<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 12, 2000
RES-CARE, INC.
(Exact Name of Registrant as specified in Charter)
Kentucky 0-20372 61-0875371
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
10140 Linn Station Road, Louisville, Kentucky 40223
(Address of principal executive offices) (Zip code)
(502) 394-2100
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report.)
<PAGE> 2
INFORMATION TO BE INCLUDED IN THE REPORT
Items 1, 2, 3, 4, 6, and 8 are not applicable and are omitted form this Report.
Item 5. Other Events
On April 12, 2000, Res-Care, Inc. issued a press release to announce
the signing of an agreement with an investor group to acquire all of the
outstanding shares of ResCare common stock. In the proposed transaction, a
company formed by The Carlyle Group, Madison Dearborn Partners, Bear Stearns
Merchant Banking and members of ResCare's senior management would merge into
ResCare, and ResCare's shareholders would receive $15.75 per share in cash.
The transaction is subject to customary closing conditions, including
approval by a majority of Res-Care's shareholders and by various regulatory
entities. The transaction is also subject to the closing of a senior credit
facility, which will finance a portion of the purchase price, and the condition
that the disinterested shareholders of Res-Care cast more votes in favor of the
transaction than against it. For this purpose, certain directors and officers of
Res-Care who have agreed to vote their shares in favor of the merger would not
be disinterested. A commitment letter for the senior credit facility has been
provided by affiliates of Lehman Brothers, Inc. and Bear Stearns & Company.
A copy of the merger agreement and press release are attached as
exhibits to this report.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits.
(a) Financial Statements of Business Acquired.
Not Applicable.
(b) Pro Forma Financial Information.
Not Applicable
(c) Exhibits.
The following exhibits are filed with this Report on Form 8-K:
-2-
<PAGE> 3
REGULATION S-K
EXHIBIT NUMBERS EXHIBIT
2.1 Agreement and Plan of Merger dated as of April 12, 2000, by
and among Res-Care, Inc., Redwood Acquisition, Inc. and RWD
Holdings, Inc.
2.2 Form of Voting and Non-Competition Agreement
99.1 Press Release dated April 12, 2000
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RES-CARE, INC.
Date: April 14, 2000 By /s/ Ronald G. Geary
------------------------------
Ronald G. Geary
Chairman, CEO and President
-3-
<PAGE> 1
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
dated April 12, 2000
by and among
RES-CARE, INC.
REDWOOD ACQUISITION, INC.
RWD HOLDINGS, INC.
<PAGE> 2
TABLE OF CONTENTS
RECITALS 1
ARTICLE 1 MERGER AND ORGANIZATION....................................1
1.1 The Merger.................................................1
1.2 Effective Time.............................................2
1.3 Effect of Merger...........................................2
ARTICLE 2 CONVERSION OF SECURITIES AT THE EFFECTIVE TIME.............3
2.1 Conversion of Securities of Redwood and Acquiror...........3
2.2 Payment of Cash for Redwood Common Stock...................4
2.3 Exchange of Acquiror Common Stock Certificate..............6
ARTICLE 3 ADDITIONAL AGREEMENTS IN CONNECTION WITH THE MERGER........6
3.1 Shareholders' Approval.....................................6
3.2 Proxy Materials and Schedule 13E-3.........................7
3.3 Termination of Redwood Stock Option Plans..................7
3.4 Reasonable Best Efforts; Consents; Other Filings...........7
3.5 Financing..................................................8
3.6 Conduct of Business by Redwood Pending the Merger..........8
3.7 Notification of Certain Matters...........................12
3.8 Access to Redwood's Books and Records.....................13
3.9 Acquisition Proposals.....................................13
3.10 Director and Officer Protection...........................14
3.11 State Takeover Laws.......................................15
3.12 List of Consents..........................................16
3.13 Solvency at Closing.......................................16
3.14 Employee Matters..........................................16
ARTICLE 4 REPRESENTATIONS AND WARRANTIES............................18
4.1 Disclosure Letters........................................18
4.2 Representations and Warranties of Redwood.................18
(a) Organization and Good Standing...................18
(b) Authorization; Binding Agreement.................19
(c) Capitalization...................................19
(d) Financial Statements.............................20
(e) Absence of Certain Changes or Events.............20
(f) SEC Reports and other Documents..................20
(g) Governmental and Other Consents and Approvals....20
(h) No Violation.....................................21
(i) Litigation.......................................22
(j) Governmental Approvals; Compliance with Law......22
(k) Brokers and Finders..............................23
(l) Fairness Opinions and Approval by Special
Committee........................................23
-i-
<PAGE> 3
(m) Taxes............................................23
(n) Employee Benefits................................24
(o) Labor............................................25
(p) Environmental Matters............................25
(q) Board Recommendation.............................27
(r) Required Shareholder Vote........................27
(s) State Takeover Statutes..........................27
(t) Material Contracts...............................27
(u) Information in Proxy Statement...................29
(v) Real Estate......................................29
(i) Ownership of the Premises...............29
(ii) Real Property Zoning....................29
(w) Insurance........................................29
(x) Affiliated Transactions..........................30
(y) Intellectual Property Rights.....................30
(z) Adequacy of Information Systems..................31
(aa) Year 2000 Compliance.............................31
(bb) Fraud and Abuse; Absence of Certain Business
Practices........................................31
(cc) Cost Reports.....................................32
(dd) Accounts Receivable..............................32
4.3 Representations and Warranties of Acquiror and Parent.....32
(a) Organization and Good Standing...................32
(b) Authorization; Binding Agreement.................32
(c) No Violation.....................................33
(d) Governmental and Other Consents and Approvals....33
(e) Proxy and Schedule 13E-3 Information.............34
(f) Financing........................................34
(g) Brokers and Finders..............................35
(h) No Prior Activities..............................35
(i) Litigation.......................................35
(j) Acquiror Vote Obtained...........................35
(k) Certain Agreements with Acquiror.................35
(l) Fraud and Abuse..................................35
(m) Independent Investigation........................36
ARTICLE 5 CONDITIONS................................................36
5.1 Conditions to Each Party's Obligation to Effect the
Merger....................................................36
5.2 Conditions to Obligation of Redwood to Effect the
Merger....................................................36
5.3 Conditions to Obligations of Acquiror and Parent to
Effect the Merger.........................................37
ARTICLE 6 TERMINATION; NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES
AND COVENANTS; WAIVER AND AMENDMENT.......................38
6.1 Termination...............................................38
6.2 Non-Survival of Representations, Warranties and
Covenants.................................................39
6.3 Amendment.................................................40
6.4 Waiver....................................................40
-ii-
<PAGE> 4
6.5 Effect of Termination.....................................40
6.6 Certain Payments..........................................40
ARTICLE 7 GENERAL AGREEMENTS........................................42
7.1 Notice....................................................42
7.2 Entire Agreement..........................................45
7.3 Parties in Interest.......................................45
7.4 Publicity.................................................45
7.5 Headings..................................................45
7.6 Interpretation............................................45
7.7 Assignment................................................45
7.8 Governing Law.............................................45
7.9 Costs and Expenses........................................46
7.10 Counterparts..............................................46
7.11 Specific Performance......................................46
7.12 WAIVER OF JURY TRIAL......................................46
EXHIBITS
Exhibit A - Articles of Merger
Exhibit B - Voting Agreement
-iii-
<PAGE> 5
DEFINED TERMS
TERM SECTION
- ---- -------
AAA 7.13
Acquiror Common Stock 2.1(c)
Acquisition Proposal 3.9
Affiliate 4.2(x)
Articles of Merger Recitals
Bear Stearns 3.8
Cash Merger Consideration 2.1(a)
Closing 1.2
Code 2.2(a)
Confidentiality Agreements 3.8
Constituent Corporations 1.1
Convertible Debentures 4.2(c)
Cost Reports 4.2(cc)
Definitive Proxy Statement 3.2(a)
Disbursing Agent 2.2(a)
Disclosure Letter 4.1
Disinterested Shares 4.2(r)
Dissenting Shares 2.1(d)
Effective Time 1.2
Environmental Claim 4.2(o)(ix)
Environmental Laws 4.2(o)(ix)
Environmental Permits 4.2(o)(ix)
ERISA 4.2(n)(i)
Exchange Act 4.2(d)
Excluded Shares 2.1(a)
Financial Statements 4.2(d)
Financing 4.3(g)
Financing Letters 4.3(g)
Hazardous Materials 4.2(o)(ix)
HSR Act 3.4
Indemnified Party 3.10
J.C. Bradford 4.2(k)
KBCA Recitals
Knowledge 7.6
Leadership Team 3.7
License 4.2(j)
Lien 4.2(h)
Material Adverse Effect 3.7
Material Contracts 4.2(t)
Merger Recitals
Parent Material Adverse Effect 4.2(d)
-iv-
<PAGE> 6
Permitted Investments 2.2(a)
Person 2.2(e)
Plan of Merger Recitals
Plans 4.2(n)(i)
Preliminary Proxy Statement 3.2(a)
Real Property 4.2(v)(iii)
Res-Care Common Stock 2.1(a)
Res-Care Shares 2.1(a)
Returns 4.2(m)(i)
Schedule 13E-3 3.2(b)
SEC 3.2(a)
SEC Filings 3.6(m)
SEC Reports 4.2(f)
Securities Act 4.2(f)
Services 4.2(j)(i)
Special Committee Recitals
Special Meeting 3.1
Stock Options 3.3
Subsidiary Securities 4.2(ii)
Surviving Corporation 1.1
Systems 4.2(z)
Tax Affiliate 4.2(m)(i)
Taxes 4.2(m)(i)
Violation 4.2(h)
Voting Agreement Recitals
WARN 3.6(t)
-v-
<PAGE> 7
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement") dated as of April 12,
2000, by and among RES-CARE, INC., a Kentucky corporation ("Res-Care"), REDWOOD
ACQUISITION, INC., a Kentucky corporation ("Acquiror"), and RWD HOLDINGS, INC.,
a Delaware corporation ("Parent"), which is the sole shareholder of Acquiror.
RECITALS
A. The boards of directors of Res-Care and Acquiror deem it advisable
for the mutual benefit of Res-Care and Acquiror and their respective
shareholders, respectively, that Acquiror be merged with and into Res-Care (the
"Merger") upon the terms and subject to the conditions set forth in the Plan of
Merger (the "Plan of Merger"), which is set forth in the Articles of Merger in
substantially the form attached hereto as Exhibit A (the "Articles of Merger"),
and in accordance with the Kentucky Business Corporation Act, as amended (the
"KBCA").
B. The boards of directors of Parent and Acquiror have approved and
adopted this Agreement. The board of directors of Res-Care and the Special
Committee of such board of directors (the "Special Committee") have approved and
adopted this Agreement and have resolved, subject to the terms of this
Agreement, to recommend to the shareholders of Res-Care to vote to approve this
Agreement and the Plan of Merger.
C. Concurrently with the execution of this Agreement and as an
inducement to the parties to enter into this Agreement, certain shareholders of
Res-Care have entered into a voting agreement (the "Voting Agreement") in the
form attached hereto as Exhibit B pursuant to which such shareholders of
Res-Care have agreed, among other things, to vote their Res-Care Common Stock
(as defined below) in favor of the Merger and the other transactions
contemplated by this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained herein, and for the purpose of setting
forth certain terms and conditions of the Merger, and the mode of carrying the
same into effect, Res-Care, Parent and Acquiror hereby agree as follows:
ARTICLE 1
MERGER AND ORGANIZATION
1.1 THE MERGER. Acquiror shall be merged with and into Res-Care at
the Effective Time (as defined below), upon the terms and subject to the
conditions hereinafter set forth, as permitted by and in accordance with the
KBCA. Acquiror and Res-Care are herein sometimes referred to as the "Constituent
Corporations," and Res-Care, which shall be the surviving corporation following
the effectiveness of the Merger, is sometimes referred to herein as the
"Surviving Corporation".
<PAGE> 8
1.2 EFFECTIVE TIME. If this Agreement is not terminated pursuant to
Article 6 hereof, as soon as practicable (and in no event more than three
business days) after all conditions to the Merger set forth in Article 5 hereof
shall have been satisfied or waived, Res-Care and Acquiror shall cause the
Articles of Merger to be executed, acknowledged and filed with the Secretary of
State of the Commonwealth of Kentucky as provided in the KBCA. The Merger shall
be consummated and become effective and the closing of the transactions
contemplated by this Agreement (the "Closing") shall occur immediately upon the
filing of the Articles of Merger with the Secretary of State of the Commonwealth
of Kentucky as provided in the KBCA (the date and time of such filing and
Closing being referred to herein as the "Effective Time"). The Closing shall
take place at Brown Todd & Heyburn PLLC, 400 West Market, 32nd Floor,
Louisville, Kentucky, or at such other place as the parties may mutually agree.
1.3 EFFECT OF MERGER. The parties agree to the following provisions
with respect to the Merger:
(a) At the Effective Time, Acquiror shall merge with and into
Res-Care and the separate corporate existence of Acquiror shall cease, and
Res-Care as the surviving corporation and successor shall succeed Acquiror as
set forth in Chapter 271B of the KBCA.
(b) The title to all real estate and other property owned by the
Constituent Corporations shall be vested in the Surviving Corporation without
reversion or impairment.
(c) The Surviving Corporation shall have all liabilities, debts
and duties of each of the Constituent Corporations.
(d) A proceeding pending against either of the Constituent
Corporations may be continued as if the Merger did not occur or the Surviving
Corporation may be substituted in the proceeding for either of the Constituent
Corporations.
(e) The name of the Surviving Corporation shall from and after
the Effective Time be and continue to be "Res-Care, Inc." until changed in
accordance with applicable law.
(f) The articles of incorporation of the Surviving Corporation
shall be the articles of incorporation of Acquiror as in effect immediately
prior to the Effective Time, PROVIDED that the articles of incorporation shall
be amended to provide that the name of the Surviving Corporation is "Res-Care,
Inc."
(g) The bylaws of Acquiror, as in effect immediately prior to
the Effective Time, shall be the bylaws of the Surviving Corporation until
thereafter amended in accordance with law, the articles of incorporation of the
Surviving Corporation and such bylaws.
(h) The directors of Acquiror immediately prior to the Effective
Time will be the initial directors of the Surviving Corporation, and the
officers of Res-Care immediately prior to the Effective Time will be the initial
officers of the Surviving Corporation, in each case until their successors are
duly elected or approved and qualified.
-2-
<PAGE> 9
ARTICLE 2
CONVERSION OF SECURITIES AT THE EFFECTIVE TIME
2.1 CONVERSION OF SECURITIES OF RES-CARE AND ACQUIROR. At the
Effective Time, upon the terms and subject to the conditions of this Agreement,
automatically by virtue of the Merger and without any action on the part of
Res-Care, Parent, Acquiror or the holders of any of their respective securities:
(a) Each share of common stock, no par value, of Res-Care
("Res-Care Common Stock") (shares of Res-Care Common Stock being hereinafter
collectively referred to as "Res-Care Shares" and individually as a "Res-Care
Share") issued and outstanding immediately prior to the Effective Time (other
than any Res-Care Shares cancelled pursuant to Section 2.1(b) and any Dissenting
Shares (as defined in Section 2.1(d) (collectively, the "Excluded Shares"))
shall be cancelled, extinguished and shall be converted automatically into the
right to receive an amount equal to $15.75 in cash, without interest (the "Cash
Merger Consideration"), payable to the holder thereof, as provided in Section
2.2 (Payment of Cash for Res-Care Common Stock), upon surrender of the
certificate formerly representing the Res-Care Shares being converted into the
right to receive the Cash Merger Consideration, less any required withholding
taxes;
(b) Each Res-Care Share held in the treasury of Res-Care and
each Res-Care Share owned by Acquiror (including Res-Care Shares contributed to
Parent by agreement with Parent which are in turn contributed by Parent to
Acquiror), if any, immediately prior to the Effective Time shall be cancelled,
extinguished and retired without any conversion thereof and no payment or
distribution shall be made with respect thereto;
(c) Each share of Acquiror's common stock, no par value
("Acquiror Common Stock"), that is issued and outstanding immediately prior to
the Effective Time shall be converted into one newly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation;
(d) Notwithstanding anything in this Agreement to the contrary,
shares of Res-Care Common Stock issued and outstanding immediately prior to the
Effective Time held by a holder who has the right, if any, under the KBCA, to
obtain payment for the fair value of such shares in accordance with the
provisions of Subtitle 13, KRS 271B.13-010 to 271B.13-310 of the KBCA (or any
successor provision) ("Dissenting Shares") shall not be converted into a right
to receive the Cash Merger Consideration (but shall have the rights set forth in
Subtitle 13 of the KBCA (or any successor provision), if applicable), unless
such holder fails to perfect or otherwise loses such holder's right to such
payment, if any, pursuant to Subtitle 13 of the KBCA. If, after the Effective
Time, such holder fails to perfect or loses any such right to payment under
Subtitle 13 of the KBCA, each such Res-Care Share of such holder shall be
treated as a share that had been converted as of the Effective Time into the
right to receive the Cash Merger Consideration in accordance with Section
2.1(a). Res-Care shall give prompt notice to Acquiror of any notices of dissent,
demands for payment of fair value or other communications or actions received by
Res-Care with respect to shares of Res-Care Common Stock, and Acquiror and
Parent shall have the right to participate in and approve all negotiations and
proceedings with respect thereto. Res-Care shall not, except with the prior
written consent of Acquiror, make any payment with respect to, or settle or
offer to settle, any such demands; and
-3-
<PAGE> 10
(e) As a result of their conversion pursuant to Section 2.1(a),
all Res-Care Shares (other than Excluded Shares) issued and outstanding
immediately before the Effective Time shall cease to be outstanding and shall
automatically be canceled and retired, and each certificate previously
evidencing such Res-Care Shares shall thereafter solely represent the right to
receive the Cash Merger Consideration pursuant to Section 2.1(a). Holders of
Dissenting Shares shall not, following the Effective Time, be entitled to vote
such shares for any purpose or be entitled to the payment of dividends or other
distributions on such shares except for the right to obtain payment for the fair
value of such shares in accordance with Subtitle 13 of the KBCA. The holders of
certificates evidencing such Res-Care Shares shall cease to have any rights with
respect to such Res-Care Shares except as otherwise provided herein or by law.
2.2 PAYMENT OF CASH FOR RES-CARE COMMON STOCK.
(a) At the Effective Time, Parent or Acquiror shall irrevocably
deposit or cause to be deposited with a bank or trust company to be designated
by Acquiror prior to the mailing of the Definitive Proxy Statement (as defined
below) and reasonably satisfactory to Res-Care which is organized and doing
business under the laws of the United States or any state thereof and has a
combined capital and surplus of at least $150,000,000 (the "Disbursing Agent"),
as agent for the holders of shares of Res-Care Common Stock, cash in the
aggregate amount required to effect conversion of shares of Res-Care Common
Stock into the Cash Merger Consideration at the Effective Time pursuant to
Section 2.1(a) (Conversion of Securities of Res-Care and Acquiror) hereof.
Pending distribution pursuant to Section 2.2(b) hereof of the cash deposited
with the Disbursing Agent, such cash shall be held in trust for the benefit of
the holders of Res-Care Common Stock and shall not be used for any other
purposes. Parent and Surviving Corporation may direct the Disbursing Agent to
invest such cash, PROVIDED that such investments (i) shall be obligations of or
guaranteed by the United States of America, commercial paper obligations
receiving the highest rating from either Moody's Investors Services, Inc. or
Standard & Poor's Corporation, or certificates of deposit, bank repurchase
agreements or bankers acceptances of domestic commercial banks with capital
exceeding $250,000,000 (collectively "Permitted Investments") or money market
funds which are invested solely in Permitted Investments and (ii) shall have
maturities that will not prevent or delay payments to be made pursuant to
Section 2.2(b) hereof. To the extent that there are losses associated with
investments in the Permitted Investments, or such amount deposited with the
Disbursing Agent in order to make payment of the Cash Merger Consideration
diminishes for other reasons below the level required to make prompt payment of
the Cash Merger Consideration as contemplated by this Agreement, the Surviving
Corporation shall promptly replace or restore the portion of the fund necessary
to pay the Cash Merger Consideration lost through investments or other events so
as to ensure that such fund is, at all times, maintained at a level sufficient
to make such payments. Any interest and other income resulting from such
investments shall be paid upon request from time to time to the Surviving
Corporation. Promptly after the Effective Time, the Surviving Corporation will
send, or will cause the Disbursing Agent to send, to each holder of Res-Care
Shares at the Effective Time a letter of transmittal for use in such exchange
(which shall specify that the delivery shall be effected, and risk of loss and
title shall pass, only upon proper delivery of certificates evidencing such
shares to the Disbursing Agent). Each holder of a certificate or certificates
representing shares of Res-Care Common Stock cancelled on the Effective Time
pursuant to Section 2.1(a) (Conversion of Securities of Res-Care and Acquiror)
hereof or cancelled thereafter pursuant to Section 2.1(d) (Conversion of
-4-
<PAGE> 11
Securities of Res-Care and Acquiror), upon surrender of such certificate or
certificates, together with a properly completed letter of transmittal, to the
Disbursing Agent, will be entitled to receive the Cash Merger Consideration
payable in respect of such Res-Care Shares. Acquiror shall be entitled to
deduct, withhold and pay over to the applicable taxing authority from the
consideration otherwise payable pursuant to this Agreement to any holder of
Res-Care Shares such amounts as Acquiror is required to deduct and withhold with
respect to the making of such payment under the Internal Revenue Code of 1986,
as amended (the "Code"), or any provision of state, local or foreign tax law. To
the extent that amounts are so withheld and paid over by Acquiror, such withheld
amounts shall be deemed for all purposes of this Agreement as having been paid
to the holder of the Res-Care Shares in respect of which such deduction and
withholding was made by Acquiror.
(b) After surrender to the Disbursing Agent of any certificate
which prior to the Effective Time shall have represented any shares of Res-Care
Common Stock, the Disbursing Agent shall promptly distribute to the person in
whose name such certificate shall have been registered a check representing the
amount of cash into which such shares of Res-Care Common Stock shall have been
converted at the Effective Time pursuant to Section 2.1(a) (Conversion of
Securities of Res-Care and Acquiror) hereof without interest. Until so
surrendered and exchanged, each such certificate shall, after the Effective
Time, be deemed to represent only the right to receive such cash, and until such
surrender and exchange, no cash shall be paid to the holder of such outstanding
certificate in respect thereof.
(c) If any cash deposited with the Disbursing Agent for purposes
of payment in exchange for shares of Res-Care Common Stock remains unclaimed
following the expiration of twelve (12) months after the Effective Time, such
cash shall be delivered to the Surviving Corporation by the Disbursing Agent,
and thereafter the Disbursing Agent shall not be liable to any persons claiming
any amount of such cash, and the surrender and exchange shall be effected
directly with the Surviving Corporation (subject to applicable abandoned
property, escheat and similar laws) and the holders of the certificates shall be
entitled to look to the Surviving Corporation only as general creditors thereof
with respect to the payment of the Cash Merger Consideration payable upon the
surrender of their certificates. No interest shall accrue or be payable with
respect to any amounts which any such holder shall be so entitled to receive.
The Surviving Corporation or the Disbursing Agent shall be authorized to pay the
cash attributable to any certificate theretofore issued which has been lost or
destroyed, upon receipt of satisfactory evidence of ownership of the shares of
Res-Care Common Stock represented thereby and of appropriate indemnification
should it be required.
(d) None of Acquiror, Parent, the Surviving Corporation or the
Disbursing Agent shall be liable to any person in respect of any cash delivered
in good faith to a public official pursuant to any requirement of applicable
abandoned property, escheat or similar law.
(e) If payment is to be made to a Person other than the Person
in whose name a surrendered certificate, which prior to the Effective Time shall
have represented any shares of Res-Care Common Stock, is registered, it shall be
a condition to such payment that the certificate so surrendered shall be
endorsed or shall otherwise be in proper form for transfer, and that the Person
requesting such payment shall have paid any transfer and other taxes required by
reason of such payment in a name other than that of the registered holder of the
certificate surrendered or shall have established to the satisfaction of the
Surviving Corporation or the Disbursing Agent
-5-
<PAGE> 12
that such tax either has been paid or is not payable. As used in this Agreement,
"Person" means an individual, a corporation, a limited liability company, a
partnership, an association, a trust or any other entity or organization,
including a government or political subdivision or any agency or instrumentality
thereof.
(f) From and after the Effective Time, the holders of shares of
Res-Care Common Stock outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to such shares of Res-Care Common Stock
except as otherwise provided herein or by law.
(g) After the Effective Time, there shall be no transfers on the
stock transfer books of the Surviving Corporation of any shares of Res-Care
Common Stock which were outstanding immediately prior to the Effective Time. If,
after the Effective Time, certificates for shares of Res-Care Common Stock are
presented to the Surviving Corporation, they shall be cancelled and promptly
exchanged for the Cash Merger Consideration except as provided in Section
2.2(d).
(h) Any portion of the Cash Merger Consideration made available
to the Disbursing Agent pursuant to Section 2.2(a) (Payment of Cash for Res-Care
Common Stock) to pay for Res-Care Shares for which appraisal rights have been
perfected shall be returned to Acquiror, upon demand.
2.3 EXCHANGE OF ACQUIROR COMMON STOCK CERTIFICATE. Immediately after
the Effective Time, upon surrender by the record holder of the certificate, duly
endorsed in blank, representing the shares of Acquiror Common Stock outstanding
immediately prior to the Effective Time, the Surviving Corporation shall deliver
to such record holder a share certificate, registered in such holder's name,
representing the number of shares of common stock of the Surviving Corporation
to which such record holder is so entitled by virtue of Section 2.1(c)
(Conversion of Securities of Res-Care and Acquiror). Such certificate will bear
a legend restricting the transferability of such shares of the Surviving
Corporation except in accordance with applicable federal and state securities
laws.
ARTICLE 3
ADDITIONAL AGREEMENTS IN CONNECTION WITH THE MERGER
3.1 SHAREHOLDERS' APPROVAL. Res-Care shall take all actions
necessary in accordance with applicable law and its articles of incorporation
and bylaws to convene a meeting of its shareholders as soon as reasonably
practicable for the purpose of considering and approving this Agreement and the
Merger (the "Special Meeting"). In connection with the Special Meeting, the
board of directors of Res-Care has recommended, based on a determination of the
Special Committee, that the shareholders of Res-Care vote to approve and adopt
this Agreement and the Merger. Res-Care, acting through its board of directors,
shall include in the Definitive Proxy Statement the recommendation of Res-Care's
board of directors that the Res-Care shareholders vote to approve and adopt this
Agreement and the Merger unless the board of directors of Res-Care or the
Special Committee shall, in the exercise of its fiduciary duty under applicable
law and, to the extent Section 3.9 (Acquisition Proposals) applies, as
-6-
<PAGE> 13
provided by Section 3.9 (Acquisition Proposals), withdraw, modify or change its
approval.
3.2 PROXY MATERIALS AND SCHEDULE 13E-3.
(a) In connection with the Special Meeting, Res-Care shall
prepare and file a preliminary proxy statement relating to the transactions
contemplated by this Agreement and the Merger (the "Preliminary Proxy
Statement") with the United States Securities and Exchange Commission (the
"SEC") and shall use its reasonable best efforts to respond to the comments of
the SEC and to cause a definitive proxy statement to be mailed to Res-Care's
shareholders (the "Definitive Proxy Statement") all as soon as reasonably
practicable; PROVIDED, that prior to the filing of each of the Preliminary Proxy
Statement and the Definitive Proxy Statement, Res-Care shall consult with
Acquiror with respect to such filings and shall afford Acquiror reasonable
opportunity to comment thereon. Acquiror shall provide Res-Care with any
information for inclusion in the Preliminary Proxy Statement and the Definitive
Proxy Statement which may be required under applicable law and which is
reasonably requested by Res-Care. Subject to Section 3.1(Shareholders'
Approval), the Definitive Proxy Statement shall include the unanimous
recommendation of the board of directors of Res-Care (other than abstentions by
management equity participants in Parent) that the holders of Res-Care Shares
vote in favor of the approval of this Agreement and the Merger.
(b) Res-Care and any Person that may be deemed to be an
affiliate of Res-Care shall prepare and file concurrently with the filing of the
Preliminary Proxy Statement a Statement on Schedule 13E-3 ("Schedule 13E-3")
with the SEC. If at any time prior to the Special Meeting any event should occur
which is required by applicable law to be set forth in an amendment of, or
supplement to, the Schedule 13E-3, Res-Care and such Person shall file such
amendments or supplements.
3.3 TERMINATION OF RES-CARE STOCK OPTION PLANS. All outstanding
stock options issued by Res-Care (collectively, the "Stock Options"), including
without limitation those issued under the (i) 1991 Incentive Stock Option Plan,
as amended, (ii) 1993 Nonemployee Directors Stock Ownership Incentive Plan, and
(iii) 1998 Omnibus Stock Plan shall terminate upon the Merger. With respect to
each Stock Option not otherwise terminated by its terms upon the effectiveness
of the Merger, Res-Care shall use its reasonable best efforts to obtain at the
earliest practicable date and prior to the Effective Time the written consent of
each holder to the cancellation of such holder's Stock Options (irrespective of
their exercise price and whether or not then currently exercisable) to take
effect on the Effective Time or shall take appropriate action to amend the
relevant plans to provide for such cancellation. At the Effective Time, the
Surviving Corporation shall pay each holder of Stock Options, whether vested or
unvested, to the extent such Stock Options have not been previously exercised or
cancelled, (x) cash in an amount equal to the product of (i) the difference
between the Cash Merger Consideration and the exercise price of such Stock
Options (but in no event less than 0), multiplied by (ii) the number of shares
of Res-Care Common Stock subject to such Stock Options, less (y) the amount of
all applicable withholding taxes; PROVIDED, that those holders of Stock Options
that have agreed in writing with Acquiror to accept options to purchase common
stock of Parent shall not receive any cash payment with respect to cancelled
Stock Options.
3.4 REASONABLE BEST EFFORTS; CONSENTS; OTHER FILINGS. Upon the terms
and subject to the conditions herein provided, and subject to the fiduciary
duties of the board of directors of
-7-
<PAGE> 14
Res-Care under applicable law, each party hereto shall use its reasonable best
efforts to take, or cause to be taken, all reasonable action and to do, or cause
to be done, and to assist and cooperate with the other parties hereto in doing,
all things necessary, proper or advisable under applicable laws and regulations
and their respective articles or certificates of incorporation and bylaws to
consummate and make effective, as soon as reasonably practicable, the Merger and
the other transactions contemplated by this Agreement, subject, however, to the
requisite vote of shareholders of Res-Care and any requisite government
approval. Such actions shall include, without limitation, using its reasonable
best efforts to (i) defend any lawsuits or other legal proceedings, whether
judicial or administrative and whether brought derivatively or on behalf of
third parties (including governmental agencies or officials), challenging this
Agreement, or the consummation of the transactions contemplated thereby or
hereby, and (ii) effect all necessary registrations and filings, including but
not limited to any filings required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder (the "HSR Act"), and submissions of information requested by
governmental authorities. Upon the terms and subject to the conditions hereof,
and subject to the fiduciary duties of the board of directors of Res-Care or the
Special Committee under applicable law, each of the parties hereto shall use its
reasonable best efforts to take, or cause to be taken, all reasonable actions
and to do, or cause to be done, all things necessary to satisfy the other
conditions of Closing set forth herein and to cooperate with all reasonable
requests made by the other party. Without limiting the generality of the
foregoing, and notwithstanding anything in this Agreement to the contrary,
Res-Care shall use its reasonable best efforts to take, or cause to be taken,
all reasonable action and to do, or cause to be done and to assist and cooperate
with the other parties hereto in doing, all things necessary, proper or
advisable to obtain all consents, amendments to or waivers from other parties
under the terms of all material leases and other material contracts, agreements,
indentures, instruments, permits, concessions, franchises or licenses applicable
to Res-Care or its subsidiaries required as a result of the transactions
contemplated by this Agreement and obtain all necessary consents, approvals and
authorizations as are required to be obtained under any federal or state law or
regulation.
3.5 FINANCING. Res-Care shall use its, and shall cause management to
use their, reasonable best efforts to cooperate with and assist Acquiror with
respect to the Financing (as defined below), including (a) providing to
Acquiror's financing sources all information reasonably requested by them to
complete the Financing, (b) assisting such financing sources upon their
reasonable request in the preparation of information memoranda to be used in
connection with the Financing including, without limitation, requests for audits
or similar accounting reviews of acquisitions by Res-Care or its subsidiaries
prior to the Effective Time, and (c) otherwise assisting such financing sources
in all reasonable respects in their efforts, including by making reasonably
available officers of Res-Care and its subsidiaries, as appropriate, at meetings
of prospective lenders in various locations.
3.6 CONDUCT OF BUSINESS BY RES-CARE PENDING THE MERGER. Res-Care
covenants and agrees that, prior to the Effective Time or earlier termination of
this Agreement as provided herein, unless Acquiror shall otherwise agree in
writing and except as contemplated by this Agreement:
(a) Res-Care shall, and shall cause its subsidiaries to, act and
carry on their respective businesses in the ordinary course of business
substantially consistent with past practice and use its and their respective
reasonable best efforts to preserve substantially intact
-8-
<PAGE> 15
their current material business organizations, keep available the services of
their current officers and employees (except for terminations of employees in
the ordinary course of business) and preserve their material relationships with
others having significant business dealings with them;
(b) Res-Care shall not (i) amend its articles of incorporation
or bylaws, or (ii) declare, set aside or pay any dividend or other distribution
or payment in cash, stock or property in respect of any of its shares of capital
stock;
(c) Except as set forth in Item 3.6(c) of the Res-Care
Disclosure Letter (as defined below) or as provided in Section 3.3 (Termination
of Res-Care Stock Option Plans), neither Res-Care nor any of its subsidiaries
shall (i) except for shares issued upon the exercise of outstanding Stock
Options, issue, grant, sell, pledge or transfer or agree or propose to issue,
grant, sell, pledge or transfer any shares of capital stock, stock options,
warrants, debt or equity securities or rights of any kind or rights to acquire
any such shares, securities or rights of Res-Care, any of its subsidiaries or
any successor thereto, (ii) acquire directly or indirectly by redemption or
otherwise any shares of the capital stock of Res-Care or its subsidiaries of any
class or any options, warrants or other rights to purchase any such shares
except as otherwise provided in this Agreement, or (iii) enter into or modify
any contract, agreement, commitment or arrangement with respect to any of the
foregoing;
(d) Except to the extent permitted under Section 3.6(j) and
except as set forth in Item 3.6(d) of the Res-Care Disclosure Letter, neither
Res-Care nor any of its subsidiaries shall (i) incur any indebtedness for
borrowed money or guarantee any such indebtedness of another person except for
guaranties by Res-Care of obligations of Res-Care's subsidiaries, issue or sell
any debt securities or warrants or other rights to acquire any debt securities
of Res-Care or any of its subsidiaries, guarantee any debt securities of another
person, enter into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement having the
economic effect of any of the foregoing, except for draw-downs by Res-Care
incurred in the ordinary course of business consistent with past practice under
currently existing indebtedness agreements, or (ii) make any loans, advances or
capital contributions to, or investments in, any other person, other than to
Res-Care or any direct or indirect wholly-owned subsidiary of Res-Care;
(e) Each of Res-Care and its subsidiaries shall use its
reasonable best efforts to keep in place its current insurance policies which
are material (either individually or in the aggregate) to the conduct of their
business; notwithstanding such efforts, if any such policy is cancelled,
Res-Care shall use its reasonable best efforts to replace such policy or
policies with a new policy or policies permitting substantially the same
coverage;
(f) Neither Res-Care nor any of its subsidiaries shall make any
material election with regard to Taxes (as defined below), file any material
amended Returns (as defined below) or settle or compromise any material federal,
state, local or foreign income tax liability. All Returns required to be filed
by or with respect to Res-Care and its subsidiaries (or any of them) after the
date hereof and on or before the Effective Time shall be prepared and timely
filed, in a manner consistent with prior years. Res-Care and its subsidiaries
shall pay in a manner consistent with prior years all Taxes shown as being
required to be paid on such returns;
-9-
<PAGE> 16
(g) Except as set forth in Item 3.6(g) of the Res-Care
Disclosure Letter, neither Res-Care nor any of its subsidiaries shall make any
material change in its (x) accounting principles or methods or (y) methods of
accruing or calculating its accounts receivable or any reserves in respect
thereof, except, in each case, insofar as may be required by a change in
generally accepted accounting principles or by rule or regulation of the SEC;
(h) Neither Res-Care nor any of its subsidiaries shall split,
combine or reclassify any capital stock of Res-Care or any subsidiary or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of capital stock of Res-Care or any subsidiary except
in connection with the exercise of any stock options held by employees and
directors of Res-Care or Convertible Debentures (as defined hereinafter);
(i) Except as set forth in Item 3.6(i) of the Res-Care
Disclosure Letter, neither Res-Care nor any of its subsidiaries shall acquire or
agree to acquire by merging or consolidating with, or by purchasing a
substantial portion of the stock or assets of, or by any other manner, any
businesses or any corporations, partnerships, joint ventures, associations or
other business organizations or divisions thereof; PROVIDED, HOWEVER, that
unless Parent has commenced its presentations to prospective investors with
respect to the Financing (as defined below), Res-Care or its subsidiaries may
enter into a definitive agreement with respect to any matter set forth in Item
3.6(i) of the Res-Care Disclosure Letter without first obtaining Acquiror's
consent as to the form and substance of such an agreement as long as the terms
of such agreement are consistent in all material respects with the terms of the
matters set forth on Item 3.6(i) of the Res-Care Disclosure Letter; PROVIDED,
FURTHER, that Res-Care shall not, and shall cause its subsidiaries not to, take
any action to purchase, release any liens, mortgages or other encumbrances or
obligation with respect to, or amend, modify or waive any of the terms of any of
the agreements affecting, any of the properties affected by that certain Amended
and Restated Pooling Agreement, dated as of December 17, 1998, by and among
Emerald Concepts, North Carolina Concepts Limited Partnership, Sterling Concepts
of Washington, D.C., WVCO, VOCA Corp. and Chase Manhattan Trust Company, N.A.,
or any agreements relating thereto;
(j) Except as set forth in Item 3.6(j) of the Res-Care
Disclosure Letter, neither Res-Care nor any of its subsidiaries shall sell,
lease, license, mortgage or otherwise encumber or subject to any Lien (as
defined below) or otherwise dispose of any of its property or assets (with an
aggregate net value in excess of $3,000,000) except for assets acquired after
the date hereof in accordance with the terms of this Agreement and which become
subject to liens pursuant to Res-Care's existing credit facilities;
(k) Except as set forth in Item 3.6(k) of the Res-Care
Disclosure Letter, neither Res-Care nor any of its subsidiaries shall acquire or
agree to acquire any assets, other than inventory in the ordinary course of
business consistent with past practice, that are material, individually or in
the aggregate, to Res-Care and its subsidiaries taken as a whole, or make or
agree to make any capital expenditures except capital expenditures which, in the
aggregate, do not exceed $2,500,000 per fiscal quarter;
(l) Neither Res-Care nor any of its subsidiaries shall (x) pay,
discharge or satisfy any material claims (including claims of shareholders),
liabilities or obligations (absolute,
-10-
<PAGE> 17
accrued, asserted or unasserted, contingent or otherwise), except for the
payment, discharge or satisfaction of (i) liabilities or obligations in the
ordinary course of business consistent with past practice or in accordance with
their terms as in effect on the date hereof, including without, limitation all
liabilities disclosed in Res-Care's Form 10-K for the year ended December 31,
1999, or (ii) claims settled or compromised to the extent permitted by Section
3.6(o), or (y) waive, release, grant, or transfer any rights of material value
or modify or change in any material respect any existing material License (as
defined below), material lease, material contract or other material document,
other than in the ordinary course of business consistent with past practice;
(m) Neither Res-Care nor any of its subsidiaries shall adopt a
plan of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or reorganization or resolutions providing for
or authorizing such a liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or reorganization;
(n) Except for the renewal of any collective bargaining
agreements expiring between the date hereof and the Closing or already expired
or as disclosed in Item 3.6(n) of the Res-Care Disclosure Letter, neither
Res-Care nor any of its subsidiaries shall enter into any new collective
bargaining agreement;
(o) Neither Res-Care nor any of its subsidiaries shall settle or
compromise any litigation (whether or not commenced prior to the date of this
Agreement) other than settlements or compromises of litigation where the
settlement is limited solely to monetary payment and the release of claims and
the amount paid by Res-Care and its subsidiaries in all such settlements or
compromises does not exceed $2,500,000 in the aggregate or $1,000,000 for any
individual settlement or compromise;
(p) Neither Res-Care nor any of its subsidiaries shall engage in
any transaction with, or enter into any agreement, arrangement, or understanding
with, directly or indirectly, any of Res-Care's or its subsidiaries' affiliates,
including, without limitation, any transactions, agreements, arrangements or
understandings with any affiliate or other Person covered under Item 404 of SEC
Regulation S-K that would be required to be disclosed under such Item 404 other
than as set forth in Item 3.6(p) of the Res-Care Disclosure Letter;
(q) Except as set forth in Item 3.6(q) of the Res-Care
Disclosure Letter, neither Res-Care nor any of its subsidiaries shall adopt,
establish, enter into, terminate, withdraw from or amend (except as may be
required by law) any bonus, profit sharing, thrift compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment or
other employee benefit plan, agreement, trust, fund or other arrangement for the
benefit or welfare of any employee, director or former director or employee, or
increase the compensation or fringe benefits of or loan or advance money or
other property to any director, employee or former director or employee or pay
any benefit not required by any existing plan, arrangement or agreement;
PROVIDED, HOWEVER, that Res-Care or its subsidiaries may, in the ordinary course
of business consistent with past practice, provide for salary increases for
individuals (other than directors and the five most senior officers of Res-Care)
and arrangements for new employees and renew existing employment agreements with
employees;
(r) Except as set forth in Item 3.6(r) of the Res-Care
Disclosure Letter, neither Res-Care nor any of its subsidiaries shall grant to
employees any new or modified severance
-11-
<PAGE> 18
(except for increases in severance granted to employees other than executive
officers in the ordinary course of business which are immaterial individually
and in the aggregate) or termination arrangement or increase or accelerate any
benefits payable under its severance or termination pay policies in effect on
the date hereof;
(s) Except in connection with a permitted acquisition, neither
Res-Care nor any of its subsidiaries shall effectuate a "plant closing" or "mass
layoff", as those terms are defined in the Worker Adjustment and Retraining
Notification Act of 1988, as amended ("WARN"), affecting in whole or in part any
site of employment, facility, operating unit or employee of Res-Care or any
subsidiary; and
(t) Neither Res-Care nor any of its subsidiaries shall authorize
any, or commit or agree to do any of the things described in clauses (a) through
(s) or anything which would make any representation or warranty of Res-Care in
this Agreement untrue or incorrect in any material respect as of the date hereof
and as of the Effective Time, as if made on such date, except to the extent such
representations and warranties expressly relate to a specific date.
3.7 NOTIFICATION OF CERTAIN MATTERS.
(a) Res-Care shall, promptly (and in any event within three (3)
business days) after obtaining knowledge of any of the following occurring
subsequent to the date of this Agreement and prior to the Effective Time, notify
Acquiror of: (i) any material claims, actions, proceedings, tax audits or
investigations commenced or, to its knowledge, threatened in writing, involving
or affecting Res-Care or any of its subsidiaries or any of their properties or
assets, which if adversely resolved would reasonably be expected to have a
Material Adverse Effect (as defined below), (ii) any notice of, or other written
communication relating to, a default or event which, with notice or lapse of
time or both, would reasonably be expected to become a default, received by
Res-Care or any of its subsidiaries, under any agreement, contract, lease,
indenture, permit, concession, franchise, license or other instrument to which
Res-Care or any of its subsidiaries is a party where such a default would
reasonably be expected to have a Material Adverse Effect, (iii) any material
event or emergency outside the normal course of the business of Res-Care or any
of its subsidiaries, including, without limitation, any instances of wrongful
injury or wrongful death of a client or otherwise of a nature that would
reasonably be expected to customarily be reported at a meeting of the board of
directors of Res-Care or of any of its committees, or (iv) any governmental
complaints, investigations, proceedings or hearings (or communications
indicating that the same may be contemplated) relating to either Res-Care or any
of its subsidiaries or to Res-Care's industry generally that are of a nature
which would customarily be reported to Res-Care's Leadership Team comprised of
the executives of Res-Care disclosed in Item 3.7(a) of the Res-Care Disclosure
Letter (the "Leadership Team"). "Material Adverse Effect" shall mean any event,
change, occurrence, effect, fact or circumstance (which shall in no event
include events, changes, occurrences, effects, facts or circumstances resulting
from general economic conditions or conditions affecting companies in Res-Care's
industry generally) having, or which would reasonably be expected to have, a
material adverse effect on (1) the ability of Res-Care to perform its
obligations under this Agreement or to consummate the transactions contemplated
hereby or (2) the condition (financial or otherwise), assets, liabilities
(actual or contingent), properties, results of operations, prospects, cash flows
or business of Res-Care and its subsidiaries, taken as a whole.
-12-
<PAGE> 19
(b) Each of Res-Care and Acquiror shall give prompt notice to
the other of the occurrence or failure to occur of an event that has caused, or,
with the lapse of time would reasonably be expected to cause, any condition to
the consummation of the Merger not to be satisfied.
3.8 ACCESS TO RES-CARE'S BOOKS AND RECORDS. Upon reasonable notice,
Res-Care shall afford Acquiror and its representatives and representatives of
all prospective sources of Financing reasonable access during normal business
hours to the offices, properties, books, records and personnel of Res-Care and
its subsidiaries and such additional information concerning the business and
properties of Res-Care and its subsidiaries as Acquiror and its representatives
may reasonably request. Res-Care shall instruct its and its subsidiaries'
employees, counsel and financial advisors to cooperate with Parent and Acquiror
in their investigation of the business of Res-Care and its subsidiaries. Unless
and until Res-Care otherwise agrees, Acquiror will obtain appropriate
undertakings from the representatives of all prospective sources of Financing to
hold in confidence all confidential information and not use any confidential
information except in connection with the transactions contemplated hereby and
the Financing, all in accordance with certain confidentiality agreements (i)
dated October 15, 1999, between Res-Care and Bear, Stearns & Co., Inc. ("Bear
Stearns"), (ii) dated October 15, 1999, between Res-Care and Madison Dearborn
Partners, and (iii) dated October 18, 1999, between Res-Care and The Carlyle
Group, the terms of which are incorporated herein by reference (collectively,
the "Confidentiality Agreements"). The parties acknowledge that the
Confidentiality Agreements shall remain in full force and effect until the
Closing.
3.9 ACQUISITION PROPOSALS.
(a) Res-Care shall not, and shall not authorize or permit any of
its subsidiaries or any of its or its subsidiaries' officers, directors,
employees or agents to, directly or indirectly, solicit, knowingly encourage,
participate in or initiate discussions or negotiations with, or provide any
non-public information to any Person (other than Acquiror, Parent or any of
their affiliates or representatives) concerning, other than the transactions
contemplated by this Agreement, any proposal or inquiry relating to any merger,
consolidation, tender offer, exchange offer, sale of 10% or more of Res-Care's
assets, sale of 10% or more of the shares of capital stock or other securities
of Res-Care or similar business combination transaction involving Res-Care or
any principal operating or business unit of Res-Care or its subsidiaries (an
"Acquisition Proposal"). Notwithstanding the foregoing, if, after the date of
this Agreement, the Special Committee receives an unsolicited written
Acquisition Proposal from any Person and the Special Committee reasonably
concludes that the failure to engage in discussions or negotiations with such
Person would be inconsistent with the Special Committee's (and the board of
directors') fiduciary duties to the Res-Care shareholders under applicable law,
then (i) Res-Care or the Special Committee may, directly or indirectly, provide
access to or furnish or cause to be furnished information concerning Res-Care's
business, properties or assets to such Person pursuant to an appropriate
confidentiality agreement and Res-Care or the Special Committee may engage in
discussions related thereto, and (ii) Res-Care or the Special Committee may
participate in and engage in discussions and negotiations with such Person
regarding such Acquisition Proposal. In the event that, after the date of this
Agreement, the Special Committee receives an unsolicited written Acquisition
Proposal and the Special Committee determines that the failure to do so would be
inconsistent with the Special Committee's (and the board of directors')
fiduciary duties to the Res-Care shareholders under applicable law, the board of
-13-
<PAGE> 20
directors of Res-Care (acting on the recommendation of the Special Committee)
may do any or all of the following: (x) withdraw, modify or change the board of
directors' approval or recommendation of this Agreement or the Merger, (y)
approve or recommend to the Res-Care shareholders a Financed Acquisition
Proposal (as defined below) and (z) terminate this Agreement; PROVIDED, HOWEVER,
that the board of directors of Res-Care shall not take any of the actions
referred to in clauses (x), (y) or (z) unless all of the following conditions
are satisfied: (1) prior to taking any such action, the board of directors of
Res-Care has terminated this Agreement pursuant to Section 6.1(d) (Termination)
and the amounts referred to in Section 6.6(a)(i) (Certain Payments) have been
paid to Acquiror in immediately available funds; (2) prior to taking any such
action, the board of directors or Res-Care or the Special Committee has, in the
exercise of its fiduciary duty under applicable law, approved and recommended a
Financed Acquisition Proposal; and (3) the board of directors of Res-Care has
given to Acquiror, at least three (3) business days prior to taking any of the
actions referred to in clauses (x), (y) or (z), written notice that such actions
are to be taken, which notice shall specify the material aspects of the actions
to be taken. As used herein, the term "Financed Acquisition Proposal" shall mean
an Acquisition Proposal which has fully committed financing, which financing, in
the good faith judgment of the board of directors of Res-Care or the Special
Committee, is at least as likely to be available and sufficient to consummate
the Financed Acquisition Proposal as the Financing (as defined below) is likely
to be available and sufficient to consummate the Merger. Notwithstanding
anything contained in this Agreement to the contrary, the exercise of Res-Care's
or its board of directors' (or the Special Committee's) rights under this
Section 3.9 shall not constitute a breach of this Agreement by Res-Care.
(b) Subject to Section 3.9(a) hereof, nothing contained in this
Section 3.9 shall prohibit Res-Care or its board of directors, upon the
recommendation of the Special Committee, from taking and disclosing to
Res-Care's shareholders a position with respect to a tender or exchange offer by
a third party pursuant to Rules 14d-9 and 14e-2(a) promulgated under the
Exchange Act (as defined below) or from making such disclosure to Res-Care's
shareholders or otherwise which, in the judgment of the Special Committee, is
necessary under applicable law or the rules of any stock exchange or failure so
to disclose would be inconsistent with its fiduciary duties to Res-Care's
shareholders under applicable law.
(c) Res-Care shall promptly, but in any event within one
business day, advise Acquiror in writing of any Acquisition Proposal or any
inquiry regarding the making of an Acquisition Proposal, including any request
for information, the material terms and conditions of such request, Acquisition
Proposal or inquiry and the identity of the Person making such request,
Acquisition Proposal or inquiry. Res-Care shall keep Acquiror reasonably
informed of the status and details, including any amendments or proposed
amendments, of any such request, Acquisition Proposal or inquiry.
3.10 DIRECTOR AND OFFICER PROTECTION. The Surviving Corporation shall
indemnify, defend and hold harmless the present and former directors, officers,
employees and agents of Res-Care and its subsidiaries (each an "Indemnified
Party") against all costs and expenses (including reasonable attorney's fees),
judgments, fines, losses, claims, damages, liabilities and settlement amounts
(PROVIDED that in the event of a settlement, such settlement shall be approved
by Acquiror, which approval shall not be unreasonably withheld) relating to
actions or omissions arising out of the Indemnified Party's being a director,
officer, fiduciary, employee or agent of
-14-
<PAGE> 21
Res-Care at or prior to the Effective Time (including the transactions
contemplated by this Agreement) to the fullest extent permitted under applicable
law, whether or not the Surviving Corporation is insured against any such matter
(and shall pay any expenses in advance of the final disposition of such action
or proceeding to each Indemnified Party as such expenses are incurred to the
fullest extent permitted under applicable law and Res-Care's existing articles
of incorporation and bylaws, PROVIDED Res-Care or the Surviving Corporation, as
the case may be, receives from the Indemnified Party to whom expenses are
advanced an undertaking to repay such advances if required under applicable law
and Res-Care's existing articles of incorporation and bylaws). All rights to
indemnification and all limitations on liability existing in favor of an
Indemnified Party as provided in Res-Care's articles of incorporation, bylaws or
indemnification agreements as in effect as of the date hereof shall survive the
Merger and shall continue in full force and effect, without any amendment
thereto, for a period of six (6) years from the Effective Time to the extent
such rights are consistent with applicable law; PROVIDED, that in the event any
claim or claims are asserted or made within such six-year period, all rights to
indemnification in respect of any such claim or claims shall continue until
disposition of any and all such claims. Without limiting the foregoing, in any
case in which approval by the Surviving Corporation is required to effectuate
any indemnification, the Surviving Corporation shall direct, at the election of
the Indemnified Party, that the determination of any such approval shall be made
by independent counsel mutually agreed to by the Surviving Corporation and the
Indemnified Party. Without limiting the foregoing, in the event any such claim,
action, suit, proceeding or investigation is brought against any Indemnified
Party (whether arising before or after the Effective Time), (i) the Indemnified
Party may retain Res-Care's regularly engaged independent legal counsel or
counsel satisfactory to them and reasonably satisfactory to Res-Care (or
satisfactory to them and reasonably satisfactory to the Surviving Corporation
after the Effective Time), and Res-Care (or after the Effective Time, the
Surviving Corporation) shall pay all reasonable fees and expenses of such
counsel for the Indemnified Party as promptly as statements therefor are
received; and (ii) Res-Care (or after the Effective Time, the Surviving
Corporation) will use all reasonable efforts to assist in the defense of any
such matter, PROVIDED that neither Res-Care nor the Surviving Corporation shall
be liable for any settlement effected without its prior written consent, which
consent shall not unreasonably be withheld. The Surviving Corporation shall
maintain in effect for a period of six (6) years after the Effective Time
directors' and officers' liability insurance covering the persons described
above (whether or not they are entitled to indemnification thereunder) who are
covered by Res-Care's existing directors' and officers' liability insurance
policies with respect to matters occurring prior to the Effective Time which
insurance shall contain terms and conditions no less advantageous than are
contained in Res-Care's current directors' and officers' liability insurance
policy. In the event Res-Care or the Surviving Corporation or any of their
respective successors or assigns (i) consolidates with or merges into any other
person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger, or (ii) transfers all or substantially all of its
properties and assets to any person, then, and in each case, proper provision
shall be made so that the successors and assigns of Res-Care or the Surviving
Corporation, as the case may be, shall assume the obligations set forth in this
Section 3.10.
3.11 STATE TAKEOVER LAWS. Res-Care shall, upon the request of Parent
or Acquiror, take all reasonable steps to assist in any challenge by Parent or
Acquiror to the validity or applicability to the Merger and the transactions
contemplated by this Agreement of any state takeover law.
-15-
<PAGE> 22
3.12 LIST OF CONSENTS. As soon as practical, but in no event later
than thirty (30) days after the date hereof, Res-Care shall deliver to Acquiror
a schedule setting forth all consents and waivers, which to the knowledge of
Res-Care, are required to be obtained as contemplated by the Financing or
Sections 4.2(h)(ii), (iii) and (iv), assuming the absence of any (a)
qualification as to Material Adverse Effect in Section 4.2(h) and (b) monetary
threshold or other materiality qualification in Section 4.2(t).
3.13 SOLVENCY AT CLOSING. Parent and Acquiror agree for the benefit
of the directors of Res-Care to take all actions necessary to ensure that
immediately following the Effective Time, the Surviving Corporation will be
solvent for all purposes under federal bankruptcy and applicable state
fraudulent transfer and fraudulent conveyance laws.
3.14 EMPLOYEE MATTERS.
(a) Prior to the Effective Time, Res-Care shall take such steps
as may be required to cause the transactions contemplated hereby and any other
dispositions of equity securities (including derivative securities) of Res-Care
in connection with this Agreement or the transactions contemplated hereby by
each individual who is a director or officer of Res-Care, to be exempt under
Rule 16b-3 promulgated under the Exchange Act, such steps to be taken in
accordance with the interpretive letter, dated January 12, 1999, issued by the
SEC to Skadden, Arps, Slate, Meagher & Flom LLP.
(b) With respect to any "employee benefit plan" (as such term is
defined in Section 3(3) of ERISA (as defined below)) established or maintained
by the Surviving Corporation, an employee's service with Res-Care and any of its
subsidiaries prior to the Effective Time shall be treated as service with the
Surviving Corporation for purposes of eligibility, vesting and benefit accruals
(but excluding benefit accrual purposes under any defined benefit pension plan
which initially becomes effective as of or after the Effective Time); PROVIDED,
HOWEVER, that nothing in this Section 3.14(b) shall obligate the Surviving
Corporation to (i) make any particular benefit plan or benefit available to any
such employee, (ii) continue any particular benefit plan or benefit or (iii)
refrain from terminating or amending any particular benefit plan or benefit.
(c) Except as set forth in Item 3.14(c) of the Res-Care
Disclosure Letter, the Surviving Corporation shall honor, in accordance with
their terms, and shall make required payments when due under, all Plans (as
defined below) maintained or contributed to by Res-Care or any of its
subsidiaries or to which Res-Care or any of its subsidiaries is a party
(including, but not limited to, employment, incentive and severance agreements
and arrangements), that are applicable with respect to any employee, director or
shareholders of Res-Care or any of its subsidiaries (whether current, former or
retired) or their beneficiaries; PROVIDED, HOWEVER, that the foregoing shall not
preclude the Surviving Corporation from amending or terminating any such Plan in
accordance with its terms.
(d) With respect to any welfare plans in which employees of
Res-Care and any of its subsidiaries prior to the Effective Time are eligible to
participate after the Effective Time, the Surviving Corporation shall (i) waive
(to the extent waived under such Res-Care plans prior to the Effective Time) all
limitations as to preexisting conditions, exclusions and waiting periods with
respect to participation and coverage requirements applicable to such employees
-16-
<PAGE> 23
and (ii) provide each such employee with credit for any co-payments and
deductibles paid prior to the Effective Time in satisfying any applicable
deductible or out-of-pocket requirements under any plan.
-17-
<PAGE> 24
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.1 DISCLOSURE LETTERS. On or prior to the date hereof, Res-Care has
delivered to Parent and Acquiror, and Parent and Acquiror have delivered to
Res-Care a letter (respectively, its "Disclosure Letter") setting forth, among
other things, items the disclosure of which is necessary or appropriate in
relation to any or all of its representations and warranties set forth below.
4.2 REPRESENTATIONS AND WARRANTIES OF RES-CARE. Subject to Section
4.1 (Disclosure Letters) and except as disclosed in (i) the specific Item noted
in the Res-Care Disclosure Letter corresponding to the specific numbered
representation or warranty set forth below or (ii) another item in the Res-Care
Disclosure Letter where disclosure is obviously pertinent to a different
numbered representation or warranty or (iii) in Res-Care's SEC Reports (as
defined below), Res-Care represents and warrants to Acquiror as follows:
(a) ORGANIZATION AND GOOD STANDING.
(i) Each of Res-Care and its subsidiaries is a duly
organized and validly existing corporation, limited liability company, limited
partnership or general partnership in good standing under the laws of the state
of its incorporation or organization with all requisite power and authority
(corporate and otherwise) to own, lease and operate its properties and conduct
its business and is duly qualified and in good standing as a foreign corporation
authorized to do business in each of the jurisdictions in which the character of
the properties owned or held under lease by it or the nature of the business
transacted by it makes such qualification necessary, except for those
jurisdictions where the failure to be so qualified would not reasonably be
expected to have a Material Adverse Effect. Res-Care has heretofore delivered to
Acquiror accurate and complete copies of its and its subsidiaries' certificates
or articles of incorporation or organization and bylaws, as currently in effect.
All of Res-Care's subsidiaries and their respective jurisdictions of
incorporation or organization are set forth in Item 4.2(a)(i) of the Res-Care
Disclosure Letter.
(ii) Except for Liens (as defined below) under Res-Care's
credit facility, all of the outstanding capital stock of, or other ownership
interests in, each subsidiary of Res-Care, is owned by Res-Care, directly or
indirectly, free and clear of any Lien and free of any other limitation or
restriction (including any restriction on the right to vote, sell or otherwise
dispose of such capital stock or other ownership interests). Except for the
Convertible Debentures (as defined below), there are no outstanding (A)
securities of Res-Care or any subsidiary convertible into or exchangeable for
shares of capital stock or other voting securities or ownership interests in any
subsidiary and (B) options or other rights to acquire from Res-Care or any
subsidiary, and no other obligation of Res-Care or any subsidiary to issue, any
capital stock, voting securities or other ownership interests in, or any
securities convertible into or exchangeable for any capital stock, voting
securities or ownership interests in, any subsidiary (the items in clauses
4.2(a)(ii)(A) and 4.2(a)(ii)(B) being referred to collectively as the
"Subsidiary Securities"). Except for the Convertible Debentures, there are no
outstanding obligations of Res-Care or any of its subsidiaries to repurchase,
redeem or otherwise acquire any outstanding Subsidiary Securities.
-18-
<PAGE> 25
(b) AUTHORIZATION; BINDING AGREEMENT. Res-Care has all requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by Res-Care's board of directors and, except
for the approval of this Agreement and the Merger by the shareholders of
Res-Care in accordance with the KBCA and the articles of incorporation and
bylaws of Res-Care, no other corporate proceedings on the part of Res-Care are
necessary to authorize this Agreement and the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by Res-Care, and
subject to the requisite approval of the shareholders of Res-Care, constitutes
the legal, valid and binding agreement of Res-Care, enforceable against Res-Care
in accordance with its terms, except as such enforceability may be limited by
(a) bankruptcy, insolvency, reorganization, moratorium or other laws, now or
hereafter in effect, relating to or limiting creditors' rights generally, and
(b) general principles of equity (whether considered in an action in equity or
at law) which provide, among other things, that the remedies of specific
performance and injunctive and other forms of equitable relief are subject to
equitable defenses and to the discretion of the court before which any
proceedings therefor may be brought.
(c) CAPITALIZATION. The authorized capital stock of Res-Care
consists of 40,000,000 shares of Res-Care Common Stock, and 1,000,000 shares of
preferred stock. As of March 31, 2000, 24,315,452 shares of Res-Care Common
Stock and no shares of preferred stock were outstanding. As of that date,
2,967,865 shares of Res-Care Common Stock were reserved for issuance upon
exercise of outstanding Stock Options, of which 691,413 shares are reserved with
respect to Stock Options having an exercise price of greater than the Cash
Merger Consideration and 2,276,452 shares are reserved with respect to Stock
Options having an exercise price of less than the Cash Merger Consideration, and
a total of 6,666,000 shares of Res-Care Common Stock were reserved for issuance
upon the conversion of 5.90% Convertible Subordinated Notes due 2005, and 6%
Convertible Subordinated Notes due 2004 (collectively, the "Convertible
Debentures"), all of which shares are reserved with respect to Convertible
Debentures having a conversion price of greater than the Cash Merger
Consideration. All of the outstanding shares of capital stock of Res-Care and
the subsidiaries of Res-Care have been duly authorized and validly issued and
are fully paid and nonassessable. Except to the extent pledged to the lenders
under Res-Care's currently existing credit facility, all issued and outstanding
shares of capital stock of the subsidiaries of Res-Care are owned by Res-Care or
a subsidiary of Res-Care free and clear of all liens, charges, encumbrances,
claims and options of any nature. As set forth in Item 4.2(c) of the Res-Care
Disclosure Letter, Res-Care has certain contractual obligations with respect to
the granting of additional stock options from and after the date hereof. Except
as set forth in this Section 4.2(c), (i) other than the Stock Options and the
Convertible Debentures, described above, neither Res-Care nor any subsidiary of
Res-Care has or as of the Effective Time will have granted any outstanding
security, call, option, warrant, subscription or other right, or entered into
any agreement or commitment which either (a) obligates Res-Care or any of its
subsidiaries to issue, sell, exchange, convert or transfer or cause to be
issued, delivered, exchanged, converted or sold any shares of the capital stock
of Res-Care or any subsidiary of Res-Care, or (b) restricts the transfer of, or
otherwise encumbers, shares of Res-Care Common Stock and (ii) there are no other
outstanding shares of capital stock or other voting securities of Res-Care.
-19-
<PAGE> 26
(d) FINANCIAL STATEMENTS. All audited and unaudited consolidated
financial statements of Res-Care and its subsidiaries (including the notes to
such financial statements) included in Res-Care's SEC Reports (as defined below)
(the "Financial Statements") filed pursuant to the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder (the
"Exchange Act"), (a) present fairly in all material respects the consolidated
financial position, consolidated results of operations, consolidated changes in
shareholders' equity and cash flow (as applicable) of Res-Care and its
subsidiaries as of the respective dates and for the respective periods
indicated, and (b) have been prepared in conformity with generally accepted
accounting principles of the United States applied on a consistent basis through
all the periods involved (except as may be indicated in the notes thereto or, in
the case of unaudited statements, as permitted by Form 10-Q of the SEC, or for
normal year-end adjustments). Res-Care has no material liabilities or
obligations of any kind or nature (whether secured or unsecured, absolute,
accrued, contingent or otherwise and whether due or to become due) that are
required by generally accepted accounting principles to be disclosed on a
balance sheet other than (i) those disclosed in the Financial Statements or the
SEC Reports, (ii) those arising in the ordinary course of business since
December 31, 1999, (iii) those approved by Acquiror pursuant to Section 3.6
(Conduct of Business by Res-Care Pending the Merger), and (iv) those which would
not reasonably be expected to have a Material Adverse Effect.
(e) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Item 4.2(e) of the Res-Care Disclosure Letter, since December 31, 1999, except
as otherwise expressly referred to in this Agreement, none of Res-Care or any of
its subsidiaries has (i) suffered any change constituting a Material Adverse
Effect; (ii) amended its articles of incorporation or bylaws; (iii) split,
combined or reclassified the Res-Care Common Stock or any capital stock of any
subsidiary; (iv) declared, set aside or paid any dividend or other distribution
with respect to the Res-Care Common Stock; or (v) materially changed the
Res-Care's accounting methods, except as required by generally accepted
accounting principles of the United States or applicable law.
(f) SEC REPORTS AND OTHER DOCUMENTS. Since January 1, 1997,
Res-Care has filed all forms, reports, definitive proxy statements, schedules
and registration statements (the "SEC Reports") required to be filed by it with
the SEC and all such SEC Reports complied in all material respects with the
applicable requirements of law including, without limitation, the Securities Act
of 1933, as amended, and the rules and regulations promulgated thereunder (the
"Securities Act"), and the Exchange Act. As of their respective dates, each SEC
Report required to be filed by Res-Care with the SEC since January 1, 1997 did
not on the date of filing of such SEC Report, except to the extent revised or
superseded by a subsequent filing with the SEC prior to the date hereof, contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(g) GOVERNMENTAL AND OTHER CONSENTS AND APPROVALS.
(i) Subject to the approval of this Agreement and the Merger
by the shareholders of Res-Care, and except as set forth in Item 4.2(g)(i) of
the Res-Care Disclosure Letter, no consent, waiver, approval, license or
authorization of or designation, declaration or filing with any governmental
agency or authority, other public persons or entities in the United States or
any other person is required in connection with the execution or delivery by
Res-Care
-20-
<PAGE> 27
of this Agreement or the consummation by Res-Care of the transactions
contemplated hereby, other than (a) filing in the Commonwealth of Kentucky of
the Articles of Merger in accordance with the KBCA, (b) filings required under
the HSR Act, (c) filings required under the Exchange Act or those required under
the rules of the Nasdaq National Market System, (d) consents under facility or
program Licenses (as defined below) for any facility or program generating less
than $750,000 in annual revenues, (e) the filing with the SEC of a Schedule
13E-3 and proxy statement related to consideration by the Res-Care shareholders
of the Merger and this Agreement at a meeting of shareholders called for that
purpose, and (f) any action, filing, consent, waiver, approval, authorization or
permit that would not in the aggregate reasonably be expected to prevent or
delay consummation of the Merger in any material respect, or otherwise prevent
Res-Care from performing its obligations under this Agreement in any material
respect or would not in the aggregate reasonably be expected to have a Material
Adverse Effect.
(ii) Res-Care shall be able to consummate the Merger and the
transactions contemplated hereby and continue all of its operations as currently
conducted without any of the foregoing resulting in (A) any change in ownership
or control payments in excess of $1,000,000 in the aggregate, or (B) a loss of
annual revenue in excess of $4,000,000 in the aggregate.
(h) NO VIOLATION. The execution and delivery of this Agreement,
the filing by Res-Care of the Articles of Merger in connection with the Merger
with the Secretary of State in the Commonwealth of Kentucky in accordance with
the KBCA, the consummation by Res-Care of the transactions contemplated hereby,
or compliance by Res-Care with any of the provisions hereof, will not:
(i) contravene, conflict or violate any provision of the
articles of incorporation or bylaws of Res-Care or any comparable charter or
organizational documents of its subsidiaries;
(ii) to the knowledge of Res-Care violate or cause Res-Care
or any of its subsidiaries to violate, in any material respect (i) any statute
or law or any judgment, decree, order, injunction, regulation or rule of any
court or governmental authority applicable to Res-Care or any of its
subsidiaries or any of their respective properties, or (ii) the award of any
arbitrator or panel of arbitrators against Res-Care or any of its subsidiaries;
(iii) except for the Convertible Debentures, Res-Care's
credit facility, Stock Options, certain severance payments, and except as forth
in Item 4.2 (h)(iii) of the Res-Care Disclosure Letter, cause the acceleration
of the maturity of any debt or obligation which is material to Res-Care and its
subsidiaries, taken as a whole; or
(iv) except as set forth in Section 4.2(g) (Governmental and
Other Consents and Approvals), or Item 4.2(h)(iii) or Item 3.14(c) of the
Res-Care Disclosure Letter, with or without notice or lapse of time, or both,
violate, contravene or otherwise breach, or be in conflict with, or constitute a
material default under, or permit the termination of, or give rise to a right of
termination, cancellation or acceleration of, or "put" right with respect to any
obligation or to loss of any benefit under, or, except as contemplated by this
Agreement, require the consent of any person under, or result in the creation or
imposition of any Lien upon any property of Res-Care or any of its subsidiaries
under any Material Contract (as defined below), to which Res-
-21-
<PAGE> 28
Care or any of its subsidiaries is a party or by which Res-Care or any of its
subsidiaries (or their respective assets) is bound.
Notwithstanding the foregoing, no violation referred to in clause (ii), no
acceleration referred to in clause (iii) and no contravention, violation,
conflict, breach, default, right of termination, cancellation or acceleration,
losses, "put" right, consent, liens or other concerns referred to in clause (iv)
(each, a "Violation") shall constitute a breach of this Section 4.2(h) to the
extent such Violations would not reasonably be expected to have a Material
Adverse Effect. As used in this Agreement, "Lien" means, with respect to any
asset, any mortgage, lien, pledge, charge, security interest or encumbrance of
any kind in respect of such asset.
(i) LITIGATION AND OUTSTANDING CLAIMS. Item 4.2(i) of the
Res-Care Disclosure Letter sets forth a complete listing of all claims, actions,
suits, proceedings and investigations pending or, to the knowledge of Res-Care,
threatened in writing, by or against any of (i) Res-Care and its subsidiaries,
(ii) its or their respective properties, assets, rights or businesses, or (iii)
to the knowledge of Res-Care, any of its or their officers or directors in
connection with their businesses or affairs. There is no legal action, suit,
arbitration or other legal, administrative or other governmental investigation,
inquiry or proceeding (whether federal, state, local or foreign) or claim
pending or, to the knowledge of Res-Care, threatened in writing against
Res-Care, any of its subsidiaries or any of their respective properties, assets,
business, franchises or governmental approvals before any court or governmental
department, commission, board, bureau, agency, instrumentality or arbitrator,
which, individually or in the aggregate, would reasonably be expected to
materially and adversely affect the ability of Res-Care to carry out or prevent
the Merger or the transactions contemplated by this Agreement nor is there any
judgment, decree, injunction, rule or order of any governmental entity or
arbitrator outstanding against Res-Care or any of its subsidiaries having any
such effect other than those listed in Item 4.2(i) of the Res-Care Disclosure
Letter.
(j) GOVERNMENTAL APPROVALS; COMPLIANCE WITH LAW. Each of
Res-Care and its subsidiaries has all licenses, certifications, permits and
other authorizations from all governmental bodies (each, a "License") necessary
to provide and receive reimbursement for the mentally retarded, developmentally
disabled and youth related services provided by Res-Care and its subsidiaries,
as more fully described in Res-Care's SEC Reports (collectively, the
"Services"), including, without limitation, the operation of the facilities at
which certain of these Services are rendered except where the failure to have
such licenses, certifications, permits and other authorizations would not
reasonably be expected to have a Material Adverse Effect. Except as set forth in
Item 4.2(j) of the Res-Care Disclosure Letter, to the knowledge of Res-Care each
such License is in full force and effect and to the knowledge of Res-Care, no
default, or event which with notice or the passage of time would constitute a
default, by Res-Care or any of its subsidiaries has occurred and is continuing
thereunder, which default would individually or in the aggregate reasonably be
expected to have a Material Adverse Effect. Except as set forth in Item 4.2(j)
of the Res-Care Disclosure Letter, the business of each of Res-Care and its
subsidiaries is being conducted in material compliance with the terms of the
Licenses and all applicable laws, ordinances, rules and regulations relating to
their respective properties or applicable to its or their respective businesses,
except where the failure to so comply would not reasonably be expected to have a
Material Adverse Effect. Res-Care has delivered or made available to Acquiror
true and correct copies of the most recent annual and complaint surveys or
related reports applicable to Res-Care and its subsidiaries and their respective
operations. True
-22-
<PAGE> 29
and complete copies of any and all plans of correction submitted in response to
said surveys and related reports have also been provided or made available to
Acquiror.
(k) BROKERS AND FINDERS. Except for J.C. Bradford & Co., LLC
("J.C. Bradford"), which has been engaged, pursuant to an engagement letter
dated November 16, 1999, a true and complete copy of which has been delivered to
Acquiror, to provide financial advisory services to the Special Committee and,
as requested by the Special Committee, to provide advice to the board of
directors of Res-Care with respect to whether the consideration to be received
by the holders of Res-Care Common Stock is fair to them, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger or in connection with any transaction
involving Res-Care based upon arrangements made by or on behalf of Res-Care.
(l) FAIRNESS OPINIONS AND APPROVAL BY SPECIAL COMMITTEE. On or
prior to the date hereof, the Special Committee approved the terms of this
Agreement and received an opinion from J.C. Bradford as of such date, which
opinion shall be confirmed in writing substantially to the effect that, from a
financial point of view, the consideration to be received by the holders of
Res-Care Common Stock (other than the management equity participants in Parent)
pursuant to the Merger is fair to them, a true and complete copy of which
written opinion has been or will promptly be delivered to Acquiror following its
receipt by the Special Committee.
(m) TAXES.
(i) Except to the extent the failure of which, would not, in
the aggregate, reasonably be expected to have a Material Adverse Effect; (A) all
Returns (as defined below) required to be filed by or with respect to Res-Care
and Tax Affiliates (as defined below) have been filed on a timely basis (taking
into consideration all extensions); (B) all such Returns were correct and
complete; (C) there are no deficiencies for Taxes that have been proposed,
asserted or assessed against Res-Care or Tax Affiliates that remain unpaid; (D)
Res-Care and its Tax Affiliates have paid or made adequate provision in the
Financial Statements (other than reserves for deferred income Taxes established
to reflect differences between book basis and Tax basis of assets and
liabilities) for the payment of all Taxes, whether or not shown on any Return;
and (E) Res-Care and each Tax Affiliate has withheld and paid all Taxes required
to have been paid in connection with amounts paid or owing to any employee,
independent contractor, shareholder, partner, or other third party. As used in
this Section 4.2(m), the term "Tax" or "Taxes" means all federal, state, local,
foreign and other net income, gross income, gross receipts, franchise, sales,
use, withholding, employment, property, alternative or add-on minimum,
environmental (including Taxes under Section 59A of the Code) or other taxes,
fees, assessments or charges of any kind whatsoever, together with any interest
and any penalties, additions to tax or additional amounts with respect thereto;
the term "Returns" means all returns, declarations, reports and statements
required to be filed in respect of Taxes, including any schedule or attachment
thereto, and including any amendment thereof; and the term "Tax Affiliate" means
any subsidiaries of Res-Care and any individual or entity for whose Taxes
Res-Care or any of its subsidiaries is or would reasonably be expected to be
held liable, whether by reason of being a member of an affiliated, consolidated,
combined, unitary, or other similar group for Tax purposes, by reason of being a
successor, member or general partner, by agreement, or otherwise (but only with
respect to the Taxes and taxable periods(s) or portions
-23-
<PAGE> 30
thereof with respect to which Res-Care or such subsidiaries is or would
reasonably be expected to be held liable for such Taxes).
(ii) Neither Res-Care nor any Tax Affiliate has granted any
extension or waiver of the statute of limitations period on the assessment of
any material Taxes, which period (after giving effect to such extension or
waiver) has not expired. Neither Res-Care nor any Tax Affiliate has received
written notice from an authority in a jurisdiction where Res-Care or any Tax
Affiliate does not file Returns that it is or may be subject to Tax in that
jurisdiction.
(iii) Neither Res-Care nor any Tax Affiliate is a party to
any Tax allocation, sharing, or similar agreement. Except as set forth in Item
4.2(m)(iii) of the Res-Care Disclosure Letter, neither Res-Care nor any Tax
Affiliate has been a member of an affiliated group filing a consolidated federal
income tax Return (other than a group the common parent of which was Res-Care).
(iv) Prior to the date of this Agreement, except as set
forth in Item 4.2(m)(iv) of the Res-Care Disclosure Letter, neither Res-Care nor
any Tax Affiliate has made any payments, is obligated to make any payments, or
is a party to any agreement that under certain circumstances could obligate it
to make any payments that will not be deductible under Code Section 280G or
would constitute compensation in excess of the limitation set forth in Section
162(m) of the Code.
(v) No consent under Section 341(f) of the Code has been
filed with respect to Res-Care or any Tax Affiliates.
(vi) Neither Res-Care nor any Tax Affiliate has been a
United States real property holding corporation within the meaning of Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code.
(n) EMPLOYEE BENEFITS.
(i) Item 4.2(n)(i) of the Res-Care Disclosure Letter sets
forth a list of each employee benefit plan, arrangement or agreement, including
each employment, severance or similar agreement, that is maintained by Res-Care
as of the date hereof or under which Res-Care would reasonably be expected to
have any direct or indirect liability or obligations (the "Plans") or by any
trade or business, whether or not incorporated (an "ERISA Affiliate") which,
together with Res-Care, would be deemed a "single employer" within the meaning
of Section 4001 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), for the benefit of any current or former employee, officer,
director or independent contractor of Res-Care and, prior to the date hereof,
Res-Care has provided Acquiror and its representatives with a copy of each
material Plan.
(ii) (a) Each of the Plans has been operated and
administered in compliance in all material respects with applicable law,
including but not limited to ERISA and the Code, (b) each of the Plans intended
to be "qualified" within the meaning of Section 401(a) of the Code has received
a favorable determination letter from the Internal Revenue Service to such
effect and Res-Care knows of no event that would reasonably be expected to cause
the disqualification of any such Plan, (c) no Plan is subject to Title IV of
ERISA, (d) except as set
-24-
<PAGE> 31
forth in Item 4.2(n)(i) of the Res-Care Disclosure Letter, no Plan provides
welfare benefits (whether or not insured) with respect to current or former
employees of Res-Care beyond their retirement or other termination of service,
other than coverage mandated by applicable law or benefits the full cost of
which is borne by the current or former employee (or such employee's
beneficiary), (e) no liability under Title IV of ERISA or Section 412 of the
Code has been incurred or would reasonably be expected to be incurred (directly
or indirectly) in connection with any Plan, (f) no Plan is a "multiemployer
pension plan," as such term is defined in Section 3(37) of ERISA, or a plan
described in Section 4063 of ERISA, (g) all contributions or other amounts
payable by Res-Care or any ERISA Affiliate as of the Effective Time with respect
to any Plan in respect of current or prior plan years which are required to be
reflected in Res-Care's or the ERISA Affiliate's financial statements in
accordance with generally accepted accounting principles of the United States
have been paid or accrued in accordance with generally accepted accounting
principles of the United States and Section 412 of the Code, (h) neither
Res-Care nor an ERISA Affiliate has engaged in a transaction in connection with
which Res-Care, its subsidiaries or any ERISA Affiliate would reasonably be
expected to be subject to either a material civil penalty assessed pursuant to
Sections 502(i) or 502(e) of ERISA or a material tax imposed pursuant to Section
4975 or 4976 of the Code, and (i) to the knowledge of Res-Care, there are no
pending, threatened or anticipated material claims (other than routine claims
for benefits) by, on behalf of or against any of the Plans or any trusts related
thereto.
(iii) Except as provided pursuant to this Agreement and as
set forth in Item 3.14(c) of the Res-Care Disclosure Letter, and except with
respect to the Plans set forth in Item 4.2(n)(i) of Res-Care Disclosure Letter,
neither the execution, delivery and performance of this Agreement by Res-Care
nor the consummation by Res-Care of the transactions contemplated hereby shall
(i) result in any material payment becoming due to any director or employee of
Res-Care, (ii) materially increase any benefits otherwise payable under any
Plan, or (iii) result in any acceleration of the time of payment or vesting of
any benefits under any Plan to any material extent.
(o) LABOR.
(i) Except as set forth in Item 4.2(o)(i) of the Res-Care
Disclosure Letter, neither Res-Care nor any of Res-Care's subsidiaries is party
to a collective bargaining agreement, and neither Res-Care nor any of its
subsidiaries is the subject of a preceding seeking to compel it to bargain with
any labor organization as to wages and conditions of employment.
(ii) Except as set forth in Item 4.2(o)(ii) of the Res-Care
Disclosure Letter, neither Res-Care nor any Controlled Entity has violated any
provision of federal or state law or any governmental rule or regulation, or any
order, decree, judgment, arbitration award, of any court, arbitrator or any
government agency regarding the terms and conditions of employment of employees,
former employees or prospective employees or other labor related matters,
including, without limitation, laws, rules, regulations, orders, rulings,
decrees, judgments and awards relating to discrimination, fair labor standards
and occupational health and safety, wrongful discharge or violation of the
personal rights of employees, former employees or prospective employee, in each
case, the violation of which individually or in the aggregate would reasonably
be expected to have a Material Adverse Effect.
(p) ENVIRONMENTAL MATTERS.
-25-
<PAGE> 32
(i) Res-Care and its subsidiaries are and have been in
material compliance with all Environmental Laws (as defined below), except for
non-compliance which would not reasonably be expected to have a Material Adverse
Effect. For purposes of this Agreement, "Environmental Laws" shall mean all
federal, state and local laws (including, without limitation, common law),
statutes, ordinances, judicial decisions, regulations, rules, judgments, orders
and decrees which pertain to environmental contamination, pollution or
protection of human health or the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface strata).
(ii) During the period beginning five years prior to the
date hereof, Res-Care and its subsidiaries have not received any notice from any
governmental authority or any written notice by any other Person alleging
potential material liability of Res-Care and its subsidiaries (including,
without limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damage,
personal injuries, or penalties) arising out of, based on or resulting from (a)
the presence or release into the environment of any Hazardous Material (as
defined herein) at any location, whether or not owned or operated by Res-Care or
any of its subsidiaries or (b) circumstances forming the basis of any violation,
or alleged violation, of any Environmental Law. For purposes of this Agreement,
"Hazardous Materials" shall mean all hazardous or toxic chemicals, substances,
wastes or materials, petroleum and petroleum products, asbestos and
asbestos-containing materials, pollutants, contaminants, and all other
substances regulated pursuant to, or that would reasonably be expected to form
the basis of liability under, any Environmental Law.
(iii) Except as would not reasonably be expected to have a
Material Adverse Effect, there has been no release, emission, discharge,
disposal or presence of Hazardous Materials at any facility owned or operated by
Res-Care or its subsidiaries under circumstances or at levels at which
investigation or cleanup would reasonably be expected to be
-26-
<PAGE> 33
required under applicable Environmental Laws which has not been remediated and
all material liabilities with respect thereto satisfied or discharged.
(iv) None of Res-Care or its subsidiaries has entered into
or agreed to any material consent order, decree or agreement under any
Environmental Law, and none of Res-Care or its subsidiaries is subject to any
material judgment, decree or order relating to compliance with Environmental
Laws or to material investigation, cleanup, remediation or removal of regulated
substances under any Environmental Law.
(q) BOARD RECOMMENDATION. On the recommendation of the Special
Committee, the board of directors of Res-Care, at a meeting duly called and
held, has by unanimous vote of those directors present (who constituted 100% of
the directors then in office exclusive of directors who recused themselves from
such vote because of their interest in the Merger and the transactions
contemplated hereby) (i) determined that this Agreement and the transactions
contemplated hereby are in the best interests of the shareholders of Res-Care,
and (ii) resolved to recommend that the holders of the shares of Res-Care Common
Stock approve this Agreement and the transactions contemplated herein, including
the Merger.
(r) REQUIRED SHAREHOLDER VOTE. The only votes of the holders of
any class or series of Res-Care securities necessary to approve this Agreement
and the Merger under the KBCA are as follows: the affirmative vote of the
holders of a majority of the outstanding shares of Res-Care Common Stock
entitled to vote thereon, and at the Special Meeting, more Disinterested Shares
(as defined below) shall have been voted for the Merger than against the Merger.
For purposes of this Agreement, "Disinterested Shares" shall mean shares of
Res-Care Common Stock other than those subject to, and held by those
shareholders who are a party to, the Voting Agreement.
(s) STATE TAKEOVER STATUTES. No state takeover statute or
similar statute or regulation of the Commonwealth of Kentucky applies or
purports to apply to this Agreement, the Merger, or any of the other
transactions contemplated hereby. No provision of the articles of incorporation
or organization, by-laws or other governing instruments of Res-Care or any of
its subsidiaries would reasonably be expected to, directly or indirectly,
restrict or impair the ability of Acquiror or its affiliates to vote, or
otherwise to exercise the rights of a shareholder with respect to, securities of
Res-Care and its subsidiaries that may be acquired or controlled by Acquiror or
its affiliates or permit any shareholder to acquire securities of Res-Care on a
basis not available to Acquiror in the event that Acquiror were to acquire
securities of Res-Care, and neither Res-Care nor any of its subsidiaries has any
rights plan, preferred stock or similar arrangement which have any of the
aforementioned consequences.
(t) MATERIAL CONTRACTS.
(i) Items 1 - 6 of Item 4.2(t)(i) of the Res-Care Disclosure
Letter set forth a list of the following (collectively, the "Material
Contracts"):
(1) a description of each lease of real or personal
property (other than any lease of personal property (A) requiring future annual
payments of less than $50,000, (B) requiring future payments in the aggregate of
less than $150,000, or (C) which is terminable by either Res-Care or its
subsidiaries without breach or penalty on less than sixty-one
-27-
<PAGE> 34
(61) days' prior written notice provided that it does not require payments or
result in obligations during such period of more than $50,000) to which any of
Res-Care or its subsidiaries is a party, either as lessee or lessor, including a
description of the parties to each such lease, the property to which each such
lease relates, and the rental term and monthly (or other) rents payable under
each such lease;
(2) all management agreements, employment agreements,
consulting agreements, and independent contractor agreements to which any of
Res-Care or its subsidiaries is a party (other than any agreement which (A)
provides for future annual payments of less than $75,000, (B) provides for
future payments in the aggregate of less than $150,000, or (C) which is
terminable by Res-Care or its subsidiaries without breach or penalty on less
than sixty-one (61) days' prior written notice provided that it does not require
payments or result in obligations during such period of more than $75,000);
(3) all guarantees, mortgages, deeds of trust,
indentures and loan agreements, other than the Convertible Debentures and
Res-Care's credit facility, to which any of Res-Care or its subsidiaries is a
party (excluding inter-company loans and guarantees and any guarantees entered
into in connection with any indebtedness disclosed in Res-Care's SEC Reports) in
excess of $2,000,000 for any individual item and $5,000,000 in the aggregate;
(4) all contracts (other than those described in or
excepted from clauses (1), (2), or (3)) to which any of Res-Care or its
subsidiaries is a party, or to which any of Res-Care or its subsidiaries or any
of its or their respective assets or properties is subject, PROVIDED, HOWEVER,
that there shall be excluded from said Res-Care Disclosure Letter pursuant to
this clause (4) any supply contracts with suppliers and other such contracts
incurred in the ordinary course of business and consistent with past practice,
other than any such contract which (A) is a contract or group of related
contracts which exceeds $100,000 in amount, or (B) cannot be performed in the
normal course within six months after the Effective Time without breach or
penalty and involves the future payment of more than $100,000;
(5) all agreements with third-party payors (other than
Job Corps contracts), including but not limited to Medicaid provider agreements,
contracts for the provision of services to at-risk or troubled youth, management
agreements, and all other agreements relating to the Services; PROVIDED,
HOWEVER, there shall be excluded from the Res-Care Disclosure Letter any
agreement involving aggregate payments less than $125,000; and
(6) all Job Corps contracts.
(ii) True and complete copies of all documents referred to
in said Item 4.2(t)(i) of the Res-Care Disclosure Letter have been provided or
made available to Acquiror. All material provisions of the contracts referred to
in such Item are valid and enforceable obligations of Res-Care or its
subsidiaries, as applicable, and, to the knowledge of Res-Care, the other
parties thereto except where the lack of validity or enforceability would not
reasonably be expected to have a Material Adverse Effect. None of Res-Care or
its subsidiaries nor, to the knowledge of Res-Care, any other party to such
contract or agreement is in default thereunder, which default would reasonably
be expected to have a Material Adverse Effect.
-28-
<PAGE> 35
(iii) Other than Material Contracts which have terminated by
expiration of their terms, none of Res-Care or its subsidiaries have lost any
Material Contract pertaining to the Services since December 31, 1999 which would
reasonably be expected to have a Material Adverse Effect. None of Res-Care or
its subsidiaries has been notified in writing that in the event of a sale or
change of ownership of any of Res-Care or its subsidiaries, any of the Material
Contracts would reasonably be expected to be terminated or modified which would
reasonably be expected to cause a Material Adverse Effect or that the respective
entity would reasonably be expected to lose or suffer diminution in the
contractual relationships under such Material Contract which would reasonably be
expected to have a Material Adverse Effect. Except as set forth in Item
4.2(t)(iii) of the Res-Care Disclosure Letter, none of Res-Care or its
subsidiaries is a party to any covenant or agreement which prohibits, limits,
restricts or otherwise adversely affects the right of any of such entities to
provide the Services or engage in any other business except when such
prohibition, limitation or restriction would not reasonably be expected to have
a Material Adverse Effect.
(u) INFORMATION IN PROXY STATEMENT. The Definitive Proxy
Statement, the Schedule 13E-3 and any other document filed with the SEC by
Res-Care in connection with the Merger (or any amendment thereof or supplement
thereto), at the date mailed to Res-Care shareholders, at the time of the
Special Meeting and at the time filed with the SEC, as the case may be, shall
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading, provided, however, that no representation is made by Res-Care with
respect to statements made therein based on information supplied by Acquiror or
Parent for inclusion in such documents. The Definitive Proxy Statement, the
Schedule 13E-3 and such other documents filed with the SEC by Res-Care shall
comply in all material respects with the provisions of the Exchange Act and the
rules and regulations thereunder.
(v) REAL ESTATE.
(i) TITLE TO THE PREMISES. Res-Care and its subsidiaries, as
the case may be, have sufficient titles, leaseholds or rights to real property
to conduct their respective businesses as currently conducted in all material
respects (the "Real Property").
(ii) REAL PROPERTY ZONING. Except as set forth in Item
4.2(v)(ii) of the Res-Care Disclosure Letter, and as would not reasonably be
expected to have a Material Adverse Effect (w) the Real Property substantially
conforms with all current applicable zoning laws and building codes, statutes,
rules, regulations and restrictions, (x) all buildings and improvements which
comprise such Real Property are located entirely within the boundary lines of
the appropriate parcel thereof, (y) Res-Care and any of its subsidiaries do not
violate any federal, state or local governmental building, zoning, health,
safety or other similar laws, ordinances or regulations, or any applicable and
legally enforceable private restrictions, and the use of such Real Property is
presently a permitted use under applicable ordinances, and (z) no written notice
of the violation of any of said laws, ordinances, regulations, codes or
restrictions have been received by Res-Care or any of its subsidiaries.
(w) INSURANCE. All material policies of fire, liability,
workers' compensation, director and officer, malpractice and professional
liability and other forms of insurance providing
-29-
<PAGE> 36
insurance coverage to or for any of Res-Care and its subsidiaries including loss
runs (which have been delivered to Acquiror) in respect of each such policy for
the last three years have been made available to Acquiror and (i) Res-Care or
its subsidiaries are named insureds under such policies, (ii) all premiums
required to be paid with respect thereto covering all periods up to and
including the Effective Time have been paid, (iii) there has been no lapse in
coverage under such policies during any period for which Res-Care and its
subsidiaries have conducted their respective operations, (iv) except as set
forth in Item 4.2(w) to the Res-Care Disclosure Letter each such policy has been
issued on an "occurrence" basis, and (v) no notice of cancellation or
termination has been received with respect to any such policy. None of Res-Care
or its subsidiaries has any obligation for retrospective premiums for any period
prior to the Effective Time which would reasonably be expected to have a
Material Adverse Effect. All such policies are in full force and effect and will
remain in full force and effect to and including the Effective Time, unless
replaced with comparable insurance policies having comparable terms and
conditions. Except as set forth in Item 4.2(w) of the Res-Care Disclosure
Letter, all such insurance policies of Res-Care and its subsidiaries will
continue to be in effect, unless replaced, immediately after the Effective Time,
without limit as to time, for occurrences prior to the Effective Time. Since
December 31, 1999 and except as disclosed in the loss runs described above,
there have been no material claims made with respect to such policies prior to
the date hereof. Except as disclosed in Item 4.2(w) of the Res-Care Disclosure
Letter, no insurer has put Res-Care on notice that coverage was denied with
respect to any claim submitted to insurer by Res-Care.
(x) AFFILIATED TRANSACTIONS. Except as set forth in Item 4.2(x)
of the Res-Care Disclosure Letter and except for any intercompany transactions
solely among Res-Care and its subsidiaries (i) there are no contracts for the
provisions of goods or services to any of Res-Care and its subsidiaries by any
Affiliate (as defined below) thereof, and (ii) there are no facilities occupied
in whole or in part by any of Res-Care and its subsidiaries and no other
property, assets, franchises, licenses or rights used by any of Res-Care and its
subsidiaries that are owned, leased by or to, or occupied by any Affiliate of
Res-Care or any of its subsidiaries. "Affiliate" shall mean any officer or
director of Res-Care or any of its subsidiaries, any holder of 5% or more of
Res-Care Common Stock or any other Person directly or indirectly controlling,
controlled by, or under common control with such shareholder, officer or
director. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling," "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities, by
contract or otherwise.
(y) INTELLECTUAL PROPERTY RIGHTS. None of Res-Care or its
subsidiaries (i) owns any patents nor (ii) has filed or applied for any patents.
Except as set forth as Items 4.2(y) of the Res-Care Disclosure Letter and except
for the federal trademark on the name "Res-Care", Res-Care and its subsidiaries
do not have any trade names or trade marks (whether registered or unregistered).
Item 4.2(y) of the Res-Care Disclosure Letter describes all material
intellectual property rights of Res-Care or its subsidiaries which are owned by
any third party. Res-Care has provided or made available to Acquiror copies of
all material agreements, licenses and sublicenses relating to Res-Care's and its
subsidiaries' rights to use such intellectual property. Except as would not
reasonably be expected to result in a Material Adverse Effect, (A) none of
Res-Care or its subsidiaries is in default, and no event has occurred which with
notice or lapse of
-30-
<PAGE> 37
time or both would reasonably be expected to constitute a default, under any of
such agreements, licenses or sublicenses, (B) none of the intellectual property
rights of Res-Care and its subsidiaries is used by Res-Care or its subsidiaries
in violation of the rights of any third party, (C) neither Res-Care nor its
subsidiaries has granted to a third party any rights to use or possess any of
its intellectual property rights, and (D) no third party has infringed upon,
misappropriated or wrongfully used any of Res-Care's and its subsidiaries'
intellectual property rights.
(z) ADEQUACY OF INFORMATION SYSTEMS. Except as would not
reasonably be expected to have a Material Adverse Effect, and as set forth in
Item 4.2(z) of the Res-Care Disclosure Letter, Res-Care and its subsidiaries
own, lease or are licensed to use all software, computer hardware, databases and
embedded control systems used by Res-Care and its subsidiaries (the "Systems").
The Systems, including all related applications and manuals therefor, are
sufficient to operate the business of Res-Care and its subsidiaries, in an
accurate and efficient manner, and the respective employees of Res-Care and its
subsidiaries have the necessary training, experience and expertise to operate
the Systems, and have operated the Systems, in an accurate and efficient manner,
in each case, as is material in relation to Res-Care and its subsidiaries, taken
as a whole. Except as would not reasonably be expected to have a Material
Adverse Effect, after the completion of the transactions contemplated hereby,
Res-Care and its subsidiaries will own all right, title, and interest in and to
or have a license to continue to use all Systems.
(aa) YEAR 2000 COMPLIANCE. Except as set forth in Item 4.2(aa)
of the Res-Care Disclosure Letter, to the extent materially necessary to operate
the business of Res-Care, the Systems can be used, during and after the calendar
year 2000, and shall operate, and has operated, during each such time period,
without error relating to the processing, calculating, comparing, sequencing or
other use of date data, except to the extent that a failure to do so would not
reasonably be expected to have a Material Adverse Effect.
(bb) FRAUD AND ABUSE; ABSENCE OF CERTAIN BUSINESS PRACTICES.
(i) To Res-Care's knowledge, none of Res-Care or its
subsidiaries nor any of their respective officers or directors, nor any other
person or entity acting on behalf of any of Res-Care or its subsidiaries, has
engaged in any activities which are prohibited under federal Medicaid, health
care fraud, false claims or false statement statutes or any federal statute
governing the Services or the regulations promulgated pursuant to such statutes
or related state, local or foreign statutes or regulations, including consumer
protection statutes, or which are prohibited by rules of professional conduct
relating to the services provided by Res-Care and its subsidiaries.
(ii) To Res-Care's knowledge, none of Res-Care or any of
its subsidiaries nor any officer or director thereof, nor any other person or
entity acting on behalf of any of Res-Care or its subsidiaries, acting alone or
together, has (A) received, directly or indirectly, any rebates, payments,
commissions, promotional allowances or any other economic benefits, regardless
of their nature or type, from or ON behalf of any client, governmental employee
or other person or entity with whom any of Res-Care and its subsidiaries has
done business directly or indirectly, or (B) directly or indirectly, given or
agreed to give any gift or similar benefit to any client, governmental employee
or other person or entity who is or may be in a position to help or hinder the
business of any of Res-Care and its subsidiaries (or assist any
-31-
<PAGE> 38
of Res-Care and its subsidiaries in connection with any actual or proposed
transaction) which, in the case of either clause (A) or clause (B) above, would
reasonably be expected to subject any of Res-Care and its subsidiaries to any
material damage or penalty in any civil, criminal or governmental litigation or
proceeding.
(cc) COST REPORTS. Except as set forth in Item 4.2(cc) of
the Res-Care Disclosure Letter, Res-Care and its subsidiaries have correctly
billed, in all material respects, all material government (federal, state, local
and foreign), and all other material third party payers providing coverage for
Res-Care's and its subsidiaries' clients and for which Res-Care or its
subsidiaries are entitled to payment. Consistent with past practices, materially
adequate reserves as reflected in the Financial Statements have been established
to enable Res-Care and its subsidiaries to settle any material liabilities which
may arise in the ordinary course, or audit of any cost reports ("Cost Reports").
Res-Care and its subsidiaries, in the ordinary course of business, have ongoing
audits of Cost Reports as filed by Res-Care and its subsidiaries; however, such
audits will not result in adverse findings which would reasonably be expected to
have a Material Adverse Effect.
(dd) ACCOUNTS RECEIVABLE. The accounts receivable reflected
in the Financial Statements and all accounts receivable arising after December
31, 1999, arose from bona fide transactions in the ordinary course of business
with third parties, and the services involved have been performed to the
respective clients and/or the account obligors, and no further material services
are required to be rendered in order to entitle Res-Care or its subsidiaries to
collect the respective accounts receivable in full. The reserves for
uncollectible accounts receivable reflected in the Financial Statements are
sufficient, in all material respects, to cover any accounts receivable which
become uncollectible. Except pursuant to Res-Care's credit facility, no account
receivable or note receivable of any of Res-Care or its subsidiaries (i) has
been assigned or pledged to any other Person or (ii) is subject to any right of
set-off in respect of any obligations of Res-Care or its subsidiaries.
4.3 REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND PARENT. Subject
to Section 4.1 (Disclosure Letters) and except as disclosed in the specific Item
noted in the Acquiror and Parent Disclosure Letter corresponding to the specific
numbered representation and warranty as set forth below, Acquiror and Parent
hereby represent and warrant to Res-Care as follows:
(a) ORGANIZATION AND GOOD STANDING. Each of Acquiror and Parent
is a duly organized and validly existing corporation in good standing under the
laws of the state of its incorporation. Each of Acquiror and Parent has
heretofore delivered or made available to Res-Care accurate and complete copies
of its articles or certificate of incorporation and bylaws as currently in
effect. Neither Acquiror nor Parent has any subsidiary (other than Acquiror, in
case of Parent) or owns or holds any capital stock, security or investment in
any other Person other than bank accounts, certificates of deposit, money market
or similar short-term investments.
(b) AUTHORIZATION; BINDING AGREEMENT. Each of Acquiror and
Parent has all requisite corporate power and authority to execute and deliver
this Agreement and to consummate the Merger and the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
Merger and the transactions contemplated hereby have been duly and validly
authorized by the boards of directors of Acquiror and Parent, and this Agreement
has been adopted by Parent as sole shareholder of Acquiror in accordance
-32-
<PAGE> 39
with the KBCA and its articles of incorporation and bylaws. No other corporate
proceedings on the part of Acquiror or Parent are necessary to authorize this
Agreement, the Merger and the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by Acquiror and Parent and
constitutes a legal, valid and binding agreement of Acquiror and Parent,
enforceable against Acquiror and Parent in accordance with its terms except as
such enforceability may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws, now or hereafter in effect,
relating to or limiting creditors, rights generally, and (b) general principles
of equity (whether considered in an action in equity or at law) which provide,
among other things, that the remedies of specific performance and injunctive and
other forms of equitable relief are subject to equitable defenses and to the
discretion of the court before which any proceedings therefor may be brought.
(c) NO VIOLATION. Neither the execution and delivery of this
Agreement, the filing of the Articles of Merger nor the consummation by Acquiror
and Parent of the transactions contemplated hereby, nor compliance by Acquiror
with any of the provisions hereof, will:
(i) contravene, conflict or violate any provision of the
charter documents or bylaws of Acquiror or Parent;
(ii) contravene, conflict or violate any statute or law or
any judgment, decree, order, injunction, regulation or rule of any court or
governmental authority applicable to Acquiror or Parent or any of their
properties;
(iii) cause the acceleration of the maturity of any debt or
obligation of Acquiror or Parent; or
(iv) with or without notice or lapse of time, or both,
violate, contravene or otherwise breach or be in conflict with, or constitute a
default under, or permit the termination of, or give rise to a right of
termination, cancellation or acceleration of, or "put" right with respect to any
obligation or to loss of any benefit under, or except as contemplated by this
Agreement, require the consent of any person under, or result in the creation or
imposition of any Lien upon any property of Acquiror or Parent under, any
contract, agreement, indenture, lease or instrument, permit, concession,
franchise, or license applicable to Acquiror or Parent to which Acquiror or
Parent is a party or by which Acquiror or Parent (or their respective assets)
may be bound.
Notwithstanding the foregoing, no Violation referred to in clauses (ii), (iii)
and (iv) shall constitute a breach of this Section 4.3 to the extent such
violations would not reasonably be expected to have a Material Adverse Effect on
the business, assets, property, condition (financial or otherwise), results of
operations or prospects of Parent and Acquiror, taken as a whole, or upon the
ability of Parent or Acquiror to consummate the Merger and transactions
contemplated by this Agreement or perform their respective obligations hereunder
(a "Parent Material Adverse Effect").
(d) GOVERNMENTAL AND OTHER CONSENTS AND APPROVALS. No consent,
waiver, approval, license or authorization of or designation, declaration or
filing with any governmental agency or authority or other public persons or
entities in the United States is required in connection with the execution or
delivery by Acquiror of this Agreement or the consummation
-33-
<PAGE> 40
by Acquiror or Parent of the Merger or the transactions contemplated hereby,
other than (a) filings in the Commonwealth of Kentucky in accordance with the
KBCA, (b) filings required under the HSR Act, (c) filings required under the
Exchange Act, and (d) any action, filing, consent, waiver, approval,
authorization or permit that would not in the aggregate reasonably be expected
to prevent or delay consummation of the Merger in any material respect, or
otherwise prevent Parent or Acquiror from performing their respective
obligations under this Agreement in any material respect or would not in the
aggregate reasonably be expected to have a Parent Material Adverse Effect.
(e) PROXY AND SCHEDULE 13E-3 INFORMATION. The information
furnished to Res-Care by Acquiror and Parent specifically for inclusion in the
Definitive Proxy Statement and the Schedule 13E-3, or any amendment or
supplement thereto, or specifically for inclusion in any other documents filed
with the SEC by Res-Care in connection with the Merger, shall, with respect to
the Definitive Proxy Statement at the time the Definitive Proxy Statement is
mailed and at the time of the Special Meeting, and, with respect to the Schedule
13E-3 and such other documents, at the time of filing with the SEC and at the
time of such Special Meeting, not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. If at any time prior to the Special Meeting, any
event with respect to Acquiror or Parent shall occur which is required to be
described in an amendment of, or supplement to, either the Preliminary Proxy
Statement or the Definitive Proxy Statement, such event shall be so described by
Parent or Acquiror and provided to Res-Care. All documents Parent or Acquiror
are responsible for filing with the SEC in connection with the transaction
contemplated herein will comply as to form, in all material respects, with the
Exchange Act and the rules and regulations thereunder.
(f) FINANCING. Acquiror has entered into commitment letters (the
"Financing Letters") pursuant to which the financing sources have committed to
the Acquiror, subject to the terms and conditions therein, and assuming that all
of the representations and warranties of Res-Care made herein are true and
correct in all material respects as of the Closing, funds which shall be
sufficient to consummate the transactions contemplated hereby (including all
indebtedness which must be refinanced), to pay all related fees and expenses and
to enable the Surviving Corporation to conduct business following the merger
consistent with past practice (the "Financing"). Acquiror has delivered true,
correct and complete copies of the Financing Letters to Res-Care. Each Financing
Letter is in full force and effect and has not been amended or terminated in any
manner adverse to Res-Care. Acquiror has taken all other actions required to
cause the Financing Letters to be effective, and each of the Financing Letters
is a valid and binding commitment of Acquiror. Assuming that all of the
representations and warranties of Res-Care made herein are true and correct,
Acquiror is not, as of the date hereof, aware of any fact, occurrence or
condition that makes any of the assumptions or statements therein inaccurate in
any material respect or that would reasonably be expected to cause the
commitment provided in the Financing Letters to be terminated or ineffective or
any of the conditions contained therein not to be met. Parent and Acquiror will
use their reasonable best efforts to obtain the Financing on reasonably
satisfactory conditions. Notwithstanding anything to the contrary contained
herein, Res-Care acknowledges that in order to satisfy this representation and
the obligations set forth in Section 5.1(d) (Conditions to Each Party's
Obligation to Effect the Merger), neither Parent nor Acquiror shall have to take
any action which necessitates (i) except for payment of fees or expenses
pursuant to the terms of the Financing Letters, the payment of money by
-34-
<PAGE> 41
Acquiror or Parent, (ii) any increase in the equity commitments reflected in the
Financing Letters or (iii) entering into commitment letters other than the
Financing Letters having terms and conditions which differ from the terms and
conditions set forth in the Financing Letters.
(g) BROKERS AND FINDERS. Except for Bear Stearns, which has been
engaged pursuant to an Engagement Letter dated November 5, 1999, the fees and
expenses of which shall be paid by Acquiror, Acquiror has not engaged any
broker, finder or investment banker which engagement would reasonably be
expected to require the payment of any brokerage, finder's or other fees by
Res-Care in connection with the transaction contemplated hereby.
(h) NO PRIOR ACTIVITIES. Acquiror and Parent have not incurred,
and will not incur, directly or through any subsidiary, any liabilities or
obligations, except those incurred in connection with their organization or with
the negotiation and consummation of the Merger, and the Financing. Except as
contemplated by this Agreement, the transaction contemplated hereby and the
Financing Letters, Acquiror and Parent have not engaged in any business
activities of any type or kind whatsoever, or entered into any agreements or
arrangements with any person or entity, or become subject to or bound by any
obligation or undertaking.
(i) LITIGATION. There is no legal action, suit, arbitration or
other legal, administrative or other governmental investigation, inquiry or
proceeding (whether federal, state, local or foreign) pending or, to the
knowledge of Acquiror or Parent, threatened against or affecting Acquiror or
Parent or any of its properties, assets, business, franchises or governmental
approvals before any court or governmental department, commission, board,
bureau, agency, instrumentality or arbitrator, which, individually or in the
aggregate, would reasonably be expected to materially and adversely affect the
ability of Acquiror or Parent to carry out, or prevent or make unduly
burdensome, the Merger or the transactions contemplated by this Agreement. There
is no basis for any such other claim, action, suit, proceeding or investigation
that would, individually or in the aggregate, reasonably be expected to have a
Parent Adverse Material Effect.
(j) ACQUIROR VOTE OBTAINED. The affirmative vote of a majority
of the shares of Acquiror Common Stock is the only vote of the holders of any
class or series of Acquiror's securities necessary to approve this Agreement and
the Merger under the KBCA, and such vote has been obtained.
(k) CERTAIN AGREEMENTS WITH ACQUIROR. Acquiror has delivered to
Res-Care true, correct and complete terms of their arrangements with each of
Ronald G. Geary, Jeffrey M. Cross, Paul G. Dunn, Ralph G. Gronefeld, Jr., and E.
Halsey Sandford.
(l) FRAUD AND ABUSE. Except to the extent that any of the
following would not be necessary in order that the business of each of Res-Care
and its subsidiaries can be conducted immediately following the Effective Time
substantially in the same manner as heretofore conducted, none of Acquiror or
Parent nor, to the knowledge of Acquiror or Parent, any other person or entity
acting or behalf of Acquiror or Parent, or, to the knowledge of Acquiror or
Parent, any persons who provide professional services under agreements with
Acquiror or Parent, has engaged in any activities which are prohibited under
federal Medicaid, health care fraud, false claims or false statement statutes or
the regulations pertaining thereto, including consumer protection statutes, or
which are prohibited by rules of professional conduct.
-35-
<PAGE> 42
(m) INDEPENDENT INVESTIGATION. Acquiror hereby acknowledges and
affirms that it has conducted and completed its own investigation, analysis and
evaluation of Res-Care, that it has made all such reviews and inspections of the
business, assets, results of operations, condition (financial and otherwise) and
prospects of Res-Care as it has deemed necessary or appropriate, that it has had
the opportunity to request all information it has deemed relevant to the
foregoing from Res-Care and has received responses it deems adequate and
sufficient to all such requests for information, and that in making its decision
to enter into this Agreement and to consummate the transactions contemplated
hereby it has relied solely on (i) its own investigation, analysis and
evaluation of Res-Care and (ii) the representations, warranties and convenants
of Res-Care contained in this Agreement and in, the documents delivered by
Res-Care pursuant hereto.
ARTICLE 5
CONDITIONS
5.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following conditions
unless waived in accordance with Section 6.4 (Waiver):
(a) This Agreement and the Merger shall have been approved at or
prior to the Effective Time by the holders of a majority of the outstanding
shares of Res-Care Common Stock entitled to vote thereon, and at the Special
Meeting more Disinterested Shares shall have been voted for the Merger than
against the Merger;
(b) No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal restraint or prohibition preventing the consummation of the Merger or any
of the other transactions contemplated hereby shall be in effect;
(c) Any applicable waiting period under the HSR Act shall have
expired or early termination shall have been granted; and
(d) Acquiror shall have received the proceeds of the Financing
on terms and conditions reasonably satisfactory to Acquiror. Acquiror
acknowledges that receiving the proceeds of the Financing on the terms and
conditions as set forth in the Financing Letters shall satisfy this condition.
5.2 CONDITIONS TO OBLIGATION OF RES-CARE TO EFFECT THE MERGER. The
obligations of Res-Care to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following additional
conditions, unless waived by Res-Care:
(a) The representations and warranties of the Acquiror and
Parent set forth in this Agreement that are qualified as to materiality shall be
true and correct, and the representations and warranties of the Acquiror and
Parent set forth in this Agreement that are not so qualified shall be true and
correct in all material respects, in each case, as of the date of this Agreement
and as of the Effective Time, as though made on and as of the Effective Time,
except
-36-
<PAGE> 43
to the extent the representation or warranty is expressly limited by its terms
to another date, in which case it shall have been true and correct as of such
date, and the Acquiror and Parent shall have received a certificate (which
certificate may be qualified by knowledge to the same extent as the
representations and warranties of the Acquiror and Parent contained in this
Agreement are so qualified) signed on behalf of each of the Acquiror and Parent
by an executive officer of the Acquiror and Parent, respectively, to such
effect, provided that such signatories shall not have any personal liability in
connection therewith; PROVIDED, HOWEVER, that Acquiror and Parent shall have the
opportunity to cure any breach of Section 4.3(l) (Fraud and Abuse) within 30
days of such a breach becoming known to them;
(b) Acquiror and Parent shall have performed in all material
respects all obligations required to be performed by them under this Agreement
prior to the Effective Time, and Res-Care shall have received a certificate from
each of Acquiror and Parent signed by its President, to that effect, PROVIDED
that such signatories shall not have any personal liability in connection
therewith; and
(c) Parent and Acquiror shall have caused the valuation firm
which has delivered a solvency letter to the financial institution providing the
debt financing for the Merger (or, if no such letter has been provided thereto,
a valuation firm reasonably acceptable to Res-Care) to have delivered to
Res-Care a letter addressed to its board of directors in form and substance
reasonably satisfactory thereto as to the solvency of Res-Care and its
subsidiaries after giving effect to the Merger, the financing arrangements
contemplated by Parent and Acquiror with respect to the Merger and the other
transactions contemplated hereby.
5.3 CONDITIONS TO OBLIGATIONS OF ACQUIROR AND PARENT TO EFFECT THE
MERGER. The obligations of Acquiror and Parent to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
additional conditions, unless waived by Acquiror or Parent:
(a) The representations and warranties of Res-Care set forth in
this Agreement that are qualified as to materiality shall be true and correct,
and the representations and warranties of Res-Care set forth in this Agreement
that are not so qualified shall be true and correct in all material respects, in
each case, as of the date of this Agreement and as of the Effective Time, as
though made on and as of the Effective Time, except to the extent the
representation or warranty is expressly limited by its terms to another date, in
which case it shall have been true and correct as of such date, and the Parent
shall have received a certificate (which certificate may be qualified by
knowledge to the same extent as the representations and warranties of Res-Care
contained in this Agreement are so qualified) signed on behalf of Res-Care by
the President and Chief Executive Officer of Res-Care to such effect, PROVIDED
that such signatories shall not have any personal liability in connection
therewith;
(b) Res-Care shall have performed in all material respects all
obligations required to be performed by it under this Agreement prior to the
Effective Time and Acquiror shall have received a certificate of Res-Care signed
by the President and the Chief Financial Officer of Res-Care to that effect,
PROVIDED that such signatories shall not have any personal liability in
connection therewith;
-37-
<PAGE> 44
(c) No statute, rule, regulation, executive order, judgment,
decree or injunction shall have been enacted, promulgated or enforced, and no
action or proceeding shall have been brought by a governmental body or agency or
shall be pending, which would reasonably be expected to (i) prevent or
substantially delay the consummation of the Merger, (ii) cause the Merger to be
rescinded or (iii) impose material limitations on the ability of the Parent or
the Acquiror effectively to acquire, hold or operate the business of Res-Care
and its subsidiaries taken as a whole;
(d) Parent and Acquiror shall have been furnished with
evidence reasonably satisfactory to them of the timely consent or approval of,
or notice to, as the case may be, each governmental authority or other person or
entity whose consent or approval, or to whom notice, is, respectively required
in connection with the execution or delivery by Res-Care, Parent or Acquiror of
this Agreement or the consummation of the transactions contemplated hereby or
the absence of which would reasonably be expected to (A) impose any material
limitation on the ability of Parent or Acquiror effectively to acquire, hold or
operate the business of Res-Care and its subsidiaries, taken as a whole, in a
manner consistent with past practice, (B) result in a Material Adverse Effect,
(C) result in change in ownership or control payments in excess of $1,000,000 in
the aggregate, or (D) result in losses in annual revenue in excess of $4,000,000
in the aggregate;
(e) Since the date of this Agreement, there shall have
occurred no event, whether individually or collectively, which would reasonably
be expected to have a Material Adverse Effect;
(f) The number of Dissenting Shares shall constitute no
greater than 7.5% of the total number of Res-Care Shares outstanding immediately
prior to the Effective Time; and
(g) Res-Care shall have taken all necessary actions to amend
or terminate its or its subsidiaries' 401(k) plans and other qualified plans,
such that Res-Care securities are neither permitted nor required as an
investment option or as a means of distribution under any 401(k) plans or other
qualified plans.
ARTICLE 6
TERMINATION; NON-SURVIVAL OF REPRESENTATIONS,
WARRANTIES AND COVENANTS; WAIVER AND AMENDMENT
6.1 TERMINATION. This Agreement may be terminated, and the Merger
abandoned, at any time prior to the Effective Time, by:
(a) mutual written consent of the boards of directors of the
Constituent Corporations;
(b) Acquiror by giving written notice to Res-Care at any time
prior to the Effective Time (i) in the event Res-Care has breached any
representation, warranty, or covenant contained in this Agreement in any
material respect, Acquiror has notified Res-Care of the breach, and the breach
has continued without cure for a period of thirty (30) days after the notice of
breach, unless Res-Care is using its reasonable best efforts to cure such
breach, then such period shall be extended for an additional thirty (30) days,
or (ii) if the Closing shall not have
-38-
<PAGE> 45
occurred on or before September 30, 2000, by reason of the failure of any
condition precedent under Section 5.1 (Conditions to Each Party's Obligations to
Effect the Merger) or 5.3 (Conditions to Obligations of Acquiror and Parent to
Effect the Merger) hereof (unless the failure results primarily from Acquiror
breaching any representation, warranty, or covenant contained in this
Agreement);
(c) Res-Care by giving written notice to Acquiror at any time
prior to the Effective Time (i) in the event Acquiror has breached any
representation, warranty, or covenant contained in this Agreement in any
material respect, Res-Care has notified Acquiror of the breach, and the breach
has continued without cure for a period of thirty (30) days after the notice of
breach, unless Acquiror is using its reasonable best efforts to cure such
breach, then such period shall be extended for an additional thirty (30) days or
(ii) if the Closing shall not have occurred on or before September 30, 2000, by
reason of the failure of any condition precedent under Sections 5.1 (Conditions
to Each Party's Obligation to Effect the Merger) or 5.2 (Conditions to
Obligation of Res-Care to Effect the Merger) hereof (unless the failure results
primarily from Res-Care breaching any representation, warranty or covenant
contained in this Agreement);
(d) Res-Care, by written notice to Acquiror, pursuant to
Section 3.9 (Acquisition Proposals) hereof;
(e) Acquiror, by written notice to Res-Care, if (i) the board
of directors of Res-Care or the Special Committee has withdrawn, modified or
changed its approval or recommendation of this Agreement or the Merger, or
approved or recommended an Acquisition Proposal, (ii) Res-Care enters into any
agreement with a Person with respect to a transaction the proposal of which
qualifies as an Acquisition Proposal, or (iii) (A) a third party commences a
tender offer or exchange offer for 25% or more of the outstanding shares of
Res-Care Common Stock and (B) the board of directors of Res-Care has recommended
that the shareholders of Res-Care tender their shares in such tender or exchange
offer, or (iv) the board of directors of Res-Care or the Special Committee shall
have resolved to do any of the foregoing;
(f) Res-Care or Acquiror, by written notice to the other, if
upon a vote at the Special Meeting, any approval of the shareholders of Res-Care
necessary to consummate the Merger and the transactions contemplated hereby
shall not have been obtained; or
(g) any of the parties, by written notice, if any court of
competent jurisdiction or other governmental entity shall have issued an order,
decree or ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting the Merger and such order, decree, ruling or other action
shall have become final and nonappealable.
Any action to be taken to terminate this Agreement under this Section shall be
taken by, or pursuant to authority granted by, the boards of directors of
Res-Care or Acquiror, as applicable. Any such action by Res-Care shall be
authorized by the Special Committee.
6.2 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The respective
representations and warranties of Res-Care and Acquiror contained herein or in
any certificate delivered pursuant hereto shall expire with, and be terminated
and extinguished upon, consummation of the Merger, and thereafter neither
Surviving Corporation nor Res-Care or Acquiror or any
-39-
<PAGE> 46
officer, director, principal or employee thereof shall be under any liability
whatsoever with respect to any such representation or warranty. This Section 6.2
shall have no effect upon any other covenant or agreement of the parties hereto,
whether to be performed before or after the consummation of the Merger.
6.3 AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto; PROVIDED,
HOWEVER, that after approval of this Agreement by the shareholders of Res-Care,
no amendment may be made which reduces the amount or changes the form of
consideration to be received in the Merger or otherwise changes or effects any
change which would reasonably expected to adversely affect the holders of
Res-Care Common Stock without the further approval of the shareholders of
Res-Care in accordance with this Section 6.3.
6.4 WAIVER. At any time prior to the Effective Time, whether before or
after the Special Meeting, any party hereto, by action taken by its board of
directors, may (i) extend the time for the performance of any of the obligations
or other acts of any other party hereto, or (ii) subject to the proviso
contained in Section 6.3 (Amendment), waive compliance with any of the
agreements of any other party or with any conditions (other than those appearing
in Section 5.1(a) and (c) (Conditions to Each Party's Obligations to Effect the
Merger)) to its own obligations. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party by a duly authorized officer, and, in
the case of Res-Care, authorized by the Special Committee.
6.5 EFFECT OF TERMINATION. In the event of the termination of this
Agreement under Section 6.1(Termination), this Agreement shall thereafter become
void and have no effect and no party hereto shall have any liability to any
other party hereto or its shareholders or directors or officers in respect
thereof, except that the provisions of Section 3.8 (Access to Res-Care's Books
and Records) and the Confidentiality Agreements, and Section 6.6 (Certain
Payments) and Article 7 (General Agreements) shall survive any such termination
if such obligations arose at or before the time of such termination.
6.6 CERTAIN PAYMENTS.
(a) In the event that:
(i) this Agreement is terminated pursuant to
Section 6.1(d) or (e) (Termination);
(ii) an Acquisition Proposal is commenced,
publicly proposed, publicly disclosed or communicated to Res-Care at any time
after the date of this Agreement and Res-Care, either on or prior to the date
which is one (1) year after the termination of this Agreement for any reason
other than a termination by Res-Care under Section 6.1(c) (Termination),
consummates with any Person a transaction the proposal of which would reasonably
be expected to otherwise qualify as an Acquisition Proposal or enters into a
definitive agreement with a Person with respect to a transaction the proposal of
which would reasonably be expected to otherwise qualify as an Acquisition
Proposal;
-40-
<PAGE> 47
(iii) the board of directors of Res-Care,
withdraws or modifies its approval or recommendation of this Agreement or the
Merger; or
(iv) in the event that any approval of the
shareholders of Res-Care necessary to consummate the Merger and transactions
contemplated hereby shall not have been obtained and an Acquisition Proposal is
commenced, publicly proposed, publicly disclosed or communicated to Res-Care,
and Res-Care, either on or prior to the date which is one (1) year after the
termination of this Agreement under Section 6.1(f) (Termination), consummates
with any Person a transaction the proposal of which would reasonably be expected
to otherwise qualify as an Acquisition Proposal or enters into a definitive
agreement with a Person with respect to a transaction the proposal of which
would reasonably be expected to otherwise qualify as an Acquisition Proposal;
then in any such event, Res-Care shall pay Acquiror Twelve Million Dollars
($12,000,000) plus an amount equal to the lesser of (A) Four Million Dollars
($4,000,000), or (B) the actual and reasonably documented out-of-pocket fees and
expenses incurred by Acquiror, Parent and shareholders of Parent in connection
with this Agreement and the transactions contemplated hereby, exclusive in all
events of any fee due to Parent or any of its stockholders or affiliates, which
amounts shall be payable in immediately available funds and within one business
day after such event has occurred (or in the case of fees and expenses, within
three business days after Res-Care's receipt of reasonable documentation
thereof).
(b) (i) In the event that this Agreement is terminated by
Acquiror or Res-Care pursuant to Section 6.1(b)(i) or 6.1(c)(i) (Termination),
the breaching party shall pay the non-breaching party, in immediately available
funds within three business days after the breaching party's receipt of
reasonable documentation thereof, an amount equal to the lesser of (A) Four
Million Dollars ($4,000,000), or (B) the actual and reasonably documented
out-of-pocket fees and expenses incurred by such non-breaching party in
connection with this Agreement and the transactions contemplated hereby
(exclusive of any fees due to the Parent or any of its stockholders or
affiliates in the event Acquiror is the non-breaching party).
(ii) In the event that any approval of the
shareholders of Res-Care necessary to consummate the Merger and the transactions
contemplated hereby shall not have been obtained, Res-Care shall pay Acquiror,
in immediately available funds within three business days after the date of the
Special Meeting at which such approval was not obtained, an amount equal to the
lesser of (A) Four Million Dollars ($4,000,000), or (B) the actual and
reasonably documented out-of-pocket fees and expenses incurred by Acquiror,
Parent and shareholders of Parent in connection with this Agreement and the
transactions contemplated hereby (exclusive of any fees due to the Parent or any
of its stockholders or affiliates).
(iii) In the event that this Agreement is terminated
by Acquiror pursuant to Section 6.1(b)(ii) (Termination) as a result of the
failure to satisfy the conditions contemplated by Sections 5.1(b) or (c)
(Conditions to Each Party's Obligation to Effect the Merger) or Sections 5.3(e),
(f) or (g) (Conditions to Obligations of Acquiror and Parent to Effect the
Merger), Res-Care shall pay Acquiror, in immediately available funds within
three business days after the occurrence of such event, an amount equal to the
lesser of (A) Four Million Dollars ($4,000,000), or (B) the actual and
reasonably documented out-of-pocket fees and expenses incurred by Acquiror,
Parent and shareholders of Parent in connection with this
-41-
<PAGE> 48
Agreement and the transactions contemplated hereby (exclusive of any fees due to
Parent or any of its stockholders or affiliates).
(c) The payments made by Acquiror to Res-Care, or by Res-Care
to Acquiror, as set forth above shall represent the sole and exclusive remedy at
law or in equity to which either party and its officers, directors,
representatives and affiliates shall be entitled in the event this Agreement
shall be terminated in the circumstances contemplated by subsection (a) or (b)
above. Such payments shall be made without duplication. Accordingly, Acquiror
shall not be entitled to payments under Section 6.6(a) in more than one
instance, and if Acquiror is entitled to payments under Section 6.6(a) it shall
not be entitled to payments under Section 6.6(b); PROVIDED, HOWEVER, that if
Acquiror is entitled to payments under Section 6.6(b) it shall be entitled to
payments under Section 6.6(a) to the extent applicable and not duplicative.
ARTICLE 7
GENERAL AGREEMENTS
7.1 NOTICE. All notices, requests and other communications to any
party shall be in writing (including telecopy or similar writing) and shall be
given,
(a) If to Acquiror:
c/o RWD Holdings, Inc.
10140 Linn Station Road
Louisville, Kentucky 40223
Attention: Ronald G. Geary
Facsimile No.: (502) 394-2164
and
c/o The Carlyle Group
520 Madison Avenue, 41st Floor
New York, New York 10022
Attention: W. Robert Dahl
Facsimile No: (212) 381-4901
and
-42-
<PAGE> 49
c/o Madison Dearborn Capital Partners III, L. P.
Three First National Plaza
Suite 3800
Chicago, Illinois 60602
Attn: Tim Sullivan
Facsimile No: (312) 895-1256
and
c/o Bear Stearns Merchant Banking Group
245 Park Avenue
New York, New York 10167
Attention: Richard Linhart
Facsimile No: (212) 272-7425
with copies to:
-43-
<PAGE> 50
Bear, Stearns & Co., Inc.
245 Park Avenue
New York, New York 10167
Attention: Robert J. Fraiman, Jr., Senior Managing
Director
Facsimile No: (212) 272-3613
and
Brown, Todd & Heyburn PLLC
400 West Market Street
Louisville, Kentucky
Attention: C. Edward Glasscock
Facsimile No.: (502) 581-1087
and
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
Attention: Richard S. Borisoff
Facsimile: (212) 757-3990
(b) If to Res-Care or Special Committee, to:
Res-Care, Inc.
Special Committee
10140 Linn Station Road
Louisville, Kentucky 40223
Attention: Bruce Lunsford
with copies to:
J.C. Bradford & Co.
330 Commerce Street
Nashville, Tennessee 37201
Attention: Thomas C. Wylly, II
Facsimile No.: (615) 271-1096
and
Bass, Berry and Sims PLC
315 Deaderick Street, Suite 2700
Nashville, Tennessee 37238
Attention: F. Mitchell Walker, Jr.
Facsimile No.: (615) 742-2775
or to such other address or telecopier number as such party may hereafter
specify for the purpose of notice to the other parties. Any such notice, request
or other communication shall be deemed
-44-
<PAGE> 51
to have been given and received on the day on which it is delivered or
telecopied (or, if such day is not a business day in Kentucky or if the notice
or other communication is not telecopied during business hours, at the place of
receipt, on the next following business day); PROVIDED that if notice or other
communication is given by telecopy, such notice or communication shall not be
deemed to have been given until receipt of a legible copy thereof and shall also
be given by certified mail or by overnight courier.
7.2 ENTIRE AGREEMENT. This Agreement (including the documents and
instruments referred to herein) and the Confidentiality Agreements constitute
the entire agreement and supersede all other prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof.
7.3 PARTIES IN INTEREST. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and, except as provided in Section
3.10 (Director and Officer Protection) with respect to the obligations of Parent
thereunder, nothing in this Agreement, express or implied, is intended to confer
upon any other person any rights or remedies of any nature whatsoever under or
by reason of this Agreement.
7.4 PUBLICITY. Res-Care and Acquiror shall consult with each other
before issuing any press releases or making any public statements with respect
to the Merger and shall not issue any such press release or such public
statement prior to such consultation and without the approval of the other
(which approval shall not be unreasonably withheld or delayed, and, with respect
to Res-Care, such approval shall not be required if (A) such disclosure is
required by (i) applicable law, rules and regulations or (ii) obligations under
the rules, regulations and listing requirements of the Nasdaq National Market
System) and (B) such party has used all reasonable efforts to consult with the
other party and to obtain such other party's consent but has been unable to do
so in a timely manner.
.
7.5 HEADINGS. The headings and the table of contents contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
7.6 INTERPRETATION. As used herein, "knowledge" (or words to such
effect) of Res-Care shall mean actual knowledge of the Leadership Team, and
"knowledge" (or words to such effect) of Acquiror shall mean the actual
knowledge of its officers.
7.7 ASSIGNMENT. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective permitted
successors and assigns of the parties hereto.
7.8 GOVERNING LAW. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the internal laws of the
Commonwealth of Kentucky, without giving effect to the principles of conflict of
laws thereof, except that the laws of the state of incorporation of a party
shall govern its internal corporate affairs. Each party hereby submits to the
jurisdiction of the Federal District Court of the Western District of Kentucky.
-45-
<PAGE> 52
7.9 COSTS AND EXPENSES. All costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such expenses.
7.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
7.11 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to the remedy of specific performance of the terms hereof, in addition
to any other remedy at law or equity.
7.12 WAIVER OF JURY TRIAL. EACH OF RES-CARE, PARENT AND ACQUIROR HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY IRREVOCABLY WAIVE, TO THE FULLEST
EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
7.13 TRANSACTION STRUCTURE. Parent is in the process of considering the
possibility of accomplishing the Merger through a structure different from the
structure contemplated in this Agreement in order to provide Parent with certain
accounting results different from the accounting results provided by the current
structure. If Parent determines that it wishes to alter the current structure of
the Merger to accomplish such accounting results, Res-Care agrees to reasonably
cooperate with Parent to amend this Agreement to restructure the form of the
Merger, PROVIDED that such restructuring shall have no adverse consequences to
Res-Care or its shareholders.
SIGNATURE PAGE FOLLOWS
-46-
<PAGE> 53
IN WITNESS WHEREOF, the parties have executed this Agreement by their
duly authorized officers as of the date first above written.
RES-CARE, INC.,
a Kentucky corporation
By /s/ Ronald G. Geary
Name: Ronald G. Geary
Title: Chairman, President and CEO
REDWOOD ACQUISITION, INC.,
a Kentucky corporation
By /s/ W. Robert Dahl
Name: W. Robert Dahl
Title: President
RWD HOLDINGS, INC.,
a Delaware corporation
By /s/ W. Robert Dahl
Name: W. Robert Dahl
Title: President
-47-
<PAGE> 54
EXHIBIT A
ARTICLES OF MERGER AND PLAN OF MERGER
-------------------------------------
<PAGE> 55
ARTICLES OF MERGER
OF
REDWOOD ACQUISITION, INC.
A KENTUCKY CORPORATION
INTO
RES-CARE, INC.
A KENTUCKY CORPORATION
1. Attached hereto as Annex A and made a part hereof is a Plan of
Merger (the "Plan of Merger") pursuant to which Redwood Acquisition, Inc., a
Kentucky corporation ("Acquiror"), shall merge with and into Res-Care, Inc., a
Kentucky corporation ("Res-Care"), in accordance with the laws of the
Commonwealth of Kentucky.
2. Acquiror has _____________ authorized shares of common stock, no par
value, of which _____ shares are issued and outstanding. The shareholders of
Acquiror were entitled to cast _______votes on the Plan of Merger. There were no
other voting groups.
3. The Plan of Merger was unanimously approved by the written consent
of all of the shareholders of Acquiror.
4. Res-Care has authorized shares of common stock, no par value, of
which _____________________ shares are issued and outstanding. The shareholders
of Res-Care were entitled to cast __________________ votes on the Plan of
Merger. There were no other voting groups.
5. The Plan of Merger was approved by the shareholders of Res-Care by a
vote of _____ shares FOR, _____ shares AGAINST, and _____ shares ABSTAINING.
6. The merger shall become effective as provided in the Plan of Merger
upon the filing of these Articles of Merger with the Kentucky Secretary of
State.
RES-CARE, INC.
By
-----------------------------------
Title:
-------------------------------
<PAGE> 56
ANNEX A
PLAN OF MERGER
This is a Plan of Merger (the "Plan of Merger") for the merger of
Redwood Acquisition, Inc. ("Acquiror"), a Kentucky corporation, into Res-Care,
Inc. ("Res-Care"), a Kentucky corporation.
ARTICLE 1
MERGER
1.1 The Merger. Upon the terms and conditions set forth in this Plan of
Merger and the Agreement and Plan of Merger (the "Plan of Merger") dated as of
April 12, 2000, among Res-Care, Acquiror and RWD Holdings, Inc. ("Parent"), a
Delaware corporation, Acquiror shall be merged with and into Res-Care (the
"Merger") at the Effective Time (as defined below), as permitted by and in
accordance with the Kentucky Business Corporation Act ("KBCA"). Acquiror and
Res-Care are herein sometimes referred to as the "Constituent Corporations," and
Res-Care, which shall be the surviving corporation following the effectiveness
of the Merger, is sometimes referred to herein as the "Surviving Corporation".
1.2 Effective Time. The Merger shall become effective and the closing
of the transactions contemplated by the Plan of Merger (the "Closing") shall
occur immediately upon the filing of the Articles of Merger with the Secretary
of State of the Commonwealth of Kentucky as provided in the KBCA (the date and
time of such filing and Closing being referred to herein as the "Effective
Time").
1.3 Effect of Merger. From and after the Effective Time:
(a) Acquiror shall merge with and into Res-Care and the separate
corporate existence of Acquiror shall cease.
(b) The title to all real estate and other property owned by the
Constituent Corporations shall be vested in the Surviving Corporation without
reversion or impairment.
(c) The Surviving Corporation shall have all liabilities, debts and
duties of each of the Constituent Corporations.
(d) A proceeding pending against either of the Constituent Corporations
may be continued as if the Merger did not occur or the Surviving Corporation may
be substituted in the proceeding for either of the Constituent Corporations.
<PAGE> 57
(e) The name of the Surviving Corporation shall from and after the
Effective Time be and continue to be "Res-Care, Inc." until changed in
accordance with applicable law.
(f) The articles of incorporation of the Surviving Corporation shall be
the articles of incorporation of Acquiror as in effect immediately prior to the
Effective Time, provided that the articles of incorporation shall be amended to
provide that the name of the Surviving Corporation is "Res-Care, Inc."
(g) The bylaws of Acquiror, as in effect immediately prior to the
Effective Time, shall be the bylaws of the Surviving Corporation until
thereafter amended in accordance with law, the articles of incorporation of the
Surviving Corporation and such bylaws.
(h) The directors of Acquiror immediately prior to the Effective Time
will be the initial directors of the Surviving Corporation, and the officers of
Res-Care immediately prior to the Effective Time will be the initial officers of
the Surviving Corporation, in each case until their successors are duly elected
or approved and qualified.
ARTICLE 2
CONVERSION OF SECURITIES AT THE EFFECTIVE TIME
2.1 Conversion of Securities of Redwood and Acquiror. At the Effective
Time, automatically by virtue of the Merger and without any action on the part
of Res-Care, Parent, Acquiror or the holders of any of their respective
securities:
(a) Each share of common stock, no par value, of Res-Care ("Res-Care
Common Stock") (shares of Res-Care Common Stock being hereinafter collectively
referred to as "Res-Care Shares" and individually as a "Res-Care Share") issued
and outstanding immediately prior to the Effective Time (other than any Res-Care
Shares cancelled pursuant to Section 2.1(b) and any Dissenting Shares (as
defined in Section 2.1(d) (collectively, the "Excluded Shares")) shall be
cancelled, extinguished and shall be converted automatically into the right to
receive an amount equal to $15.75 in cash, without interest (the "Cash Merger
Consideration"), payable to the holder thereof, as provided in Section 2.2, upon
surrender of the certificate formerly representing the Res-Care Shares being
converted into the right to receive the Cash Merger Consideration, less any
required withholding taxes;
(b) Each Res-Care Share held in the treasury of Res-Care and each
Res-Care Share owned by Acquiror (including Res-Care Shares contributed to
Parent by agreement with Parent which are in turn contributed by Parent to
Acquiror), if any, immediately prior to the Effective Time shall be cancelled,
extinguished and retired without any conversion thereof and no payment or
distribution shall be made with respect thereto;
(c) Each share of Acquiror's common stock, no par value ("Acquiror
Common Stock"), that is issued and outstanding immediately prior to the
Effective Time shall be converted into one newly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation;
<PAGE> 58
(d) Notwithstanding anything in this Plan of Merger to the contrary,
shares of Res-Care Common Stock issued and outstanding immediately prior to the
Effective Time held by a holder who has the right, if any, under the KBCA, to
obtain payment for the fair value of such shares in accordance with the
provisions of Subtitle 13, KRS 271B.13-010 to 271B.13-310 of the KBCA (or any
successor provision) ("Dissenting Shares") shall not be converted into a right
to receive the Cash Merger Consideration (but shall have the rights set forth in
Subtitle 13 of the KBCA (or any successor provision), if applicable), unless
such holder fails to perfect or otherwise loses such holder's right to such
payment, if any, pursuant to Subtitle 13 of the KBCA. If, after the Effective
Time, such holder fails to perfect or loses any such right to payment under
Subtitle 13 of the KBCA, each such Res-Care Share of such holder shall be
treated as a share that had been converted as of the Effective Time into the
right to receive the Cash Merger Consideration in accordance with Section
2.1(a); and
(e) As a result of their conversion pursuant to Section 2.1(a), all
Res-Care Shares (other than Excluded Shares) issued and outstanding immediately
before the Effective Time shall cease to be outstanding and shall automatically
be canceled and retired, and each certificate previously evidencing such
Res-Care Shares shall thereafter solely represent the right to receive the Cash
Merger Consideration pursuant to Section 2.1(a). Holders of Dissenting Shares
shall not, following the Effective Time, be entitled to vote such shares for any
purpose or be entitled to the payment of dividends or other distributions on
such shares except for the right to obtain payment for the fair value of such
shares in accordance with Subtitle 13 of the KBCA. The holders of certificates
evidencing such Res-Care Shares shall cease to have any rights with respect to
such Res-Care Shares except as otherwise provided herein or by law.
2.2 Payment of Cash for Res-Care Common Stock.
(a) At the Effective Time, Parent or Acquiror shall irrevocably deposit
or cause to be deposited with [insert entity selected by Acquiror as provided in
the Agreement and Plan of Merger] (the "Disbursing Agent"), as agent for the
holders of shares of Res-Care Common Stock, cash in the aggregate amount
required to effect conversion of shares of Res-Care Common Stock into the Cash
Merger Consideration at the Effective Time pursuant to Section 2.1(a) hereof.
Pending distribution pursuant to Section 2.2(b) hereof of the cash deposited
with the Disbursing Agent, such cash shall be held in trust for the benefit of
the holders of Res-Care Common Stock and shall not be used for any other
purposes. Parent and Surviving Corporation may direct the Disbursing Agent to
invest such cash, provided that such investments (i) shall be obligations of or
guaranteed by the United States of America, commercial paper obligations
receiving the highest rating from either Moody's Investors Services, Inc. or
Standard & Poor's Corporation, or certificates of deposit, bank repurchase
agreements or bankers acceptances of domestic commercial banks with capital
exceeding $250,000,000 (collectively "Permitted Investments") or money market
funds which are invested solely in Permitted Investments and (ii) shall have
maturities that will not prevent or delay payments to be made pursuant to
Section 2.2(b) hereof. To the extent that there are losses associated with
investments in the Permitted Investments, or such amount deposited with the
Disbursing Agent in order to make payment of the Cash Merger Consideration
diminishes for other reasons below the level required to make prompt payment of
the Cash Merger Consideration as contemplated by this Plan of Merger, the
Surviving Corporation shall promptly replace or restore the portion of the fund
necessary to pay the Cash Merger Consideration lost through investments or other
events so as to ensure that such fund is, at all times, maintained at a
<PAGE> 59
level sufficient to make such payments. Any interest and other income resulting
from such investments shall be paid upon request from time to time to the
Surviving Corporation. Promptly after the Effective Time, the Surviving
Corporation will send, or will cause the Disbursing Agent to send, to each
holder of Res-Care Shares at the Effective Time a letter of transmittal for use
in such exchange (which shall specify that the delivery shall be effected, and
risk of loss and title shall pass, only upon proper delivery of certificates
evidencing such shares to the Disbursing Agent). Each holder of a certificate or
certificates representing shares of Res-Care Common Stock cancelled on the
Effective Time pursuant to Section 2.1(a) hereof or cancelled thereafter
pursuant to Section 2.1(d), upon surrender of such certificate or certificates,
together with a properly completed letter of transmittal, to the Disbursing
Agent, will be entitled to receive the Cash Merger Consideration payable in
respect of such Res-Care Shares. Acquiror shall be entitled to deduct, withhold
and pay over to the applicable taxing authority from the consideration otherwise
payable pursuant to this Plan of Merger to any holder of Res-Care Shares such
amounts as Acquiror is required to deduct and withhold with respect to the
making of such payment under the Internal Revenue Code of 1986, as amended (the
"Code"), or any provision of state, local or foreign tax law. To the extent that
amounts are so withheld and paid over by Acquiror, such withheld amounts shall
be deemed for all purposes of this Plan of Merger as having been paid to the
holder of the Res-Care Shares in respect of which such deduction and withholding
was made by Acquiror.
(b) After surrender to the Disbursing Agent of any certificate which
prior to the Effective Time shall have represented any shares of Res-Care Common
Stock, the Disbursing Agent shall promptly distribute to the person in whose
name such certificate shall have been registered a check representing the amount
of cash into which such shares of Res-Care Common Stock shall have been
converted at the Effective Time pursuant to Section 2.1(a) hereof without
interest. Until so surrendered and exchanged, each such certificate shall, after
the Effective Time, be deemed to represent only the right to receive such cash,
and until such surrender and exchange, no cash shall be paid to the holder of
such outstanding certificate in respect thereof.
(c) If any cash deposited with the Disbursing Agent for purposes of
payment in exchange for shares of Res-Care Common Stock remains unclaimed
following the expiration of twelve (12) months after the Effective Time, such
cash shall be delivered to the Surviving Corporation by the Disbursing Agent,
and thereafter the Disbursing Agent shall not be liable to any persons claiming
any amount of such cash, and the surrender and exchange shall be effected
directly with the Surviving Corporation (subject to applicable abandoned
property, escheat and similar laws) and the holders of the certificates shall be
entitled to look to the Surviving Corporation only as general creditors thereof
with respect to the payment of the Cash Merger Consideration payable upon the
surrender of their certificates. No interest shall accrue or be payable with
respect to any amounts which any such holder shall be so entitled to receive.
The Surviving Corporation or the Disbursing Agent shall be authorized to pay the
cash attributable to any certificate theretofore issued which has been lost or
destroyed, upon receipt of satisfactory evidence of ownership of the shares of
Res-Care Common Stock represented thereby and of appropriate indemnification
should it be required.
(d) None of Acquiror, Parent, the Surviving Corporation or the
Disbursing Agent shall be liable to any person in respect of any cash delivered
in good faith to a public official pursuant to any requirement of applicable
abandoned property, escheat or similar law.
<PAGE> 60
(e) If payment is to be made to a Person other than the Person in whose
name a surrendered certificate, which prior to the Effective Time shall have
represented any shares of Res-Care Common Stock, is registered, it shall be a
condition to such payment that the certificate so surrendered shall be endorsed
or shall otherwise be in proper form for transfer, and that the Person
requesting such payment shall have paid any transfer and other taxes required by
reason of such payment in a name other than that of the registered holder of the
certificate surrendered or shall have established to the satisfaction of the
Surviving Corporation or the Disbursing Agent that such tax either has been paid
or is not payable. As used in this Plan of Merger, "Person" means an individual,
a corporation, a limited liability company, a partnership, an association, a
trust or any other entity or organization, including a government or political
subdivision or any agency or instrumentality thereof.
(f) From and after the Effective Time, the holders of shares of
Res-Care Common Stock outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to such shares of Res-Care Common Stock
except as otherwise provided herein or by law.
(g) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of any shares of Res-Care Common
Stock which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, certificates for shares of Res-Care Common Stock are
presented to the Surviving Corporation, they shall be cancelled and promptly
exchanged for the Cash Merger Consideration except as provided in Section
2.2(d).
(h) Any portion of the Cash Merger Consideration made available to the
Disbursing Agent pursuant to Section 2.2(a) to pay for Res-Care Shares for which
appraisal rights have been perfected shall be returned to Acquiror, upon demand.
2.3 Exchange of Acquiror Common Stock Certificate. Immediately after
the Effective Time, upon surrender by the record holder of the certificate, duly
endorsed in blank, representing the shares of Acquiror Common Stock outstanding
immediately prior to the Effective Time, the Surviving Corporation shall deliver
to such record holder a share certificate, registered in such holder's name,
representing the number of shares of common stock of the Surviving Corporation
to which such record holder is so entitled by virtue of Section 2.1(c). Such
certificate will bear a legend restricting the transferability of such shares of
the Surviving Corporation except in accordance with applicable federal and state
securities laws.
2.4 Termination of Res-Care Stock Option Plans. All outstanding stock
options issued by Res-Care (collectively, the "Stock Options"), including
without limitation those issued under the (i) 1991 Incentive Stock Option Plan,
as amended, (ii) 1993 Nonemployee Directors Stock Ownership Incentive Plan and
(iii) 1998 Omnibus Stock Plan, shall terminate upon the Merger. At the Effective
Time, the Surviving Corporation shall pay each holder of Stock Options, whether
vested or unvested, to the extent such Stock Options have not been previously
exercised or cancelled, (x) cash in an amount equal to the product of (i) the
difference between the Cash Merger Consideration and the exercise price of such
Stock Options (but in no event less than 0), multiplied by (ii) the number of
shares of Redwood Common Stock subject to such Stock Options, less (y) the
amount of all applicable withholding taxes; provided, that those holders of
<PAGE> 61
Stock Options that have agreed in writing with Acquiror to accept options to
purchase common stock of Parent shall not receive any cash payment with respect
to cancelled Stock Options.
<PAGE> 62
EXHIBIT B
VOTING AGREEMENT
----------------
<PAGE> 1
EXHIBIT 2.2
VOTING AND NON-COMPETITION AGREEMENT
VOTING AGREEMENT, dated as of April 12, 2000 (the
"Agreement"), by and among RWD Holdings, Inc., a Delaware corporation
("Parent"), and the Persons listed on Schedule A hereto (each, a "Shareholder"
and, collectively, the "Shareholders").
WHEREAS, Res-Care, Inc., a Kentucky corporation (the
"Company"), and Parent propose to enter into an Agreement and Plan of Merger in
the form attached hereto as Exhibit A (as amended, the "Merger Agreement"),
which provides for, among other things, the merger of a wholly-owned subsidiary
of Parent with and into the Company (the "Merger");
WHEREAS, as of the date hereof, the Shareholders are holders
of record or Beneficially Own (as defined herein) shares of common stock, no par
value (the "Company Common Stock"), of the Company; and
WHEREAS, as a condition to the willingness of Parent to enter
into the Merger Agreement, Parent has required that each Shareholder agree, and
in order to induce Parent to enter into the Merger Agreement, each Shareholder
has agreed, to enter into this Agreement with respect to all of the shares of
Company Common Stock now held of record or Beneficially Owned and which may
hereafter be acquired by such Shareholder (collectively, the "Shares").
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements contained herein, and intending to be legally
bound hereby, the parties hereto hereby agree as follows:
<PAGE> 2
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 GENERAL. Capitalized terms used and not defined herein have the
respective meanings ascribed to them in the Merger Agreement.
Section 1.2 BENEFICIAL OWNERSHIP. For purposes of this Agreement,
"Beneficially Own" or "Beneficial Ownership" with respect to any securities
shall mean "beneficial ownership" of such securities (as determined pursuant to
Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), including pursuant to any agreement, arrangement or understanding,
whether or not in writing. Without duplicative counting of the same securities
by the same holder, securities Beneficially Owned by a Shareholder shall include
securities Beneficially Owned by all other Persons (as defined in the Merger
Agreement) with whom such Person would constitute a "group" within the meaning
of Section 13(d) of the Exchange Act other than parties to this Agreement.
ARTICLE II
Section 2.1 VOTING AGREEMENT. Each of the Shareholders hereby irrevocably
and unconditionally agrees that during the term of this Agreement as specified
in Section 5.1, at any meeting of the shareholders of the Company, however
called, and in any action by consent of the shareholders of the Company, each of
the Shareholders shall vote (or cause to be voted) the Shares held of record (to
the extent such Person also has the right to vote such Shares) or Beneficially
Owned (to the extent such Person also has the right to vote such Shares) by such
Shareholder:
2
<PAGE> 3
(a) in favor of the Merger, the Merger Agreement (provided that the
Merger Agreement shall not have been amended in a manner materially adverse to
the interests of the Shareholders thereunder) and the transactions contemplated
by the Merger Agreement (each of the Shareholders acknowledges receipt and
review of a copy of the Merger Agreement); and
(b) against any Business Combination (as defined below) other than the
Merger. For purposes of this Agreement, "Business Combination" shall mean,
whether effected in one transaction or a series of transactions, (a) any merger,
consolidation, reorganization or other business combination pursuant to which
the business of the Company is combined with that of one or more Persons
including, without limitation, any joint venture, in violation of the Merger
Agreement, or (b) the acquisition, directly or indirectly, by another Person of
all or a substantial portion of the assets of, or of any right to all or a
substantial portion of the revenues or income of, the Company by way of a
negotiated purchase, lease, license, exchange, joint venture or other means, in
violation of the Merger Agreement, or (c) the acquisition, directly or
indirectly, by another Person of control of the Company through a proxy contest
or otherwise, in violation of the Merger Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each of the Shareholders hereby represents and warrants,
severally and not jointly, to Parent as follows:
Section 3.1 AUTHORITY RELATIVE TO THIS AGREEMENT. Such Shareholder has all
necessary power and authority to execute and deliver this Agreement, to perform
its obligations
3
<PAGE> 4
hereunder and to consummate the transactions contemplated hereby. Where such
Shareholder is a corporation, limited liability company, partnership or other
entity, the execution and delivery of this Agreement by such Shareholder and the
consummation by such Shareholder of the transactions contemplated hereby have
been duly and validly authorized by the board of directors or other governing
body of such Shareholder, and no other proceedings on the part of such
Shareholder are necessary to authorize this Agreement or to consummate such
transactions. This Agreement has been duly and validly executed and delivered by
such Shareholder and constitutes a legal, valid and binding obligation of such
Shareholder, enforceable against such Shareholder in accordance with its terms,
except to the extent enforceability may be limited by bankruptcy, insolvency,
moratorium or other laws affecting creditors' rights generally or by general
principles governing the availability of equitable remedies.
Section 3.2 NO CONFLICT.
(a) The execution and delivery of this Agreement by such Shareholder
does not, and the performance of this Agreement by such Shareholder shall not,
(i) where such Shareholder is a corporation, limited liability company,
partnership or other entity, conflict with or violate the organizational
documents of such Shareholder, (ii) conflict with or violate any agreement,
arrangement, law, rule, regulation, order, judgment or decree to which such
Shareholder is a party or by which such Shareholder (or the Shares held of
record or Beneficially Owned by such Shareholder) is bound or affected or (iii)
result in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or encumbrance on any of the Shares held of record or
Beneficially Owned by such Shareholder pursuant to any note, bond, mortgage,
indenture, contract, agreement, lease,
4
<PAGE> 5
license, permit, franchise or other instrument or obligation to which such
Shareholder is a party or by which such Shareholder (or the Shares held of
record or Beneficially Owned by such Shareholder) is bound or affected, except,
in the case of clauses (ii) and (iii) of this Section 3.2(a), for any such
conflicts, violations, breaches, defaults or other occurrences which would not
prevent or delay the performance by such Shareholder of its obligations under
this Agreement.
(b) The execution and delivery of this Agreement by such Shareholder
does not, and the performance of this Agreement by such Shareholder shall not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental entity except for applicable requirements, if
any, of the Exchange Act, and except where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not prevent or delay the performance by such Shareholder of its
obligations under this Agreement.
Section 3.3 TITLE TO THE SHARES. As of the date hereof, such Shareholder is
the record or Beneficial Owner of the number of Shares listed opposite the name
of such Shareholder on Schedule A hereto. The Shares listed opposite the name of
such Shareholder on Schedule A hereto are all the securities of the Company
either held of record or Beneficially Owned by such Shareholder. Such
Shareholder has not appointed or granted any proxy, which appointment or grant
is still effective, with respect to the Shares held of record or Beneficially
Owned by such Shareholder. Each Shareholder has the right to vote or cause to be
voted each of the Shares listed opposite the name of such Shareholder on
Schedule A hereto and, except as set forth on Schedule 3.3 hereto, the Shares
listed opposite the name of such Shareholder on Schedule A hereto are owned free
and clear of all security interests, liens, claims, pledges,
5
<PAGE> 6
options, rights of first refusal, agreements, limitations on such Shareholder's
voting rights, charges and other encumbrances of any nature whatsoever.
ARTICLE IV
COVENANTS OF THE SHAREHOLDERS
Section 4.1 NO INCONSISTENT AGREEMENT OR ACTION. Each of the Shareholders
hereby covenants and agrees that such Shareholder shall not, or permit any
Person under such Shareholder's control to, enter into any voting agreement or
grant a proxy or power of attorney with respect to the Shares held of record or
Beneficially Owned by such Shareholder or form any "group" for purposes of the
Exchange Act or the rules promulgated thereunder. Except on the terms and
conditions set forth in Section 3.9 of the Merger Agreement, no Shareholder
shall (i) solicit, initiate, encourage (including by way of furnishing
information or assistance) or take any other action to facilitate, any inquiry
or the making of any proposal which constitutes, or may reasonably be expected
to lead to, any Acquisition Proposals (as defined in the Merger Agreement) or
agree to or endorse any Acquisition Proposal, (ii) propose, enter into or
participate in any discussions or negotiations regarding any of the foregoing,
(iii) furnish to any other Person any information with respect to the Company's
business, properties or assets or (iv) otherwise cooperate in any way with, or
assist or participate in, facilitate or encourage, any effort or attempt by any
other Person to do or seek any of the foregoing.
Section 4.2 TRANSFER OF TITLE.
(a) Each of the Shareholders hereby covenants and agrees that such
Shareholder shall not (i) tender any Shares, (ii) sell, assign or transfer
record or Beneficial Ownership of any of the Shares, or (iii) pledge,
hypothecate or otherwise dispose of any Shares.
6
<PAGE> 7
(b) Notwithstanding the foregoing, [ ] may, subject to compliance with
the rules and regulations of the Exchange Act, sell or pledge up to [ ] Shares,
as provided in an Agreement by and among the Company, Parent and [ ], dated as
of April 12, 2000 (the "[ ] Agreement").
Section 4.3 NON-COMPETE. For the duration of the Non-Competition Period (as
defined in Section 5.1(b)), each Shareholder shall not, whether for his account
or for any other Person, (i) engage in or be involved with any provider of
residential, training, educational or support services to populations with
special needs, including persons with developmental or other disabilities or
at-risk or troubled youth (the "Industry"), in the continental United States,
Canada or the Commonwealth of Puerto Rico (the "Territory") or engage in
competition with any business then conducted by the Company or any of its
subsidiaries, or (ii) serve as an employee, officer or director of or consultant
to, or independent contractor to or have any interest (as a partner, owner,
shareholder, joint venturer, lender, guarantor or otherwise) in any business
which is engaged in any part of the Industry or in competition with any business
then conducted by the Company or any of its subsidiaries. Without limiting the
generality of the foregoing, for the duration of the Non-Competition Period,
each Shareholder shall not, whether for his own account or for any other Person,
directly or indirectly, invest in any entity conducting business in the Industry
in the Territory or in any business in competition with any business then
conducted by the Company or any of its subsidiaries without the prior written
consent of the Company, provided that each Shareholder may make such investments
to the extent such Shareholder is legally compelled to do so pursuant to legally
binding commitments approved by Company; PROVIDED, HOWEVER, that each
Shareholder may negotiate transactions on behalf of the Company and other
parties so long as such Shareholder believes in good faith that such
transactions are in the best interests of the Company.
7
<PAGE> 8
Section 4.4 NON-SOLICITATION. For the duration of the Non-Competition
Period, each Shareholder shall not, whether for his own account or for any other
Person, solicit, raid, entice or induce any person that presently is or at any
time during the Non-Competition Period shall be (or, in the case of termination,
is at the time of termination) a management employee or officer of the Company
or any of its subsidiaries to become employed by any Person, and each
Shareholder shall not approach any such employee for such purpose or authorize
the taking of such actions by any other Person or assist any such Person in
taking such action.
ARTICLE V
MISCELLANEOUS
Section 5.1 TERMINATION.
(a) Except with respect to Sections 4.3 and 4.4, this Agreement shall
be effective as of the date of this Agreement and shall terminate upon the
earlier to occur of (i) the closing of the transactions contemplated by the
Merger Agreement and (ii) the date the Merger Agreement is terminated in
accordance with its terms.
(b) In respect of the obligations set forth in Sections 4.3 and 4.4,
this Agreement shall be effective as of the date of this Agreement and shall
terminate upon the earlier to occur of (i) five years following the closing of
the transactions contemplated by the Merger Agreement (the "Non-Competition
Period") and (ii) the date the Merger Agreement is terminated in accordance with
its terms.
Section 5.2 ADDITIONAL SHARES. If, after the date hereof, a Shareholder
acquires the right to vote any additional shares of Company Common Stock (any
such shares shall be referred to herein as "Additional Shares"), including,
without limitation, upon exercise of any
8
<PAGE> 9
option, warrant or right to acquire shares of Company Common Stock or through
any stock dividend or stock split, the provisions of this Agreement applicable
to the Shares shall be applicable to such Additional Shares as if such
Additional Shares had been Shares as of the date hereof. The provisions of the
immediately preceding sentence shall be effective with respect to Additional
Shares without action by any Person immediately upon the acquisition by a
Shareholder of record or Beneficial Ownership of such Additional Shares.
Section 5.3 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
Section 5.4 ENTIRE AGREEMENT. This Agreement and, with respect to [ ], the
[ ] Agreement constitute the entire agreement between Parent and the
Shareholders with respect to the subject matter hereof and supersedes all prior
agreements and understandings, both written and oral, between Parent and the
Shareholders with respect to the subject matter hereof.
Section 5.5 AMENDMENT AND WAIVER. No alteration, waiver, amendment or
supplement of this Agreement shall be binding or effective unless the same is
set forth in an instrument in writing signed by the parties hereto. The waiver
or failure to insist upon strict compliance with any condition or provision
hereof shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other waiver or failure.
Section 5.6 SEVERABILITY. If any term or other provision of this Agreement
is held to be invalid, illegal or unenforceable, all other conditions and
provisions of this Agreement shall
9
<PAGE> 10
nevertheless remain in full force and effect so long as the economic or legal
substance of this Agreement is not affected in any manner materially adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereby shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by applicable law
in a mutually acceptable manner in order that the terms of this Agreement remain
as originally contemplated.
Section 5.7 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Kentucky applicable
to agreements made and to be performed entirely within such state. Each party
hereby submits to the jurisdiction of the Federal District Court of the Western
District of Kentucky.
Section 5.8 WAIVER OF JURY TRIAL. Parent and each Shareholder hereby
irrevocably waives, to the fullest extent permitted by law, all rights to trial
by Jury in any action, proceeding or counterclaim (whether based on contract,
tort or otherwise) arising out of or relating to this Agreement or any of the
transactions contemplated hereby.
Section 5.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which, when taken
together, shall constitute one and the same instrument.
10
<PAGE> 11
IN WITNESS WHEREOF, each of the Shareholders and Parent have
caused this Agreement to be duly executed as of the date first written above.
RWD HOLDINGS, INC.
By:
---------------------------------
Name: W. Robert Dahl
Title: President
THE SHAREHOLDERS
[ ]
[ ]
[ ]
[ ]
[ ]
11
<PAGE> 12
SCHEDULE A
----------
<TABLE>
<CAPTION>
NUMBER OF SHARES
--------------------------------------------------
NAME OF SHAREHOLDER OWNER OF RECORD VESTED STOCK OPTION TOTAL
- ------------------- --------------- ------------------- -----
<S> <C> <C> <C>
James R. Fornear 1,438,548 1,125 1,439,673
Margaret H. Fornear 661,667 ----- 661,667
James R. Fornear and
Margaret M. Fornear jointly 702,209 ----- 702,209
Ronald G. Geary 799,781 816,046 1,615,827
Eugene Halsey Sandford 141,689 2,025 143,714
Jeffrey M. Cross 22,650 159,325 181,975
Paul G. Dunn 1,300 131,795 132,500
Ralph G. Gronefeld 705 145,051 145,756
Vincent D. Pettinelli 2,305,504 ----- 2,305,504
</TABLE>
12
<PAGE> 13
SCHEDULE 3.3
------------
13
<PAGE> 1
Exhibit 99.1
Press Release dated April 12, 2000
ResCare 10140 Linn Station Road Louisville, Kentucky 40223-3813 Phone:
502.394.2100 www.rescare.com
Contact: Nel Taylor
Vice President of Communications
(502) 394-2357
RESCARE ANNOUNCES $700 MILLION BUYOUT TRANSACTION
SHAREHOLDERS TO BE OFFERED $15.75 PER SHARE
LOUISVILLE, Ky. (April 12, 2000) -- ResCare, Inc. (Nasdaq/NM:RSCR), the nation's
leading provider of services to persons with mental retardation and
developmental disabilities (MR/DD) and at-risk and special needs youth, today
announced the signing of an agreement with an investor group to acquire all of
the outstanding shares of ResCare common stock. In the proposed transaction, a
company formed by The Carlyle Group, Madison Dearborn Partners, Bear Stearns
Merchant Banking and members of ResCare's senior management would merge into
ResCare. Shareholders would receive $15.75 per share in cash in the proposed
transaction. Based on the 24.3 million shares of ResCare common stock currently
outstanding, the transaction is valued at approximately $700 million. ResCare's
closing stock price on April 11, 2000, was $8.75 per share.
The transaction is subject to customary closing conditions, including approvals
by ResCare's shareholders and various regulatory entities. The transaction is
also subject to the condition that disinterested shareholders of ResCare cast
more votes in favor of the transaction than against it. For this purpose,
certain directors and officers of ResCare who have agreed to vote their shares
in favor of the merger would not be disinterested. The excluded individuals are
the members of management participating in the transaction, as well as James
Fornear and Vincent Pettinelli, who are directors and shareholders of the
Company and are not participating in the transaction.
The consummation of the transaction is also subject to the closing of a senior
credit facility, which will finance a portion of the purchase price. A
commitment letter for that facility has been provided by affiliates of Lehman
Brothers, Inc. and Bear Stearns & Company. The Company expects to hold a special
meeting of its shareholders to consider the transaction in the third quarter of
2000.
ResCare's Board of Directors approved the proposed transaction, which was
unanimously recommended by a Special Committee of independent directors that
evaluated the offer. The Board and Special Committee received a fairness opinion
with respect to the proposed transaction from J.C. Bradford & Co., which served
as financial advisor to the Special Committee.
<PAGE> 2
Pursuant to the terms of the Merger Agreement, the Company has agreed not to
solicit other acquisition proposals; however, the Board of Directors may
consider unsolicited proposals in the exercise of its fiduciary duties.
Robert Dahl, a managing director of The Carlyle Group, said, "ResCare has an
excellent performance record and a strong management team, and is well
positioned as a high-quality, efficient provider of services to persons with
MR/DD and at-risk and special needs youth. We are very pleased to be joining
with the management team and other financial partners to provide a sound capital
base for the Company's continued growth."
The Carlyle Group ("Carlyle") is a global diversified investment firm, based in
Washington D.C., with more than $10 billion of capital under management. Carlyle
has developed a distinctive proven investment strategy that integrates industry
specialization with broad product knowledge and global reach. Carlyle focuses on
investing in specific industries where it has a competitive advantage through
in-depth knowledge, strategic relationships and dedicated investment teams.
Founded in 1987, Carlyle has demonstrated its success through the completion of
approximately 131 transactions to date, investing over $3.8 billion of equity
and purchasing more than $12.6 billion of assets.
Madison Dearborn Partners, headquartered in Chicago, is a leading private equity
investment firm with more than $7 billion of capital under management. Madison
Dearborn Partners focuses on management buyouts and growth equity transactions
involving rapidly developing companies. Madison Dearborn Partners has
significant investment experience in several specific industries, including
communications, basic industries, consumer/e-commerce, health care and financial
services.
Bear Stearns Merchant Banking was formed in 1997 as the private investment arm
of Bear, Stearns & Co., Inc., a leading global investment bank. In the past
three years, BSMB has invested or committed over $300 million in 23 management
buyout and growth capital transactions. BSMB is currently finalizing an
institutional fund with a $1.5 billion target.
ResCare's services reach approximately 16,200 consumers in 28 states,
Washington, D.C. and Canada in its Division for Persons with Disabilities and
10,000 at-risk and special needs youth in 17 states and Puerto Rico in its
Division for Youth Services. Now in its 26th year, ResCare employs approximately
29,000 people in the United States, Puerto Rico and Canada. More information
about ResCare is available on the Company's web site at www.rescare.com.
The Company from time to time makes forward-looking statements in its
public disclosures, including statements relating to revenues that might be
expected from new or acquired programs and facilities, other statements
regarding development and acquisition activities, statements regarding
reimbursement under federal and state programs and statements regarding various
trends favoring downsizing, de-institutionalization and privatization of
government programs. In the Company's filings under the federal securities laws,
including its annual, periodic and current reports, the Company identifies
important factors that could cause the Company's results
<PAGE> 3
to differ materially from those contained in such forward-looking statements.
Reference is hereby made to such disclosures.
-END-
