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- -AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 30, 1998
REGISTRATION NO. 333-44029
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3/A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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RES-CARE, INC.
(Exact name of registrant as specified in its charter)
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KENTUCKY 61-0875371
(State or other jurisdiction of incorporation) (I.R.S. Employer Identification No.)
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10140 LINN STATION ROAD
LOUISVILLE, KENTUCKY 40223
(502) 394-2100
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
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RONALD G. GEARY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
RES-CARE, INC.
10140 LINN STATION ROAD
LOUISVILLE, KENTUCKY 40223
(502) 394-2100
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPIES TO:
HENRY D. KAHN, ESQ.
PIPER & MARBURY L.L.P.
36 SOUTH CHARLES STREET
BALTIMORE, MD 21201
(410) 539-2530
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
FROM TIME TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [x]
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If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement from the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE(1)
--------------------------- ------------ ---------------- ---------------- ------------
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6% Convertible Subordinated Notes Due 2004 $109,360,000 100% $109,360,000 $33,139.39(2)
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Common Stock, no par value per share (3) -- -- --
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(1) Calculated pursuant to Rule 457(i) under the Securities Act of 1933, as
amended.
(2) Previously paid.
(3) Such indeterminate number of shares of Common Stock as may be issuable upon
conversion of the Convertible Subordinated Notes registered hereunder,
including such shares as may be issuable pursuant to antidilution
adjustments. Pursuant to Rule 457(i), no registration fee is required for
these shares.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH
SECTION 8(A), MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE> 4
PROSPECTUS SUBJECT TO COMPLETION
January 30, 1998
RES-CARE, INC.
$109,360,000
6% CONVERTIBLE SUBORDINATED NOTES DUE 2004
AND
SHARES OF COMMON STOCK
ISSUABLE UPON CONVERSION THEREOF
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This Prospectus relates to the resale from time to time by the holders (the
"Selling Securityholders") of up to $109,360,000 aggregate principal amount of
6% Convertible Subordinated Notes Due 2004 (the "Notes") of Res-Care, Inc., a
Kentucky corporation (the "Company"), and the resale of shares of Common Stock,
no par value per share (the "Common Stock") of the Company issuable upon the
conversion thereof (the "Conversion Shares").
The Notes are convertible at the option of the holder into shares of Common
Stock of the Company following the date of initial issuance thereof and prior to
maturity, unless previously redeemed or repurchased, at a conversion price of
$28.2125 per share (equivalent to a conversion rate of 38.7630 shares per $1,000
principal amount of Notes and representing in the aggregate 3,876,296 shares),
subject to adjustment in certain events. Interest on the Notes is payable
semi-annually on June 1 and December 1 of each year, commencing June 1, 1998.
The Notes are not redeemable by the Company until December 5, 2000.
Thereafter, the Notes will be redeemable, at any time, upon not less than 30 nor
more than 60 days notice at the option of the Company, in whole or in part, at
the redemption prices set forth herein, plus accrued interest. Upon a Repurchase
Event (as defined), each holder of the Notes may require the Company to
repurchase all or a portion of such holder's Notes at 100% of the principal
amount thereof, together with accrued and unpaid interest to the repurchase
date. The Notes are unsecured and subordinated in right of payment in full to
all existing and future Senior Indebtedness (as defined) of the Company. See
"Description of the Notes."
The Notes were originally issued by the Company in a private placement on
November 21, 1997 to the Initial Purchasers (as defined) and were simultaneously
sold by the Initial Purchasers in transactions exempt from registration under
the Securities Act of 1933, as amended (the "Securities Act"), in the United
States to persons reasonably believed to be "qualified institutional buyers" as
defined in Rule 144A under the Securities Act and in offshore transactions to
persons outside of the United States in reliance on Regulation S under the
Securities Act.
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The Selling Securityholders may offer Notes or Conversion Shares from time
to time to purchasers directly or through underwriters, dealers or agents. Such
Notes or Conversion Shares may be sold at market prices prevailing at the time
of sale or at negotiated prices. Each Selling Securityholder will be responsible
for payment of any and all commissions to brokers, which will be negotiated on
an individual basis.
The Notes have been designated for trading on the Private Offerings, Resales
and Trading through Automated Linkages ("PORTAL") Market. The Common Stock is
quoted on the Nasdaq Stock Market's National Market (the "Nasdaq National
Market") under the symbol "RSCR." On January 29, 1998, the last reported sale
price of the Common Stock as reported on Nasdaq was $29.00 per share. The
Conversion Shares have been approved for quotation on the Nasdaq National
Market. For a description of certain federal income tax consequences to the
holders of the Notes, see "Certain Federal Income Tax Consequences."
The Company will not receive any of the proceeds from the sale of any Notes
or Conversion Shares by the Selling Securityholders. Expenses of preparing and
filing the registration statement to which this Prospectus relates and all
post-effective amendments will be borne by the Company. See "Plan of
Distribution" for a description of the indemnification arrangements between the
Company and the Selling Securityholders.
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SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE NOTES AND THE COMMON
STOCK OFFERED HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is January 30, 1998
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by the Company with the Commission, including the
reports and other information incorporated by reference into this Prospectus,
can be inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at its regional
offices located at 7 World Trade Center, 13th Floor, New York, New York 10048
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material can also be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at rates prescribed by the Commission or from the Commission's Internet
web site at http://www.sec.gov. The Common Stock of the Company is quoted on the
Nasdaq National Market. Reports, proxy statements and other information
concerning the Company can be inspected at the offices of The Nasdaq Stock
Market, 1735 K Street, Washington, D.C. 20006.
The Company has agreed that, if at any time while the Notes or the Common
Stock issuable upon conversion of the Notes are restricted securities within the
meaning of the Securities Act or the Company is not subject to the informational
requirements of the Exchange Act, the Company will furnish to holders of such
Notes and Common Stock and to prospective purchasers designated by such holders
the information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act to permit compliance with Rule 144A in connection with resales of
such Notes and Common Stock.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission (File No.
0-20372) pursuant to the Exchange Act are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1996;
2. The Supplemental Consolidated Financial Statements and Management's
Discussion and Analysis of Supplemental Financial Condition and Results of
Operations contained in the Registration Statement on Form S-3 (File No:
333-23599) filed April 15, 1997;
3. The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, June 30 and September 30, 1997;
4. The Company's Current Reports on Form 8-K and 8-K/A filed March 19,
1997, August 14, 1997, October 14, 1997, November 7, 1997 and January 9, 1998;
and
5. The Registration Statement on Form 8-A with respect to Res-Care Common
Stock dated June 25, 1992.
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6. All other documents filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of the Prospectus
and prior to the termination of the offering made hereby.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the request of any such person, a copy of any
or all of the documents which have been incorporated herein by reference, other
than exhibits to such documents (unless such exhibits are specifically
incorporated by reference into such documents). Requests for such documents
should be directed to Res-Care, Inc., 10140 Linn Station Road, Louisville,
Kentucky 40223, Attention: Pamela M. Spaniac, telephone: (502) 394-2100.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
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SUMMARY
The following is a summary of certain information contained elsewhere or
incorporated by reference in this Prospectus. This summary is not intended to be
complete and is qualified in its entirety by reference to, and should be read in
conjunction with, the detailed information, including "Risk Factors" and
consolidated financial statements, condensed consolidated financial statements
and pro forma condensed consolidated income statement and notes thereto
appearing elsewhere herein or incorporated by reference in this Prospectus.
Unless the context suggests otherwise, references in this Prospectus to
"Res-Care" or the "Company" include Res-Care, Inc. and its subsidiaries.
THE COMPANY
Res-Care is a leading provider of residential, training, educational and
support services to populations with special needs, including persons with
developmental and other disabilities and at-risk and troubled youths. The
services provided by the Company have historically been provided by state and
local government agencies and not-for-profit organizations. The Company's
programs include an array of services provided in both residential and
non-residential settings for adults and youths with mental retardation or other
developmental disabilities ("MR/DD") and disabilities caused by acquired brain
injury, and at-risk and troubled youths who have severe behavioral disorders,
who are from disadvantaged backgrounds or who have entered the juvenile justice
system. Because most of Res-Care's MR/DD consumers require services over their
entire lives and many states have extensive waiting lists for services, Res-Care
has experienced high occupancy rates at its MR/DD facilities and a stable base
of recurring revenues.
Res-Care's growth strategy is to: (i) pursue acquisitions; (ii) add programs
and expand its existing programs in markets in which it currently operates; and
(iii) expand into additional geographic areas in the United States. The markets
for the Company's services are highly fragmented, and the Company believes that
there are significant opportunities to enhance its market positions through an
active acquisition program in the disabilities and at-risk and troubled youth
sectors that will enable the Company to expand its operations into new
geographic areas, add program offerings and establish new relationships with
governmental entities. The Company believes it has developed a disciplined
approach to acquisitions which focuses on acquiring operations in favorable
reimbursement environments, which are accretive to the Company's earnings per
share and which: (i) expand service offerings; (ii) increase market share in
existing markets; or (iii) help attain critical mass in new markets. The Company
intends to build upon its established relationships with governmental entities
to expand its current programs and obtain contracts for additional programs in
existing markets, and to develop new programs in response to societal trends and
the needs of governmental agencies. The Company also intends to expand its
programs to additional geographic areas which management identifies as having
favorable reimbursement and operating environments.
The Company was incorporated in Kentucky in 1974. Its principal executive
office is located at 10140 Linn Station Road, Louisville, Kentucky 40223, and
its telephone number is (502) 394-2100.
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THE OFFERING
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Securities Offered............. $109,360,000 principal amount of 6% Convertible
Subordinated Notes due 2004 (the "Notes") and the
Conversion Shares. See "Description of Notes" and
"Plan of Distribution."
Interest Payment Dates......... June 1 and December 1 of each year, commencing June
1, 1998.
Maturity Date.................. December 1, 2004
Interest....................... 6% per annum.
Conversion Rights.............. The Notes are convertible, at the option of the
Holder, at any time following the date of initial
issuance thereof and prior to maturity, unless
previously redeemed, into Common Stock at a
conversion price of $28.2125 per share, subject to
adjustments in certain events. See "Description of
Notes -- Conversion Rights."
Optional Redemption............ The Notes are not redeemable by the Company prior to
December 5, 2000. Subject to the foregoing, the Notes
will be redeemable on not less than 30 nor more than
60 days' notice at the option of the Company, in
whole or in part, at any time, at the redemption
prices set forth in "Description of Notes -- Optional
Redemption," in each case together with accrued and
unpaid interest and liquidated damages, if any.
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Repurchase Events.............. Upon the occurrence of any Repurchase Event (as
defined herein) occurring prior to the maturity of
the Notes, each Holder shall have the right, at such
Holder's option, to require the Company to purchase
all or any part of such Holder's Notes at 100% of the
principal amount thereof, subject to adjustments in
certain events, together with accrued and unpaid
interest thereon and liquidated damages, if any, to,
but excluding, the date of the purchase. See
"Description of Notes -- Certain Rights to Require
Repurchase of Notes."
Subordination.................. The Notes are general unsecured obligations of the
Company, subordinated in right of payment to all
existing and future Senior Indebtedness of the
Company. At December 31, 1997, the Company had
outstanding no indebtedness that would have
constituted Senior Indebtedness. The Indenture
governing the Notes does not prohibit or limit the
ability of the Company or its subsidiaries to incur
additional indebtedness, including Senior
Indebtedness. See "Description of Notes --
Subordination."
Use of Proceeds................ The Company will not receive any proceeds from the
sale of the Notes or the Conversion Shares.
Trading........................ Prior to the resale thereof pursuant to this
Prospectus, each of the Notes was eligible for
trading on the PORTAL Market. Notes sold pursuant to
this Prospectus are not expected to remain eligible
for trading on the PORTAL Market. The Conversion
Shares have been authorized for listing on the Nasdaq
National Market upon official notice of issuance.
The Common Stock is quoted on the Nasdaq National
Market under the symbol "RSCR."
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RISK FACTORS
This Prospectus, including statements incorporated by reference, contains
forward-looking statements which involve risks and uncertainties. The Company's
actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors discussed below, as
well as those discussed elsewhere in this Prospectus. In addition to the other
information contained or incorporated by reference in this Prospectus, the
following risk factors should be considered carefully in evaluating an
investment in the Notes and the Conversion Shares offered hereby.
SUBSTANTIAL DEPENDENCE ON GOVERNMENTAL REIMBURSEMENT
A substantial portion of the Company's revenues has been and will continue
to be attributable to Medicaid-funded disabilities services programs, with the
majority of the remaining revenues attributable to federal Job Corps contracts.
Governmental agencies have undertaken cost containment measures designed to
limit payments to health care and other service providers, and these efforts are
expected to continue. Various proposals are currently under consideration to
revamp the federally-funded Medicaid programs, including efforts to introduce
managed care and other arrangements in which financial risks associated with
service delivery are retained by the provider rather than by the funding source.
State regulatory agencies which administer Medicaid programs have substantial
discretion with regard to the implementation of Medicaid reimbursement programs
and with regard to the audit and inspection of Medicaid programs. Recent federal
budget legislation repealed a provision of the Medicaid Act known as the "Boren
Amendment," the effect of which is to limit in some respects providers' ability
to challenge state rate setting determinations. Actions taken by state
regulators following the repeal of the Boren Amendment could have a material
adverse effect on the Company's business and results of operations. An adverse
ruling in litigation with the State of Indiana has resulted in a reduction in
rates payable to the Company by the State of Indiana for the 39 months ended
September 30, 1997, although the amount of the reduction had been adequately
reserved by the Company in prior years. The Commonwealth of Kentucky has
challenged in an audit proceeding certain costs associated with a program
managed by the Company in Kentucky, which could lead to retroactive rate
adjustments to the provider of record; the provider of record has filed a
declaratory action against Kentucky in an effort to resolve this matter. Various
other states have initiatives underway to change Medicaid reimbursement
methodologies. No assurance can be given that developments in one or more
jurisdictions will not adversely affect the Company's business, financial
condition or results of operations.
GROWTH STRATEGY; RISKS ASSOCIATED WITH FUTURE ACQUISITIONS AND NEW CONTRACTS
Most of the Company's facilities and programs are operating at or near full
capacity. Moreover, in light of governmental budgetary pressures and competitive
forces, there has been downward pressure on reimbursement rates. Thus, the
Company's ability to expand its revenue base is dependent to a significant
extent on its ability to effect acquisitions and to obtain new contracts. The
Company regularly reviews acquisition opportunities and opportunities for new
contracts and periodically engages in discussions regarding possible
acquisitions and contracts. Although the Company currently has no definitive
agreement with respect to any material acquisition, the Company continually
evaluates opportunities to expand its business through acquisitions of other
companies that provide services to various special needs populations and
frequently enters into discussions and letters of intent which may lead to
acquisitions. There can be no assurance that the Company will be able to
identify
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acquisition or new contract prospects on terms favorable to the Company
or in a timely manner, enter into acceptable agreements or close any such
transactions. There can be no assurance that the Company will be able to achieve
its growth strategy, and any failure to do so could have a material adverse
effect on the Company's business, financial condition, results of operations and
ability to sustain growth. In addition, the Company believes that it will
compete for acquisition candidates and management contracts with a variety of
other prospective bidders, some of which have greater resources than the
Company. Increased competition for such acquisition candidates and management
contracts could have the effect of increasing the costs to the Company of
pursuing this growth strategy, could reduce the number of attractive candidates
to be acquired or could reduce the profitability of management contracts. Future
acquisitions and efforts to obtain management contracts could divert
management's attention from the daily operations of the Company and otherwise
require additional management, operational and financial resources. Moreover,
there can be no assurance that the Company will successfully integrate such new
operations into its business or operate such acquisitions profitably.
Acquisitions may also involve a number of special risks including adverse
short-term effects on the Company's business and results of operations;
dependence on retaining key personnel; amortization of acquired intangible
assets; and risks associated with unanticipated liabilities and contingencies.
The Company may require additional debt or equity financing for future
acquisitions, which may not be available to the Company on terms favorable to
it, if at all. To the extent the Company uses its capital stock for all or a
portion of the consideration to be paid for future acquisitions, dilution may be
experienced by existing shareholders, including persons who are entitled to
become shareholders upon conversion of the Notes. In the event that the
Company's capital stock does not maintain sufficient value or acquisition
candidates are unwilling to accept the Company's capital stock as consideration
for the sale of their businesses, the Company may be required to utilize more of
its cash resources, if available, in order to continue its acquisition program.
If the Company does not have sufficient cash resources or is not able to use its
capital stock as consideration for acquisitions, its growth through acquisitions
could be limited.
UNCERTAIN ABILITY TO EXPAND YOUTH SERVICES OPERATIONS
Although Res-Care has operated Job Corps centers since 1976 and has provided
services for youths with developmental disabilities in its disabilities services
operations since 1978, the Company began intensive efforts to expand its at-risk
and troubled youth services operations in 1996 following the formation of its
Youthtrack, Inc. and Alternative Youth Services, Inc. subsidiaries. The Company
has not yet developed significant experience in operating special needs youth
programs other than Job Corps centers. No assurance can be given that the
Company will be able to generate sufficient revenues or contribution margin to
enable the Company to realize adequate returns on its investment in this sector.
The market for delivery of at-risk and troubled youth services is highly
competitive. Several of the Company's competitors have more experience than does
the Company in developing and implementing these services. Due to the
highly-fragmented nature of the youth services industry, the barriers to entry
remain low, and the Company may experience intensive competition as it seeks to
expand in this area, including competition from companies with substantially
greater resources than Res-Care. Moreover, the privatized management of programs
for at-risk and troubled youths has received varying degrees of acceptance by
state and local governmental authorities, and no assurance can be given that the
level of acceptance will rise or be maintained. There can be no assurance that
the Company will succeed in its goal to significantly increase the revenues and
operating income attributable to its at-risk and troubled youth services
operations.
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DEPENDENCE ON GOVERNMENTAL AGENCIES AND GOVERNMENT CONTRACTS
The Company conducts its business primarily under contracts with federal,
state and local governments and governmental agencies, and virtually all of the
Company's revenues are attributable to such contracts. The Company's cash flow
is subject to the receipt of sufficient funding and timely payment by applicable
governmental entities. If the appropriate governmental agency does not receive
sufficient appropriations to cover its contractual obligations, a contract may
be terminated or the Company's compensation may be deferred or reduced. A number
of federal, state and local governments, including certain of those with which
the Company has contracts, have experienced fiscal difficulties. Any deferral or
reduction in payment could have a material adverse effect on the Company's cash
flow. In addition, the Company is dependent on governmental entities for
referral of a sufficient number of individuals to occupy the Company's
facilities and programs. The failure of the Company to receive a sufficient
number of such referrals may have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company's contracts are typically subject to renewal (or in the case of
Job Corps contracts, extension) annually. The renewal and financial terms of
each contract are dependent upon many factors, including the quality and type of
services provided, governmental budget constraints, changes in government or
agency personnel and priorities or philosophies of governments or agencies with
respect to provision of services to various at-risk populations. Government and
agency contracts generally are subject to audits, reviews and investigations.
These audits, reviews and investigations typically involve a review of the
contractor's performance under the contract, its reported costs and its
compliance with applicable laws and regulations. In addition, some contracts are
subject to competitive bidding, and the Company's customers generally may
terminate their contracts with the Company for cause and upon certain other
specified conditions. The loss or renewal on less favorable terms of certain of
the Company's contracts could have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company derives revenue from the operation of multiple Job Corps
contracts awarded by the United States Department of Labor (the "DOL").
Performance at each Job Corps center is evaluated by the DOL using certain
objective and subjective criteria, and contracts for Job Corps centers not
meeting DOL expectations may not be extended or awarded during rebid. In 1996,
the Company's contract to operate the Crystal Springs, Mississippi Job Corps
center was not extended for the full term of its final contract year due to
performance issues at that center and in October 1997, the Company was not
successful in retaining the contract to operate the Gulfport, Mississippi Job
Corps Center upon its being rebid. The DOL has recently made efforts to
encourage new participants in the program, including minority-owned businesses,
and several companies with government defense contracting experience have begun
to bid for Job Corps contracts thereby increasing the competition for such
contracts. Although the Company has been able to retain most of its Job Corps
contracts in the past and was awarded a new Job Corps contract in 1996 to
operate the Edison Job Corps Center in Edison, New Jersey and in 1997 to operate
the Blue Ridge Job Corps Center in Marion, Virginia, there can be no assurance
that the DOL will continue to extend the Company's Job Corps contracts or award
the Company additional Job Corps contracts, in the future.
The Company has contracted with providers of record in various states to
manage and operate MR/DD facilities for them. In such cases, the Company is
dependent on the relationship between the state and local
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governments or governmental agencies and the providers of record with which they
contract. Each state and local government or governmental agency may terminate
or declare a breach of contract with providers of record, may be denied federal
matching funds as partial reimbursement for certain program expenses or may
reduce their placement of individuals with, or the use of, such providers of
record for reasons that may be beyond the control of the Company. Such actions
could adversely affect the ability of the providers of record to pay the Company
pursuant to their subcontracts.
GOVERNMENT REGULATION
The Company is subject to extensive federal, state and local regulations
governing licensure, conduct of operations at existing facilities, construction
of new facilities, purchase or lease of existing facilities, addition of new
services, capital expenditures, cost containment and reimbursement for services
rendered. Failure by the Company to meet applicable standards could result in
the loss of a license, the delay or loss of reimbursement or the loss of an
ability to expand services. To date, loss of license has not been a significant
factor in the Company's operations. There can be no assurance that federal,
state or local governments will not impose additional restrictions on the
operations of the Company that might adversely affect its business, financial
condition and results of operations.
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company's quarterly results of operations may fluctuate significantly as
a result of a variety of factors, including the timing of acquisitions or the
opening of new programs, the timing of rate adjustments and the cumulative
effect of rate adjustments differing from previously estimated amounts. Results
for any particular quarter may not be indicative of future quarterly or annual
results.
OPPOSITION TO PROGRAM LOCATION AND ADVERSE PUBLICITY
The Company's success in obtaining new contracts may depend, in part, upon
its ability to locate facilities that can be leased or acquired on favorable
terms by the Company. Group homes are generally located in residential
communities. Larger facilities for persons with disabilities and at-risk and
troubled youths may be in or near populated areas and, therefore, may generate
legal action or other forms of opposition from residents in areas surrounding a
proposed site. The Company's business also is subject to public scrutiny and,
consequently, could be significantly affected by negative publicity, negative
public reaction or governmental investigations with respect to the Company's
policies or operations or the actions of consumers under its care. The Company's
reputation is very important to the retention and procurement of contracts.
Negative publicity or a governmental investigation with respect to the Company's
policies or operations or the actions of individuals under its care could have a
material adverse effect on the Company's business, financial condition and
results of operations.
POTENTIAL LEGAL LIABILITY
The Company's management of its residential, training, educational and
support programs exposes it to potential third-party claims or litigation by
participants or other persons for wrongful death, personal injury or other
damages resulting from contact with Company facilities, programs, personnel or
participants. In addition, the Company's contracts and the laws of certain
states generally require the Company to maintain adequate
-7-
<PAGE> 15
insurance for its operations and to indemnify the governmental agency against
any damages to which the governmental agency may be subject in connection with
such claims or litigation. The Company has, on occasion, been sued by third
parties and maintains an insurance program that provides coverage for certain
liability risks faced by the Company, including wrongful death, personal injury,
bodily injury or property damage to a third party where the Company is found to
be negligent. There can be no assurance, however, that the Company's insurance
will be adequate to cover potential third-party claims.
DEPENDENCE ON SENIOR MANAGEMENT AND SKILLED PERSONNEL
The success of the Company is highly dependent upon the efforts and
abilities of Ronald G. Geary, its President and Chief Executive Officer and
other members of the Company's senior management team, some of whom have only
recently joined the Company. Although the majority of the Company's senior
executives have many years experience with the Company, the Company has recently
employed a new executive vice president in charge of MR/DD development
activities and a new executive vice president in charge of finance and
administration. The Company has entered into separate employment agreements with
the President and four other senior executive officers containing customary
noncompetition, nondisclosure, and nonsolicitation covenants. The loss of the
services of one or more of the senior executives could have a material adverse
effect upon the Company's business, financial condition and results of
operations.
AVAILABILITY OF QUALIFIED PERSONNEL
The Company competes with many other providers of long-term care with
respect to attracting and retaining qualified and skilled personnel. A possible
shortage of professional personnel or direct service staff or other outside
pressures, including collective bargaining efforts, may require the Company to
enhance its wage and benefits package in order to compete in the hiring and
retention of such personnel. The Company will also be dependent upon the
available labor pool of semi-skilled and unskilled employees in each of the
markets in which it operates. The Company's labor costs are expected to
increase, and there can be no assurance that the Company can match an increase
in such costs by corresponding increases in reimbursement rates for services
rendered by the Company. Any significant failure to control its labor costs or
to receive increased reimbursement for such costs through rate increases would
have a material adverse effect on the Company's business, financial condition
and results of operations.
SUBORDINATION
The Notes are general unsecured obligations, subordinated in right of
payment in full to all existing and future Senior Indebtedness of the Company.
Under the Indenture (as defined herein), the Notes are subordinated to the
Company's Senior Indebtedness (principally bank debt). As a result of such
subordination, in the event of any insolvency, liquidation or reorganization of
the Company or upon acceleration of the Notes due to an Event of Default (as
defined in the Indenture), the assets of the Company will be available to pay
obligations on the Notes and any other subordinated indebtedness of the Company
only after all Senior Indebtedness has been paid in full, and there may not be
sufficient assets remaining to pay amounts due on any or all of the Notes and
any other subordinated indebtedness of the Company then outstanding. The
Indenture does not prohibit or limit the incurrence of indebtedness, including
Senior Indebtedness, by the Company. The incurrence of such indebtedness could
adversely affect the Company's ability to pay its obligations under the Notes.
As of
-8-
<PAGE> 16
December 31, 1997, the Company had outstanding no indebtedness that would have
constituted Senior Indebtedness.
ABSENCE OF PUBLIC MARKET FOR THE NOTES
Prior to the date hereof, there has been no established trading market for
the Notes. The Notes have been designated for trading on the PORTAL Market;
however, Notes sold pursuant to this Prospectus are not expected to remain
eligible for trading on the PORTAL Market. The Company does not intend to apply
for listing of the Notes on any securities exchange or for quotation through the
Nasdaq National Market. There can be no assurance that an active trading market
for the Notes will develop or, if one does develop, that it will be maintained.
If an active trading market for the Notes fails to develop or be sustained, the
trading price of such Notes could be adversely affected and holders of the Notes
may experience difficulty in reselling the Notes or may be unable to sell them
at all. If a public trading market develops for the Notes, future trading prices
of the Notes will depend upon many factors, including, among other things,
prevailing interest rates and the market price of the shares of Common Stock.
The liquidity of, and trading market for, the Notes also may be adversely
affected by general declines in the market for similar securities. Such a
decline may adversely affect such liquidity and trading markets independent of
the financial performance of, and prospects for, the Company.
LIMITATION ON REPURCHASE OF NOTES UPON REPURCHASE EVENT
Upon the occurrence of a Repurchase Event (as defined herein) each Holder of
Notes may require the Company to repurchase all or a portion of such Holder's
Notes. If a Repurchase Event were to occur, there could be no assurance that the
Company would have sufficient financial resources or would be able to arrange
financing to pay the repurchase price for all Notes tendered by Holders thereof.
The Company's ability to repurchase the Notes in such event may be limited by
law, the Indenture and the terms of other agreements relating to borrowings that
constitute Senior Indebtedness, as such indebtedness or agreements may be
entered into, replaced, supplemented or amended from time to time. The Company
may be required to refinance Senior Indebtedness in order to make any such
payment. If the Company is prohibited from repurchasing the Notes, such failure
would constitute an Event of Default under the Indenture, which may, in turn,
constitute a further default under certain of the Company's existing agreements
relating to borrowings and the terms of other indebtedness that the Company may
enter into from time to time. In such circumstances, the subordination
provisions in the Indenture would prohibit payments to the Holders of the Notes.
Furthermore, the Company may not have the financial ability to repurchase the
Notes in the event that maturity of Senior Indebtedness is accelerated as a
result of a default under the applicable loan or similar agreement. See
"Description of Notes -- Certain Rights to Require Repurchase of Notes."
COMPETITION
The provision of disabilities and youth services is subject to a number of
competitive factors, including quality of services provided, cost-effectiveness,
reporting and regulatory expertise, reputation in the community and the location
and appearance of facilities and programs. In addition to certain not-for-profit
organizations, including organizations affiliated with advocacy and sponsoring
groups, certain proprietary competitors operate in multiple jurisdictions and
may be well capitalized. The Company faces significant competition from
not-for-profit organizations and proprietary competitors in the states in which
it now operates and expects to face
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<PAGE> 17
similar competition in any state that it may enter in the future. Many of the
Company's competitors have greater resources than the Company. Such competition
may adversely affect the Company's ability to obtain new contracts and complete
acquisitions on favorable terms.
ENVIRONMENTAL AND EMPLOYEE SAFETY LAWS
The Company must comply with various federal and state laws and regulations
that govern the handling and disposal of medical and infectious waste in the
operation of its businesses. Failure to comply with these laws or regulations
could subject the Company to fines, criminal penalties and other enforcement
actions. The Company has developed and implemented policies with respect to the
handling and disposal of medical and infectious waste and believes it is in
compliance with such laws and regulations. Federal regulations promulgated by
the Occupational Safety and Health Administration impose additional requirements
on the Company with regard to protecting employees from exposure to bloodborne
pathogens. The Company believes that it has complied, and will continue to be
able to comply, with these regulations. However, there can be no assurance that
the regulations will not adversely affect the Company's business, financial
condition and results of operations.
VOLATILITY OF MARKET PRICE
In the future, there may be significant volatility in the market price of
the Common Stock. The Company believes that the current market price of the
Common Stock reflects expectations that the Company will be able to continue to
operate its programs profitably and to acquire or develop additional and new
programs at a significant rate and operate them profitably. If the Company is
unable to operate its programs profitably or develop new programs at a pace that
reflects the expectations of the market, investors could sell shares of Common
Stock at or after the time that it becomes apparent that such expectations may
not be realized, resulting in a decrease in the market price of the Common
Stock. In addition to the operating results of the Company, changes in earnings
estimates by analysts, changes in general conditions in the economy or the
financial markets or other developments affecting the Company or comparable
companies within the privatization services industries could cause the market
price of the Common Stock to fluctuate substantially. In recent years, the stock
market has experienced extreme price and volume fluctuations. This volatility
has had a significant effect on the market prices of securities issued by many
companies for reasons unrelated to their operating performance.
EFFECT OF ANTI-TAKEOVER PROVISIONS
The Company's Charter and Bylaws contain certain anti-takeover provisions
and the Company may add other such provisions in the future. The Company's Board
of Directors has the authority to issue preferred stock and to determine the
price, rights, conversion ratios, preferences and privileges of that stock
without further vote or action by the holders of the Common Stock. The rights of
the holders of Common Stock will be subject to, and may be adversely affected
by, the rights, including economic rights, of the holders of any shares of
preferred stock. Any such issuance may discourage third parties from attempting
to acquire control of the Company. Furthermore, the Company is subject to the
anti-takeover provisions of the Kentucky Business Corporation Act prohibiting
the Company from engaging in a "business combination" with an "interested
stockholder" for a period of five years after the date of the transaction in
which the person first becomes an "interested stockholder," unless the business
combination is approved in a prescribed manner. The application of this
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<PAGE> 18
statute and certain other provisions of the Company's Amended and Restated
Articles of Incorporation also could have the effect of discouraging, delaying
or preventing a change of control of the Company not approved by the Board of
Directors, which could adversely affect the market price of the Company's Common
Stock.
USE OF PROCEEDS
The Company will not receive any proceeds from the sales of the Notes or the
Conversion Shares by the Selling Securityholders.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's ratio of earnings to fixed
charges for each of the periods indicated.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
1992 1993 1994 1995 1996 1996 1997
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of
Earnings to
Fixed Charges...... 5.39 7.29 7.07 6.73 6.08 6.80 6.89
</TABLE>
The ratio of earnings to fixed charges is computed by dividing fixed charges
into earnings. Earnings is defined as pretax income from continuing operations
adjusted by adding fixed charges and excluding interest capitalized during the
period. Fixed charges consist of interest and financing charges, the estimated
interest component of rent expense and preferred stock dividends.
SELLING SECURITYHOLDERS
The Notes were originally issued by the Company in a private placement on
November 21, 1997 to NationsBanc Montgomery Securities, Inc., J.C. Bradford &
Co., L.L.C. and Equitable Securities Corporation (the "Initial Purchasers") and
were simultaneously sold by the Initial Purchasers, in transactions exempt from
the registration requirements of the Securities Act, to persons reasonably
believed by such Initial Purchasers to be "qualified institutional buyers" (as
defined in Rule 144A under the Securities Act) and in offshore transactions to
persons outside of the United States in reliance on Regulation S under the
Securities Act. The Selling Securityholders may from time to time offer and sell
pursuant to this Prospectus any or all of the Notes and Conversion Shares. The
term "Selling Securityholder" includes the holders listed below and the
beneficial owners of the Notes and their transferees, pledgees, donees or other
successors.
The following table sets forth information with respect to the Selling
Securityholders and the respective principal amount of Notes beneficially owned
by each Selling Securityholder that may be offered pursuant to this Prospectus.
Such information has been obtained from the Selling Securityholders and has not
been independently verified by the Company.
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<PAGE> 19
<TABLE>
<CAPTION>
PERCENTAGE NUMBER OF PERCENTAGE
PRINCIPAL OF TOTAL CONVERSION PERCENTAGE OF TOTAL
AMOUNT OUT- SHARES THAT OF COMMON VOTING POWER
OF NOTES STANDING MAY BE STOCK OUT- AFTER CON-
NAME OWNED NOTES SOLD(1) STANDING(2) VERSION(3)
---- ------------ ---------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Natwest Securities Limited $ 11,750,000 10.74% 416,482 3.26% 3.26%
Shepherd Investments 9,250,000 8.46 327,868 2.58 2.58
International Ltd.
Bankers Trust International 7,500,000 6.86 265,839 2.10 2.10
CFW-C, L.P. 5,500,000 5.03 194,949 1.55 1.55
Argent Classic Convertible 5,400,000 4.94 191,404 1.52 1.52
Arbitrage Fund (Bermuda), L.P.
Froley Revy Investment Co. Inc. 3,500,000 3.20 124,058 * *
Account: State of Oregon/SAIF
Corporation
Forest Fulcrum Fd, LP 3,125,000 2.86 110,766 * *
Forest Global Convert Ser A-5 2,775,000 2.54 98,360 * *
R2 Investments, LDC 2,450,000 2.24 86,840 * *
AIM Balanced Fund 2,000,000 1.83 70,890 * *
Commonwealth Life Insurance 2,000,000 1.83 70,890 * *
Company (Teamsters - Camden
Non-Enhanced)
Black Diamond Partners, L.P. 1,852,000 1.69 65,644 * *
Black Diamond Ltd. 1,801,000 1.65 63,836 * *
Lincoln National Convertible 1,715,000 1.57 60,788 * *
Securities Fund
State Board of Administration of 1,500,000 1.37 53,167 * *
Florida
Goldman, Sachs & Co. 1,500,000 1.37 53,167 * *
Hudson River Trust Growth & 1,150,000 1.05 40,762 * *
Income Account
Equitable Life Assurance 1,150,000 1.05 40,762 * *
Separate Account Convertibles
Hudson River Trust Balanced 1,095,000 1.00 38,812 * *
Account
Argent Classic Convertible 1,000,000 * 35,445 * *
Arbitrage Fund, L.P.
Pennsylvania Power & Light Co. 1,000,000 * 35,445 * *
Retirement Plan
Swiss Bank Corporation - London 1,000,000 * 35,445 * *
Branch (4)
Stark International 1,000,000 * 35,445 * *
Memphis Light, Gas & Water 980,000 * 34,736 * *
Retirement Fund
Hudson River Trust Growth 820,000 * 29,065 * *
Investors
KA Management Ltd. 570,000 * 20,203 * *
Weirton Trust 510,000 * 18,077 * *
CPR (USA) 500,000 * 17,772 * *
TQA Vantage Fund, Ltd. 500,000 * 17,722 * *
Dr. Scholl Foundation 450,000 * 15,950 * *
KA Trading L.P. 430,000 * 15,241 * *
Libertyview Plus Fund 400,000 * 14,178 * *
Forest Performance Fund 300,000 * 10,633 * *
Fox Family Portfolio Partnership 300,000 * 10,633 * *
TQA Leverage Fund, L.P. 300,000 * 10,633 * *
Forest Global Convert Ser B-1 275,000 * 9,747 * *
The Frist Foundation 255,000 * 9,038 * *
TQA Vantage Plus, Ltd. 200,000 * 7,089 * *
Walker Art Center 195,000 * 6,911 * *
Forest Global Convert Ser B-3 175,000 * 6,202 * *
LLT Limited (5) 175,000 * 6,202 * *
Highbridge Capital Corp. 160,000 * 5,671 * *
Forest Convertible Opportunity 150,000 * 5,316 * *
Fund
Forest Global Convert Ser B-2 125,000 * 4,430 * *
Fox Family Foundation 125,000 * 4,430 * *
Forest Global Convert Ser B-5 100,000 * 3,544 * *
Goldman, Sachs & Co. Employee 100,000 * 3,544 * *
Benefit Plan
Libertyview Fund LLC 100,000 * 3,544 * *
United National Insurance 80,000 * 2,835 * *
Forest Performance Greyhound 75,000 * 2,658 * *
David Lipscomb University 65,000 * 2,303 * *
General Endowment
Forest Global Convert Ser A-1 50,000 * 1,772 * *
Any other holder of Notes or 29,882,000 27.3 1,059,175 7.9 7.9
future transferee, pledgee,
donee or successor of or from
any such other holder (6)(7)
</TABLE>
-----------------
* Less than 1%.
(1) Assumes conversion of the full amount of Notes held by such holder at
the initial conversion price of $28.2125 per share; such conversion price is
subject to adjustment as described under "Description of the Notes--
Conversion." Accordingly, the number of shares of Common Stock issuable upon
conversion of the Notes may increase or decrease from time to time. Under the
terms of the Indenture, fractional shares will not be issued upon conversion of
the Notes; cash will be paid in lieu of fractional shares, if any.
(2) Computed in accordance with Rule 13d-3(d)(1) promulgated under the
Exchange Act and based upon 12,365,682 shares of Common Stock outstanding as of
December 31, 1997, treating as outstanding the number of Conversion Shares shown
as being issuable upon the assumed conversion by the named holder of the full
amount of such holder's Notes but not assuming the conversion of the Notes of
any other holder. Includes Common Stock, if any, beneficially owned by the
holder other than the Conversion Shares.
(3) The percentage of total voting power after conversion represents the
percentage of the voting power each stockholder will have after the conversion
based upon 12,365,682 shares of Common Stock outstanding as of December 31, 1997
treating as outstanding the number of Conversion Shares as being issuable upon
the assumed conversion by the named holder of the full amount of such holder's
Notes but not assuming the conversion of the Notes of any other holder. Includes
Common Stock, if any, beneficially owned by the holder other than the Conversion
Shares.
(4) SBC Warburg Dillon Read Inc. acts as investment advisor for Swiss Bank
Corporation - London Branch.
(5) With respect to the principal amount of notes owned, LLT Limited shares
beneficial ownership and investment power with Forest Investment Management,
L.P.
(6) Information concerning other Selling Securityholders will be set forth
in amendments to the Registration Statement of which this Prospectus is a part
or in supplements to this Prospectus, from time to time to the extent required.
(7) Assumes that any other holders of Notes, or any future transferees,
pledgees, donees or successors of or from any such other holders of Notes, do
not beneficially own any Common Stock other than the Common Stock issuable upon
conversion of the Notes at the initial conversion rate.
None of the Selling Securityholders has, or within the past three years has
had, any position, office or other material relationship with the Company or any
of its predecessors or affiliates. Because the Selling Securityholders may,
pursuant to this Prospectus, offer all or some portion of the Notes or the
Conversion Shares, no estimate can be given as to the amount of the Notes or the
Conversion Shares that will be held by the Selling Securityholders upon
termination of any such sales. In addition, the Selling Securityholders
identified above may have sold, transferred or otherwise disposed of all or a
portion of their Notes, in transactions exempt from the registration
requirements of the Securities Act, since the date on which they provided the
information
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<PAGE> 20
regarding their Notes. Information regarding changes with respect to the Selling
Securityholders will be set forth in supplements to this Prospectus if and when
necessary. See "Plan of Distribution."
DESCRIPTION OF NOTES
The Notes were issued under an indenture dated as of November 21, 1997 (the
"Indenture") between the Company and PNC Bank, Kentucky, Inc., as trustee (the
"Trustee"). The following summaries of certain provisions of the Indenture do
not purport to be complete and are subject to, and are qualified in their
entirety by reference to, all of the provisions of the Indenture and the
Registration Rights Agreement including the definition therein of certain terms.
Wherever particular sections or defined terms of the Indenture are referred to,
such sections or defined terms are incorporated herein by reference. Copies of
the form of Indenture are available from the Company or the Initial Purchasers
upon request.
GENERAL
The Notes represent general unsecured subordinated obligations of the
Company, are convertible into Common Stock of the Company as described under
"Conversion Rights" and will mature on December 1, 2004 ("Maturity"). The Notes
will bear interest at the rate of 6% per annum from the date of initial issuance
of Notes pursuant to the Indenture, or from the most recent Interest Payment
Date to which interest has been paid or provided for, payable semi-annually on
June 1 and December 1 of each year, commencing June 1, 1998 to the Person in
whose name the Notes (or any predecessor Notes) are registered (individually, a
"Holder" and collectively, the "Holders") at the close of business on the
preceding May 15 or November 15, as the case may be (whether or not a Business
Day). Interest on the Notes will be paid on the basis of a 360-day year
consisting of twelve 30-day months.
Principal of, and premium, if any, interest and liquidated damages, if any,
on the Notes will be payable (i) in respect of Notes held of record by DTC or
its nominee, in same day funds on or prior to the respective payment dates and
(ii) in respect of Notes held of record by Holders other than DTC or its
nominee, in same day funds, at the office of the Trustee in New York, New York,
and the Notes may be surrendered for transfer, exchange or conversion at the
office of the Trustee in New York, New York. In addition, with respect to Notes
held of record by holders other than DTC or its nominee, payment of interest may
be made at the option of the Company by check mailed to the address of the
persons entitled thereto as it appears in the Register for the Notes on the
Regular Record Date for such interest.
The Notes were issued only in registered form, without coupons and in
denominations of $1,000 or any integral multiple thereof. No service charge will
be made for any transfer or exchange of the Notes, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge and
any other expenses (including the fees and expenses of the Trustee) payable in
connection therewith. The Company is not required (i) to issue or register the
transfer of or exchange of any Notes during a period beginning at the opening of
business 15 days before the day of the mailing of a notice of redemption and
ending at the close of business on the day of such mailing, (ii) to register the
transfer of or exchange of any Note selected for redemption in whole or in part,
except the unredeemed portion of Notes being redeemed in part or (iii) to
register the transfer or exchange of any Notes surrendered for conversion or
repurchase upon the occurrence of a Repurchase Event.
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<PAGE> 21
All monies paid by the Company to the Trustee or any Paying Agent for the
payment of principal of, and premium, if any, interest and liquidated damages,
if any, on any Note which remain unclaimed for two years after such principal,
premium, interest or liquidated damages, if any, become due and payable may be
repaid to the Company. Thereafter, the Holder of such Note may, as an unsecured
general creditor, look only to the Company for payment thereof.
The Indenture does not contain any provisions that would afford protection
to Holders of the Notes against a sudden and dramatic decline in the credit
quality of the Company resulting from any takeover, recapitalization or similar
restructuring, except as described below under "Certain Rights to Require
Repurchase of Notes."
CONVERSION RIGHTS
The Notes are convertible, at the option of the Holder, into Common Stock
following the date of initial issuance and prior to redemption or final
maturity, initially at the conversion price of $28.2125 per share. The right to
convert Notes which have been called for redemption will terminate at the close
of business on the second business day preceding the Redemption Date, unless the
Company defaults on a redemption payment. See "Optional Redemption" below.
The conversion price will be subject to adjustments upon the occurrence of
any of the following events: (i) the subdivision, combination or
reclassification of outstanding shares of Common Stock; (ii) the payment of a
dividend or distribution on Common Stock exclusively in shares of Common Stock
or the payment of a dividend or distribution on any class of capital stock of
the Company in shares of Common Stock; (iii) the issuance of rights or warrants
to all holders of Common Stock entitling them to acquire shares of Common Stock
(or securities convertible into Common Stock) at a price per share less than the
Current Market Price; (iv) the distribution to all holders of Common Stock of
shares of capital stock (other than Common Stock), evidences of indebtedness,
cash or assets (including securities, but excluding dividends or distributions
in connection with the liquidation, dissolution or winding up of the Company or
paid exclusively in cash and dividends, distributions, rights and warrants
referred to above); (v) the distribution to all or substantially all holders of
Common Stock of rights or warrants to subscribe for its securities (other than
those referred to in (iii) above); (vi) a distribution consisting exclusively of
cash (excluding any cash distributions referred to in (iv) above) to all holders
of Common Stock in an aggregate amount that, together with (A) all other cash
distributions (excluding any cash distributions referred to in (iv) above) made
within the 12 months preceding the date fixed for determining the stockholders
entitled to such distribution in respect of which no adjustment has previously
been made and (B) any cash and the fair market value of other consideration
payable in respect of any tender offer by the Company or a subsidiary of the
Company for the Common Stock consummated within the 12 months preceding such
date of determination, exceeds the greater of (A) 10% of the Company's market
capitalization (being the product of the Current Market Price times the number
of shares of Common Stock then outstanding) on such date of determination
entitled to such distribution or (B) the Company's retained earnings on the date
of determination entitled to such distribution; (vii) the consummation of a
tender offer made by the Company or any subsidiary of the Company for all or any
portion of the Common Stock which involves an aggregate consideration that,
together with (X) any cash and the fair market value of other consideration
payable in respect of any tender offer by the Company or a subsidiary of the
Company for the Common Stock consummated within the 12 months preceding the
consummation of such tender offer in respect
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<PAGE> 22
of which no adjustment has been previously made and (Y) the aggregate amount of
all cash distributions (excluding any cash distributions referred to in (iv)
above) to all holders of the Common Stock within the 12 months preceding the
consummation of such tender offer in respect of which no adjustment has been
previously made, exceeds the greater of (A) 10% of the product of the Current
Market Price immediately prior to the date of consummation of such tender offer
times the number of shares of Common Stock outstanding at the date of
consummation of such tender offer or (B) the Company's retained earnings on the
date of consummation of the tender offer; and (viii) payment in respect of a
tender offer or exchange offer by a person other than the Company or any
subsidiary of the Company in which, as of the closing date of the offer, the
Board of Directors is not recommending rejection of the offer. The adjustment
referred to in clause (viii) will only be made if the tender offer or exchange
is for an amount which increases the offeror's ownership of Common Stock to more
than 25% of the total shares of Common Stock outstanding, and if the cash and
value of any other consideration included in such payment per share of Common
Stock exceeds the current market price per share of Common Stock on the business
day next succeeding the last date on which tenders or exchanges may be made
pursuant to such tender or exchange offer. The adjustment referred to in clause
(viii) will generally not be made, however, if, as of the closing of the offer,
the offering documents with respect to such offer disclose a plan or an
intention to cause the Company to engage in a consolidation or merger of the
Company or a sale of all or substantially all of the Company's assets. No
adjustment of the conversion price will be required to be made until cumulative
adjustments amount to at least one percent of the conversion price, as last
adjusted. Any adjustments that would not otherwise be sufficient to require a
change to be made pursuant to the immediately preceding sentence shall be
carried forward and taken into account in any subsequent adjustment.
In addition to the foregoing adjustments, the Company will be permitted to
reduce the conversion price as it considers to be advisable in order that any
event treated for federal income tax purposes as a dividend of stock or stock
rights will not be taxable to the holders of the Common Stock or, if that is not
possible, to diminish any income taxes that are otherwise payable because of
such event.
In the case of any consolidation or merger of the Company with any other
corporation (other than one in which no change is made in the Common Stock), or
any sale or transfer of all or substantially all of the assets of the Company,
the Holder of any Note then outstanding will, with certain exceptions, have the
right thereafter to convert such Note only into the kind and amount of
securities, cash and other property receivable upon such consolidation, merger,
sale or transfer by a holder of the number of shares of Common Stock into which
such Note might have been converted immediately prior to such consolidation,
merger, sale or transfer; and adjustments will be provided for events subsequent
thereto that are as nearly equivalent as practical to the conversion price
adjustments described above.
Fractional shares of Common Stock will not be issued upon conversion, but,
in lieu thereof, the Company will pay a cash adjustment based upon the then
Closing Price at the close of business on the day of conversion (or, if such day
is not a Trading Day, on the Trading Day immediately preceding such day). If any
Notes are surrendered for conversion during the period from the opening of
business on any Regular Record Date through and including the next succeeding
Interest Payment Date (except any such Notes called for redemption), such Notes
when surrendered for conversion must instead be accompanied by payment of an
amount equal to the interest thereon which the registered Holder on such Regular
Record Date is to receive; provided however that the Notes or portions thereof
which have been called for redemption and the conversion rights of which
terminate during such period must be accompanied by payment of an amount equal
to the interest which would
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<PAGE> 23
have accrued on the principal amount of the Notes being surrendered for
conversion for the period from the conversion date to such Interest Payment
Date. Except as described in the preceding sentence, no interest will be payable
by the Company on converted Notes with respect to any Interest Payment Date
subsequent to the date of conversion. No other payment or adjustments for
interest or dividends is to be made upon conversion.
SUBORDINATION
The payment of the principal of, and premium, if any, interest and
liquidated damages, if any, on the Notes is subordinated, to the extent set
forth in the Indenture, in right of payment to the prior payment in full of all
Senior Indebtedness. If there is a payment or distribution of assets to
creditors upon any liquidation, dissolution, winding up, reorganization,
assignment for the benefit of creditors, marshalling of assets or any
bankruptcy, insolvency or similar proceedings of the Company, the holders of all
Senior Indebtedness will be entitled to receive payment in full of all amounts
due or to become due thereon or provision for such payment in money or money's
worth before the Holders of the Notes will be entitled to receive any payment in
respect of the principal of, or premium, if any, interest or liquidated damages,
if any, on the Notes. In the event of the acceleration of the Maturity of the
Notes, the holders of all Senior Indebtedness then outstanding will first be
entitled to receive payment in full in cash of all amounts due thereon or
provision for such payment in money or money's worth before the Holders of the
Notes will be entitled to receive any payment for the principal of, or premium,
if any, interest or liquidated damages, if any, on the Notes. The Company also
may not make any payment (whether by redemption, purchase, retirement,
defeasance or otherwise) to the Holders upon or in respect of the Notes if (i) a
default in the payment of the principal of, or premium, if any, or interest on
any Designated Senior Indebtedness (a "Payment Default") occurs or (ii) any
other default occurs and is continuing with respect to any Designated Senior
Indebtedness which permits holders of Designated Senior Indebtedness as to which
that default relates to accelerate its maturity (a "Nonpayment Default") and the
Trustee receives notice of that default (a "Payment Blockage Notice") from the
Company or other person permitted to give such notice under the Indenture. The
payments on or in respect of the Notes shall be resumed (i) in the case of a
Payment Default respecting Designated Senior Indebtedness, on the date on which
that default is cured or waived and (ii) in the case of a Nonpayment Default
respecting Designated Senior Indebtedness, the earliest of (a) the date on which
that Nonpayment Default is cured or waived, (b) the date the applicable Payment
Blockage Notice is retracted by written notice to the Trustee from a
representative of the holders of the Designated Senior Indebtedness which have
given that Payment Blockage Notice or (c) 179 days after the date on which the
applicable Payment Blockage Notice is received by the Trustee, unless any
Payment Default has occurred and is continuing or an Event of Default of the
type referred to in clause (g) of the first sentence under "--Events of Default"
has occurred. No Nonpayment Default which existed or was continuing on the date
of any Payment Blockage Notice may be made the basis for giving a second Payment
Blockage Notice and only one such Payment Blockage Notice with respect to a
Nonpayment Default may be given in any 365-day period.
"Senior Indebtedness" is defined in the Indenture as (a) all indebtedness of
the Company for money borrowed under the Company's credit facilities and any
predecessor or successor credit facilities thereto, whether outstanding on the
date of execution of the Indenture (such as the Company's Revolving Credit
Facility, any increase in the maximum principal amount thereof and any
predecessor or successor facilities thereto) or thereafter created, incurred or
assumed, (b) indebtedness of the Company for money borrowed, whether outstanding
on the date of execution of the Indenture or thereafter created, incurred or
assumed, except any such other indebtedness that by the terms of the instrument
or instruments by which such indebtedness was created or
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<PAGE> 24
incurred expressly provides that it (i) is junior in right of payment to the
Notes or (ii) ranks pari passu in right of payment with the Notes, and (c) any
amendments, renewals, extensions, modifications, refinancings and refundings of
any of the foregoing. The term "indebtedness for money borrowed" when used with
respect to the Company is defined to mean (i) any obligation of or any
obligation guaranteed by, the Company for the repayment of borrowed money
(including without limitation fees, penalties and other obligations in respect
thereof), whether or not evidenced by bonds, notes or other written instruments,
(ii) any deferred payment obligation of, or any such obligation guaranteed by,
the Company for the payment of the purchase price of property or assets
evidenced by a note or similar instrument and (iii) any obligation of, or any
such obligation guaranteed by, the Company for the payment of rent or other
amounts under a lease of property or assets which obligation is required to be
classified and accounted for as a capitalized lease on the balance sheet of the
Company, under generally accepted accounting principles. As used in the
Indenture, "Designated Senior Indebtedness" means principal, interest, premiums,
fees, indemnifications, reimbursements, damages and other liabilities payable
under the documentation governing any indebtedness (a) under any debt facility
with banks or other lenders which provides for revolving credit loans, term
loans, receivables financing (including through the sale of receivables) or
letters of credit to the Company or any of its subsidiaries and (b) any other
Senior Indebtedness the principal amount of which is $5.0 million or more and
that has been designated by the Company as "Designated Senior Indebtedness."
The Indenture does not limit or prohibit the incurrence of indebtedness,
including Senior Indebtedness, by the Company or its subsidiaries. As of
December 31, 1997, the Company had outstanding no indebtedness which constitutes
Senior Indebtedness. The Company expects to incur Senior Indebtedness from time
to time in the future.
INFORMATION CONCERNING THE TRUSTEE
PNC Bank, Kentucky, Inc. is both the Trustee under the Indenture for the
Notes and the lead bank under the Company's Revolving Credit Facility. The
Indenture does not preclude the Trustee from enforcing its rights as a creditor,
including its rights as a holder of Senior Indebtedness. In the event of a
conflict of interest arising between the Holders of the Notes and the holders of
Senior Indebtedness, PNC Bank, Kentucky, Inc. will resign as Trustee and a
successor trustee will be appointed.
OPTIONAL REDEMPTION
The Notes will be redeemable, at the Company's option, in whole or from time
to time in part, at any time on or after December 5, 2000, upon not less than 30
nor more than 60 days' notice mailed to each Holder of Notes to be redeemed at
its address appearing in the Security Register and prior to Maturity at the
following Redemption Prices (expressed as percentages of the principal amount)
plus accrued interest to the Redemption Date (subject to the right of Holders of
record on the relevant Regular Record Date to receive interest due on an
Interest Payment Date that is on or prior to the Redemption Date).
If redeemed during the period beginning December 1 (December 5, if in the
year 2000), in the year indicated and ending on the succeeding November 30, the
redemption price shall be:
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<PAGE> 25
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
2000 103.43%
2001 102.57%
2002 101.71%
2003 100.86%
2004 100.00%
</TABLE>
in each case together with accrued and unpaid interest and liquidated damages,
if any, up to but not including the date of redemption. No sinking fund is
provided for the Notes.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company will not consolidate with or merge into any other Person or
convey, transfer or lease its properties and assets substantially as an entirety
to any Person, and the Company will not permit any Person to consolidate with or
merge into the Company unless: (a) the Person formed by such consolidation or
into which the Company is merged or the Person or corporation which acquires the
properties and assets of the Company substantially as an entirety is a
corporation, partnership or trust organized and validly existing under the laws
of the United States or any state thereof or the District of Columbia and
expressly assumes payment of the principal of and premium, if any, and interest
on the Notes and performance and observance of each obligation of the Company
under the Indenture; (b) after consummating such consolidation, merger, transfer
or lease, no Default or Event of Default will occur and be continuing, (c) such
consolidation, merger, conveyance, transfer or lease does not adversely affect
the validity or enforceability of the Notes and (d) the Company or Successor
Person has delivered to the Trustee an Officer's Certificate and an Opinion of
Counsel, each stating that such consolidation, merger, conveyance, transfer or
lease complies with the provisions of the Indenture.
CERTAIN RIGHTS TO REQUIRE REPURCHASE OF NOTES
In the event of any Repurchase Event occurring after the date of issuance of
the Notes and on or prior to Maturity, each Holder of Notes will have the right,
at the Holder's option, to require the Company to repurchase all or any part of
the Holder's Notes on the date (the "Repurchase Date") that is 30 days after the
date the Company gives notice of the Repurchase Event as described below at a
price (the "Repurchase Price") equal to 100% of the principal amount thereof,
together with accrued and unpaid interest and liquidated damages, if any, to the
Repurchase Date. On or prior to the Repurchase Date, the Company shall deposit
with the Trustee or a Paying Agent an amount of money in same day funds
sufficient to pay the Repurchase Price of the Notes which are to be repaid on or
promptly following the Repurchase Date.
Failure by the Company to provide timely notice of a Repurchase Event, as
provided for below, or to repurchase the Notes when required under the preceding
paragraph will result in an Event of Default under the Indenture whether or not
such repurchase is permitted by the subordination provisions of the Indenture.
On or before the 15th day after the occurrence of a Repurchase Event, the
Company is obligated to mail to all Holders of Notes a notice of the occurrence
of such Repurchase Event and identifying the Repurchase Event, the Repurchase
Date, the date by which the repurchase right must be exercised, the Repurchase
Price for Notes
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<PAGE> 26
(which shall equal 100% of the principal amount thereof, together with accrued
and unpaid interest and liquidated damages, if any,) and the procedures which
the Holder must follow to exercise this right. To exercise the repurchase right,
the Holder of a Note must deliver, on or before the close of business on the
Repurchase Date, written notice to the Company (or an agent designated by the
Company for such purpose) and to the Trustee of the Holder's exercise of such
right, together with the certificates evidencing the Notes with respect to which
the right is being exercised, duly endorsed for transfer.
A "Repurchase Event" shall have occurred upon the occurrence of a Change in
Control (as defined below) or a Termination of Trading (as defined below).
A "Change in Control" shall occur when: (i) all or substantially all of the
Company's assets are sold as an entirety to any person or related group of
persons; (ii) there shall be consummated any consolidation or merger of the
Company (A) in which the Company is not the continuing or surviving corporation
(other than a consolidation or merger with a wholly owned subsidiary of the
Company in which all shares of Common Stock outstanding immediately prior to the
effectiveness thereof are changed into or exchanged for the same consideration)
or (B) pursuant to which the Common Stock would be converted into cash,
securities or other property, in each case, other than a consolidation or merger
of the Company in which the holders of the Common Stock immediately prior to the
consolidation or merger have, directly or indirectly, at least a majority of the
total voting power of all classes of capital stock entitled to vote generally in
the election of directors of the continuing or surviving corporation immediately
after such consolidation or merger in substantially the same relative proportion
as their ownership of Common Stock immediately before such transaction; (iii)
any person, or any persons acting together which would constitute a "group" for
purposes of Section 13(d) of the Exchange Act, together with any affiliates
thereof, shall beneficially own (as defined in Rule 13d-3 under the Exchange
Act) at least 50% of the total voting power of all classes of capital stock of
the Company entitled to vote generally in the election of directors of the
Company; (iv) at any time during any consecutive two-year period, individuals
who at the beginning of such period constituted the Board of Directors of the
Company (together with any new directors whose election by such Board of
Directors or whose nomination for election by the stockholders of the Company
was approved by a vote of 66 2/3% of the directors then still in office who were
either directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Company then in office; or (v) the
Company is liquidated or dissolved or adopts a plan of liquidation or
dissolution.
A "Termination of Trading" shall occur if the Common Stock (or other common
stock into which the Notes are then convertible) is neither listed for trading
on a U.S. national securities exchange nor approved for trading on an
established automated over-the-counter trading market in the United States.
If a Repurchase Event were to occur, there can be no assurance that the
Company would have sufficient funds to repurchase the Notes tendered by the
Holders thereof. The Company's Senior Indebtedness may provide that a change in
control of the Company would constitute an event of default thereunder, the
occurrence of which would cause any repurchase of the Notes, absent a waiver, to
be blocked by the subordination provisions of the Notes. In addition, even if
such event of default did not occur or was waived, the right to require the
Company to repurchase Notes as a result of the occurrence of a Repurchase Event
could create an event of default under Senior Indebtedness of the Company, as a
result of which any repurchase could, absent a waiver, be blocked by the
subordination provisions of the Notes. See "-- Subordination." The Company's
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<PAGE> 27
ability to pay cash to the Holders of Notes upon a Repurchase Event may be
limited by certain financial covenants contained in the Company's Senior
Indebtedness. Failure by the Company to repurchase the Notes when required will
result in an Event of Default with respect to the Notes whether or not such
repurchase is permitted by the subordination provisions thereof.
In the event a Repurchase Event occurs and the Holders exercise their rights
to require the Company to repurchase Notes, the Company intends to comply with
applicable tender offer rules under the Exchange Act, including Rules 13e-4 and
14e-1, as then in effect, with respect to any such purchase.
The foregoing provisions would not necessarily afford Holders of the Notes
protection in the event of highly leveraged or other transactions involving the
Company that may adversely affect Holders. In addition, the foregoing provisions
may discourage open market purchases of the Common Stock or a non-negotiated
tender or exchange offer for such stock and, accordingly, may limit a
stockholder's ability to realize a premium over the market price of the Common
Stock in connection with any such transaction.
EVENTS OF DEFAULT
The following are Events of Default under the Indenture with respect to the
Notes: (a) default in the payment of the principal of, or the premium, if any,
on any Note when due (even if such payment is prohibited by the subordination
provisions of the Indenture); (b) default in the payment of any interest and
liquidated damages, if any, on any Note when due, which default continues for 30
days (even if such payment is prohibited by the subordination provisions of the
Indenture); (c) failure to provide timely notice of a Repurchase Event as
required by the Indenture; (d) default in the payment of the Repurchase Price in
respect of any Note on the Repurchase Date therefor (even if such payment is
prohibited by the subordination provisions of the Indenture); (e) default in the
performance, or breach, of any other covenant or warranty of the Company in the
Indenture which continues for 60 days after written notice as provided in the
Indenture; (f) default under one or more bonds, notes or other evidences of
indebtedness for money borrowed by the Company or any subsidiary of the Company
or under one or more mortgages, indentures or instruments under which there may
be issued or by which there may be secured or evidenced any indebtedness for
money borrowed by the Company or any subsidiary of the Company, whether such
indebtedness now exists or shall hereafter be created, which default
individually or in the aggregate shall constitute a failure to pay the principal
of indebtedness in excess of $10,000,000 when due and payable after the
expiration of any applicable grace period with respect thereto or shall have
resulted in indebtedness in excess of $10,000,000 becoming or being declared due
and payable prior to the date on which it would otherwise have become due and
payable, without such indebtedness having been discharged, or such acceleration
having been rescinded or annulled, within a period of 30 days after there shall
have been given to the Company by the Trustee or to the Company and the Trustee
by the Holders of at least 25% in aggregate principal amount of the Outstanding
Notes (as defined in the Indenture) a written notice specifying such default and
requiring the Company to cause such indebtedness to be discharged or cause such
acceleration to be rescinded or annulled; and (g) certain events of bankruptcy,
insolvency or reorganization of the Company or any subsidiary of the Company.
If an Event of Default with respect to the Notes (other than as specified in
clause (g) in the immediately preceding paragraph) shall occur and be
continuing, the Trustee or the Holders of not less than 25% in aggregate
principal amount of the Outstanding Notes may declare the principal of, and
premium, if any, on all such Notes
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<PAGE> 28
to be due and payable immediately, but if the Company cures all Events of
Default and has paid or deposited with the Trustee a sum sufficient to pay all
interest on, premium, if any, and principal of Notes then due and certain other
conditions are met, such declaration may be canceled and past defaults may be
waived by the holders of a majority in principal amount of Outstanding Notes. If
an Event of Default shall occur as a result of an event of bankruptcy,
insolvency or reorganization of the Company or any subsidiary of the Company,
the aggregate principal of, premium, if any, any accrued and unpaid interest and
liquidated damages, if any, on the Notes shall automatically become due and
payable. The Company is required to furnish to the Trustee annually a statement
as to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance. The Indenture provides that
the Trustee may withhold notice to the Holders of the Notes of any continuing
default (except in the payment of the principal of, or premium, if any, or
interest on any Notes) if the Trustee considers it in the interest of Holders of
the Notes to do so.
MODIFICATION, AMENDMENTS AND WAIVERS
Modifications and amendments of the Indenture may be made by the Company and
the Trustee with the consent of the Holders of a majority in aggregate principal
amount of Outstanding Notes; provided, however, that no such modification or
amendment may without consent of the Holder of each Outstanding Note affected
thereby (i) change the maturity of the principal of, or any installment of
interest on, any Note; (ii) reduce the principal amount of, or the premium or
interest on, any Note; (iii) change the place of payment where, or currency in
which, any Note or any premium or interest thereof is payable; (iv) impair the
right of a Holder to institute suit for the enforcement of any payment on or
with respect to any Note; (v) change the currency in which the Notes are
payable; (vi) adversely affect the right to convert the Notes; (vii) adversely
affect the right to cause the Company to repurchase the Notes; (viii) modify the
subordination provisions in a manner adverse to the Holders of the Notes; or
(ix) reduce the above stated percentage of aggregate principal amount of
Outstanding Notes necessary for waiver or compliance with certain provisions of
the Indenture or for waiver of certain defaults.
The Holders of a majority in aggregate principal amount of Outstanding Notes
may waive compliance by the Company with certain restrictive provisions of the
Indenture. The Holders of a majority in aggregate principal amount of
Outstanding Notes may waive any past default or right under the Indenture,
except (i) a default in payment of principal, premium or interest, (ii) the
right of a Holder to redeem or convert the Note, or (iii) with respect to any
covenant or provision of the Indenture that requires the consent of the Holder
of each Outstanding Note affected.
SATISFACTION AND DISCHARGE
The Company may discharge its obligations under the Indenture, other than
its obligation to pay the principal of and interest on the Notes and certain
other obligations (including its obligation to deliver shares of Common Stock
upon conversion of the Notes), while Notes remain Outstanding if (a) all
Outstanding Notes have become due and payable or will become due and payable at
their scheduled maturity within one year, or (b) all Outstanding Notes are
scheduled for redemption within one year or are delivered to the Trustee for
conversion in accordance with the Indenture, and in either case the Company has
irrevocably deposited with the Trustee an amount sufficient to pay and discharge
all Outstanding Notes on the date of their scheduled maturity or the scheduled
date of redemption.
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<PAGE> 29
FORM, DENOMINATION AND REGISTRATION
The Notes were issued in fully registered form, without coupons, in
denominations of $1,000 in principal amount and integral multiples thereof.
Global Notes; Book-Entry Form. Notes offered in reliance on Rule 144A are
evidenced by one or more global Notes (hereinafter referred to as the "144A
Global Notes") and Notes offered in reliance on Regulation S are evidenced by
one or more global Notes (hereinafter referred to as the "Regulation S Global
Notes," and, together with the 144A Global Notes, the "Global Notes"). The
Global Notes were deposited with, or on behalf of, the Depository Trust Company,
New York, New York ("DTC") and registered in the name of Cede & Co. ("Cede") as
DTC's nominee. Beneficial interests in the Regulation S Global Notes may only be
held through the Euroclear System ("Euroclear") operated by Morgan Guaranty
Trust Company of New York, Brussels office or Cedel, S.A. ("Cedel"). Except as
set forth below, the Global Notes may be transferred, in whole or in part, only
to another nominee of DTC or to a successor of DTC or its nominee. The 144A
Global Notes will be (i) reduced in principal amount to reflect the subsequent
transfer by owners of beneficial interest in the 144A Global Notes to a
Regulation S Purchaser (as defined herein) and (ii) increased in principal
amount to reflect the subsequent transfer from a Regulation S Purchaser. The
Regulation S Global Notes will be (i) reduced in principal amount to reflect the
subsequent transfer by owners of beneficial interest in the Regulation S Global
Notes to a QIB (as defined herein) and (ii) increased in principal amount to
reflect the subsequent transfer from a QIB.
QIBs may hold their interests in the 144A Global Notes directly through DTC
if such Holders are participants in DTC, or indirectly through organizations
which are participants in DTC (the "Participants"). Transfers between
Participants will be effected in the ordinary way in accordance with DTC rules
and will be settled in same day funds. Holders of beneficial interest in the
Regulation S Global Notes (a "Regulation S Holder") may hold their interest in
the Regulation S Global Notes directly through Cedel or Euroclear, or indirectly
through organizations that are participants in Cedel or Euroclear. Cedel and
Euroclear will hold interests in the Regulation S Global Notes on behalf of
their participants through their respective depositaries at DTC. Transfers
between participants in Euroclear and Cedel will be effected in the ordinary way
in accordance with their respective rules and operating procedures. The laws of
some states require that certain persons take physical delivery of securities in
definitive form. Consequently, the ability to transfer beneficial interests in
the Global Notes to such persons may be limited.
The Holders of Notes who are not Participants may beneficially own interests
in the Global Notes held by DTC only through Participants or certain banks,
brokers, dealers, trust companies and other parties that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants"). So long as Cede, as the nominee of DTC, is
the registered owner of the Global Notes, Cede for all purposes will be
considered the sole holder of the Global Notes.
Payment of interest on and the redemption price (upon redemption at the
option of the Company or at the option of the Holder upon a Repurchase Event) of
the Global Notes will be made to Cede, the nominee for DTC, as the registered
owner of the Global Notes, by wire transfer of immediately available funds.
Neither the Company, the Trustee nor any paying agent will have any
responsibility or liability for any aspect of the records
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<PAGE> 30
relating to or payments made on account of beneficial ownership interests in the
Global Notes or for maintaining, supervising or reviewing any records relating
to such beneficial ownership interests.
With respect to any payment of interest on and the redemption price (upon
redemption at the option of the Company or at the option of the Holder upon a
Repurchase Event) of the Global Notes, DTC's practice is to credit Participants'
accounts on the payment date therefor with payments in amounts proportionate to
their respective beneficial interests in the Notes represented by the Global
Notes as shown on the records of DTC, unless DTC has reason to believe that it
will not receive payment on such payment date. Payments by Participants to
owners of beneficial interests in Notes represented by the Global Notes held
through such Participants will be the responsibility of such Participants, as is
now the case with securities held for the accounts of customers registered in
"street name."
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a person
having a beneficial interest in Notes represented by the Global Notes to pledge
such interest to persons or entities that do not participate in the DTC system,
or otherwise take actions in respect of such interest, may be affected by the
lack of a physical certificate evidencing such interest.
Neither the Company nor the Trustee (or any registrar, paying agent or
conversion agent under the Indenture) will have any responsibility for the
performance by DTC or its Participants or Indirect Participants of their
respective obligations under the rules and procedures governing their
operations.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a "banking
organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934, as amended.
DTC holds securities for its Participants. DTC also facilitates the clearance
and settlement among Participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic book-entry changes to
accounts of its Participants, thereby eliminating the need for physical movement
of certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and may include certain other
organizations such as the Initial Purchasers. Certain of such Participants (or
their representatives), together with other entities, own DTC. Indirect access
to the DTC system is available to others such as banks, brokers dealers and
trust companies that clear through, or maintain a custodial relationship with, a
Participant, either directly or indirectly. The rules applicable to DTC and its
Participants are on file with the Securities and Exchange Commission.
Although DTC, Euroclear and Cedel have agreed to the foregoing procedures in
order to facilitate transfers of interests in the Global Note among Participants
of DTC, Euroclear and Cedel, they are under no obligation to perform or continue
to perform such procedures, and such procedures may be discontinued at any time.
If DTC is at any time unwilling or unable to continue as depositary and a
successor depositary is not appointed by the Company within 90 days, the Company
will cause the Notes to be issued in definitive form in exchange for the Global
Notes.
Certificated Notes. Notes sold to investors that are neither QIBs nor
Regulation S Purchasers will be issued in definitive registered form and may not
be evidenced by Global Notes. QIBs and Regulation S Holders may
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<PAGE> 31
request that their Notes be issued in definitive registered form. In addition,
certificated Notes may be issued in exchange for Notes represented by the Global
Notes if no successor depositary is appointed by the Company as set forth above
under the paragraph entitled "Global Notes; Book-Entry Form."
Restrictions on Transfer; Legends. The Notes, and the Common Stock into
which they may be converted, will be subject to certain transfer restrictions as
described below under the caption "Transfer Restrictions," and certificates
evidencing the Notes will bear a legend to such effect.
PAYMENTS OF PRINCIPAL AND INTEREST
The Indenture requires that payments in respect of the Notes (including
principal, premium, if any, interest and liquidated damages, if any) held of
record by DTC (including Notes evidenced by the Global Notes) be made in same
day funds. Payments in respect of the Notes held of record by holders other than
DTC may, at the option of the Company, be made by check and mailed to such
holders of record as shown on the register for the Notes.
GOVERNING LAW
The Indenture and, except as may otherwise be required by mandatory
provisions of law, Notes are governed by and construed in accordance with the
laws of the State of New York, without giving effect to such state's conflicts
of laws principles.
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED SHARES
The authorized capital stock of the Company consists of 40,000,000 shares of
Common Stock and 1,000,000 shares of Preferred Stock issuable in series.
COMMON STOCK
As of December 31, 1997, there were 12,365,682 shares of Common Stock
outstanding. All outstanding shares are validly issued, fully paid and
nonassessable.
Holders of shares of Common Stock are entitled to one vote per share on all
matters to be voted upon by the shareholders. Holders of shares of Common Stock
are entitled to receive dividends and other distributions when, as and if
declared from time to time by the Board of Directors out of funds legally
available therefor subject to any preferential rights of, and sinking fund or
redemption or purchase rights with respect to, outstanding shares of Preferred
Stock, if any. In the event of a voluntary or involuntary liquidation,
dissolution or winding up of the Company, the holders of shares of Common Stock
would be entitled to share ratably in all assets remaining after payment of
liabilities subject to prior distribution rights of any shares of Preferred
Stock then outstanding. Holders of the shares of Common Stock have no preemptive
or conversion rights and the
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<PAGE> 32
shares of Common Stock are not subject to further calls or assessment by the
Company. There are no redemption or sinking fund provisions applicable to the
shares of Common Stock.
In connection with the election of directors, each holder of shares of
Common Stock is entitled to cumulative voting; that is, the holder is entitled
to vote the number of shares the holder owns multiplied by the number of members
of the Board of Directors to be elected by such class (currently six), and the
holder may cast the whole number of votes for one candidate, or distribute such
votes among two or more candidates.
PREFERRED STOCK
None of the shares of Preferred Stock are presently outstanding. The Board
of Directors has the authority, without any further vote or action by the
shareholders, to issue shares of Preferred Stock in one or more series and to
fix the number of shares, designations of such series, dividend rates, relative
rights (including voting rights), preferences and limitations of such series to
the full extent now or hereafter permitted by Kentucky law.
The rights of the holders of Common Stock will be subject to, and may be
adversely affected by, the rights of the holders of any Preferred Stock that may
be issued in the future. It is not possible to state the actual effect of the
authorization and issuance of series of shares of Preferred Stock upon the
rights of holders of shares of Common Stock unless and until the Board of
Directors determines the attributes of the series and the specific rights of its
holders. Such effects might include, however, (i) restrictions on dividends on
shares of Common Stock if dividends on shares of Preferred Stock have not been
paid; (ii) dilution of the voting power of shares of Common Stock to the extent
that the shares of Preferred Stock have voting rights, or to the extent that any
series of shares of Preferred Stock is convertible into shares of Common Stock;
(iii) dilution of the equity interest of holders of shares of Common Stock
unless the shares of Preferred Stock are subsequently redeemed by the Company;
and (iv) limitation on the right of holders of shares of Common Stock to share
in the Company's assets upon liquidation until satisfaction of any liquidation
preference granted to holders of shares of Preferred Stock. Issuance of a new
series of Preferred Stock, while providing desirable flexibility in connection
with possible acquisitions and other corporate purposes, could have the effect
of making it more difficult for a third party to acquire, or of discouraging a
third party from acquiring, a majority of the outstanding voting stock of the
Company. The Company has no present intention to issue any shares of Preferred
Stock.
CERTAIN PROVISIONS RELATING TO CHANGE IN CONTROL
The Company's Amended and Restated Articles of Incorporation and Bylaws
contain various provisions that may have the effect, either alone or in
combination with each other, of making more difficult or discouraging a business
combination or an attempt to obtain control of the Company that is not approved
by the Board of Directors. These provisions include (i) the right of the Board
of Directors to issue unissued and unreserved shares of Common Stock without
shareholder approval, (ii) the right of the Board of Directors to issue shares
of Preferred Stock in one or more series and to designate the number of shares
of each such series and the relative rights and preferences of such series,
including voting rights, terms of redemption, redemption prices and conversion
rights, without further shareholder approval, (iii) a Board of Directors whose
terms are staggered at such time as there are nine or more directors of the
Company, (iv) provisions prohibiting the removal of directors other than for
cause, applicable only when the Company has nine or more directors, and (v) the
right of the Board of Directors to consider the interests of various
constituencies, including employees, customers,
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suppliers and creditors of the Company, as well as the communities in which the
Company is located, in addition to the interests of the Company and its
shareholders, in discharging their duties and determining what is in the
Company's best interests.
Section 271B.12-210 of the Kentucky Business Corporation Act (the "Act")
generally prevents a corporation from entering into certain business
combinations with an interested shareholder (defined as any person or entity
that is the beneficial owner of at least 10% of a corporation's voting stock) or
its affiliates for a period of five years after the date of the transaction in
which the person became an interested shareholder, unless (i) the transaction is
approved by a majority of the independent members of the Board of Directors of
the corporation prior to such business combination, or (ii) the business
combination is approved by a vote of 80% of the outstanding voting stock and by
a vote of two-thirds of the outstanding voting stock not owned by the interested
shareholder.
The Act further provides that the prior approval of a business combination
by the independent members of the board of directors or the shareholders is not
required if the business combination meets certain minimum price and procedural
requirements. Generally, the consideration to be received in the business
combination must not be less than the highest of (i) the highest per share price
paid by the interested shareholder in acquiring its stock ownership in the
corporation (A) during the five years prior to the announcement of the business
combination ("Announcement Date") and (B) in the transaction in which it became
an interested shareholder ("Determination Date"), whichever is greater; (ii) the
market value per share of the stock on the Announcement Date or the
Determination Date, whichever is greater; and (iii) the price per share equal to
the market value per share of the stock multiplied by the fraction of (X) the
highest per share price paid by the interested shareholder during the five years
prior to the Announcement Date over (Y) the market value per share of the stock
on the first day of such five year period prior to the Announcement Date. In the
event these and other minimum price criteria and procedural requirements are met
with respect to a particular business combination, the requirements of Kentucky
law apply and, accordingly, only a majority vote of the outstanding voting stock
is required, or, for certain transactions, no shareholder vote is necessary. The
Act provides that a corporation may elect not to be governed by Section
271B.12-210. The Company currently does not intend to make such an election in
order to avail itself of the rights afforded by Section 271B.12-210.
The Company's Bylaws contain provisions requiring advance notice to the
Company of (i) nominations of persons to the Board of Directors who are not
nominated by the Company and (ii) proposals to be brought before the Company's
annual meeting of shareholders (other than proposals made by the Company).
Without compliance with these provisions, any such nominations or shareholder
proposals may be disregarded by the Company.
INDEMNIFICATION
The Company's Amended and Restated Articles of Incorporation eliminate the
personal liability of its directors to the Company and its shareholders for
monetary damages for breach of their duties as directors, except for liability
(i) for any transaction in which the director's personal financial interest is
in conflict with the financial interests of the Company or its shareholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or are known to the directors to be a violation of law, (iii) for a
vote for or assent to unlawful payment of a dividend or unlawful purchase,
redemption or other acquisition of Common Stock or
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Preferred Stock of the Company, or (iv) for any transaction from which the
director derived an improper personal benefit. This provision does not eliminate
the duty of care, and, in appropriate circumstances, equitable remedies such as
an injunction or other forms of non-monetary relief would remain available under
Kentucky law. The provision also does not affect a director's responsibilities
under any other law, such as the federal securities laws or state or federal
environmental laws.
The Company's Bylaws also provide that the Company shall indemnify its
directors and officers to the fullest extent permitted by the Act. The Company
believes that indemnification under its Bylaws covers at least negligence and
gross negligence by such directors and officers, and requires the Company to
advance litigation expenses in the case of actions, including shareholder
derivative actions, against an undertaking by the officer or director to repay
such advances if it is ultimately determined that the officer or director is not
entitled to indemnification. The Company believes that these provisions are
essential to attracting and retaining qualified persons as directors and
officers.
REGISTRAR AND TRANSFER AGENT
The registrar and transfer agent for the Company's shares of Common Stock is
Mid-America Bank of Louisville and Trust Company, Louisville, Kentucky.
INCLUSION IN THE NASDAQ NATIONAL MARKET
The Common Stock is quoted on the Nasdaq National Market under the symbol
"RSCR."
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of certain United States federal income
tax considerations relevant to Holders of the Notes and the Conversion Shares as
of the date hereof. This discussion is based on existing provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations
promulgated thereunder, judicial decisions now in effect and administrative
rulings, all of which are subject to change or alternative construction,
possibly with retroactive effect. This summary does not discuss other federal
taxes (such as federal estate and gift taxes) that may be important to Holders
of the Notes or any state, local or foreign tax considerations, nor does it
purport to address all federal income tax consequences applicable to all
categories of investors, some of which may be subject to special rules in light
of their personal circumstances, such as life insurance companies, tax-exempt
organizations, dealers in securities or currency, banks or other financial
institutions, investors whose functional currency is not the U.S. dollar, or
investors that hold the Notes as part of a hedge, straddle or conversion
transaction. In addition, this summary deals only with Notes and Common Stock
into which the Notes are convertible which are held as "capital assets" within
the meaning of Section 1221 of the Code and that are purchased by investors upon
initial issuance at the initial offering price. The Company will not seek a
ruling from the Internal Revenue Service (the "IRS") with regard to the United
States federal income tax treatment relating to an investment in the Notes (or
the Common Stock into which the Notes are convertible) and, therefore, there can
be no assurance that the IRS will agree with the conclusions set forth below.
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For purposes of this summary, the term "U.S. Holder" means a beneficial
owner of a Note or Common Stock that is (i) a citizen or resident of the United
States, (ii) except to the extent otherwise provided in Treasury regulations
with respect to a partnership, a corporation or other entity created or
organized in or under the laws of the United States or any political subdivision
thereof, (iii) an estate the income of which is subject to United States federal
income taxation regardless of its source, and (iv) a trust if (a) a U.S. court
is able to exercise primary supervision over the trust's administration and (b)
one or more U.S. fiduciaries have the authority to control all of the trust's
substantial decisions. The term "Non-U.S. Holder" shall mean the beneficial
owner of a Note or Common Stock other than a U.S. Holder.
PERSONS CONSIDERING THE PURCHASE OF THE NOTES SHOULD CONSULT THEIR OWN TAX
ADVISORS CONCERNING THE APPLICATION OF UNITED STATES FEDERAL TAX LAWS, AS WELL
AS THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION, TO THEIR
PARTICIPATION IN THE OFFERING, OWNERSHIP AND DISPOSITION OF THE NOTES, INCLUDING
CONVERSION OF THE NOTES, AND THE EFFECT THAT THEIR PARTICULAR SITUATIONS MAY
HAVE ON SUCH TAX CONSIDERATIONS. THIS SUMMARY DOES NOT PURPORT TO ADDRESS ALL
ASPECTS OF FEDERAL, STATE, LOCAL OR FOREIGN TAXATION THAT MAY BE RELEVANT TO AN
INVESTOR'S DECISION TO PURCHASE THE NOTES.
TAXATION OF U.S. HOLDERS
Adjustments to Conversion Price. The Indenture provides that the conversion
price will be adjusted upon the occurrence of certain circumstances. Section 305
of the Code treats as a distribution taxable as a dividend (to the extent of the
Company's current or accumulated earnings and profits) certain actual or
constructive distributions of stock with respect to stock and convertible
securities. Applicable Treasury regulations treat holders of convertible
debentures as having received such a constructive distribution where the
conversion price is adjusted to reflect certain distributions with respect to
the stock into which such debentures are convertible. Thus, under certain
circumstances, an adjustment in the conversion price of the Common Stock may be
taxable to the U.S. Holders as a dividend distribution. In such a case, U.S.
Holders may recognize income as a result of an event pursuant to which they
receive no cash or property that could be used to pay the related income tax.
Generally, a holder's tax basis in a Note will be increased by the amount of any
such constructive dividend. Holders of the Notes are advised to consult their
tax advisors with respect to the potential of taxable constructive dividend
distributions upon such conversion price modifications.
Payments of Interest. The payment of stated interest on the Notes will be
taxable to a U.S. Holder as ordinary interest income at the time it accrues or
is received in accordance with the holder's usual method of accounting for
federal income tax purposes.
Conversion of a Note into Common Stock. In general, a U.S. Holder will not
recognize gain or loss on conversion of a Note solely into Common Stock of the
Company pursuant to the terms of the conversion right of the Notes, except with
respect to cash received in lieu of a fractional share. The holding period of
the Common Stock received by the U.S. Holder upon conversion of a Note generally
will include the period during which the Note was held prior to the conversion.
The U.S. Holder's aggregate tax basis in the Common Stock received upon
conversion of a Note generally will equal the U.S. Holder's aggregate tax basis
in the Note
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exchanged (reduced by the portion allocable to cash received in lieu of a
fractional share). A U.S. Holder generally will recognize capital gain or loss
in connection with any cash received in lieu of a fractional share in an amount
equal to the difference between the amount of cash received and the U.S.
Holder's tax basis in the fractional share. U.S. Holders should consult their
own tax advisors regarding the tax consequences of converting the Notes into
Common Stock, in particular in the case of the conversion of a Note into Common
Stock after a record date for the payment of interest but prior to the next
succeeding interest payment date.
Disposition of Notes or Common Stock. A U.S. Holder of a Note (or the Common
Stock into which it was converted) generally will recognize capital gain or loss
upon the sale, exchange, retirement or other disposition of the Note (or the
Common Stock) measured by the difference between (i) the amount realized (except
to the extent the amount is attributable to accrued interest income, which will
generally be taxable as ordinary income) and (ii) the U.S. Holder's tax basis in
the Note (or the Common Stock). The gain or loss on such disposition will be
taken into account in determining the amount of the U.S. Holder's net capital
gain which is taxed at a rate of 20% if the Note (or the Common Stock) has been
held for more than 18 months at the time of such disposition or mid-term gain or
loss (net mid-term gains being taxed at a rate of 28%) if the Note (or Common
Stock) has been held for more than one year but not more than 18 months at the
time of such disposition.
Market Discount. The resale of Notes may be affected by the "market
discount" provisions of the Code. For this purpose, the market discount on a
Note will generally be equal to the amount, if any, by which the stated
redemption price at maturity of the Note immediately after its acquisition
exceeds the holder's tax basis in the Note. Subject to a de minimis exception,
these provisions generally require a holder of a Note acquired at a market
discount to treat as ordinary income any gain recognized on the disposition of
such Note to the extent of the "accrued market discount" on such Note at the
time of disposition. In general, market discount on a Note will be treated as
accruing on a straight-line basis over the term of such Note, or, at the
election of the holder, under a constant yield method. A holder of a Note
acquired at a market discount may be required to defer the deduction of a
portion of the interest on any indebtedness incurred or maintained to purchase
or carry the Note until the Note is disposed of in a taxable transaction, unless
the holder elects to include accrued market discount in income currently.
Distributions with Respect to Common Stock. In general, distributions made
by the Company with respect to Common Stock will constitute dividends for
federal income tax purposes and will be taxable to a holder as ordinary income
to the extent of the Company's undistributed current or accumulated earnings and
profits (as determined for federal income tax purposes). Distributions in excess
of the Company's current or accumulated earnings and profits will be treated
first as a nontaxable return of capital reducing the U.S. Holder's tax basis in
the Common Stock, thus increasing the amount of any gain (or reducing the amount
of any loss) which might be realized by such holder upon the sale, exchange or
redemption of such Common Stock. Any such distributions in excess of the U.S.
Holder's tax basis in the Common Stock will be treated as capital gain to the
U.S. Holder (provided the Common Stock is held as a capital asset), and will be
either more-than-18-month, mid-term or short-term capital gain depending upon
the holder's federal income tax holding period for the Common Stock.
Subject to certain limitations, to the extent that distributions made by the
Company are treated as dividends, a U.S. Holder of Common Stock that is taxed as
a domestic corporation and that meets the applicable holding period and taxable
income requirements of the Code may be entitled to a deduction under Section 243
of the Code equal in amount to 70% of the dividends paid out of such earnings
and profits (the "Dividends Received
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Deduction"). With respect to Common Stock considered to be "portfolio stock" as
defined in Section 246A of the Code, the Dividends Received Deduction will be
reduced to the extent that the Common Stock constitutes "debt financed portfolio
stock." In addition, under certain circumstances, the receipt of a dividend on
the Common Stock determined to be an "extraordinary dividend" may cause the
holder's tax basis in the Common Stock to be reduced by the untaxed portion of
the dividend and could result in gain recognition pursuant to Section 1059 of
the Code.
TAXATION OF NON-U.S. HOLDERS
Payments of Interest. The payment of stated interest on a Note by the
Company or any paying agent to a Non-U.S. Holder will qualify for the "portfolio
interest exemption" and, therefore, will not be subject to United States federal
income tax or withholding tax, provided that such interest income is not taxable
as effectively connected with a United States trade or business of the Non-U.S.
Holder and provided that the Non-U.S. Holder (i) does not actually or
constructively own 10% or more of the combined voting power of all classes of
stock of the Company entitled to vote, (ii) is not a controlled foreign
corporation related to the Company actually or constructively through stock
ownership, (iii) is not a bank receiving interest on a loan entered into in the
ordinary course of business, and (iv) either (a) provides a Form W-8 (or
suitable substitute form) signed under penalties of perjury that includes its
name and address and certifies as to its non-United States status in compliance
with applicable law and regulations, or (b) deposits the Note with a securities
clearing organization, bank or financial institution that holds customers'
securities in the ordinary course of its trade or business and which holds the
Note and provides a statement to the Company or its agent under penalties of
perjury in which it certifies that such a Form W-8 (or a suitable substitute)
has been received by it from the Non-U.S. Holder or qualifying intermediary and
furnishes the Company or its agent with a copy thereof. For purposes of
determining whether a Non-U.S. Holder constructively owns more than 10% of the
Company's combined voting power, the Non-U.S. Holder will be treated as owning
the number of shares of Common Stock that he would acquire if he converted all
of his Notes.
Recently finalized Treasury regulations (the "Regulations") provide
alternative methods for satisfying the certification requirement described in
clause (iv) above. These Regulations also generally will require, in the case of
Notes held by a foreign partnership, that (a) the certification described in
clause (iv) above be provided by the partners rather than by the foreign
partnership, and (b) the partnership provide certain information, including a
United States taxpayer identification number. A look-through rule will apply in
the case of tiered partnerships. These Regulations generally will be effective
January 1, 1999. Non-U.S. Holders of the Notes are advised to consult their tax
advisors with respect to their qualification for the portfolio interest
exemption and the steps necessary to comply with such exemption.
Except to the extent otherwise provided under an applicable tax treaty, a
Non-U.S. Holder generally will be taxed in the same manner as a U.S. Holder with
respect to interest on a Note if such interest income is effectively connected
with a United States trade or business of the Non-U.S. Holder. Effectively
connected interest received by a corporate Non-U.S. Holder may also, under
certain circumstances, be subject to an additional "branch profits tax" at a 30%
rate (or, if applicable, a lower treaty rate). A Non-U.S. Holder may be required
to satisfy certain certification requirements in order to claim a reduction of
or exemption from
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withholding under the foregoing rules. Non U.S. Holders should consult
applicable income tax treaties, which may provide different rules.
Interest income of a Non-U.S. Holder that is not effectively connected with
a United States trade or business and that does not qualify for the portfolio
interest exemption described above generally will be subject to a withholding
tax at a 30% rate (or, if applicable, a lower treaty rate).
Conversion of a Note into Common Stock. In general, no United States federal
income tax or withholding tax will be imposed upon the conversion of a Note into
Common Stock by a Non-U.S. Holder except, with respect to the receipt of cash in
lieu of fractional shares by Non-U.S. Holders upon conversion of a Note, where
any one of the four exceptions described below under " -- Disposition of Notes
or Common Stock" is applicable. In addition, under certain circumstances, the
extent to which the fair market value of the Common Stock received upon
conversion is attributable to accrued interest will be treated as ordinary
interest income taxable as described above under " --Payments of Interest."
Disposition of Notes or Common Stock. A Non-U.S. Holder of the Note (or the
Common Stock into which it was converted) generally will not be subject to
United States federal income tax or withholding tax on any gain realized on the
sale, exchange, retirement or other disposition of the Note (including the
receipt of cash in lieu of fractional shares upon conversion of the Note to
Common Stock), unless (i) the gain is effectively connected with a United States
trade or business of the Non-U.S. Holder, (ii) in the case of a Non-U.S. Holder
who is an individual, such holder is present in the United States for a period
or periods aggregating 183 days or more during the taxable year of the
disposition, and either such holder has a "tax home" in the United States or the
disposition is attributable to an office or other fixed place of business
maintained by such holder in the United States, (iii) the Non-U.S. Holder is
subject to tax pursuant to the provisions of the Code applicable to certain
United States expatriates, or (iv) the Company is a United States real property
holding corporation. The Company does not believe that it is, or is likely to
become, a United States real property holding corporation.
Distributions with Respect to Common Stock. To the extent distributions made
by the Company are treated as dividends (as described above under "Taxation of
U.S. Holders -- Distributions with Respect to Common Stock"), a Non-U.S. Holder
will be subject to United States federal withholding tax at a 30% rate (or lower
rate provided under an applicable income tax treaty) on dividends paid (or
deemed paid, as described above under "Taxation of U.S. Holders -- Adjustment to
Conversion Price") on Common Stock, unless the dividends are taxable as
effectively connected with the conduct of a trade or business in the United
States and the Non-U.S. Holder delivers IRS Form 4224 to the payor. Except to
the extent otherwise provided under an applicable tax treaty, a Non-U.S. Holder
generally will be taxed in the same manner as a U.S. Holder on dividends paid
(or deemed paid) that are effectively connected with the conduct of a trade or
business in the United States by the Non-U.S. Holder. If such Non-U.S. Holder is
a foreign corporation, it may also be subject to a United States branch profits
tax on such effectively connected income at a 30% rate or such lower rate as may
be specified by an applicable income tax treaty.
Under current Treasury Regulations, dividends paid to an address in a
foreign country are presumed to be paid to a resident of that country (unless
the payor has knowledge to the contrary) for purposes of the withholding rules
discussed below and, under the current interpretation of Treasury Regulations,
for purposes of determining the applicability of a tax treaty rate. Under the
Regulations effective January 1, 1999, however, a
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Non-U.S. Holder of Common Stock who wishes to claim the benefit of an applicable
treaty rate would be required to satisfy applicable certification requirements.
In addition, under these Regulations, in the case of Common Stock held by a
foreign partnership, the certification requirement generally would be applied to
the partners of the partnership and the partnership would be required to provide
certain information, including a United States taxpayer identification number.
These Regulations also will provide look-through rules for tiered partnerships.
BACKUP WITHHOLDING AND INFORMATION REPORTING
U.S. Holders. Under current United States federal income tax law, U.S.
Holders of Notes or Common Stock will be subject to information reporting and,
under certain circumstances, may be subject to "backup withholding" at the rate
of 31% in respect to payments of principal, interest and dividends made to, and
the proceeds of disposition of Notes or Common Stock by, certain noncorporate
U.S. Holders. Generally, the backup withholding rules will apply only if the
U.S. Holder (i) fails to furnish its taxpayer identification number ("TIN") to
the payor, (ii) furnishes such payor with an incorrect TIN, (iii) is notified by
the IRS that it has failed to report properly interest, dividends or other
"reportable payments" as defined by the Code, or (iv) under certain
circumstances, fails to provide such payor or the U.S. Holder's securities
broker with a certified statement, signed under penalty of perjury, that the TIN
provided is its correct number and that the U.S. Holder is not subject to backup
withholding. Backup withholding will not apply with respect to payments made to
certain U.S. Holders of the Notes, including payments to certain exempt
recipients (such as corporations and exempt organizations). The amount of backup
withholding from a payment to a holder will be allowed as a credit against the
holder's federal income tax liability and may entitle such holder to a refund
provided the required information is furnished to the IRS.
Non-U.S. Holders. The Company must report annually to the IRS and to each
Non-U.S. Holder any interest or dividend that is subject to withholding, or that
is exempt from U.S. withholding tax (pursuant to a tax treaty or the exceptions
described above).
Backup withholding at a rate of 31% and information reporting generally may
apply to payments of principal and interest if the payee fails to certify under
penalties of perjury that it is not a U.S. person, provided the payor does not
have actual knowledge that the holder is a United States person. Dividends paid
to Non-U.S. Holders that are subject to the 30% withholding tax described above
or that are subject to treaty reduction generally will be exempt from United
States backup withholding tax.
Payment of the proceeds of the sale or other disposition of Notes or Common
Stock to or through a United States office of a broker, U.S. or foreign, will be
subject to information reporting and possible backup withholding at a rate of
31% unless the owner certifies its non-United States status under penalties of
perjury or otherwise establishes an exemption (provided the broker does not have
actual knowledge that the holder is a U.S. Person or that the conditions of any
other exemption are not, in fact, satisfied). Payment of the proceeds on the
sale of Notes or Common Stock to or through a foreign office of a foreign broker
that is not a "U.S. related person" generally will not be subject to information
reporting or backup withholding tax. For this purpose, a "U.S. related person"
is (i) a "controlled foreign corporation" for United States federal income tax
purposes or (ii) a foreign person 50% or more of whose gross income from all
sources for a specified period is derived from
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activities that are effectively connected with the conduct of a United States
trade or business. In the case of the payment of proceeds from the disposition
of Notes to or through a foreign office of a broker that is either a United
States person or a related person, information reporting is required on the
payment unless the broker has documentary evidence in its files that the owner
is a Non-U.S. Holder and the broker has no actual knowledge to the contrary.
Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be allowed as a refund or a credit against such Non-U.S.
Holder's United States federal income tax, provided that the required
information is furnished to the IRS.
The backup withholding and information reporting rules would also be changed
by the Regulations. These regulations will provide that proceeds from the
disposition of Common Stock after December 31, 1998 will be exempt from backup
withholding and information reporting only if the Non-U.S. Holder complies with
certain certification requirements or otherwise establishes an exemption.
Holders of Notes should consult their tax advisors regarding their
qualification for exemption from backup withholding and the procedure for
obtaining such an exemption.
THE FOREGOING SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS FOR
GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, PROSPECTIVE HOLDERS
SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES OF
THE ACQUISITION, OWNERSHIP AND DISPOSITION OF THE NOTES AND THE COMMON STOCK
INTO WHICH THE NOTES ARE CONVERTIBLE (INCLUDING THE APPLICABILITY AND EFFECT OF
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS).
PLAN OF DISTRIBUTION
Pursuant to a Registration Rights Agreement dated as of November 21, 1997
(the "Registration Rights Agreement") between the Company and the initial
purchasers named therein entered into in connection with the offering of the
Notes, the Registration Statement of which this Prospectus forms a part was
filed with the Commission covering the resale of the Notes and the Conversion
Shares. The Company has agreed to use all reasonable efforts to keep the
Registration Statement effective for a period ending two years from the date of
effective date thereof (or such earlier date when the holders of the Securities
are able to sell all such Notes and the Conversion Shares immediately without
restriction as described in the Registration Rights Agreement). The Company will
be permitted to suspend the use of this Prospectus (which is a part of the
Registration Statement) in connection with sale of the Notes and the Conversion
Shares by holders during certain periods of time under certain circumstances
relating to pending corporate developments and public filings with the
Commission and similar events. The specific provisions relating to the
registration rights described above are contained in the Registration Rights
Agreement, and the foregoing summary is qualified in its entirety by reference
to the provisions of such agreement.
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The Company will not receive any of the proceeds from the offering of Notes
and the Conversion Shares by the Selling Securityholders. Sales of the Notes and
the Conversion Shares may be effected by or for the account of the Selling
Securityholders from time to time in transactions (which may include block
transactions in the case of the Conversion Shares) on any exchange or market on
which such securities are listed or quoted, as applicable, in negotiated
transactions, through a combination of such methods of sale, or otherwise, at
fixed prices that may be changed, at market prices prevailing at the time of
sale, at prices related to prevailing market prices, or at negotiated prices.
The Selling Securityholders may effect such transactions by selling the Notes or
Conversion Shares directly to purchasers, through broker-dealers acting as
agents for the Selling Securityholders, or to broker-dealers who may purchase
Notes or Conversion Shares as principals and thereafter sell the Notes or
Conversion Shares from time to time in transactions (which may include block
transactions in the case of the Conversion Shares) on any exchange or market on
which such securities are listed or quoted, as applicable, in negotiated
transactions, through a combination of such methods of sale, or otherwise. In
effecting sales, broker-dealers engaged by Selling Securityholders may arrange
for other broker-dealers to participate. Such broker-dealers, if any, may
receive compensation in the form of discounts, concessions or commissions from
the Selling Securityholders and/or the purchasers of the Notes or Conversion
Shares for whom such broker-dealers may act as agents or to whom they may sell
as principals, or both (which compensation as to a particular broker-dealer
might be in excess of customary commissions). The Selling Securityholders and
any broker-dealers, agents or underwriters that participate with the Selling
Securityholders in the distribution of the Notes or Conversion Shares may be
deemed to be "underwriters" within the meaning of the Securities Act. Any
commissions paid or any discounts or concessions allowed to any such persons,
and any profits received on the resale of the Notes or Conversion Shares offered
hereby and purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
Pursuant to the Registration Rights Agreement, the Company has agreed to pay
all expenses incident to the offer and sale of the Notes and Conversion Shares
offered by the Selling Securityholders hereby, except that the Selling
Securityholders will pay all underwriting discounts and selling commissions, if
any. The Company and the Selling Securityholders are obligated to indemnify each
other against certain liabilities arising under the Securities Act.
The outstanding Common Stock is quoted on the Nasdaq National Market and the
Conversion Shares have been approved for listing on the Nasdaq National Market
subject to official notice of issuance. The Initial Purchasers have advised the
Company that they are making and currently intend to continue making a market in
the Notes. They are not obligated to do so, however, and any such market making
may be discontinued at any time without notice, in the sole discretion of the
Initial Purchasers. The Company does not intend to apply for listing of the
Notes on any securities exchange or for quotation through the Nasdaq National
Market. Accordingly, no assurance can be given as to the development of
liquidity of any trading market that may develop for the Notes. See "Risk
Factors -- Absence of Public Market for Notes."
To comply with the securities laws of certain states, if applicable, the
Notes and Conversion Shares offered hereby will be offered or sold in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain states the Notes and Conversion Shares may not be sold
unless they have been registered or qualified for sale in the applicable state
or an exemption from the registration or qualification requirement is available
and is complied with.
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<PAGE> 42
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the Notes or the Conversion Shares may be limited
in its ability to engage in market activities with respect to such Note or
Conversion Shares. In addition and without limiting the foregoing, each Selling
Securityholder will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, which provisions may limit the timing of
purchase and sales of any of the Notes and Conversion Shares by the Selling
Securityholders. The foregoing may affect the marketability of the Notes and the
Conversion Shares.
LEGAL MATTERS
Certain legal matters in connection with the validity of the securities
offered hereby have been passed upon for the Company by Piper & Marbury L.L.P.,
Baltimore, Maryland and Reed Weitkamp Schell Cox & Vice, Louisville, Kentucky.
EXPERTS
The supplemental consolidated financial statements and schedule of
Res-Care, Inc. and its subsidiaries as of December 31, 1995 and 1996, and for
each of the years in the three-year period ended December 31, 1996, have been
incorporated by reference herein from the Company's Registration Statement on
Form S-3 (File No. 333-23599) filed April 15, 1997 in reliance upon the reports
of KPMG Peat Marwick LLP, independent certified public accountants, incorporated
by reference herein, and upon the authority of said firm as experts in
accounting and auditing.
The consolidated financial statements and schedule of Res-Care, Inc.
and its subsidiaries as of December 31, 1995 and 1996, and for each of the years
in the three-year period ended December 31, 1996, have been incorporated by
reference herein from the Company's Annual Report on Form 10-K for the year
ended December 31, 1996 in reliance upon the reports of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
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<PAGE> 43
========================================
No dealer, salesperson or any other person has been authorized to give
any information or to make any representations not contained or
incorporated by reference in this Prospectus in connection with the offer
contained herein, and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company or the Selling Securityholders. This Prospectus does not constitute
an offer to sell, or the solicitation of an offer to buy the
securities offered hereby by anyone in any jurisdiction in which such
offer or solicitation is not authorized or in which the person making
such offer or solicitation is not qualified to do so, or to any person to
whom it is unlawful to make such offer or solicitation. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under
any circumstances, create any implication that there has been no change in
the affairs of the Company or that the information herein is correct as of
any time subsequent to the date hereof.
TABLE OF CONTENTS
Page
----
Summary............................................1
The Company........................................1
Risk Factors.......................................4
Use of Proceeds...................................11
Ratio of Earnings to Fixed Charges................11
Selling Securityholders...........................11
Description of Notes..............................13
Description of Capital Stock......................24
Certain Federal Income Tax Considerations.........27
Plan of Distribution..............................33
Legal Matters.....................................35
Experts...........................................35
=======================================
=======================================
$109,360,000
RES-CARE, INC.
6% CONVERTIBLE
SUBORDINATED
NOTES
DUE 2004
AND
SHARES OF COMMON STOCK
ISSUABLE UPON CONVERSION THEREOF
--------------
PROSPECTUS
--------------
January 30, 1998
=======================================
<PAGE> 44
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses payable by the Company in
connection with the offering of the Notes and the Conversion Shares being
registered, other than discounts and commissions. The Selling Securityholders
will not share any portion of these expenses. All amounts are estimated except
the SEC Registration Fee and the Nasdaq Listing Application Fee.
Registration Fee............................ $33,139.39
Nasdaq Listing Application Fee.............. 17,500.00
Printing Expenses........................... 5,000.00
Legal Fees and Expenses..................... 20,000.00
Accounting Fees and Expenses................ 15,000.00
Miscellaneous............................... 2,197.61
----------
Total........................................ $92,837.00
==========
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 271B.8-510 of the Kentucky Business Corporation Act (the "Act")
permits the indemnification by a corporation of any director who is made party
to a threatened, pending or completed action, suit or proceeding because he is
or was a director of such corporation. To be eligible for indemnification, such
person must have conducted himself in good faith and reasonably believed that
his conduct, if undertaken in his official capacity with the corporation, was in
the corporation's best interests, and, if not in his official capacity, was at
least not opposed to the corporation's best interests. In the case of a criminal
proceeding, the director must also not have reasonable cause to believe his
conduct was unlawful. A director may not be indemnified under the
above-referenced section in connection with a proceeding by or in the right of
the corporation in which the director was adjudged liable to the corporation or
in connection with any other proceeding charging improper personal benefit to
him, whether or not involving action in official capacity, in which he was
adjudged liable on the basis that personal benefit was improperly received by
him. Indemnification permitted under Section 271B.8-510 of the Act in connection
with a proceeding by or in the right of the corporation shall be limited to
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<PAGE> 45
reasonable expenses incurred in connection with the proceeding. Section
271B.8-560 of the Act provides that a Kentucky corporation may indemnify its
officers, employees and agents to the same extent as directors. Mandatory
indemnification against reasonable expenses incurred in connection with a
proceeding is provided for by the Act, unless otherwise limited by the
corporation's articles of incorporation, where a director or officer has been
wholly successful on the merits or otherwise, in the defense of any proceeding
to which he was a party because he is or was a director or officer of the
corporation. A court of competent jurisdiction may also order indemnification if
the director is fairly and reasonably entitled thereto in view of all relevant
circumstances, whether or not he met the applicable standard of conduct or was
adjudged liable to the corporation, but if he was adjudged liable, his
indemnification shall be limited to reasonable expenses incurred.
The Act provides that indemnification pursuant to its provisions is not
exclusive of other rights of indemnification to which a person may be entitled
under any bylaw, agreement, vote of shareholders or disinterested directors, or
otherwise. Additionally, the Act provides that a corporation may purchase and
maintain insurance on behalf of directors, officers, employees or agents of the
corporation against liability asserted against or incurred by such party in
their respective capacity with the corporation.
Article X of the Company's Amended and Restated Articles of
Incorporation and Article X of the Company's Bylaws provide for indemnification
of its directors, officers, employees and other agents to the maximum extent
permitted by law.
ITEM 16. EXHIBITS
The following exhibits are filed herewith or incorporated by reference:
<TABLE>
<S> <C>
2.1 Agreement by and among Res-Care, Inc., RSCR California, Inc., Res-Care Illinois, Inc.,
Res-Care Kansas, Inc., and RSCR Texas, Inc. and Beverly Health and Rehabilitation
Services, Inc., Beverly Enterprises-California, Inc., Beverly Enterprises-Illinois, Inc.,
Beverly Enterprises-Kansas, Inc. and Beverly Enterprises-Texas, Inc. dated April 5, 1995
(excluding Exhibits and Schedules). Exhibit 2-1 to the Company's Report on Form 8-K
dated May 1, 1995 filed on May 12, 1995 is hereby incorporated by reference.
2.2 Stock Purchase Agreement by and among Housecall Medical Resources Inc. and Res-Care,
Inc., Blair S. Gordon and J. Paul Gordon dated as of May 31, 1995 (excluding
Exhibits and Schedules). Exhibit 2-1 to the Company's Report on Form 8-K dated May
31, 1995 filed on June 15, 1995 is hereby incorporated by reference.
2.3 Stock Purchase Agreement by and among the Company and Richard Greer, Robert Greer
and Alicia Greer Austin dated July 31, 1997. Exhibit 2-1 to the Company's Report on
Form 8-K dated July 31, 1997 filed on August 14, 1997 is hereby incorporated by
reference.
3.1 Articles of Amendment to Amended and Restated Articles of Incorporation of the
Company. Exhibit 3.1 to the Company's Registration Statement on Form S-3 (Reg. No.
333-32513) is hereby incorporated by reference.
</TABLE>
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<PAGE> 46
<TABLE>
<S> <C>
3.2 Amended and Restated Articles of Incorporation of the Company. Exhibit 3.1 to the
Company's Registration Statement on Form S-1 (Reg. No. 33-48749 is hereby
incorporated by reference.
3.3 Bylaws of the Company. Exhibit 3.2 to the Company's Registration Statement on Form
S-1 (Reg. No. 33-48749) is hereby incorporated by reference.
4.1 Specimen Common Stock Certificate. Exhibit 4.1 to the Company's Registration
Statement on Form S-1 (Reg. No. 33-48749) is hereby incorporated by reference.
4.2 Article VI of the Amended and Restated Articles of Incorporation of the Company
included in Exhibit 3.1.
4.3 Indenture, dated as of November 21, 1997, between the Company and PNC Bank,
Kentucky, Inc. (previously filed).
4.4 Registration Rights Agreement, dated as of November 21, 1997, by and among the
Company, NationsBanc Montgomery Securities, Inc., J.C. Bradford & Co., L.L.C. and
Equitable Securities Corporation (previously filed).
5.1 Opinion of Reed Weitkamp Schell Cox & Vice (previously filed).
5.2 Opinion of Piper & Marbury L.L.P. (previously filed).
10.1 1991 Incentive Stock Option Plan of the Company (adopted April 24, 1991, amended and
restated as of February 23, 1995). Exhibit 4 to the Company's Registration Statement on
Form S-8 (Reg. No. 33-80331) is hereby incorporated by reference.
10.2 Amended and Restated Employment Agreement, dated April 27, 1992, between the
Company and E. Halsey Sandford. Exhibit 10.14 to the Company's Registration
Statement on Form S-1 (Reg. No. 33-48749) is hereby incorporated by reference.
10.3 1991 Compensation/Evaluation Bonus Plan. Exhibit 10.15 to the Company's
Registration Statement on Form S-1 (Reg. No. 33-48749) is hereby incorporated by
reference.
10.4 1993 Nonemployee Directors Stock Ownership Incentive Plan of the Company (adopted
October 28, 1993). Exhibit 4.1 to the Company's Registration Statement on Form S-8
(Reg. No. 33-76612) is hereby incorporated by reference.
10.5 Amended and Restated Loan Agreement dated as of April 26, 1995 by and among
Res-Care, Inc., and PNC Bank, Kentucky, Inc. and National City Bank, Kentucky. Exhibit
10.7 to the Company's Annual Report on Form 10-K for the year ending December 31,
1995 is hereby incorporated by reference.
</TABLE>
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<PAGE> 47
<TABLE>
<S> <C>
10.6 1994 Employee Stock Purchase Plan effective July 1, 1995. Exhibit 4.1 to the
Company's Registration Statement on Form S-8 (Reg. No. 33-85964) is hereby
incorporated by reference.
10.7 Employment Agreement dated October 26, 1995 between the Company and Ronald G.
Geary. Exhibit 10-1 to the Company's Report on Form 10-Q for the quarter ending
September 30, 1995 is hereby incorporated by reference.
10.8 Res-Care, Inc. 401(K) Restoration Plan effective December 1, 1995. Exhibit 10.11 to the
Company's Annual Report on Form 10-K for the year ending December 31, 1995 is
hereby incorporated by reference.
10.9 Second Amendment to Loan Instruments dated as of February 16, 1996 by and among
Res-Care, Inc., and PNC Bank, Kentucky, Inc. National City Bank, Kentucky and
SunTrust Bank, Nashville, N.A. Exhibit 10.12 to the Company's Annual Report on Form
10-K for the year ending December 31, 1995 is hereby incorporated by reference.
10.10 Second Amended and Restated Employment Agreement dated March 17, 1996 between
the Company and E. Halsey Sandford. Exhibit 10.13 to the Company's Annual Report on
Form 10-K for the year ending December 31, 1995 is hereby incorporated by reference.
10.11 Amended and Restated Employment Agreement dated as of October 26, 1995 and
amended November 5, 1996 between the Company and Ronald G. Geary. Exhibit 10.11
to the Company's Annual Report on Form 10-K for the year ending December 31, 1996 is
hereby incorporated by reference.
10.12 Loan Agreement dated as of December 23, 1996 by and among Res-Care, Inc. and all of
its subsidiaries and PNC Bank, Kentucky, Inc., National City Bank of Kentucky,
SunTrust Bank, Nashville, N.A., and Bank One, Kentucky, NA. Exhibit 10.12 to the
Company's Annual Report on Form 10-K for the year ending December 31, 1996 is
hereby incorporated by reference.
10.13 Employment Agreement dated January 1, 1997 between the Company and Jeffrey M.
Cross. Exhibit 10.13 to the Company's Annual Report on Form 10-K for
the year ending December 31, 1996 is hereby incorporated by reference.
10.14 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.
10.15 Amendment to the Employment Agreement between the Company and Jeffrey M. Cross
dated August 4, 1997. Exhibit 10.3 to the Company's Report on Form 10-Q for the
quarter ending June 30, 1997 is hereby incorporated by reference.
</TABLE>
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<PAGE> 48
<TABLE>
<S> <C>
10.16 Amendment to the Employment Agreement between the Company and Paul G. Dunn
dated August 4, 1997. Exhibit 10.4 to the Company's Report on Form 10-Q
for the quarter ending June 30, 1997 is hereby incorporated by reference.
10.17 Employment Agreement between the Company and Pamela M. Spaniac dated July 10,
1997. Exhibit 10.5 to the Company's Report on Form 10-Q for the
quarter ending June 30, 1997 is hereby incorporated by reference.
10.18 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 10.6 to the Company's Report on Form 10-Q for the quarter ending June 30, 1997
is hereby incorporated by reference.
10.19 Second 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 November 20, 1997
(previously filed).
12.1 Computation of Ratio of Earnings to Fixed Charges (previously filed).
23.1 Consent of KPMG Peat Marwick LLP (filed herewith).
23.2 Consent of Reed Weitkamp Schell Cox & Vice (included in opinion filed as Exhibit 5.1).
24.1 Power of Attorney (included on signature page)
25.1 Statement of Eligibility of Trustee under the Trust Indenture Act of 1939 on Form T-1
(previously filed).
</TABLE>
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
II-5
<PAGE> 49
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information required
to be included in the post-effective amendment by those paragraphs is contained
in periodic reports filed with or furnished to the Commission by the registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report, to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
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<PAGE> 50
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Louisville, Commonwealth of Kentucky on January 30,
1998.
RES-CARE, INC.
By: /s/ Ronald G. Geary
------------------------------
Ronald G. Geary, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
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<PAGE> 51
<TABLE>
<CAPTION>
Signature Capacity Date
- --------- -------- ----
<S> <C> <C>
* Chairman of the Board of Directors January 30, 1998
- -------------------------------
James R. Fornear
/s/ Ronald G. Geary Chief Executive Officer, January 30, 1998
- ------------------------------- President and Director
Ronald G. Geary
* Senior Executive and Director January 30, 1998
- -------------------------------
E. Halsey Sandford
* Secretary, Treasurer and Director January 30, 1998
- -------------------------------
Spiro B. Mitsos
/s/ Pamela M. Spaniac Executive Vice President of Finance and January 30, 1998
- ------------------------------- and Administration and Chief Financial Officer
Pamela M. Spaniac
* Director January 30, 1998
- -------------------------------
Seymour L. Bryson
* Director January 30, 1998
- -------------------------------
W. Bruce Lunsford
*By: /s/ Ronald G. Geary January 30, 1998
--------------------------
Attorney-in-fact
</TABLE>
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<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Registration
Statement on Form S-3 of Res-Care, Inc. of our report dated February 28, 1997,
with respect to the supplemental consolidated balance sheets of Res-Care, Inc.
and subsidiaries as of December 31, 1995 and 1996 and the related supplemental
consolidated statements of income, shareholders' equity, and cash flows for each
of the years in the three-year period ended December 31, 1996, and the related
schedule, which report appears in the Registration Statement on Form S-3 filed
April 15, 1997.
/s/ KPMG PEAT MARWICK LLP
January 29, 1998
<PAGE> 2
EXHIBIT 23.1
Page 2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Registration
Statement on Form S-3 of Res-Care, Inc. of our report dated February 26, 1997,
with respect to the consolidated balance sheets of Res-Care, Inc. and
subsidiaries as of December 31, 1995 and 1996 and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the years
in the three-year period ended December 31, 1996, and the related schedule,
which report appears in the Form 10-K for the year ended December 31, 1996.
/s/ KPMG PEAT MARWICK LLP
January 29, 1998
