<PAGE> 1
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 March 31, 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 March 31, 1997 was 10,067,223.
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RES-CARE, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE
NUMBER
Item 1. Condensed Consolidated Financial Statements 3
(Unaudited)
Condensed Consolidated Balance Sheets at March 31, 1997 3
and December 31, 1996
Condensed Consolidated Statements of Income for the 4
three months ended March 31, 1997 and 1996
Condensed Consolidated Statements of Cash Flows for the 5
three months ended March 31, 1997 and 1996
Notes to Condensed Consolidated Financial Statements -- 6
March 31, 1997
Item 2. Management's Discussion and Analysis of Financial 7
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Index to Exhibits 14
Signatures 15
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PART I FINANCIAL INFORMATION
ITEM I
RES-CARE, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
1997 1996
---------- -------------
(UNAUDITED) (NOTE)
(in thousands)
<S> <C> <C>
Assets:
- -----------------
Current assets:
Cash and cash equivalents $ 8,244 $ 7,932
Accounts and notes receivable, less allowance
for contractual adjustments of $2,249 in
1997 and $1,945 in 1996 45,199 33,996
Inventories 656 656
Deferred income taxes 2,863 2,498
Other current assets 1,935 1,961
-------- --------
Total current assets 58,897 47,043
Property and equipment, less accumulated
depreciation of $8,297 in 1997 and
$7,568 in 1996 48,035 43,581
Deferred start-up cost less accumulated
amortization of $3,282 in 1997 and
$3,123 in 1996 3,736 3,456
Excess of acquisition costs over net assets acquired,
less accumulated amortization of $799 in 1997
and $633 in 1996 19,346 14,558
Licenses costs less accumulated amortization of
$184 in 1997 and $158 in 1996 2,999 3,013
Long-term receivables and advances to managed facilities 1,105 1,102
Long-term deferred income taxes 753 --
Other assets 3,822 2,559
======== ========
Total Assets $138,693 $115,312
======== ========
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities:
Notes payable $ 127 $ 369
Trade accounts payable 6,112 5,241
Accrued expenses 18,403 16,059
Accrued income taxes 3,537 2,021
-------- --------
Total current liabilities 28,179 23,690
-------- --------
Long-term liabilities 1,812 1,421
Long-term debt 45,336 30,672
Long-term deferred income taxes -- 1,361
-------- --------
Total liabilities 75,327 57,144
-------- --------
Minority interest in equity of
consolidated subsidiary 117 73
-------- --------
Shareholders' equity:
Preferred shares, no par value, authorized
1,000 shares, no shares issued
or outstanding -- --
Common stock, no par value, authorized
20,000 shares, issued 13,838
shares in 1997 and 1996 15,535 15,535
Additional paid in capital 6,782 4,035
Retained earnings 44,687 42,314
-------- --------
67,004 61,884
Less cost of common shares in treasury
(3,770 shares in 1997 and 3,804
shares in 1996) 3,755 3,789
-------- --------
Total shareholders' equity 63,249 58,095
-------- --------
Total liabilities and shareholders' equity $138,693 $115,312
======== ========
<FN>
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).
</TABLE>
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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
March 31
-----------------------------------------
1997 1996
----------------- -----------------
<S> <C> <C>
Net revenues $ 64,867 $ 54,066
Operating expenses:
Facility and program expenses 56,121 47,676
Corporate general and administrative 2,565 2,385
Depreciation and amortization 1,179 789
Nonrecurring acquisition related expenses 149 -
------------ ------------
Total operating expenses 60,014 50,850
------------ ------------
Operating income 4,853 3,216
Other expenses (income):
Gain from sale of assets (15) (15)
Interest expense 562 270
Interest income (116) (106)
------------ ------------
Total other expenses, net 431 149
Minority Interest in (income) loss of
consolidated subsidiary (44) 10
------------ ------------
Income before income taxes 4,378 3,077
Income taxes 1,771 1,156
------------ ------------
Net income 2,607 1,921
============ ============
Income data:
Income per share $ 0.25 $ 0.19
========== ==========
Weighted average shares used in per share
calculation 10,517,339 10,230,215
</TABLE>
See notes to condensed consolidated financial statements.
4
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RES-CARE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
March 31
--------------------------
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,607 $ 1,921
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation and amortization 1,179 789
Provision for contractual adjustments 309 200
Deferred income taxes - net (159) (24)
Provision for compensation - stock options -- 4
Gain from sale of assets (15) (15)
Income (loss) applicable to minority interest of consolidated subsidiary 44 (10)
Changes in operating assets and liabilities
Increase in accounts and notes receivable (11,524) (3,550)
Decrease (increase) in inventories 7 (86)
Decrease (increase) in other current assets 174 (166)
Increase in other assets (76) (1)
Increase in trade accounts payable 871 34
Increase in accrued expenses 2,224 1,614
Increase in accrued income taxes 1,613 1,032
Decrease in long-term liabilities (285) (37)
-------- -------
Net cash (used in) provided by operating activities (3,031) 1,709
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (3,174) (1,326)
Acquisition of businesses (7,336) --
Payments received on notes from sale of assets 10 10
Deferred start-up costs (391) (364)
Increase in goodwill (71) (180)
(Increase) decrease in other assets (129) 23
-------- -------
Net cash used in investing activities (11,091) (1,837)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt borrowings 14,304 --
Repayment of long-term debt -- (1,179)
Proceeds received from exercise of stock options 364 258
Partnership distributions (234) (196)
-------- -------
Net cash provided by (used in) financing activities 14,434 (1,117)
-------- -------
Increase (decrease) in cash and cash equivalents 312 (1,245)
Cash and cash equivalents at beginning of period 7,932 7,461
-------- -------
Cash and cash equivalents at end of period $ 8,244 $ 6,216
======== =======
</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 three-month
period ended March 31, 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
As of March 31, 1997, the Company had a revolving credit
facility with its banks: PNC Bank, Kentucky, Inc.; National City Bank of
Kentucky; SunTrust Bank, Nashville, N.A.; and Bank One, Kentucky, N.A. The
facility provides for maximum borrowings of $65 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 March 31, 1997, letters
of credit in the amount of $4.6 million were outstanding and $18.9 million was
available under the revolving credit facility for additional borrowing. 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 March 31, 1997, uncleared checks in the amount of $4.0
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 March 31, 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 March 31, 1997 compared to March 31, 1996
Revenues
Total net revenues for the first quarter of 1997 increased by
20.0%, or $10.8 million, to $64.9 million compared to $54.1 million for the
first quarter of 1996. Of the increase, 80.6% resulted from increased
disabilities services revenues. Disabilities services net revenues increased by
19.8%, or $8.7 million, to $52.6 million in the first quarter of 1997 compared
to $43.9 million in the first 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 prior
periods. Average revenue per census day increased to $120.15 in the first
quarter of 1997 compared to $117.46 for the same period in 1996, an increase of
2.3% primarily due to rate increases in some states. Average disabilities
services facility and program occupancy rates for the first quarter of 1997
were 97.4% compared to 97.8% for the first 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 pending approval of an alternate plan by the U.S.
Health Care Financing Administration. In Tennessee, new regulations which could
affect the management fees of the Company under its management contracts with
not-for-profit providers for group homes have been 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 any such regulations will have 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 first quarter results, and Texas has
been paying under the new rates during the first 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
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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.
Youth services net revenues for the first quarter of 1997
increased by 21.8%, or $2.2 million, to $12.3 million compared to $10.1 million
during the first quarter of 1996. The increase resulted primarily from an
acquisition by and a new contract awarded to Youthtrack and acquisitions by
Alternative Youth Services that were operational in the first quarter of 1997
compared to the same period of 1996.
Facility and Program Expenses
Facility and program expenses in the first quarter of 1997
increased 17.7%, or $8.4 million, compared to the first quarter of 1996. Of this
increase, $6.8 million, or 81.0% was due to payroll and payroll-related
expenses. These expenses reflected additional personnel as well as other costs
associated with new facilities and programs in both of the Company's divisions.
Facility and program expenses in the first quarter of 1997 decreased as a
percentage of total net revenues to 86.5% from 88.2% for the same period of
1996.
Disabilities services facility and program expenses in the
first quarter of 1997 increased 17.3%, or $6.7 million, to $45.3 million
compared to $38.6 million during the first quarter of 1996. Payroll and
payroll-related expenses represented 80.6% of the increase due primarily to the
additional personnel and other costs associated with the new facilities and
programs that were operational in the first quarter of 1997 as compared to 1996.
As a percentage of net revenues, disabilities services facility and program
expenses in the first quarter of 1997 decreased to 86.2% from 87.9% for the same
period in 1996.
Youth services facility and program expenses in the first
quarter of 1997 increased 18.7%, or $1.7 million, to $10.8 million compared to
$9.1 million during the first quarter of 1996. Payroll and payroll-related
expenses represented 82.4% of the increase due primarily to the additional
facilities and programs that were operational during the first quarter of 1997
compared to the same period in 1996. As a percentage of net revenues, youth
services facility and program expenses decreased to 87.9% in the first quarter
of 1997 from 89.5% for the first quarter of 1996. This decrease was due
primarily to Youthtrack revenues which commenced in July 1996.
Other Operating Expenses
Corporate general and administrative expenses increased 7.5%,
or $180,000, in the first quarter of 1997 compared to the first quarter of 1996.
Payroll and payroll-related expenses represented 90% of the increase due
primarily to the addition of support staff and increase in staff
8
<PAGE> 9
salaries. Corporate general and administrative expenses in the first quarter of
1997 decreased as a percentage of total net revenues to 4.0% from 4.4% for the
same period in 1996.
Depreciation and amortization expenses in the first quarter of
1997 increased 52.1%, or $390,000, to $1.2 million compared to $789,000 during
the first quarter of 1996. The increase resulted primarily from the purchase of
real property and intangible assets since the first quarter of 1996.
Net interest expense in the first quarter of 1997 increased
$282,000 to $446,000 compared to $164,000 for the first quarter of 1996. The
increase resulted primarily from the increased utilization of the Company's
credit facility for acquisitions made during 1996.
Liquidity and Capital Resources
For the first three months of 1997, net cash used in operating
activities was $3.0 million compared to $1.7 million in net cash provided by
operating activities for the first three months of 1996, an increase of $4.7
million in net cash used. The increase was due primarily to the increase in
accounts and notes receivable.
During the first quarter of 1997, net cash used in investing
activities was $11.1 million compared to $1.8 million for the first three months
of 1996, an increase of $9.3 million, due primarily to the purchase of property
and equipment and the acquisition of businesses and related assets.
For the first three months of 1997, net cash provided by
financing activities was $14.4 million compared to $1.1 million net cash used in
financing activities for the first three months of 1996, an increase of $15.5
million in net cash provided. The increase was due primarily to long-term
borrowings for acquisitions.
As of March 31, 1997, the Company had $18.9 million available
on its line-of-credit and $8.2 million in cash and cash equivalents. Outstanding
at that date were irrevocable standby letters of credit in the principal amount
of $4.6 million issued in connection with workers' compensation insurance and
certain facility leases.
Subsequent to March 31, 1997, the Company closed on a
secondary public offering of its common stock which generated proceeds of $26.3
million after estimated expenses of $450,000 incurred in connection with the
offering. Net proceeds were used to pay down the Company's line-of-credit.
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
9
<PAGE> 10
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 acquisitions 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.
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 formula. 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, 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.
10
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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 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.
11
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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 larger 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-three months ended March 31, 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 larger 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 larger 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 report 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 the 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 determine the effect
on the Company if Kentucky should prevail.
In addition, the Company is a party to various other legal
proceedings encountered
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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
(c) Effective January 1, 1997, the Company acquired all of the
partnership interests in Premier Rehabilitation Centers from Stanley L.
Goldstein, Walter A. Winshall and Premier Rehabilitation Centers, Inc., a
corporation wholly owned by Stanley L. Goldstein, in exchange for 409,250 shares
of the Company's common stock. The transaction was exempt from registration
under Section 4 of the Securities Act of 1933 since the stock was issued only to
the partners pursuant to the acquisition of their partnership interests and was
not a public offering.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
Effective May 1, 1997, the Company entered into an employment
agreement with Paul G. Dunn, Executive Vice President for Development, who will
take over the primary responsibilities from E. Halsey Sandford. Mr. Sandford
will remain involved with the Company as Senior Executive with a reduced time
commitment and will remain on the Board of Directors.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.1. Employment Agreement dated January 1, 1997,
between the Company and Jeffrey M. Cross. Exhibit 10.13 to the Company's Report
on Form 10-K for the year ending December 31, 1996 is hereby incorporated by
reference.
10.2. Employment Agreement dated April 13, 1997 between
the Company and Paul G. Dunn.
27. Financial Data Schedule.
(b) On March 19, 1997, the Company filed a Report on Form 8-K
to report the results of the first month of operations after its acquisition of
Premier Rehabilitation Centers.
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE NUMBER
------ ----------------------- -----------
<S> <C>
Exhibit 10.1 Employment Agreement dated January 1, 1997, between
the Company and Jeffrey M. Cross. Exhibit 10.13 to the
Company's Report on Form 10-K for the year ending December
31, 1996 is hereby incorporated by reference.
Exhibit 10.2 Employment Agreement dated April 13, 1997 between the
Company and Paul G. Dunn.
Exhibit 27 Financial Data Schedule.
</TABLE>
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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: May 14, 1997 By: /s/ Ronald G. Geary
------------------------------------------
Ronald G. Geary
President and Chief Executive Officer
Date: May 14, 1997 By: /s/ R. Dan Brice
------------------------------------------
R. Dan Brice
Acting Vice President of Finance/Administration
15
<PAGE> 1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Employment Agreement") is made and entered
into this 13th day of April, 1997, between RES-CARE, INC., a Kentucky
corporation (the "Company"), and PAUL G. DUNN (the "Employee").
RECITALS:
---------
WHEREAS, the Company has a need for additional business and revenues in
the operation or management of facilities, residences and programs in its
Division for Persons with Disabilities;
WHEREAS, the Employee has substantial experience in development
matters; 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 May 1, 1997, and ending on April 30,
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 (May 1 through
April 30 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 DEVELOPMENT. During
the Term, the Employee shall serve as the Executive Vice President of
Development of the
<PAGE> 2
Company. The Employee shall, 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"), develop additional business
and revenues for the Company's Division for Persons with Disabilities,
including, as appropriate, identifying, locating, analyzing, negotiating, and
arranging for the acquisition of new business for the Company and its
subsidiaries through the acquisition of equity interests in or the assets of
existing enterprises, joint venture arrangements, management agreements or
consulting agreements. 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 his
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 his personal assets in such form or manner as will not
require his 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 him to continue to maintain his 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 April immediately preceding the date on which the adjustment is to be
made over that established for the month of April 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 his Base Salary (as adjusted by
the CPI for the year of the Term for which the bonus is determined), in
accordance with and based upon the mutually agreeable performance goals
-2-
<PAGE> 3
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.
(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. Provided Employee continues to be employed
hereunder, on the fourth (4th) Thursday of each June commencing in 1998,
Employee shall be granted options to purchase 25,000 shares of Company common
stock (with such maximum number of shares to be equitably adjusted for stock
splits, stock dividends, recapitalizations and the like) for the preceding
twelve (12) month period. Provided Employee shall continue to be employed
hereunder, any stock options granted to Employee pursuant to this paragraph
(d) shall vest and be exercisable immediately on the date of grant and such
options 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.
(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) ADDITIONAL BENEFITS. As additional consideration for the
execution of this Employment Agreement and the continuing services of Employee
hereunder, the Company agrees to provide to Employee the following additional
benefits:
(i) COMPANY LOAN. Upon the execution of this Employment
Agreement, the Company will loan to Employee the principal sum of
$15,000, and the Employee will execute and deliver to the Company
the promissory note in the form attached hereto as Exhibit A (the
"Initial Note"). Subject to the provisions of this paragraph (i),
the Initial Note shall have a final maturity date of April 30,
2000, at which time the entire principal balance and any accrued
and unpaid interest shall be payable. Interest shall accrue and
be payable annually on April 30 of each year on the outstanding
principal balance at the Prime Rate (as defined below), as
adjusted as and
-3-
<PAGE> 4
when the Prime Rate is adjusted. The "Prime Rate" means at any
time the interest rate per annum most recently designated or
announced by PNC Bank, Kentucky, Inc. ("Bank") as its "prime
rate" in effect at its principal office in Louisville, Kentucky,
it being expressly understood and agreed that such term does not
necessarily mean or imply that it is the lowest or best rate then
available from the Bank. Provided Employee is employed by the
Company on April 30 of each year of the Initial Term, $5,000 of
the principal balance of the Initial Note and all of the accrued
and unpaid interest on the Initial Note as of such date shall be
forgiven and discharged by the Company. In addition, if Employee
is terminated (A) without Cause (as defined in Section 4(c)
hereof) or (B) within three (3) months after the occurrence of a
Change of Control (as defined in Section 5(d) hereof) applicable
to the Company, the entire principal balance and all accrued and
unpaid interest on the Initial Note shall be forgiven and
discharged by the Company. The entire principal balance and all
accrued and unpaid interest of the Initial Note (other than
amounts which may have been previously forgiven and discharged
pursuant to this paragraph (i)) shall be immediately due and
payable upon Employee's voluntary termination or termination by
the Company for Cause.
(ii) MOVING EXPENSES. Employee will promptly move
his residence from the San Diego, California area to the
Louisville, Kentucky metropolitan area. Employee will be
reimbursed by the Company for his reasonable and necessary
expenses in connection with the relocation of his residence
pursuant to the Company's standard relocation policy except that
the $5,000 cap on expense reimbursement in such policy shall be
waived by 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 San Diego, California (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 document
preparation fees. The Company shall also pay the customary
closing costs of Employee in connection with his 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.
(iii) EDUCATIONAL EXPENSES. Employee is enrolled in
the two (2) year Masters of Business Administration Program at
the University of Phoenix. Employee's enrollment and
participation in such program shall be eligible for reimbursement
under the Company's tuition reimbursement plan, subject to all of
the customary rules and restrictions of such plan, except that
the limitation on maximum reimbursements under such plan shall be
waived by the Company.
(iv) LOSS ON SALE OF EXISTING RESIDENCE. Employee
has received an appraisal of the Existing Residence of $255,000
as of December 1996. To the extent the sales price of the
Existing Residence is less than $255,000 (the "Sale Shortfall"),
the
-4-
<PAGE> 5
Company will lend to Employee, on the date of the closing of his
sale of the Existing Residence (the "Closing Date") an amount
equal to the lesser of (A) the Sale Shortfall or (B) $15,000. In
connection with any such loan, Employee will execute and deliver
to the Company a promissory note in the form attached as Exhibit
B (the "Residence Note") which shall provide for a maturity date
of three (3) years after the Closing Date, at which time the
entire principal balance, plus accrued interest at the Prime
Rate, would be payable. In addition, the entire principal balance
and all accrued and unpaid interest of the Residence Note shall
be immediately due and payable upon Employee's termination for
any reason or the termination of this Employment Agreement for
any reason, including the failure of the parties to extend the
same. The parties agree that if this Employment Agreement is
extended beyond the Initial Term, the parties shall discuss the
possibility of (x) an extension of the maturity date of the
Residence Note, and/or (y) a schedule for the forgiveness and
discharge of all or a portion of the Residence Note.
(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 him 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 (including, without limitation, in connection with the exercise of
any option or the discharge of any obligation under the Initial Note), the
Company determines 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 he will treat all of the amounts payable pursuant to
this Employment Agreement as compensation for income tax purposes.
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:
-5-
<PAGE> 6
(a) DEATH. The Employee's employment hereunder shall
terminate upon his death.
(b) DISABILITY. If, as a result of the Employee's incapacity
due to physical or mental illness, the Employee shall have been absent from his
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
his 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 his 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
his 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" shall,
for purposes of this Employment Agreement, mean: (i) if the Employee's
employment is terminated by his death, the date of his 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 his duties on a full-time basis), (iii) if the
Employee's employment is
-6-
<PAGE> 7
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 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 his death, the Employee shall continue to receive his full Base
Salary until the date of his death and a Cash Bonus, prorated based upon the
number of full months that have elapsed from the immediately preceding May 1
until the date of his death (plus any earned but unpaid Cash Bonus for a prior
period).
(b) DISABILITY. During any period that the Employee fails to
perform his duties hereunder as a result of incapacity due to physical or
mental illness, the Employee shall continue to receive his 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 May 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 shall, through the Date of Termination, continue to pay the
Employee his 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 his 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 his 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 May 1 until the Date of Termination (plus any earned but unpaid Cash
Bonus for a prior period). A "Change of Control" shall be applicable to the
Company --
-7-
<PAGE> 8
(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
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 shall, through the Date of
Termination, continue to pay the Employee his full Base Salary and the Company
shall pay the Employee his 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 shall, through the
Date of Termination, continue to pay the Employee his 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.
-8-
<PAGE> 9
7. RESTRICTIVE COVENANTS.
(a) ACKNOWLEDGMENTS. Employee acknowledges that (i) his services
hereunder are of a special, unique and extraordinary character and that his
position with the Company will place him 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 him access to
Confidential Information, (ii) the Company has provided Employee with a unique
opportunity as its Executive Vice President of Development, (iii) the nature
and periods of the restrictions imposed by the covenants contained in this
Section 7 are fair, reasonable and 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, he will not directly or
indirectly disclose or use or otherwise exploit for his own benefit, or the
benefit of any other person, except as may be necessary in the performance of
his 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 he 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 employment" 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
-9-
<PAGE> 10
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
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,
-10-
<PAGE> 11
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.
(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 his 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 representatives, 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 him.
-11-
<PAGE> 12
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):
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:
----------------
Paul G. Dunn
11298 Duenda Road
San Diego, California 92127
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
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<PAGE> 13
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.
IN WITNESS WHEREOF, the parties hereto have executed this
Employment Agreement on the day and year set forth above.
RES-CARE, INC.
By: /s/ Ronald G. Geary
------------------------------------------
Ronald G. Geary
President and Chief Executive Officer
/s/ Paul G. Dunn
---------------------------------------------
Paul G. Dunn
-13-
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 8,244
<SECURITIES> 0
<RECEIVABLES> 47,448
<ALLOWANCES> 2,249
<INVENTORY> 656
<CURRENT-ASSETS> 58,897
<PP&E> 56,332
<DEPRECIATION> 8,297
<TOTAL-ASSETS> 138,693
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<BONDS> 0
<COMMON> 15,535
0
0
<OTHER-SE> 47,714
<TOTAL-LIABILITY-AND-EQUITY> 63,249
<SALES> 0
<TOTAL-REVENUES> 64,867
<CGS> 0
<TOTAL-COSTS> 60,014
<OTHER-EXPENSES> 44
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<INCOME-PRETAX> 4,378
<INCOME-TAX> 1,771
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