
9. SUCCESSORS AND ASSIGNS; ASSIGNMENT. This Employment Agreement shall
be binding on, and inure to the benefit of, the parties hereto and their
respective heirs, executors, legal repre sentatives, successors and assigns;
PROVIDED, HOWEVER, that this Employment Agreement is intended to be personal to
the Employee and the rights and obligations of the Employee hereunder may not be
assigned or transferred by her.
10. NOTICES. All notices, requests, demands and other communications
required or permitted to be given or made under this Employment Agreement, or
any other agreement executed in connection therewith, shall be in writing and
shall be deemed to have been given on the date of delivery personally or upon
deposit in the United States mail postage prepaid by registered or certified
mail, return receipt requested, to the appropriate party or parties at the
following addresses (or at such other address as shall hereafter be designated
by any party to the other parties by notice given in accordance with this
Section):
-10-
<PAGE> 11
TO THE COMPANY:
---------------
Res-Care, Inc.
10140 Linn Station Road
Louisville, Kentucky 40223
Attn: Ronald G. Geary,
President and Chief Executive Officer
TO THE EMPLOYEE:
----------------
Pamela Mandel Spaniac
1111 South Saint Paul Street
Denver, Colorado 80210
11. EXECUTION IN COUNTERPARTS. This Employment Agreement may be
executed in multiple counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same document.
12. FURTHER ASSURANCES. The parties each hereby agree to execute and
deliver all of the agreements, documents and instruments required to be executed
and delivered by them in this Employment Agreement and to execute and deliver
such additional instruments and documents and to take such additional actions as
may reasonably be required from time to time in order to effectuate the
transactions contemplated by this Employment Agreement.
13. SEVERABILITY OF PROVISIONS. The invalidity or unenforceability of
any particular provision of this Employment Agreement shall not affect the other
provisions hereof and this Employment Agreement shall be construed in all
respects as if such invalid or unenforceable provisions were omitted.
14. GOVERNING LAW. This Employment Agreement is executed and delivered
in, and shall be governed by, enforced and interpreted in accordance with the
laws of, the Commonwealth of Kentucky.
15. TENSE; CAPTIONS. In construing this Employment Agreement, whenever
appropriate, the singular tense shall also be deemed to mean the plural, and
vice versa, and the captions contained in this Employment Agreement shall be
ignored.
16. SURVIVAL. The provisions of Sections 5, 6 and 7 hereof shall
survive the termination, for any reason, of this Employment Agreement, in
accordance with their terms.
-11-
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement on the day and year set forth above.
RES-CARE, INC.
By:
------------------------------------------
Ronald G. Geary
President and Chief Executive Officer
------------------------------------------
Pamela Mandel Spaniac
11
<PAGE> 1
Exhibit 10.6
FIRST AMENDMENT TO LOAN INSTRUMENTS
This First Amendment to Loan Instruments (the "First Amendment"), is
made and entered into as of the 23rd day of June, 1997, by and among (i) (a) PNC
BANK, KENTUCKY, INC., a Kentucky banking corporation with principal office and
place of business in Louisville, Kentucky ("PNC"), (b) NATIONAL CITY BANK OF
KENTUCKY, a national banking association with principal office and place of
business in Louisville, Kentucky ("National City"), (c) SUNTRUST BANK,
NASHVILLE, N.A., a national banking association with principal office and place
of business in Nashville, Tennessee ("SunTrust"), (d) BANK ONE, KENTUCKY, NA, a
national banking association with principal office and place of business in
Louisville, Kentucky ("Bank One"), and (e) WACHOVIA BANK, N.A., a national
banking association with principal office and place of business in Atlanta,
Georgia ("Wachovia") (PNC, National City, SunTrust, Bank One and Wachovia are
hereinafter collectively referred to as the "Banks", and each is hereinafter
individually referred to as a "Bank"); (ii) PNC BANK, KENTUCKY, INC., in its
capacity as the administrative bank hereunder (in such capacity the
"Administrative Bank"); and (iii) RES-CARE, INC., a Kentucky corporation with
principal office and place of business in Louisville, Kentucky ("Res-Care") and
each of the Consolidated Subsidiaries of Res-Care identified on Schedule 1
hereto (Res-Care and each Consolidated Subsidiary, a "Borrower," and all of the
foregoing collectively, the "Borrowers").
PRELIMINARY STATEMENT
A. The Existing Borrowers (defined herein) obtained from PNC, National
City, SunTrust and Bank One certain credit accommodations pursuant to a Loan
Agreement dated as of December 23, 1996 (the "Old Loan Agreement") including the
following: (i) a revolving line of credit in the principal amount of Sixty Five
Million Dollars ($65,000,000) (the "Original Revolving Credit Facility"), (ii) a
commitment to issue letters of credit for the account of the Borrowers in an
aggregate outstanding amount of up to Ten Million Dollars ($10,000,000) and
(iii) a swing revolving line of credit in the principal amount of Seven Million
Five Hundred Thousand Dollars ($7,500,000) (the "Original Swing Line Credit
Facility").
B. The Borrowers wish to provide for certain amendments of the Loan
Agreement and the Loan Instruments (each capitalized term used herein, unless
otherwise expressly defined herein, shall have the meaning set forth in the Loan
Agreement) as set forth herein, including, but not limited to (i) the increase
of the principal amount of the Original Revolving Credit Facility to One Hundred
Million Dollars ($100,000,000), (ii) the increase of the principal amount of the
Original Swing Line Credit Facility to Twelve Million Five Hundred Thousand
Dollars ($12,500,000), (iii) the amendment of certain financial covenants and
(iv) the addition of the New Borrowers (as defined herein) as parties to the
Loan Instruments. The Banks, including Wachovia which is joining the other
lenders as a Bank, are agreeable to such changes, upon satisfaction of the terms
and conditions set forth herein.
<PAGE> 2
Now, therefore, in consideration of the premises and the mutual
covenants and agreements set forth herein and in the Loan Agreement and for
other good and valuable consideration, the mutuality, receipt and sufficiency of
which are hereby acknowledged, the parties hereby agree as follows:
I. AMENDMENTS TO LOAN AGREEMENT
A. INTRODUCTION. The introductory paragraph in the Loan
Agreement is hereby amended and restated as follows:
THIS LOAN AGREEMENT (this "Loan Agreement"), originally made
and entered into as of December 23, 1996, as subsequently
amended and restated as of June 23, 1997, is made and entered
by and among (i) (a) PNC BANK, KENTUCKY, INC., a Kentucky
banking corporation with principal office and place of
business in Louisville, Kentucky ("PNC"), (b) NATIONAL CITY
BANK OF KENTUCKY, a national banking association with
principal office and place of business in Louisville, Kentucky
("National City"), (c) SUNTRUST BANK, NASHVILLE, N.A., a
national banking association with principal office and place
of business in Nashville, Tennessee ("SunTrust"), (d) BANK
ONE, KENTUCKY, NA, a national banking association with
principal office and place of business in Louisville, Kentucky
("Bank One"), and (e) WACHOVIA BANK, N.A., a national banking
association with principal office and place of business in
Atlanta, Georgia ("Wachovia") (PNC, National City, SunTrust,
Bank One and Wachovia are hereinafter collectively referred to
as the "Banks", and each is hereinafter individually referred
to as a "Bank"); (ii) PNC BANK, KENTUCKY, INC., in its
capacity as the administrative bank hereunder (in such
capacity the "Administrative Bank"); and (iii) RES-CARE, INC.,
a Kentucky corporation with principal office and place of
business in Louisville, Kentucky ("Res-Care") and each of the
Consolidated Subsidiaries of Res-Care identified on Schedule 1
hereto (Res-Care and each Consolidated Subsidiary, a
"Borrower," and all of the foregoing collectively, the
"Borrowers").
B. PRELIMINARY STATEMENT. Paragraphs A, B and C of the
Preliminary Statement are hereby amended and restated as follows:
A. The Borrowers desire to obtain from the Banks a
revolving line of credit in the principal amount of One
Hundred Million Dollars ($100,000,000.00) (as defined in
Section 1 hereof, the "Revolving Credit Facility").
B. The Borrowers desire to obtain from the Banks a
commitment to issue letters of credit for the account of the
Borrowers in an aggregate outstanding amount of up to Ten
Million ($10,000,000.00) at any one time, as a subfacility
2
<PAGE> 3
under the Revolving Credit Facility (as defined in Section 1
hereof, the "Letter of Credit Subfacility").
C. The Borrowers desire to obtain from PNC a swing
line revolving line of credit in the principal amount of
Twelve Million Five Hundred Thousand Dollars ($12,500,000) (as
defined in Section 1 hereof, the "Swing Line Credit
Facility").
C. SECTION 1 - DEFINITIONS AND CROSS REFERENCE. The following
definitions and provisions of Section 1 of the Loan Agreement are hereby amended
r added as follows:
1.25 "Cash Flow from Operations" means the sum of the
amounts for the period in question of (i) Net Income, (ii)
Interest Expense, (iii) provisions for taxes based on income,
(iv) depreciation, amortization and other non-cash charges to
Net Income, minus non-cash credits to Net Income, of the
Borrowers on a consolidated basis in accordance with GAAP,
determined as of the end of each Fiscal Quarter, for the
previous four Fiscal Quarters. The Borrowers may include in
the calculation of "Cash Flow from Operations" the sum of (i),
(ii), (iii) and (iv) for the 12 months preceding the date of
calculation for any entity that has been acquired in a
Permitted Business Combination; provided, however, that:
(a) if the portion of the sum of (i), (ii),
(iii) and (iv) that is based upon pre-acquisition
unaudited financial results of entities acquired in
Permitted Business Combinations (the "Pre-Acquisition
Financial Results") equals or exceeds twenty five
percent (25%) (the "Cash Flow from Operations
Limitation") of the total "Cash Flow from Operations"
of the Borrowers for the period being measured, then
the calculation of total "Cash Flow from Operations"
may include the portion of the Pre- Acquisition
Financial Results that is equal to the Cash Flow from
Operations Limitation but must exclude the portion of
Pre-Acquisition Financial Results that exceeds the
Cash Flow from Operations Limitation;
(b) if the calculation of "Cash Flow from
Operations" is performed at any time from the
beginning of the seventh month after the date of
acquisition of an entity until the end of the twelfth
month following the acquisition, the calculation with
respect to such entity shall be based upon the actual
financial results of such entity for the period
occurring after the acquisition, annualized on a
12-month basis;
(c) Net Income for purposes of the
calculation of Cash Flow from Operations shall not
include any Net Income of a Borrower derived from
such Borrower's ownership of a Person that is not a
Consolidated
3
<PAGE> 4
Subsidiary except to the extent such Borrower has
received a distribution of such Net Income from such
Person; and
(d) Net Income for purposes of the
calculation of "Cash Flow from Operations" may
include an adjustment, subject to the approval of the
Administrative Bank in its discretion exercised
reasonably, to increase Net Income by the amount of
certain extraordinary or non-recurring expenses as
were incurred by entities acquired in Permitted
Business Combinations during the 12 months preceding
the date of calculation, to the extent that the
Company has demonstrated to the reasonable
satisfaction of the Administrative Bank that such
extraordinary or non-recurring expenses will not
continue during the period after the acquisition.
1.86 "Pricing Level" means, for any Pricing Period,
Pricing Level I, Pricing Level II, Pricing Level III, Pricing
Level IV, Pricing Level V, or Pricing Level VI, as may be in
effect for such Pricing Period; PROVIDED that, the Default
Rate shall be in effect upon the occurrence and during the
continuation of any Event of Default.
1.87 "Pricing Level I" means the Pricing Level that
will be in effect for the applicable Pricing Period if, as at
the relevant Date of Determination, the ratio of the
Borrowers' Indebtedness as measured on such Date of
Determination, to the Borrowers' Cash Flow from Operations as
measured on such Date of Determination, is less than 1.00 to
1.0.
1.88 "Pricing Level II" means the Pricing Level that
will be in effect for the applicable Pricing Period if, as at
the relevant Date of Determination, the ratio of the
Borrowers' Indebtedness as measured on such Date of
Determination, to the Borrowers' Cash Flow from Operations as
measured on such Date of Determination, is equal to or greater
than 1.00 to 1.0, but is less than 1.50 to 1.0.
1.89 "Pricing Level III" means the Pricing Level that
will be in effect for the applicable Pricing Period if, as at
the relevant Date of Determination, the ratio of the
Borrowers' Indebtedness as measured on such Date of
Determination, to the Borrowers' Cash Flow from Operations as
measured on such Date of Determination, is equal to or greater
than 1.50 to 1.0, but is less than 2.00 to 1.0.
1.90 "Pricing Level IV" means the Pricing Level that
will be in effect for the applicable Pricing Period if, as of
the relevant Date of Determination, the ratio of the
Borrowers' Indebtedness as measured on such Date of
Determination, to the Borrowers' Cash Flow from Operations as
measured on such Date of Determination, is equal to or greater
than 2.00 to 1.0, but less than 2.50 to 1.0.
4
<PAGE> 5
1.91 "Pricing Level V" means the Pricing Level that
will be in effect for the applicable Pricing Period if, as of
the relevant Date of Determination, the Borrowers'
Indebtedness as measured on such Date of Determination, to the
Borrowers' Cash Flow from Operations as measured on such Date
of Determination, is equal to or greater than 2.50 to 1.0, but
less than 3.0 to 1.0.
1.91A "Pricing Level VI" means the Pricing Level that
will be in effect for the applicable Pricing Period if, as of
the relevant Date of Determination, the ratio of the
Borrowers' Indebtedness as measured on such Date of
Determination, to the Borrowers' Cash Flow from Operations as
measured on such Date of Determination, is equal to or greater
than 3.0 to 1.0.
1.97 "Revolving Credit Facility" means the revolving
line of credit established by the Banks in favor of the
Borrowers in the principal amount of One Hundred Million
Dollars ($100,000,000) pursuant to which the Borrowers may
obtain Revolving Credit Loans from the Banks and/or Letters of
Credit from PNC during the term of the Revolving Credit
Facility upon the terms and conditions set forth in this Loan
Agreement. The Revolving Credit Facility includes as a
sublimit the Letter of Credit Subfacility and the Swing Line
Credit Facility. All references to the "aggregate principal
balance of the Revolving Credit Loans outstanding" or similar
phrases in this Loan Agreement or in the Revolving Credit
Notes shall mean, as of the date of determination thereof, the
sum of (i) the entire aggregate outstanding principal balance
of all Revolving Credit Loans made by the Banks pursuant to
this Loan Agreement, (ii) the then existing Letter of Credit
Usage and (iii) the then existing Swing Line Usage.
1.101 "Revolving Credit Notes" means collectively (i)
that certain Amended and Restated Revolving Credit Promissory
Note made by the Borrowers, payable to the order of PNC, and
in the face principal amount of Thirty Million Dollars
($30,000,000), a form of which is annexed to this Loan
Agreement as EXHIBIT A-1, as the same may hereafter be
amended, modified, renewed, replaced and/or restated from time
to time, (ii) that certain Amended and Restated Revolving
Credit Promissory Note made by the Borrowers, payable to the
order of National City, and in the face principal amount of
Twenty Four Million Dollars ($24,000,000), a form of which is
annexed to this Loan Agreement as EXHIBIT A-2, as the same may
hereafter be amended, modified, renewed, replaced and/or
restated from time to time, (iii) that certain Amended and
Restated Revolving Credit Promissory Note made by the
Borrowers, payable to the order of SunTrust, and in the face
principal amount of Eighteen Million Dollars ($18,000,000), a
form of which is annexed to this Loan Agreement as EXHIBIT
A-3, as the same may hereafter be amended, modified, renewed,
replaced and/or restated from time to time, (iv) that certain
Amended and Restated Revolving Credit Promissory Note made by
the Borrowers, payable to the order of Bank One and in the
face principal amount of Eighteen
5
<PAGE> 6
Million Dollars ($18,000,000), a form of which is annexed to
this Loan Agreement as EXHIBIT A-4, as the same may hereafter
be amended, modified, renewed, replaced and/or restated from
time to time, (v) that certain Revolving Credit Promissory
Note made by the Borrowers, payable to the order of Wachovia
and in the face principal amount of Ten Million Dollars
($10,000,000), a form of which is annexed to this Loan
Agreement as EXHIBIT A-5, as the same may hereafter be
amended, modified, renewed, replaced and/or restated from time
to time and (vi) each future Revolving Credit Promissory Note,
if any, made by the Borrowers pursuant to the Revolving Credit
Facility.
1.110 "Swing Line Note" means that certain Swing Line
Promissory Note dated of even date with this Loan Agreement,
made by the Borrowers, payable to the order of PNC, and in the
face principal amount of Twelve Million Five Hundred Thousand
Dollars ($12,500,000), a form of which is annexed to this Loan
Agreement as EXHIBIT B, as the same may hereafter be amended,
modified, renewed, replaced and/or restated from time to time.
1.112 "Swing Line Usage" means, as at any date of
determination thereof, the sum of the maximum aggregate
principal amount of all outstanding Swing Line Loans, which
amount shall never exceed $12,500,000.
1.119 "First Amendment" means the First Amendment to
Loan Instruments made and entered into as of June 23, 1997, by
and among the Banks, the Administrative Bank and the
Borrowers.
1.120 "First Amendment Closing Date" means the date
on which the First Amendment to Loan Instruments has been
executed and delivered by the parties thereto, June 23, 1997.
1.121 "Existing Borrowers" means any and all
Borrowers party to the Loan Agreement as of December 23, 1996,
other than Southwind Residential Services, Inc., formerly a
Kansas corporation, and Residential Alternatives in Supportive
Environments, Inc., formerly an Ohio corporation, which were
merged into other Borrowers.
1.122 "New Borrowers" means certain Subsidiaries
created or acquired since December 23, 1996, specifically
identified as RSCR West Virginia, Inc. and Raiment, Inc. but
does not currently include the entities listed on Schedule
1.122 attached to the First Amendment.
D. SECTION 2 - REVOLVING CREDIT FACILITY. Section 2 of the
Loan Agreement is hereby amended and restated as follows:
6
<PAGE> 7
(1) Section 2. The first paragraph of Section 2 is
hereby amended and restated in its entirety as follows:
Subject to the terms and conditions of this Loan Agreement,
the Banks hereby establish the Revolving Credit Facility in
favor of the Borrowers in the principal amount of One Hundred
Million Dollars ($100,000,000). Pursuant to the Revolving
Credit Facility, the Borrowers may obtain Revolving Credit
Loans and/or Letters of Credit pursuant to, and subject to the
terms and conditions set forth in, this Loan Agreement for the
purposes set forth in Sections 2.5A and 2.7 hereof. The
Revolving Credit Facility is subject to the following terms
and conditions:
(2) Section 2.1 REVOLVING LOAN COMMITMENTS, REVOLVING
CREDIT LOANS. The eighth and ninth lines of the first paragraph of Section 2.1
are hereby amended to delete the words "Sixty Five Million Dollars
($65,000,000)" and to insert therefor the words "One Hundred Million Dollars
($100,000,000)".
(3) Section 2.2A RATES OF INTEREST is hereby amended
by deleting the second paragraph thereof and subsections (i), (ii) and (iii) and
inserting therefor the following:
Subject to the provisions of Sections 2.2E and 4 hereof,
Revolving Credit Loans shall bear interest through maturity as
follows:
(i) if a Base Rate Loan, at a rate equal to the
higher of (a) the Federal Funds Effective Rate plus one half
percent (0.5%) per annum plus the Applicable Base Rate Margin
or (b) the Prime Rate plus the Applicable Base Rate Margin;
PROVIDED THAT, on each Date of Determination, commencing with
the first Date of Determination to occur after the Closing
Date, the Applicable Base Rate Margin in effect for the
Pricing Period commencing on such Date of Determination and
continuing for the term of the Pricing Period that begins on
such Date of Determination shall be the Applicable Base Rate
Margin corresponding to the Pricing Level in effect for such
Pricing Period, as follows:
<TABLE>
<CAPTION>
Pricing Level Applicable Base Rate Margin
------------- ---------------------------
<S> <C>
Level I 0.00%
Level II 0.00%
Level III 0.00%
Level IV 0.00%
Level V 0.00%
Level VI 0.125%
</TABLE>
(ii) if a Euro-Rate Loan, at a rate per annum equal
to the sum of the Euro-Rate plus the Applicable Euro-Rate
Margin; PROVIDED THAT, on each Date of
7
<PAGE> 8
Determination, commencing with the first Date of Determination
to occur after the Closing Date, the Applicable Euro-Rate
Margin in effect for the Pricing Period commencing on such
Date of Determination and continuing for the term of the
Pricing Period that begins on such Date of Determination shall
be the Applicable Euro-Rate Margin corresponding to the
Pricing Level in effect for such Pricing Period, as follows:
<TABLE>
<CAPTION>
Pricing Level Applicable Euro-Rate Margin
------------- ---------------------------
<S> <C>
Level I 0.500%
Level II 0.625%
Level III 0.875%
Level IV 1.125%
Level V 1.375%
Level VI 1.625%
</TABLE>
(iii) Notwithstanding that the Pricing Level
Calculation Date of the applicable Pricing Level for a Pricing
Period occurs after the relevant Date of
Determination, upon the actual calculation of the applicable
Pricing Level for such Pricing Period, adjustments to the
amount of accrued interest on the Base Rate Loans and/or
Euro-Rate Loans, as applicable, shall be made to reflect
retroactive application of the applicable Pricing Level to the
first day of such Pricing Period.
(4) Section 2.2G LIMITATION ON EURO-RATE TRANCHES is
hereby amended and restated in its entirety as follows:
G. LIMITATION ON EURO-RATE LOAN TRANCHES. At no time
shall the number of Euro-Rate Loans outstanding at any time
outstanding exceed nine (9).
(5) Section 2.3B COMMITMENT FEE is hereby amended by
deleting subsection (i) and inserting therefor the following:
(i) The Borrowers agree to pay to the Administrative
Bank, for the benefit of the Banks in proportion to their
respective Revolving Credit Facility Pro Rata Shares,
commitment fees (the "Revolving Credit Facility Commitment
Fees") for the period from and including the Closing Date to
and excluding the Revolving Loan Commitment Termination Date,
equal to the average of the daily excess of the Revolving Loan
Commitments (as they may be reduced pursuant to Section 2.4C
hereof) over the aggregate outstanding principal amount of
Revolving Credit Loans and the Letter of Credit Usage
multiplied by the Applicable Commitment Fee Percentage set
forth below; PROVIDED THAT, on each Date of Determination,
commencing with the first Date of Determination to occur after
the Closing Date, the Applicable Commitment Fee Percentage in
effect for the Pricing Period
8
<PAGE> 9
commencing on such Date of Determination and continuing for
the term of the Pricing Period that begins on such Date of
Determination shall be the Applicable Commitment Fee
Percentage corresponding to the Pricing Level in effect for
such Pricing Period, as follows:
<TABLE>
<CAPTION>
Pricing Level Applicable Commitment Fee Percentage
------------- ------------------------------------
<S> <C>
Level I 0.25%
Level II 0.25%
Level III 0.25%
Level IV 0.25%
Level V 0.30%
Level VI 0.30%
</TABLE>
PROVIDED, FURTHER, that, in the case of PNC only, the
calculation of the Revolving Credit Facility Commitment Fee
shall be adjusted to add the aggregate outstanding principal
amount of Swing Line Loans to the aggregate outstanding
principal amount of Revolving Credit Loans and the Letter of
Credit Usage allocable to PNC, before the calculation of the
Revolving Credit Facility Commitment Fee payable to PNC is
performed.
The Revolving Credit Facility Commitment Fees shall be
calculated on the basis of a 360-day year and the actual
number of days elapsed and shall be payable quarterly in
arrears on the last day of each Fiscal Quarter, commencing on
the first such date to occur after the Closing Date, and on
the Revolving Loan Commitment Termination Date. The Borrowers
shall have no liability to the Banks for any Revolving Credit
Facility Commitment Fees paid to the Administrative Bank which
the Administrative Bank does not properly remit to such Bank,
and such Bank's sole remedy in respect thereof shall be
against the Administrative Bank.
(6) Section 2.3 FEES . A new Section 2.3D FIRST
AMENDMENT CLOSING FEES AND EXPENSES is added to Section 2.3 as follows:
D. FIRST AMENDMENT CLOSING FEES AND EXPENSES . The
Borrowers agree to pay to the Administrative Bank on the First
Amendment Closing Date, for the benefit of the Banks, Closing
Fees in the total amount set forth in SCHEDULE 2.3D hereto.
Upon receipt of such moneys, the Administrative Bank shall
remit the Closing Fees set forth in SCHEDULE 2.3D to the
Banks. The Borrowers shall have no liability to any Bank for
any Closing Fees paid to the Administrative Bank which the
Administrative Bank does not properly remit to such Bank
pursuant to SCHEDULE 2.3D, and such Bank's sole remedy in
respect thereof shall be against the Administrative Bank.
Pursuant to this Section 2.3D and Section 15.10 hereof, the
Borrowers also agree to pay to the Administrative Bank on the
Closing Date the
9
<PAGE> 10
reasonable fees and expenses of the Administrative Bank's
counsel in negotiating, drafting and closing the First
Amendment and related documents.
(7) Section 2.7F COMPENSATION (with respect to
Letters of Credit) is hereby amended by deleting subsection (i) and inserting
therefor the following:
(i) With respect to each Letter of Credit, a letter
of credit fee (the "Letter of Credit Fee") payable to PNC for
the account of the Banks (and to be shared by the Banks pro
rata in accordance with their respective Revolving Credit
Facility Pro Rata Shares) equal to the Applicable Letter of
Credit Percentage multiplied by the maximum amount available
from time to time to be drawn under such Letter of Credit;
PROVIDED THAT, on each Date of Determination, commencing with
the first Date of Determination to occur after the Closing
Date, the applicable Letter of Credit Percentage in effect for
the Pricing Period commencing on such Date of Determination
and continuing for the term of the Pricing Period that begins
on such Date of Determination shall be the Applicable Letter
of Credit Percentage corresponding to the Pricing Level in
effect for such Pricing Period, as follows:
<TABLE>
<CAPTION>
Pricing Level Applicable Letter of Credit Percentage
------------- --------------------------------------
<S> <C>
Level I 0.500%
Level II 0.625%
Level III 0.875%
Level IV 1.125%
Level V 1.375%
Level VI 1.625%
</TABLE>
The Letter of Credit Fee, as based on the Applicable Letter of
Credit Percentage, shall be payable quarterly in advance
beginning on the date of issuance of such Letter of Credit and
quarterly in advance beginning on the date, if such should
occur, of each renewal or extension of such Letter of Credit;
E. SECTION 3 - SWING LINE CREDIT FACILITY. Section 3 of the
Loan Agreement is hereby amended and restated as follows:
(1) Section 3.1. The first paragraph of Section 3.1
is hereby amended and restated in its entirety as follows:
3.1 SWING LINE CREDIT FACILITY. From the date hereof
throughout the Swing Line Commitment Period, and subject to
the terms, conditions and other provisions of this Agreement,
PNC agrees to make Swing Line Loans to the Borrowers from time
to time in a total amount not exceeding Twelve Million Five
Hundred Thousand Dollars ($12,500,000.00) in amounts of Twenty
Five Thousand
10
<PAGE> 11
Dollars ($25,000) and integral multiples of Five Thousand
Dollars ($5,000) in excess thereof. The Swing Line Credit
Facility is established for the administrative convenience of
the Borrowers, PNC and the Banks. During the Swing Line
Commitment Period the Borrowers may borrow and repay advances
under the Swing Line Credit Facility in whole or in part, and
reborrowing all in accordance with the terms, conditions and
other provisions of this Agreement. The making of each Swing
Line Loan shall be subject to the further provisions of this
Section 3.1, and shall be subject to all of the conditions of
lending stated in Section 5.2 being fulfilled at the time of
each Swing Line Loan, and provided further that each Swing
Line Loan shall be on the terms and subject to the conditions
hereinafter stated.
(2) Section 3.1H. Section 3.1H is hereby amended and
restated in its entirety as follows:
H. LIMITATION. The Borrowers may not request that PNC
make any Swing Line Loan if, after making such Swing Line
Loan, (y) the total aggregate principal amount of outstanding
Swing Line Loans would exceed Twelve Million Five Hundred
Thousand Dollars ($12,500,000.00), or (z) the Total
Utilization of Revolving Loan Commitments would exceed the
Revolving Loan Commitments, as the amount available under such
Revolving Loan Commitments may be reduced from time to time
pursuant to Section 2.4C hereof.
F. SECTION 8 - NEGATIVE COVENANTS. Section 8 of the Loan
Agreement is hereby amended and restated as follows:
(1) Section 8.2 INDEBTEDNESS. Section 8.2 is hereby
amended and restated in its entirety as follows:
8.2 INDEBTEDNESS, ETC. The Borrowers will not,
without the prior written consent of the Banks, directly or
indirectly, create, incur, assume, guarantee, agree to
purchase or repurchase or provide funds in respect of, or
otherwise become liable with respect to any Indebtedness other
than:
(i) The Revolving Credit Facility;
(ii) The Swing Line Credit Facility;
(iii) The Equipment Leases in the aggregate amount
not exceeding Two Million Five Hundred Thousand Dollars
($2,500,000);
(iv) The Beverly Note;
11
<PAGE> 12
(v) Current liabilities of the Borrowers (other than
for borrowed money) incurred in the ordinary course of their
businesses and in accordance with customary trade practices;
(vi) (A) Promissory notes or other evidence of
indebtedness issued by one or more of the Borrowers as all or
part of the Business Combination Consideration in connection
with a Permitted Business Combination, or (B) purchase money
indebtedness incurred or assumed by the Borrowers in
connection with acquisition of tangible and intangible
personal and real property acquired other than in connection
with a Permitted Business Combination, to the extent that such
tangible and intangible personal and real property are to be
used by the Borrowers in businesses permitted under Section
8.5 hereof; PROVIDED THAT the aggregate amount of indebtedness
described in (B) of this Section 8.2(vi) shall not exceed Five
Million Dollars ($5,000,000); and PROVIDED FURTHER that the
aggregate amount of indebtedness described in (A) AND (B) of
this Section 8.2(vi) shall not exceed Twelve Million Five
Hundred Thousand Dollars ($12,500,000); and
(vii) The advances, loans and guarantees permitted
under Section 8.12 hereof.
(2) Section 8.11 PERMITTED BUSINESS COMBINATIONS. Section 8.11
is hereby amended by deleting subsections (iv) and (v) and inserting therefor
the following:
(iv) the Business Combination Consideration
associated with the proposed Business Combination plus the
aggregate Business Combination Consideration associated with
Permitted Business Combinations that have been completed in
the current Fiscal Year does not exceed Fifty Million Dollars
($50,000,000);
(v) the Business Combination Consideration associated
with the proposed Business Combination does not exceed Ten
Million Dollars ($10,000,000)(except for the acquisition of
certain interests by RCP and RSCRP to occur on or after the
Closing Date as contemplated in the Exchange Agreement dated
December 9, 1996);
G. SECTION 14 - NOTICES. Section 14 of the Loan Agreement is
hereby amended to add to the list of Banks which shall receive notice pursuant
to Section 14, Wachovia, as follows:
Wachovia Bank, N.A.
191 Peachtree Street, 29th Floor
Atlanta, Georgia 30303-1757
Attn: John Tibe, Assistant Vice President
12
<PAGE> 13
H. SCHEDULE 1 - LIST OF BORROWERS OTHER THAN RES-CARE.
Schedule 1 is hereby amended and replaced in its entirety by Schedule 1 attached
to this First Amendment.
I. SCHEDULE 2.1 - SCHEDULE OF REVOLVING LOAN COMMITMENTS AND
REVOLVING CREDIT FACILITY PRO RATA SHARES. Schedule 2.1 is hereby amended and
replaced in its entirety by Schedule 1 attached to this First Amendment.
J. SCHEDULE 2.3D - SCHEDULE OF FIRST AMENDMENT CLOSING FEES.
Schedule 2.3D is hereby added to the Loan Agreement by Schedule 2.3D attached to
this First Amendment.
K. SCHEDULE 6.13 - CONSOLIDATED SUBSIDIARIES OF RES-CARE,
INC.. Schedule 6.13 is hereby amended by adding the entities listed on Schedule
6.13 to this First Amendment thereto.
L. SCHEDULE 8.4 - SCHEDULE OF LIENS NOT OTHERWISE DESCRIBED IN
SECTION 8.4. Schedule 8.4 is hereby amended and restated in its entirety by
Schedule 8.4 attached to this Amendment.
M. EXHIBITS A-1 THROUGH A-4. Exhibits A-1 through A-4 are
replaced in their entirety by Exhibits A-1 through A-5 attached to this First
Amendment.
N. RATIFICATION. The Loan Agreement, as amended by this First
Amendment, remains in full force and effect and the Borrower reaffirms and
ratifies its obligations under the Loan Agreement, as amended by this First
Amendment.
II. AMENDMENT AND RESTATEMENT OF REVOLVING CREDIT NOTES
The Revolving Credit Notes are amended and restated in their
entirety by new Revolving Credit Notes, in the form of Exhibits A-1 through A-5
attached to this First Amendment, executed and delivered by the Borrowers in
amendment and replacement of, but not in novation of, the original Revolving
Credit Notes.
III. AMENDMENT AND RESTATEMENT OF SWING LINE NOTE
The Swing Line Note is amended and restated in its entirety by
the new Swing Line Note, in the form of Exhibit B attached to this First
Amendment, executed and delivered by the Borrowers in amendment and replacement
of, but not in novation of, the original Swing Line Note.
IV. AMENDMENT OF STOCK PLEDGE AGREEMENT
13
<PAGE> 14
A. PRELIMINARY STATEMENT. Paragraph A of the Preliminary
Statement of the Stock Pledge Agreement is amended and restated in its entirety
as follows:
Pursuant to that certain Loan Agreement of even date herewith,
among (i) (a) PNC, (b) NATIONAL CITY BANK OF KENTUCKY, a
national banking association with principal office and place
of business in Louisville, Kentucky ("National City"), (c)
SUNTRUST BANK, NASHVILLE, N.A., a national banking association
with principal office and place of business in Nashville,
Tennessee ("SunTrust"), (d) BANK ONE, KENTUCKY, NA, a national
banking association with principal office and place of
business in Louisville, Kentucky ("Bank One"), and (e)
WACHOVIA BANK, N.A., a national banking association with
principal office and place of business in Atlanta, Georgia
("Wachovia") (PNC, National City, SunTrust, Bank One and
Wachovia are hereinafter collectively referred to as the
"Banks" and each is hereinafter individually referred to as a
"Bank"); (ii) PNC in its capacity as the Administrative Bank;
and (iii) Res-Care and each of the Consolidated Subsidiaries
of Res-Care identified on SCHEDULE 1 to the Loan Agreement
(Res-Care and each Consolidated Subsidiary, collectively, the
"Borrowers"), (a) the Banks have established a revolving line
of credit in the principal amount of One Hundred Million
Dollars ($100,000,000.00) in favor of the Borrowers (the
"Revolving Credit Facility"), (b) the Banks have committed to
issue letters of credit for the account of the Borrowers in an
aggregate amount of up to Ten Million Dollars ($10,000,000.00)
as a sublimit of the Revolving Credit Facility (the "Letter of
Credit Facility"), and (c) PNC has established a swing line
revolving line of credit in the principal amount of Twelve
Million Five Hundred Thousand Dollars ($12,500,000.00) in
favor of the Borrowers as a sublimit of the Revolving Credit
Facility (the "Swing Line Credit Facility").
B. EXHIBIT A TO STOCK PLEDGE AGREEMENT. Exhibit A to the Stock
Pledge Agreement is amended and restated in its entirety by Exhibit C to this
First Amendment.
C. DELIVERY OF STOCK CERTIFICATES TO ADMINISTRATIVE BANK.
Res-Care covenants to deliver the pledged share certificates identified in
Section II of Exhibit A to the Stock Pledge Agreement, as amended, to the
Administrative Bank on the First Amendment Closing Date.
D. RATIFICATION. The Stock Pledge Agreement, as amended by
this First Amendment, remains in full force and effect and Res-Care reaffirms
and ratifies its obligations under the Stock Pledge Agreement, as amended by
this First Amendment.
V. AMENDMENT AND RATIFICATION OF SECURITY AGREEMENTS
Each of the Security Agreements remains in full force and
effect and each Borrower reaffirms and ratifies its obligations under the
Security Agreement to which it is a party. Each
14
<PAGE> 15
Borrower agrees that the Security Agreement to which it is a party shall
continue to secure all indebtedness of the Borrower to the Banks evidenced by
the Revolving Credit Notes, the Swing Line Note, the Applications and Agreements
for Letters of Credit and the Loan Agreement, all as they may be amended by this
First Amendment. Additionally, each of the New Borrowers, as of the date of the
First Amendment, shall have executed and delivered to the Administrative Bank a
Security Agreement and UCC-1 financing statements in favor of the Banks, in form
and substance satisfactory to the Banks.
VI. CLOSING CONDITIONS
The establishment of the Revolving Credit Facility by the Banks in
favor of the Borrowers, the obtaining of the Revolving Credit Loans and/or
Letters of Credit by the Borrowers thereunder, the making of the Swing Line
Loans by PNC to the Borrowers, all as amended by this First Amendment, are
subject to the satisfaction of all the following conditions (in addition to the
conditions set forth in the Loan Agreement):
A. CONDITIONS TO CLOSING OF THE FIRST AMENDMENT. The obligation of the
Banks to make the Revolving Credit Loans to the Borrowers and to make the Swing
Line Loans to the Borrowers are subject to the condition that, in addition to
the satisfaction of the conditions precedent specified in Section 5.1 of the
Loan Agreement, and with respect to the Swing Line Loan, the conditions
precedent specified in Section 3.1D of the Loan Agreement, as of the First
Amendment Closing Date, the Banks shall have received the following from the
Borrowers, dated the First Amendment Closing Date or such other date as shall be
acceptable to the Banks:
(1) This First Amendment, duly executed and delivered by the
each of the Borrowers.
(2) The Revolving Credit Notes, duly executed and delivered by
each of the Borrowers.
(3) The Swing Line Note, duly executed and delivered by each
of the Borrowers.
(4) Stock certificates evidencing all of the issued and
outstanding shares of the common stock of all New Borrowers as identified below,
and executed blank stock powers appended thereto:
RSCR West Virginia, Inc.*
Raiment, Inc.
*Already delivered to the Administrative Bank.
(5) Security Agreements, executed and delivered by all
Subsidiaries acquired or created by all New Borrowers, as identified below:
15
<PAGE> 16
RSCR West Virginia, Inc.*
Raiment, Inc.
*Already delivered to the Administrative Bank.
(6) UCC-1 financing statements appropriate for filing in
filing offices designated by the Administrative Bank, executed and delivered by
all New Borrowers acquired or created by the Borrowers since December 23, 1996,
as identified below:
RSCR West Virginia, Inc.*
Raiment, Inc.
*Already delivered to the Administrative Bank.
(7) A Certificate of the Secretary or Assistant Secretary of
each the Existing Borrowers certifying as to the authenticity, completeness and
accuracy of, and attaching copies of any amendments to the Articles of
Incorporation or Bylaws since December 23, 1996, and Resolutions of the Board of
Directors of each of the Existing Borrowers authorizing such Borrower's
execution, delivery and performance of the First Amendment and any other Loan
Instruments to which such Borrower is a party, and certifying the names and true
signatures of the officers of such Borrower authorized to execute and deliver
the Loan Instruments to which the Borrower is a party, on behalf of such
Borrower.
(8) A Certificate of the Secretary or Assistant Secretary of
each New Borrower certifying as to the authenticity, completeness and accuracy
of, and attaching copies of their respective Certificates of Incorporation and
Bylaws, together with any amendments thereto, and Resolutions of the Board of
Directors of each New Borrower authorizing such New Borrower's execution,
delivery and performance of the First Amendment and any other Loan Instruments
to which such New Borrower is a party, and certifying the names and true
signatures of the officers of such New Borrower authorized to execute and
deliver the Loan Instruments to which the New Borrower is a party, on behalf of
such New Borrower.
(9) An opinion from counsel to the Borrowers, in form and
substance satisfactory to the Banks, giving substantially the same opinions as
were given in connection with the execution and delivery of the Loan Agreement
dated as of December 23, 1996, but to be given with respect to the execution and
delivery of this First Amendment.
(10) Such other documents as the Banks may reasonably request.
16
<PAGE> 17
VII. REPRESENTATIONS AND WARRANTIES
A. REPRESENTATIONS AND WARRANTIES OF BORROWER AND CONSOLIDATED
SUBSIDIARIES. To induce the Banks to enter into this First Amendment, the
Borrowers represent and warrant to the Banks as follows:
(1) Each Borrower has full power, authority, and capacity to
enter into this First Amendment, and this First Amendment constitutes the legal,
valid and binding obligations of each Borrower, enforceable against each in
accordance with its terms.
(2) No Event of Default under the Loan Agreement or any of the
other Loan Instruments has occurred which continues unwaived by the Banks, and
no event which with the passage of time, the giving of notice or both would
constitute an Event of Default, exists as of the date hereof.
(3) The person executing this First Amendment on behalf of
each Borrower is duly authorized to do so. Each such person has been duly
authorized pursuant to resolutions of the Borrowers approved by the directors of
the Borrowers to execute and deliver minor amendments to the Loan Instruments of
the sort set forth in this First Amendment without the necessity of further
action by the respective boards of directors.
(4) The representations and warranties made by each Borrower
in all of the Loan Instruments are hereby remade and restated as of the date
hereof.
(5) There are no material actions, suits, legal, equitable,
arbitration or administrative proceedings pending or threatened against any
Borrower, the adverse determination of which could have a material adverse
effect on the Loan Instruments, the business operations or financial condition
of the Borrowers or the ability of the Borrowers to fulfill their obligations
under the Loan Instruments.
17
<PAGE> 18
IN WITNESS WHEREOF, the Borrowers, the Banks and the Administrative
Bank have each caused this First Amendment to be duly executed as of the date
and year first hereinabove written.
PNC BANK, KENTUCKY, INC.
("PNC")
--------------------------------------
By: Ben Willingham, Vice President
NATIONAL CITY BANK OF
KENTUCKY
("National City")
--------------------------------------
By: Deroy Scott, Vice President
SUNTRUST BANK, NASHVILLE, N.A.
("SunTrust")
Karen Cole Ahern, Group Vice President
--------------------------------------
BANK ONE, KENTUCKY, NA
("Bank One")
Todd D. Munson, Senior Vice President
--------------------------------------
WACHOVIA BANK, N.A.
("Wachovia")
By:
--------------------------------------
PNC BANK, KENTUCKY, INC.
(the "Administrative Bank")
By: Ben Willingham, Vice President
--------------------------------------
18
<PAGE> 19
RES-CARE, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President and
Chief Executive Officer
COMMUNITY ALTERNATIVES INDIANA,
INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
COMMUNITY ALTERNATIVES
NEBRASKA, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
COMMUNITY ADVANTAGE, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
TEXAS HOME MANAGEMENT, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
CAPITAL TX INVESTMENTS, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
19
<PAGE> 20
THM HOMES, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
RSCR TEXAS, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
RES-CARE NEW MEXICO, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
RES-CARE OHIO, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
COMMUNITY ALTERNATIVES OF
TEXAS, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
CATX PROPERTIES, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
20
<PAGE> 21
RES-CARE CALIFORNIA, INC., d/b/a
RCCA Services
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
RES-CARE FLORIDA, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
RSCR CALIFORNIA, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
RES-CARE KANSAS, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
RES-CARE ILLINOIS, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
RES-CARE OKLAHOMA, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
21
<PAGE> 22
RES-CARE TENNESSEE, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
RES-CARE TRAINING
TECHNOLOGIES, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
YOUTHTRACK, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, Chairman
RES-CARE PREMIER, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
RSCR PREMIER, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
RES-CARE NEW JERSEY, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
22
<PAGE> 23
COMMUNITY ALTERNATIVES
KENTUCKY, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
ALTERNATIVE YOUTH SERVICES, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
COMMUNITY ALTERNATIVES
VIRGINIA, INC.
(a "Borrower")
By: Ronald G. Geary, President
--------------------------------------
RSCR WEST VIRGINIA, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
RAIMENT, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
23
<PAGE> 24
SCHEDULE 1
LIST OF BORROWERS OTHER THAN RES-CARE, INC.
1. COMMUNITY ALTERNATIVES INDIANA, INC., a Delaware corporation with
principal office and place of business in Louisville, Kentucky ("CAI").
2. COMMUNITY ALTERNATIVES NEBRASKA, INC., a Delaware corporation, with
principal office and place of business in Louisville, Kentucky ("CAN").
3. COMMUNITY ADVANTAGE, INC., a Delaware corporation with principal
office and place of business in Louisville, Kentucky ("CA").
4. TEXAS HOME MANAGEMENT, INC., a Delaware corporation with principal
office and place of business in Louisville, Kentucky ("THM").
5. CAPITAL TX INVESTMENTS, INC., a Delaware corporation with principal
office and place of business in Louisville, Kentucky ("CTXI").
6. THM HOMES, INC., a Delaware corporation with principal office and
place of business in Louisville, Kentucky ("THMH").
7. RSCR TEXAS, INC., formerly THM Properties, Inc., a Delaware
corporation with principal office and place of business in Louisville, Kentucky
("RSCRT").
8. RES-CARE NEW MEXICO, INC., a Delaware corporation with principal
office and place of business of Louisville, Kentucky ("RCNM").
9. RES-CARE OHIO, INC., a Delaware corporation with principal office
and place of business in Louisville, Kentucky ("RCO").
10. COMMUNITY ALTERNATIVES OF TEXAS, INC., a Delaware corporation with
principal office and place of business in Louisville, Kentucky ("CAT").
11. CATX PROPERTIES, INC., a Delaware corporation with principal
office and place of business in Louisville, Kentucky ("CATXP").
12. RES-CARE CALIFORNIA, INC., d/b/a RCCA Services, a Delaware
corporation with principal office and place of business in Louisville, Kentucky
("RCC").
13. RES-CARE FLORIDA, INC., a Delaware corporation with principal
office and place of business in Louisville, Kentucky ("RCF").
14. RSCR CALIFORNIA, INC., a Delaware corporation with principal
office and place of business in Louisville, Kentucky ("RSCRC").
<PAGE> 25
15. RES-CARE KANSAS, INC., a Delaware corporation with principal
office and place of business in Louisville, Kentucky ("RCK").
16. RES-CARE ILLINOIS, INC., a Delaware corporation with principal
office and place of business in Louisville, Kentucky ("RCI").
17. RES-CARE OKLAHOMA, INC. a Delaware corporation with principal
office and place of business in Louisville, Kentucky ("RCOK").
18. RES-CARE TENNESSEE, INC., a Delaware corporation with principal
office and place of business in Louisville, Kentucky ("RCT").
19. RES-CARE TRAINING TECHNOLOGIES, INC., a Delaware corporation with
principal office and place of business in Louisville, Kentucky ("RCTT").
20. YOUTHTRACK, INC., a Delaware corporation with principal office
and place of business in Littleton, Colorado ("YT").
21. RES-CARE PREMIER, INC., a Delaware corporation with principal
office and place of business in Louisville, Kentucky ("RCP").
22. RSCR PREMIER, INC., a Delaware corporation with principal office
and place of business in Louisville, Kentucky ("RSCRP").
23. RES-CARE NEW JERSEY, INC., a Delaware corporation with principal
office and place of business in Louisville, Kentucky ("RCNJ").
24. COMMUNITY ALTERNATIVES KENTUCKY, INC., a Delaware corporation
with principal office and place of business in Louisville, Kentucky ("CAK").
25. ALTERNATIVE YOUTH SERVICES, INC., a Delaware corporation with
principal office and place of business in Louisville, Kentucky ("AYS")
26. COMMUNITY ALTERNATIVES VIRGINIA, INC., a Delaware corporation
with principal office and place of business in Louisville, Kentucky ("CAV").
27. RSCR WEST VIRGINIA, INC., a Delaware corporation with principal
office and place of business in Louisville, Kentucky ("RSCRWV").
28. RAIMENT, INC., a Missouri corporation with principal office and
place of business in Louisville, Kentucky ("R").
<PAGE> 26
SCHEDULE 2.1
SCHEDULE OF REVOLVING LOAN COMMITMENTS AND
REVOLVING CREDIT FACILITY PRO RATA SHARES
The maximum amount of the Revolving Credit Facility is $100,000,000.
<TABLE>
<CAPTION>
Revolving
Loan
Name Of Bank Pro Rata Share Commitment
------------ -------------- ----------
<S> <C> <C>
PNC Bank, Kentucky, Inc. 30.00% $30,000,000
National City Bank, Kentucky 24.00 24,000,000
SunTrust Bank, Nashville, NA 18.00 18,000,000
Bank One, Kentucky NA 18.00 18,000,000
Wachovia Bank, N.A. 10.00 10,000,000
----- ----------
Totals 100.00% $100,000,000
</TABLE>
<PAGE> 27
SCHEDULE 2.3D
SCHEDULE OF FIRST AMENDMENT CLOSING FEES
The Banks identified below will receive a payment of First Amendment
Closing Fees under this SCHEDULE 2.3D, based upon the total additional
commitment of each Bank under the First Amendment, multiplied by 20/100 of one
percent (0.20%), as set forth in the table below. The aggregate First Amendment
Closing Fees payable under this SCHEDULE 2.3D total $70,000 ($35,000,000 x
0.20%).
<TABLE>
<CAPTION>
Additional Applicable
Name of Bank Commitment Percentage Closing Fee
- ------------ ---------- ---------- -----------
<S> <C> <C> <C>
PNC Bank, Kentucky, Inc. $ 5,000,000 0.20% $10,000.00
National City Bank, Kentucky 6,500,000 0.20% 13,000.00
SunTrust Bank, Nashville, NA 5,500,000 0.20% 11,000.00
Bank One, Kentucky NA 8,000,000 0.20% 16,000.00
Wachovia Bank, N.A. 10,000,000 0.20% 20,000.00
---------- ---------
Totals $35,000,000 $ 70,000.00
</TABLE>
<PAGE> 28
SCHEDULE 8.4
Schedule of Existing Liens Not Otherwise Described in Section 8.4
-----------------------------------------------------------------
1. UCC-1 from Res-Care, Inc., as Debtor, in favor of Orix Credit
Alliance, Inc., filed in Jefferson County, Kentucky, #96-00851.
2. Security documents from Raiment, Inc. in favor of Boatmen's,
including, but not limited to a security agreement and UCC-1s with respect to a
revolving line of credit with a current balance of approximately $6,000 and a
deed of trust securing a loan with a currrent balance of approximately $92,000.
Raiment, Inc. and Res-Care, Inc. covenant to cause these security documents to
be released within 30 days of the First Amendment Closing Date.
<PAGE> 29
EXHIBIT A-1
-----------
AMENDED AND RESTATED REVOLVING CREDIT PROMISSORY NOTE
$30,000,000.00 December 23, 1996
Restated as of June _, 1997
FOR VALUE RECEIVED, RES-CARE, INC., COMMUNITY ALTERNATIVES INDIANA,
INC., COMMUNITY ALTERNATIVES NEBRASKA, INC., COMMUNITY ADVANTAGE, INC., TEXAS
HOME MANAGEMENT, INC., CAPITAL TX INVESTMENTS, INC., THM HOMES, INC., RSCR
TEXAS, INC., formerly THM Properties, Inc., RES-CARE NEW MEXICO, INC., RES-CARE
OHIO, INC., COMMUNITY ALTERNATIVES OF TEXAS, INC., CATX PROPERTIES, INC.,
RES-CARE CALIFORNIA, INC., d/b/a RCCA Services, RES-CARE FLORIDA, INC., RSCR
CALIFORNIA, INC., RES-CARE KANSAS, INC., RES-CARE ILLINOIS, INC., RES-CARE
OKLAHOMA, INC. RES-CARE TENNESSEE, INC., RES-CARE TRAINING TECHNOLOGIES, INC.,
YOUTHTRACK, INC., RES-CARE PREMIER, INC., RSCR PREMIER, INC., RES-CARE NEW
JERSEY, INC., COMMUNITY ALTERNATIVES KENTUCKY, INC., ALTERNATIVE YOUTH SERVICES,
INC., COMMUNITY ALTERNATIVES VIRGINIA, INC., RSCR WEST VIRGINIA, INC., and
RAIMENT, INC. (collectively, the "Makers"), promise to pay to the order of PNC
BANK, KENTUCKY, INC., a Kentucky banking corporation (the "Payee"), on or before
the Revolving Loan Commitment Termination Date (as defined in the Loan Agreement
defined below), the lesser of (y) Thirty Million Dollars ($30,000,000.00), and
(z) the unpaid aggregate principal amount of all advances made by the Payee to
the Makers as Revolving Credit Loans under the Loan Agreement referred to below.
The Makers also promise to pay interest on the unpaid principal amount
hereof until paid at the rates, at the times and from the dates which shall be
determined in accordance with the provisions of that certain Loan Agreement
dated as of December 23, 1996, as amended (together with all future amendments,
modifications, supplements and/or restatements thereof, the "Loan Agreement";
capitalized terms used herein without definition shall have the meanings
assigned those terms in the Loan Agreement), entered into by and among the
Makers, the Banks party thereto (referred to herein individually as a "Bank" and
collectively as the "Banks"), and PNC Bank, Kentucky, Inc., as Administrative
Bank.
This Note is one of the Makers' "Revolving Credit Notes" and is issued
pursuant to and is entitled to the benefits of the Loan Agreement to which
reference is hereby made for a more complete statement of the terms and
conditions under which the Revolving Credit Loans evidenced hereby were or are
made and are to be repaid.
All payments of principal and interest in respect of this Note shall be
made in lawful money of the United States of America in same day funds at the
office of the Administrative Bank located
A-1-1
<PAGE> 30
at 500 West Jefferson Street, Louisville, Kentucky, or at such other place as
shall be designated in writing for such purpose in accordance with the terms of
the Loan Agreement. Until notified in writing of the transfer of this Note, the
Makers and the Administrative Bank shall be entitled to deem the Payee or such
person who has been so identified by the transferor in writing to the Makers and
the Administrative Bank as the holder of this Note, as the owner and holder of
this Note. Each of the Payee and any subsequent holder of this Note agrees that
before disposing of this Note or any part hereof it will make a notation hereon
or in its records of all principal payments previously made hereunder and of the
date to which interest herein has been paid; PROVIDED, HOWEVER, that the failure
to make a notation of any payment made on this Note shall not limit or otherwise
affect the obligation of the Makers hereunder with respect to payments of
principal or interest on this Note.
Whenever any payment on this Note shall be stated to be due on a day
which is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the payment of interest on this Note; PROVIDED, HOWEVER, that if the day on
which any payment relating to a Euro-Rate Loan is due is not a Business Day but
is a day of the month after which no further Business Day occurs in such month,
then the due date thereof shall be the next preceding Business Day.
This Note is subject to prepayment at the option of the Makers as
provided in Section 2.4 of the Loan Agreement.
This Note is secured by the Stock Pledge Agreement and the Security
Agreements.
This Note is subject to restriction on transfer or assignment as
provided in Section 12 of the Loan Agreement.
THE LOAN AGREEMENT AND THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE COMMONWEALTH
OF KENTUCKY, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Note may become, or may be declared to be, due and
payable in the manner, upon the conditions and with the effect provided in the
Loan Agreement.
The terms of this Note are subject to amendment only in the manner
provided in the Loan Agreement.
No reference herein to the Loan Agreement and no provision of this Note
or the Loan Agreement shall alter or impair the obligation of the Makers, which
is absolute and unconditional, to pay the principal of and interest on this Note
at the place, at the respective times, and in the currency herein prescribed.
A-1-2
<PAGE> 31
The Makers promise to pay all reasonable costs and expenses, including
reasonable fees and expenses of counsel, as provided in Section 10.4 of the Loan
Agreement. The Makers hereby consent to all renewals and extensions of time at
or after the maturity hereof, without notice, and hereby waives diligence,
presentment, protest, demand and notice of every kind and, to the full extent
permitted by law, the right to plead any statute of limitations as a defense to
any demand hereunder.
This Note is delivered in amendment and restatement of, but not in
novation of, that Note of the Makers in the original amount of $25,000,000 dated
December 23, 1996.
A-1-3
<PAGE> 32
IN WITNESS WHEREOF, the Makers have caused this Note to be executed and
delivered by its duly authorized officer, as of the day and year and the place
first above written.
RES-CARE, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President and
Chief Executive Officer
COMMUNITY ALTERNATIVES INDIANA,
INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
COMMUNITY ALTERNATIVES
NEBRASKA, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
COMMUNITY ADVANTAGE, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
TEXAS HOME MANAGEMENT, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
CAPITAL TX INVESTMENTS, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
A-1-4
<PAGE> 33
THM HOMES, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
RSCR TEXAS, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
RES-CARE NEW MEXICO, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
RES-CARE OHIO, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
COMMUNITY ALTERNATIVES OF
TEXAS, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
CATX PROPERTIES, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
A-1-5
<PAGE> 34
RES-CARE CALIFORNIA, INC., d/b/a
RCCA Services
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
RES-CARE FLORIDA, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
RSCR CALIFORNIA, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
RES-CARE KANSAS, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
RES-CARE ILLINOIS, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
RES-CARE OKLAHOMA, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
A-1-6
<PAGE> 35
RES-CARE TENNESSEE, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
RES-CARE TRAINING
TECHNOLOGIES, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
YOUTHTRACK, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, Chairman
RES-CARE PREMIER, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
RSCR PREMIER, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
RES-CARE NEW JERSEY, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
A-1-7
<PAGE> 36
COMMUNITY ALTERNATIVES
KENTUCKY, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
ALTERNATIVE YOUTH SERVICES, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
COMMUNITY ALTERNATIVES
VIRGINIA, INC.
(a "Borrower")
By: Ronald G. Geary, President
-------------------------------------
RSCR WEST VIRGINIA, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
RAIMENT, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
A-1-8
<PAGE> 37
EXHIBIT A-2
-----------
AMENDED AND RESTATED REVOLVING CREDIT PROMISSORY NOTE
$24,000,000.00 December 23, 1996
Restated as of June _, 1997
FOR VALUE RECEIVED, RES-CARE, INC., COMMUNITY ALTERNATIVES INDIANA,
INC., COMMUNITY ALTERNATIVES NEBRASKA, INC., COMMUNITY ADVANTAGE, INC., TEXAS
HOME MANAGEMENT, INC., CAPITAL TX INVESTMENTS, INC., THM HOMES, INC., RSCR
TEXAS, INC., formerly THM Properties, Inc., RES-CARE NEW MEXICO, INC., RES-CARE
OHIO, INC., COMMUNITY ALTERNATIVES OF TEXAS, INC., CATX PROPERTIES, INC.,
RES-CARE CALIFORNIA, INC., d/b/a RCCA Services, RES-CARE FLORIDA, INC., RSCR
CALIFORNIA, INC., RES-CARE KANSAS, INC., RES-CARE ILLINOIS, INC., RES-CARE
OKLAHOMA, INC. RES-CARE TENNESSEE, INC., RES-CARE TRAINING TECHNOLOGIES, INC.,
YOUTHTRACK, INC., RES-CARE PREMIER, INC., RSCR PREMIER, INC., RES-CARE NEW
JERSEY, INC., COMMUNITY ALTERNATIVES KENTUCKY, INC., ALTERNATIVE YOUTH SERVICES,
INC., COMMUNITY ALTERNATIVES VIRGINIA, INC., RSCR WEST VIRGINIA, INC., and
RAIMENT, INC. (collectively, the "Makers"), promise to pay to the order of
NATIONAL CITY BANK OF KENTUCKY, a national banking association (the "Payee"), on
or before the Revolving Loan Commitment Termination Date (as defined in the Loan
Agreement defined below), the lesser of (y) Twenty Four Million Dollars
($24,000,000.00), and (z) the unpaid aggregate principal amount of all advances
made by the Payee to the Makers as Revolving Credit Loans under the Loan
Agreement referred to below.
The Makers also promise to pay interest on the unpaid principal amount
hereof until paid at the rates, at the times and from the dates which shall be
determined in accordance with the provisions of that certain Loan Agreement
dated as of December 23, 1996, as amended (together with all future amendments,
modifications, supplements and/or restatements thereof, the "Loan Agreement";
capitalized terms used herein without definition shall have the meanings
assigned those terms in the Loan Agreement), entered into by and among the
Makers, the Banks party thereto (referred to herein individually as a "Bank" and
collectively as the "Banks"), and PNC Bank, Kentucky, Inc., as Administrative
Bank.
This Note is one of the Makers' "Revolving Credit Notes" and is issued
pursuant to and is entitled to the benefits of the Loan Agreement to which
reference is hereby made for a more complete statement of the terms and
conditions under which the Revolving Credit Loans evidenced hereby were or are
made and are to be repaid.
All payments of principal and interest in respect of this Note shall be
made in lawful money of the United States of America in same day funds at the
office of the Administrative Bank located at 500 West Jefferson Street,
Louisville, Kentucky, or at such other place as shall be designated in
A-2-1
<PAGE> 38
writing for such purpose in accordance with the terms of the Loan Agreement.
Until notified in writing of the transfer of this Note, the Makers and the
Administrative Bank shall be entitled to deem the Payee or such person who has
been so identified by the transferor in writing to the Makers and the
Administrative Bank as the holder of this Note, as the owner and holder of this
Note. Each of the Payee and any subsequent holder of this Note agrees that
before disposing of this Note or any part hereof it will make a notation hereon
or in its records of all principal payments previously made hereunder and of the
date to which interest herein has been paid; PROVIDED, HOWEVER, that the failure
to make a notation of any payment made on this Note shall not limit or otherwise
affect the obligation of the Makers hereunder with respect to payments of
principal or interest on this Note.
Whenever any payment on this Note shall be stated to be due on a day
which is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the payment of interest on this Note; PROVIDED, HOWEVER, that if the day on
which any payment relating to a Euro-Rate Loan is due is not a Business Day but
is a day of the month after which no further Business Day occurs in such month,
then the due date thereof shall be the next preceding Business Day.
This Note is subject to prepayment at the option of the Makers as
provided in Section 2.4 of the Loan Agreement.
This Note is secured by the Stock Pledge Agreement and the Security
Agreements.
This Note is subject to restriction on transfer or assignment as
provided in Section 12 of the Loan Agreement.
THE LOAN AGREEMENT AND THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE COMMONWEALTH
OF KENTUCKY, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Note may become, or may be declared to be, due and
payable in the manner, upon the conditions and with the effect provided in the
Loan Agreement.
The terms of this Note are subject to amendment only in the manner
provided in the Loan Agreement.
No reference herein to the Loan Agreement and no provision of this Note
or the Loan Agreement shall alter or impair the obligation of the Makers, which
is absolute and unconditional, to pay the principal of and interest on this Note
at the place, at the respective times, and in the currency herein prescribed.
A-2-2
<PAGE> 39
The Makers promise to pay all reasonable costs and expenses, including
reasonable fees and expenses of counsel, as provided in Section 10.4 of the Loan
Agreement. The Makers hereby consent to all renewals and extensions of time at
or after the maturity hereof, without notice, and hereby waives diligence,
presentment, protest, demand and notice of every kind and, to the full extent
permitted by law, the right to plead any statute of limitations as a defense to
any demand hereunder.
This Note is delivered in amendment and restatement of, but not in
novation of, that Note of the Makers in the original amount of $17,500,000 dated
December 23, 1996.
A-2-3
<PAGE> 40
IN WITNESS WHEREOF, the Makers have caused this Note to be executed and
delivered by its duly authorized officer, as of the day and year and the place
first above written.
RES-CARE, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President and
Chief Executive Officer
COMMUNITY ALTERNATIVES INDIANA,
INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
COMMUNITY ALTERNATIVES
NEBRASKA, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
COMMUNITY ADVANTAGE, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
TEXAS HOME MANAGEMENT, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
CAPITAL TX INVESTMENTS, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
A-2-4
<PAGE> 41
THM HOMES, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
RSCR TEXAS, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
RES-CARE NEW MEXICO, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
RES-CARE OHIO, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
COMMUNITY ALTERNATIVES OF
TEXAS, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
CATX PROPERTIES, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
A-2-5
<PAGE> 42
RES-CARE CALIFORNIA, INC., d/b/a
RCCA Services
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
RES-CARE FLORIDA, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
RSCR CALIFORNIA, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
RES-CARE KANSAS, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
RES-CARE ILLINOIS, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
RES-CARE OKLAHOMA, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
A-2-6
<PAGE> 43
RES-CARE TENNESSEE, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
RES-CARE TRAINING
TECHNOLOGIES, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
YOUTHTRACK, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, Chairman
RES-CARE PREMIER, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
RSCR PREMIER, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
RES-CARE NEW JERSEY, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
A-2-7
<PAGE> 44
COMMUNITY ALTERNATIVES
KENTUCKY, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
ALTERNATIVE YOUTH SERVICES, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
COMMUNITY ALTERNATIVES
VIRGINIA, INC.
(a "Borrower")
By: Ronald G. Geary, President
-----------------------------------
RSCR WEST VIRGINIA, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
RAIMENT, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
A-2-8
<PAGE> 45
EXHIBIT A-3
-----------
AMENDED AND RESTATED REVOLVING CREDIT PROMISSORY NOTE
$18,000,000.00 December 23, 1996
Restated as of June _, 1997
FOR VALUE RECEIVED, RES-CARE, INC., COMMUNITY ALTERNATIVES INDIANA,
INC., COMMUNITY ALTERNATIVES NEBRASKA, INC., COMMUNITY ADVANTAGE, INC., TEXAS
HOME MANAGEMENT, INC., CAPITAL TX INVESTMENTS, INC., THM HOMES, INC., RSCR
TEXAS, INC., formerly THM Properties, Inc., RES-CARE NEW MEXICO, INC., RES-CARE
OHIO, INC., COMMUNITY ALTERNATIVES OF TEXAS, INC., CATX PROPERTIES, INC.,
RES-CARE CALIFORNIA, INC., d/b/a RCCA Services, RES-CARE FLORIDA, INC., RSCR
CALIFORNIA, INC., RES-CARE KANSAS, INC., RES-CARE ILLINOIS, INC., RES-CARE
OKLAHOMA, INC. RES-CARE TENNESSEE, INC., RES-CARE TRAINING TECHNOLOGIES, INC.,
YOUTHTRACK, INC., RES-CARE PREMIER, INC., RSCR PREMIER, INC., RES-CARE NEW
JERSEY, INC., COMMUNITY ALTERNATIVES KENTUCKY, INC., ALTERNATIVE YOUTH SERVICES,
INC., COMMUNITY ALTERNATIVES VIRGINIA, INC., RSCR WEST VIRGINIA, INC., and
RAIMENT, INC. (collectively, the "Makers"), promise to pay to the order of
SUNTRUST BANK, NASHVILLE, N.A., a Tennessee banking corporation (the "Payee"),
on or before the Revolving Loan Commitment Termination Date (as defined in the
Loan Agreement defined below), the lesser of (y) Eighteen Million Dollars
($18,000,000.00), and (z) the unpaid aggregate principal amount of all advances
made by the Payee to the Makers as Revolving Credit Loans under the Loan
Agreement referred to below.
The Makers also promise to pay interest on the unpaid principal amount
hereof until paid at the rates, at the times and from the dates which shall be
determined in accordance with the provisions of that certain Loan Agreement
dated as of December 23, 1996, as amended (together with all future amendments,
modifications, supplements and/or restatements thereof, the "Loan Agreement";
capitalized terms used herein without definition shall have the meanings
assigned those terms in the Loan Agreement), entered into by and among the
Makers, the Banks party thereto (referred to herein individually as a "Bank" and
collectively as the "Banks"), and PNC Bank, Kentucky, Inc., as Administrative
Bank.
This Note is one of the Makers' "Revolving Credit Notes" and is issued
pursuant to and is entitled to the benefits of the Loan Agreement to which
reference is hereby made for a more complete statement of the terms and
conditions under which the Revolving Credit Loans evidenced hereby were or are
made and are to be repaid.
All payments of principal and interest in respect of this Note shall be
made in lawful money of the United States of America in same day funds at the
office of the Administrative Bank located at 500 West Jefferson Street,
Louisville, Kentucky, or at such other place as shall be designated in
A-3-1
<PAGE> 46
writing for such purpose in accordance with the terms of the Loan Agreement.
Until notified in writing of the transfer of this Note, the Makers and the
Administrative Bank shall be entitled to deem the Payee or such person who has
been so identified by the transferor in writing to the Makers and the
Administrative Bank as the holder of this Note, as the owner and holder of this
Note. Each of the Payee and any subsequent holder of this Note agrees that
before disposing of this Note or any part hereof it will make a notation hereon
or in its records of all principal payments previously made hereunder and of the
date to which interest herein has been paid; PROVIDED, HOWEVER, that the failure
to make a notation of any payment made on this Note shall not limit or otherwise
affect the obligation of the Makers hereunder with respect to payments of
principal or interest on this Note.
Whenever any payment on this Note shall be stated to be due on a day
which is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the payment of interest on this Note; PROVIDED, HOWEVER, that if the day on
which any payment relating to a Euro-Rate Loan is due is not a Business Day but
is a day of the month after which no further Business Day occurs in such month,
then the due date thereof shall be the next preceding Business Day.
This Note is subject to prepayment at the option of the Makers as
provided in Section 2.4 of the Loan Agreement.
This Note is secured by the Stock Pledge Agreement and the Security
Agreements.
This Note is subject to restriction on transfer or assignment as
provided in Section 12 of the Loan Agreement.
THE LOAN AGREEMENT AND THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE COMMONWEALTH
OF KENTUCKY, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Note may become, or may be declared to be, due and
payable in the manner, upon the conditions and with the effect provided in the
Loan Agreement.
The terms of this Note are subject to amendment only in the manner
provided in the Loan Agreement.
No reference herein to the Loan Agreement and no provision of this Note
or the Loan Agreement shall alter or impair the obligation of the Makers, which
is absolute and unconditional, to pay the principal of and interest on this Note
at the place, at the respective times, and in the currency herein prescribed.
A-3-2
<PAGE> 47
The Makers promise to pay all reasonable costs and expenses, including
reasonable fees and expenses of counsel, as provided in Section 10.4 of the Loan
Agreement. The Makers hereby consent to all renewals and extensions of time at
or after the maturity hereof, without notice, and hereby waives diligence,
presentment, protest, demand and notice of every kind and, to the full extent
permitted by law, the right to plead any statute of limitations as a defense to
any demand hereunder.
This Note is delivered in amendment and restatement of, but not in
novation of, that Note of the Makers in the original amount of $12,500,000 dated
December 23, 1996.
A-3-3
<PAGE> 48
IN WITNESS WHEREOF, the Makers have caused this Note to be executed and
delivered by its duly authorized officer, as of the day and year and the place
first above written.
RES-CARE, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President and
Chief Executive Officer
COMMUNITY ALTERNATIVES INDIANA,
INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
COMMUNITY ALTERNATIVES
NEBRASKA, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
COMMUNITY ADVANTAGE, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
TEXAS HOME MANAGEMENT, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
CAPITAL TX INVESTMENTS, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
A-3-4
<PAGE> 49
THM HOMES, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
RSCR TEXAS, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
RES-CARE NEW MEXICO, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
RES-CARE OHIO, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
COMMUNITY ALTERNATIVES OF
TEXAS, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
CATX PROPERTIES, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
A-3-5
<PAGE> 50
RES-CARE CALIFORNIA, INC., d/b/a
RCCA Services
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
RES-CARE FLORIDA, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
RSCR CALIFORNIA, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
RES-CARE KANSAS, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
RES-CARE ILLINOIS, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
RES-CARE OKLAHOMA, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
A-3-6
<PAGE> 51
RES-CARE TENNESSEE, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
RES-CARE TRAINING
TECHNOLOGIES, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
YOUTHTRACK, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, Chairman
RES-CARE PREMIER, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
RSCR PREMIER, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
RES-CARE NEW JERSEY, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
A-3-7
<PAGE> 52
COMMUNITY ALTERNATIVES
KENTUCKY, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
ALTERNATIVE YOUTH SERVICES, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
COMMUNITY ALTERNATIVES
VIRGINIA, INC.
(a "Borrower")
x By: Ronald G. Geary, President
-----------------------------------
RSCR WEST VIRGINIA, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
RAIMENT, INC.
(a "Maker")
-----------------------------------
By: Ronald G. Geary, President
A-3-8
<PAGE> 53
EXHIBIT A-4
-----------
AMENDED AND RESTATED REVOLVING CREDIT PROMISSORY NOTE
$18,000,000.00 December 23, 1996
Restated as of June _, 1997
FOR VALUE RECEIVED, RES-CARE, INC., COMMUNITY ALTERNATIVES INDIANA,
INC., COMMUNITY ALTERNATIVES NEBRASKA, INC., COMMUNITY ADVANTAGE, INC., TEXAS
HOME MANAGEMENT, INC., CAPITAL TX INVESTMENTS, INC., THM HOMES, INC., RSCR
TEXAS, INC., formerly THM Properties, Inc., RES-CARE NEW MEXICO, INC., RES-CARE
OHIO, INC., COMMUNITY ALTERNATIVES OF TEXAS, INC., CATX PROPERTIES, INC.,
RES-CARE CALIFORNIA, INC., d/b/a RCCA Services, RES-CARE FLORIDA, INC., RSCR
CALIFORNIA, INC., RES-CARE KANSAS, INC., RES-CARE ILLINOIS, INC., RES-CARE
OKLAHOMA, INC. RES-CARE TENNESSEE, INC., RES-CARE TRAINING TECHNOLOGIES, INC.,
YOUTHTRACK, INC., RES-CARE PREMIER, INC., RSCR PREMIER, INC., RES-CARE NEW
JERSEY, INC., COMMUNITY ALTERNATIVES KENTUCKY, INC., ALTERNATIVE YOUTH SERVICES,
INC., COMMUNITY ALTERNATIVES VIRGINIA, INC., RSCR WEST VIRGINIA, INC., and
RAIMENT, INC. (collectively, the "Makers"), promise to pay to the order of BANK
ONE, KENTUCKY, NA, a national banking association (the "Payee"), on or before
the Revolving Loan Commitment Termination Date (as defined in the Loan Agreement
defined below), the lesser of (y) Eighteen Million Dollars ($18,000,000.00), and
(z) the unpaid aggregate principal amount of all advances made by the Payee to
the Makers as Revolving Credit Loans under the Loan Agreement referred to below.
The Makers also promise to pay interest on the unpaid principal amount
hereof until paid at the rates, at the times and from the dates which shall be
determined in accordance with the provisions of that certain Loan Agreement
dated as of December 23, 1996, as amended (together with all future amendments,
modifications, supplements and/or restatements thereof, the "Loan Agreement";
capitalized terms used herein without definition shall have the meanings
assigned those terms in the Loan Agreement), entered into by and among the
Makers, the Banks party thereto (referred to herein individually as a "Bank" and
collectively as the "Banks"), and PNC Bank, Kentucky, Inc., as Administrative
Bank.
This Note is one of the Makers' "Revolving Credit Notes" and is issued
pursuant to and is entitled to the benefits of the Loan Agreement to which
reference is hereby made for a more complete statement of the terms and
conditions under which the Revolving Credit Loans evidenced hereby were or are
made and are to be repaid.
All payments of principal and interest in respect of this Note shall be
made in lawful money of the United States of America in same day funds at the
office of the Administrative Bank located at 500 West Jefferson Street,
Louisville, Kentucky, or at such other place as shall be designated in
A-4-1
<PAGE> 54
writing for such purpose in accordance with the terms of the Loan Agreement.
Until notified in writing of the transfer of this Note, the Makers and the
Administrative Bank shall be entitled to deem the Payee or such person who has
been so identified by the transferor in writing to the Makers and the
Administrative Bank as the holder of this Note, as the owner and holder of this
Note. Each of the Payee and any subsequent holder of this Note agrees that
before disposing of this Note or any part hereof it will make a notation hereon
or in its records of all principal payments previously made hereunder and of the
date to which interest herein has been paid; PROVIDED, HOWEVER, that the failure
to make a notation of any payment made on this Note shall not limit or otherwise
affect the obligation of the Makers hereunder with respect to payments of
principal or interest on this Note.
Whenever any payment on this Note shall be stated to be due on a day
which is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the payment of interest on this Note; PROVIDED, HOWEVER, that if the day on
which any payment relating to a Euro-Rate Loan is due is not a Business Day but
is a day of the month after which no further Business Day occurs in such month,
then the due date thereof shall be the next preceding Business Day.
This Note is subject to prepayment at the option of the Makers as
provided in Section 2.4 of the Loan Agreement.
This Note is secured by the Stock Pledge Agreement and the Security
Agreements.
This Note is subject to restriction on transfer or assignment as
provided in Section 12 of the Loan Agreement.
THE LOAN AGREEMENT AND THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE COMMONWEALTH
OF KENTUCKY, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Note may become, or may be declared to be, due and
payable in the manner, upon the conditions and with the effect provided in the
Loan Agreement.
The terms of this Note are subject to amendment only in the manner
provided in the Loan Agreement.
No reference herein to the Loan Agreement and no provision of this Note
or the Loan Agreement shall alter or impair the obligation of the Makers, which
is absolute and unconditional, to pay the principal of and interest on this Note
at the place, at the respective times, and in the currency herein prescribed.
A-4-2
<PAGE> 55
The Makers promise to pay all reasonable costs and expenses, including
reasonable fees and expenses of counsel, as provided in Section 10.4 of the Loan
Agreement. The Makers hereby consent to all renewals and extensions of time at
or after the maturity hereof, without notice, and hereby waives diligence,
presentment, protest, demand and notice of every kind and, to the full extent
permitted by law, the right to plead any statute of limitations as a defense to
any demand hereunder.
This Note is delivered in amendment and restatement of, but not in
novation of, that Note of the Makers in the original amount of $10,000,000 dated
December 23, 1996.
A-4-3
<PAGE> 56
IN WITNESS WHEREOF, the Makers have caused this Note to be executed and
delivered by its duly authorized officer, as of the day and year and the place
first above written.
RES-CARE, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President and
Chief Executive Officer
COMMUNITY ALTERNATIVES INDIANA,
INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
COMMUNITY ALTERNATIVES
NEBRASKA, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
COMMUNITY ADVANTAGE, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
TEXAS HOME MANAGEMENT, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
CAPITAL TX INVESTMENTS, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
A-4-4
<PAGE> 57
THM HOMES, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
RSCR TEXAS, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
RES-CARE NEW MEXICO, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
RES-CARE OHIO, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
COMMUNITY ALTERNATIVES OF
TEXAS, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
CATX PROPERTIES, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
A-4-5
<PAGE> 58
RES-CARE CALIFORNIA, INC., d/b/a
RCCA Services
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
RES-CARE FLORIDA, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
RSCR CALIFORNIA, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
RES-CARE KANSAS, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
RES-CARE ILLINOIS, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
RES-CARE OKLAHOMA, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
A-4-6
<PAGE> 59
RES-CARE TENNESSEE, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
RES-CARE TRAINING
TECHNOLOGIES, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
YOUTHTRACK, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, Chairman
RES-CARE PREMIER, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
RSCR PREMIER, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
RES-CARE NEW JERSEY, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
A-4-7
<PAGE> 60
COMMUNITY ALTERNATIVES
KENTUCKY, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
ALTERNATIVE YOUTH SERVICES, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
COMMUNITY ALTERNATIVES
VIRGINIA, INC.
(a "Borrower")
By: Ronald G. Geary, President
-------------------------------------
RSCR WEST VIRGINIA, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
RAIMENT, INC.
(a "Maker")
-------------------------------------
By: Ronald G. Geary, President
A-4-8
<PAGE> 61
EXHIBIT A-5
-----------
REVOLVING CREDIT PROMISSORY NOTE
$10,000,000.00 June _, 1997
FOR VALUE RECEIVED, RES-CARE, INC., COMMUNITY ALTERNATIVES INDIANA,
INC., COMMUNITY ALTERNATIVES NEBRASKA, INC., COMMUNITY ADVANTAGE, INC., TEXAS
HOME MANAGEMENT, INC., CAPITAL TX INVESTMENTS, INC., THM HOMES, INC., RSCR
TEXAS, INC., formerly THM Properties, Inc., RES-CARE NEW MEXICO, INC., RES-CARE
OHIO, INC., COMMUNITY ALTERNATIVES OF TEXAS, INC., CATX PROPERTIES, INC.,
RES-CARE CALIFORNIA, INC., d/b/a RCCA Services, RES-CARE FLORIDA, INC., RSCR
CALIFORNIA, INC., RES-CARE KANSAS, INC., RES-CARE ILLINOIS, INC., RES-CARE
OKLAHOMA, INC. RES-CARE TENNESSEE, INC., RES-CARE TRAINING TECHNOLOGIES, INC.,
YOUTHTRACK, INC., RES-CARE PREMIER, INC., RSCR PREMIER, INC., RES-CARE NEW
JERSEY, INC., COMMUNITY ALTERNATIVES KENTUCKY, INC., ALTERNATIVE YOUTH SERVICES,
INC., COMMUNITY ALTERNATIVES VIRGINIA, INC., RSCR WEST VIRGINIA, INC., and
RAIMENT, INC. (collectively, the "Makers"), promise to pay to the order of
WACHOVIA BANK, N.A., a national banking association (the "Payee"), on or before
the Revolving Loan Commitment Termination Date (as defined in the Loan Agreement
defined below), the lesser of (y) Ten Million Dollars ($10,000,000.00), and (z)
the unpaid aggregate principal amount of all advances made by the Payee to the
Makers as Revolving Credit Loans under the Loan Agreement referred to below.
The Makers also promise to pay interest on the unpaid principal amount
hereof until paid at the rates, at the times and from the dates which shall be
determined in accordance with the provisions of that certain Loan Agreement
dated as of December 23, 1996, as amended (together with all future amendments,
modifications, supplements and/or restatements thereof, the "Loan Agreement";
capitalized terms used herein without definition shall have the meanings
assigned those terms in the Loan Agreement), entered into by and among the
Makers, the Banks party thereto (referred to herein individually as a "Bank" and
collectively as the "Banks"), and PNC Bank, Kentucky, Inc., as Administrative
Bank.
This Note is one of the Makers' "Revolving Credit Notes" and is issued
pursuant to and is entitled to the benefits of the Loan Agreement to which
reference is hereby made for a more complete statement of the terms and
conditions under which the Revolving Credit Loans evidenced hereby were or are
made and are to be repaid.
All payments of principal and interest in respect of this Note shall be
made in lawful money of the United States of America in same day funds at the
office of the Administrative Bank located at 500 West Jefferson Street,
Louisville, Kentucky, or at such other place as shall be designated in writing
for such purpose in accordance with the terms of the Loan Agreement. Until
notified in
A-5-1
<PAGE> 62
writing of the transfer of this Note, the Makers and the Administrative Bank
shall be entitled to deem the Payee or such person who has been so identified by
the transferor in writing to the Makers and the Administrative Bank as the
holder of this Note, as the owner and holder of this Note. Each of the Payee and
any subsequent holder of this Note agrees that before disposing of this Note or
any part hereof it will make a notation hereon or in its records of all
principal payments previously made hereunder and of the date to which interest
herein has been paid; PROVIDED, HOWEVER, that the failure to make a notation of
any payment made on this Note shall not limit or otherwise affect the obligation
of the Makers hereunder with respect to payments of principal or interest on
this Note.
Whenever any payment on this Note shall be stated to be due on a day
which is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the payment of interest on this Note; PROVIDED, HOWEVER, that if the day on
which any payment relating to a Euro-Rate Loan is due is not a Business Day but
is a day of the month after which no further Business Day occurs in such month,
then the due date thereof shall be the next preceding Business Day.
This Note is subject to prepayment at the option of the Makers as
provided in Section 2.4 of the Loan Agreement.
This Note is secured by the Stock Pledge Agreement and the Security
Agreements.
This Note is subject to restriction on transfer or assignment as
provided in Section 12 of the Loan Agreement.
THE LOAN AGREEMENT AND THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE COMMONWEALTH
OF KENTUCKY, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Note may become, or may be declared to be, due and
payable in the manner, upon the conditions and with the effect provided in the
Loan Agreement.
The terms of this Note are subject to amendment only in the manner
provided in the Loan Agreement.
No reference herein to the Loan Agreement and no provision of this Note
or the Loan Agreement shall alter or impair the obligation of the Makers, which
is absolute and unconditional, to pay the principal of and interest on this Note
at the place, at the respective times, and in the currency herein prescribed.
A-5-2
<PAGE> 63
The Makers promise to pay all reasonable costs and expenses, including
reasonable fees and expenses of counsel, as provided in Section 10.4 of the Loan
Agreement. The Makers hereby consent to all renewals and extensions of time at
or after the maturity hereof, without notice, and hereby waives diligence,
presentment, protest, demand and notice of every kind and, to the full extent
permitted by law, the right to plead any statute of limitations as a defense to
any demand hereunder.
A-5-3
<PAGE> 64
IN WITNESS WHEREOF, the Makers have caused this Note to be executed and
delivered by its duly authorized officer, as of the day and year and the place
first above written.
RES-CARE, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President and
Chief Executive Officer
COMMUNITY ALTERNATIVES INDIANA,
INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
COMMUNITY ALTERNATIVES
NEBRASKA, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
COMMUNITY ADVANTAGE, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
TEXAS HOME MANAGEMENT, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
CAPITAL TX INVESTMENTS, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
A-5-4
<PAGE> 65
THM HOMES, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
RSCR TEXAS, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
RES-CARE NEW MEXICO, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
RES-CARE OHIO, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
COMMUNITY ALTERNATIVES OF
TEXAS, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
CATX PROPERTIES, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
A-5-5
<PAGE> 66
RES-CARE CALIFORNIA, INC., d/b/a
RCCA Services
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
RES-CARE FLORIDA, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
RSCR CALIFORNIA, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
RES-CARE KANSAS, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
RES-CARE ILLINOIS, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
RES-CARE OKLAHOMA, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
A-5-6
<PAGE> 67
RES-CARE TENNESSEE, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
RES-CARE TRAINING
TECHNOLOGIES, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
YOUTHTRACK, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, Chairman
RES-CARE PREMIER, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
RSCR PREMIER, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
RES-CARE NEW JERSEY, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
A-5-7
<PAGE> 68
COMMUNITY ALTERNATIVES
KENTUCKY, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
ALTERNATIVE YOUTH SERVICES, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
COMMUNITY ALTERNATIVES
VIRGINIA, INC.
(a "Borrower")
By: Ronald G. Geary, President
--------------------------------------
RSCR WEST VIRGINIA, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
RAIMENT, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
A-5-8
<PAGE> 69
EXHIBIT B
---------
AMENDED AND RESTATED SWING LINE PROMISSORY NOTE
$12,500,000.00 December 23, 1996
Restated as of June _, 1997
FOR VALUE RECEIVED, RES-CARE, INC., COMMUNITY ALTERNATIVES INDIANA,
INC., COMMUNITY ALTERNATIVES NEBRASKA, INC., COMMUNITY ADVANTAGE, INC., TEXAS
HOME MANAGEMENT, INC., CAPITAL TX INVESTMENTS, INC., THM HOMES, INC., RSCR
TEXAS, INC., formerly THM Properties, Inc., RES-CARE NEW MEXICO, INC., RES-CARE
OHIO, INC., COMMUNITY ALTERNATIVES OF TEXAS, INC., CATX PROPERTIES, INC.,
RES-CARE CALIFORNIA, INC., d/b/a RCCA Services, RES-CARE FLORIDA, INC., RSCR
CALIFORNIA, INC., RES-CARE KANSAS, INC., RES-CARE ILLINOIS, INC., RES-CARE
OKLAHOMA, INC. RES-CARE TENNESSEE, INC., RES-CARE TRAINING TECHNOLOGIES, INC.,
YOUTHTRACK, INC., RES-CARE PREMIER, INC., RSCR PREMIER, INC., RES-CARE NEW
JERSEY, INC., COMMUNITY ALTERNATIVES KENTUCKY, INC., ALTERNATIVE YOUTH SERVICES,
INC., COMMUNITY ALTERNATIVES VIRGINIA, INC., RSCR WEST VIRGINIA, INC., and
RAIMENT, INC. (collectively, the "Makers"), promise to pay to the order of PNC
BANK, KENTUCKY, INC., a Kentucky banking corporation (the "Payee"), on or before
the Swing Line Commitment Termination Date (as defined in the Loan Agreement
defined below), the lesser of (y) Twelve Million Five Hundred Thousand Dollars
($12,500,000.00), and (z) the unpaid aggregate principal amount of all advances
made by the Payee to the Makers as Swing Line Loans under the Loan Agreement
referred to below.
The Makers also promise to pay interest on the unpaid principal amount
hereof until paid at the rates, at the times and from the dates which shall be
determined in accordance with the provisions of that certain Loan Agreement
dated as of December 23, 1996, as amended (together with all future amendments,
modifications, supplements and/or restatements thereof, the "Loan Agreement";
capitalized terms used herein without definition shall have the meanings
assigned those terms in the Loan Agreement), entered into by and among the
Makers, the Banks party thereto (referred to herein individually as a "Bank" and
collectively as the "Banks"), and PNC Bank, Kentucky, Inc., as Administrative
Bank.
This Note is the Makers' "Swing Line Note" and is issued pursuant to
and is entitled to the benefits of the Loan Agreement to which reference is
hereby made for a more complete statement of the terms and conditions under
which the Swing Line Loans evidenced hereby were or are made and are to be
repaid.
All payments of principal and interest in respect of this Note shall be
made in lawful money of the United States of America in same day funds at the
office of the Administrative Bank located at 500 West Jefferson Street,
Louisville, Kentucky, or at such other place as shall be designated in
B-1
<PAGE> 70
writing for such purpose in accordance with the terms of the Loan Agreement.
Until notified in writing of the transfer of this Note, the Makers and the
Administrative Bank shall be entitled to deem the Payee or such person who has
been so identified by the transferor in writing to the Makers and the
Administrative Bank as the holder of this Note, as the owner and holder of this
Note. Each of the Payee and any subsequent holder of this Note agrees that
before disposing of this Note or any part hereof it will make a notation hereon
or in its records of all principal payments previously made hereunder and of the
date to which interest herein has been paid; PROVIDED, HOWEVER, that the failure
to make a notation of any payment made on this Note shall not limit or otherwise
affect the obligation of the Makers hereunder with respect to payments of
principal or interest on this Note.
Whenever any payment on this Note shall be stated to be due on a day
which is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the payment of interest on this Note; PROVIDED, HOWEVER, that if the day on
which any payment relating to a Euro-Rate Loan is due is not a Business Day but
is a day of the month after which no further Business Day occurs in such month,
then the due date thereof shall be the next preceding Business Day.
This Note is subject to prepayment at the option of the Makers.
This Note is secured by the Stock Pledge Agreement and the Security
Agreements.
This Note is subject to restriction on transfer or assignment as
provided in Section 12 of the Loan Agreement.
THE LOAN AGREEMENT AND THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE COMMONWEALTH
OF KENTUCKY, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Note may become, or may be declared to be, due and
payable in the manner, upon the conditions and with the effect provided in the
Loan Agreement.
The terms of this Note are subject to amendment only in the manner
provided in the Loan Agreement.
No reference herein to the Loan Agreement and no provision of this Note
or the Loan Agreement shall alter or impair the obligation of the Makers, which
is absolute and unconditional, to pay the principal of and interest on this Note
at the place, at the respective times, and in the currency herein prescribed.
B-2
<PAGE> 71
The Makers promise to pay all reasonable costs and expenses, including
reasonable fees and expenses of counsel, as provided in Section 10.4 of the Loan
Agreement. The Makers hereby consent to all renewals and extensions of time at
or after the maturity hereof, without notice, and hereby waives diligence,
presentment, protest, demand and notice of every kind and, to the full extent
permitted by law, the right to plead any statute of limitations as a defense to
any demand hereunder.
This Note is delivered in amendment and restatement of, but not in
novation of, that Swing Line Note of the Makers in the original amount of
$7,500,000 dated December 23, 1996.
B-3
<PAGE> 72
IN WITNESS WHEREOF, the Makers have caused this Note to be executed and
delivered by its duly authorized officer, as of the day and year and the place
first above written.
RES-CARE, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President and
Chief Executive Officer
COMMUNITY ALTERNATIVES INDIANA,
INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
COMMUNITY ALTERNATIVES
NEBRASKA, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
COMMUNITY ADVANTAGE, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
TEXAS HOME MANAGEMENT, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
CAPITAL TX INVESTMENTS, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
B-4
<PAGE> 73
THM HOMES, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
RSCR TEXAS, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
RES-CARE NEW MEXICO, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
RES-CARE OHIO, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
COMMUNITY ALTERNATIVES OF
TEXAS, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
CATX PROPERTIES, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
B-5
<PAGE> 74
RES-CARE CALIFORNIA, INC., d/b/a
RCCA Services
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
RES-CARE FLORIDA, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
RSCR CALIFORNIA, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
RES-CARE KANSAS, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
RES-CARE ILLINOIS, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
RES-CARE OKLAHOMA, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
B-6
<PAGE> 75
RES-CARE TENNESSEE, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
RES-CARE TRAINING
TECHNOLOGIES, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
YOUTHTRACK, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, Chairman
RES-CARE PREMIER, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
RSCR PREMIER, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
RES-CARE NEW JERSEY, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
B-7
<PAGE> 76
COMMUNITY ALTERNATIVES
KENTUCKY, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
ALTERNATIVE YOUTH SERVICES, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
COMMUNITY ALTERNATIVES
VIRGINIA, INC.
(a "Borrower")
By: Ronald G. Geary, President
--------------------------------------
RSCR WEST VIRGINIA, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
RAIMENT, INC.
(a "Maker")
--------------------------------------
By: Ronald G. Geary, President
B-8
<PAGE> 77
EXHIBIT C
Exhibit A
to Stock Pledge Agreement
between Res-Care, Inc.
and
PNC Bank, Kentucky, Inc.,
as Administrative Bank
----------------------
C-1
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 9,603
<SECURITIES> 0
<RECEIVABLES> 43,520
<ALLOWANCES> 2,570
<INVENTORY> 690
<CURRENT-ASSETS> 55,924
<PP&E> 58,840
<DEPRECIATION> 8,530
<TOTAL-ASSETS> 139,976
<CURRENT-LIABILITIES> 26,517
<BONDS> 0
0
0
<COMMON> 41,731
<OTHER-SE> 52,507
<TOTAL-LIABILITY-AND-EQUITY> 139,976
<SALES> 0
<TOTAL-REVENUES> 134,857
<CGS> 0
<TOTAL-COSTS> 124,949
<OTHER-EXPENSES> 80
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<INCOME-TAX> 3,722
<INCOME-CONTINUING> 5,494
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