<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12.
</TABLE>
RES-CARE, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
================================================================================
<PAGE> 2
10140 LINN STATION ROAD
LOUISVILLE, KENTUCKY 40223
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 26, 2000
Res-Care, Inc. ("ResCare") will hold its annual meeting of shareholders
at The Olmsted, 3701 Frankfort Avenue, Louisville, Kentucky 40207, at 10:00 a.m.
(EDT), on Tuesday, September 26, 2000, for the following purposes:
1. To elect eight directors to serve for a term of one year
and until their respective successors are elected.
2. To approve the 2000 Stock Option and Incentive Compensation
Plan for employees.
3. To approve the 2000 Non-Employee Directors Stock Ownership
Incentive Plan.
4. To ratify the selection of KPMG LLP as ResCare's
independent auditors for the fiscal year ending
December 31, 2000.
5. To transact any other business that may properly come
before the meeting or any adjournment or adjournments of
the meeting.
The Board of Directors has fixed the close of business on August 1,
2000 as the record date to determine which shareholders are entitled to receive
notice of the annual meeting and to vote at the meeting.
We appreciate and welcome your participation in ResCare's affairs.
Whether or not you plan to attend the annual meeting, please vote by completing,
signing and dating the enclosed proxy card and returning it promptly to us in
the enclosed self-addressed, postage prepaid envelope. If you attend the
meeting, you may revoke your proxy and vote your shares in person.
By order of the Board of Directors
SPIRO B. MITSOS
Secretary
August 18, 2000
1
<PAGE> 3
on at the annual meeting. On matters that require approval by the affirmative
vote of a majority of the shares represented at the annual meeting, an
abstention has the same legal effect as a vote "against" the matter, even though
you may interpret the action differently.
If a broker indicates on the proxy card that it does not have
discretionary authority to vote certain shares on a particular matter (a broker
non-vote), the inspectors will not consider those shares as present and entitled
to vote on that matter. Abstentions and broker non-votes will have no effect on
the election of directors.
Voting and Revocation of Proxy
If your proxy card is properly signed and returned to ResCare and is
not revoked, your proxy will vote according to your instructions. If there are
no specific instructions on the proxy card, your proxy holder will vote the
shares represented:
o FOR the election of the people nominated as directors for
a one-year term;
o FOR the adoption of the 2000 Stock Option and Incentive
Compensation Plan;
o FOR the adoption of the 2000 Non-Employee Directors Stock
Ownership Incentive Plan;
o FOR the ratification of the selection of KPMG LLP as
ResCare's independent auditors for the current fiscal
year; and
o In the proxy's best judgment on such other matters that
may properly come before the annual meeting.
In addition, if a shareholder votes shares cumulatively in the election
of directors or votes for a person other than the nominees named in this proxy
statement or substitutes for those nominees, then the proxy holders will have
the discretionary authority to vote your shares cumulatively and distribute the
votes represented by proxy cards among the nominees listed in this proxy
statement and any other nominees as the proxy holders, in their best judgment,
determine.
You may revoke your proxy at any time in one of three ways by:
o giving written notice of the revocation to the secretary
of ResCare;
o signing and delivering a proxy with a later date; or
o attending and voting in person at the annual meeting.
Your proxy will not be revoked as to any matter that has already been
voted on under the authority of the proxy before the revocation. Your presence
at the annual meeting does not by itself revoke the proxy.
OWNERSHIP OF EQUITY SECURITIES
The following table shows certain information about the beneficial
ownership of ResCare common shares as of July 31, 2000 by:
o each person whom ResCare knows beneficially owns more than
5 percent of the outstanding ResCare common shares or has
filed a Schedule 13G with the Securities and Exchange
Commission with respect to ResCare shares;
o each of ResCare's directors;
o each of ResCare's executive officers named in the Summary
Compensation Table; and
3
<PAGE> 4
o all directors and executive officers of ResCare as a
group.
Unless otherwise indicated, each of the shareholders listed below has sole
voting and investment power over the shares.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND ADDRESS (1) BENEFICIALLY OWNED (2) PERCENT OF TOTAL
-------------------- ---------------------- ----------------
<S> <C> <C>
James R. Fornear 2,623,820 (3)(4) 10.8%
Vincent D. Pettinelli 2,312,437 (5) 9.5%
FMR Corporation 1,606,800 (6) 6.6%
Amalgamated Gadget, L.P. 1,462,120 (7) 5.7%
Ronald G. Geary 1,389,554 (8) 5.6%
Margaret H. Fornear 1,363,876 (9) 5.6%
Goldman Sachs Asset Management 1,169,550 (10) 4.8%
Spiro B. Mitsos, Ph.D 283,265 (11) 1.2%
Jeffrey M. Cross 167,154 (12) *
E. Halsey Sandford 143,715 (13) *
Paul G. Dunn 121,280 (14) *
W. Bruce Lunsford 62,025 (15) *
Seymour L. Bryson, Ph.D 32,963 (16) *
Ralph G. Gronefeld, Jr 16,317 (17) *
Olivia F. Kirtley 11,250 (18) *
All directors and executive officers as a group (11 persons) 7,163,780 (19) 28.4%
</TABLE>
---------------
* Indicates less than 1 percent of outstanding common shares.
(1) The following are addresses of the people ResCare knows beneficially own
more than five percent of the outstanding common shares: James R. and
Margaret H. Fornear, 175 Bayview Avenue, Naples, Florida 34108; Vincent D.
Pettinelli, 5943 Macewen Court, Dublin, Ohio 43017; Ronald G. Geary, 10140
Linn Station Road, Louisville, Kentucky 40223; FMR Corporation, 82
Devonshire Street, Boston, Massachusetts 92109; Goldman Sachs Asset
Management, 1 New York Plaza, New York, NY 10004, and Amalgamated Gadget,
L.P., City Center Tower II, 301 Commerce Street, Suite 2975, Fort Worth,
Texas 76102.
(2) Each named person or group is considered to be the beneficial owner of
securities that the person may acquire within 60 days through the exercise
or conversion of convertible securities, options, warrants and rights, if
any. Those securities are included in the total number of outstanding
shares when computing the percentage beneficially owned by the person or
group. The securities are not included in the total number of outstanding
shares when computing the percentage of shares beneficially owned by any
other person or group. The number of shares includes shares that would be
issued when a person converts convertible securities or when a person or
group exercises options (including employee stock options).
(3) As husband and wife, James R. Fornear and Margaret H. Fornear each may be
considered the beneficial owner of the common shares owned by the other
under the applicable rules of the Securities and Exchange Commission. Both
Mr. and Mrs. Fornear disclaim such beneficial ownership. Does not include
shares owned by Mr. and Mrs. Fornear's adult children.
(4) Includes 1,403,757 shares over which Mr. Fornear shares voting and
investment power and 1,218,038 shares over which he has sole voting and
investment power. Includes 702,209 shares over which Mr. Fornear shares
voting and investment power with Mrs. Fornear as trustee of three trusts of
which she is the beneficiary. Also includes 3,150 shares subject to options
that are presently exercisable. Does not include shares held for the
benefit of family members in trusts with an independent trustee.
(5) Includes 900 shares subject to options that are currently exercisable,
2,103,891 shares held by a trust of which Mr. Pettinelli is trustee and
beneficiary and 6,033 shares held by a corporation in which Mr. Pettinelli
holds greater than a majority ownership.
(6) The information for FMR Corporation and its controlling stockholders,
Edward D. Johnson, III and Abigail P. Johnson is based on the Schedule 13G
dated February 14, 2000 filed with the Securities and Exchange Commission
4
<PAGE> 5
which states that these shares were acquired in the ordinary course of
business solely for investment purposes and not for the purpose or effect
of changing or influencing the control of ResCare.
(7) The information for Amalgamated Gadget, L.P. is based on the Schedule 13G
dated May 12, 2000 filed with the Securities and Exchange Commission which
states that the shares represent shares obtainable upon conversion of
ResCare's 6% Convertible Subordinated Notes due 2004 and were acquired
pursuant to an Investment Management Agreement solely for investment
purposes and not for the purpose of changing or influencing the control of
ResCare.
(8) Includes 591,046 shares subject to options that are presently exercisable,
2,800 shares held by Mrs. Geary in which Mr. Geary disclaims beneficial
ownership and 2,510 shares held for the benefit of Mr. Geary by the
Retirement Savings Plan over which Mr. Geary has no voting power but
does have investment power. In May 2000, in consideration for $1.00 from
ResCare, Mr. Geary terminated options previously granted to him for 112,500
shares, all of which were exercisable. In addition, in May 2000, Mr. Geary
waived options for 112,500 shares that were to be granted to him effective
February 2000 under his employment agreement for consideration of $1.00.
(9) Includes 702,209 shares over which Mrs. Fornear has shared voting and
investment power as beneficiary of three trusts of which Mr. Fornear is
trustee and 661,667 shares over which she has sole voting and investment
power. Does not include shares held for the benefit of family members in
trusts with an independent trustee.
(10) The information for Goldman Sachs Asset Management, based on the Schedule
13G dated February 10, 2000 filed with the Securities and Exchange
Commission states that these shares were acquired in the ordinary course of
business solely for investment purposes and not for the purpose or effect
of changing or influencing control of ResCare.
(11) Represents shares owned jointly by Dr. and Mrs. Mitsos over which they
share voting and investment power.
(12) Includes 22,650 shares owned jointly by Mr. and Mrs. Cross over which they
share voting and investment power and 144,504 shares subject to options
that are presently exercisable.
(13) Includes 2,025 shares subject to options that are presently exercisable.
Does not include 129,622 shares held in trust for the benefit of Mrs.
Sandford and their children for which Mrs. Sandford is trustee and over
which Mr. Sandford has no voting or investment power and in which he
disclaims any beneficial interest.
(14) Includes 1,300 shares owned jointly by Mr. and Mrs. Dunn over which they
share voting and investment power and 119,980 shares subject to options
that are presently exercisable.
(15) Includes 20,025 shares subject to options that are presently exercisable.
(16) Includes 20,025 shares subject to options that are presently exercisable.
(17) Includes 15,150 shares subject to options that are presently exercisable
and 467 shares held by the Retirement Savings Plan over which Mr. Gronefeld
has no voting power, but does have investment power. Also includes 700
shares held in Mrs. Gronefeld's IRA over which Mr. Gronefeld holds neither
voting nor investment power. In May 2000, Mr. Gronefeld terminated options
for 15,000 shares of which 9,001 were currently exercisable in
consideration for $1,500.00 from ResCare. In July 2000, Mr. Gronefeld
terminated options for 112,500 shares, of which 75,000 were currently
exercisable, for consideration of $1.00.
(18) Includes 7,650 shares over which Ms. Kirtley exercises sole voting and
investment power and 3,600 over which she shares voting and investment
power with her husband. Also includes 3,150 shares subject to options that
are presently exercisable.
(19) Includes 919,955 shares subject to options that are presently exercisable.
5
<PAGE> 6
ELECTION OF DIRECTORS
(ITEM 1 ON THE PROXY CARD)
NOMINEES
At the annual meeting, shareholders will elect eight people to the
board of directors to serve until the next annual meeting and until their
respective successors are elected and qualified. In August 1999, in accordance
with the merger agreement with PeopleServe, Inc., the board of directors
appointed Vincent D. Pettinelli to the board, which increased the number of
directors from seven to eight. The proxy holders, unless you instruct them
otherwise, intend to vote the shares covered by valid proxies FOR the election
of the eight nominees named in the following table to the board of directors. If
any of these people will not be available for election, the proxy holders will
have the discretion to vote FOR a substitute. In addition, the proxy holders
will have the discretion to vote or withhold their vote for any additional
nominees named by shareholders and to vote cumulatively if a shareholder should
vote cumulatively. The board of directors is not aware of any circumstances in
which any of the following people would not be available to continue to serve as
a director, if elected.
<TABLE>
<CAPTION>
DIRECTOR OR
NAME AGE OFFICER SINCE PRINCIPAL OCCUPATION
---- --- ------------- --------------------
<S> <C> <C> <C>
James R. Fornear 69 1974 Retired
Ronald G. Geary 53 1990 Chairman of the Board, President and Chief Executive Officer of ResCare
E. Halsey Sandford 67 1984 Senior Executive of ResCare
Spiro B. Mitsos 69 1974 Practicing Psychologist
Seymour L. Bryson 62 1989 Associate Chancellor (Diversity), Southern Illinois University at Carbondale
W. Bruce Lunsford 52 1992 Chairman of the Board of Ventas, Inc.
Olivia F. Kirtley 49 1998 Vice President of Vermont American Corporation
Vincent D. Pettinelli 56 1999 Retired
</TABLE>
JAMES R. FORNEAR, the founder of ResCare, served as Chairman of the
Board of ResCare from 1984 until 1998. Mr. Fornear was the President of ResCare
from 1974 to 1990 and Chief Executive Officer of ResCare from 1989 to 1993.
RONALD G. GEARY, an attorney and certified public accountant, has
served as a director and President of ResCare since 1990 and as Chief Executive
Officer since 1993. He was elected Chairman of the Board in June 1998 when Mr.
Fornear retired. Before he was named Chief Executive Officer, Mr. Geary was
Chief Operating Officer of ResCare from 1990 to 1993. Mr. Geary is a director of
Ventas, Inc., a real estate investment trust.
E. HALSEY SANDFORD has been a director of ResCare since 1984 and has
been Senior Executive since 1997. From 1992 to 1997, Mr. Sandford served as
Executive Vice President responsible for development for ResCare's Division for
Persons with Disabilities.
SPIRO B. MITSOS, PH.D., a psychologist, has been a director of ResCare
since 1974. He has been Secretary of ResCare since 1984 and he served as
Treasurer of ResCare from 1984 until 1998. Dr. Mitsos has been employed by
ResCare to provide psychological consultation services to facilities operated by
ResCare since 1984. Dr. Mitsos has served as an adjunct faculty member at
Southern Illinois University, the University of Kentucky and the University of
Evansville.
6
<PAGE> 7
SEYMOUR L. BRYSON, PH.D. has served as a director of ResCare since
1989. Since 1984, Dr. Bryson has held several positions with Southern Illinois
University at Carbondale, including professor in the University's Rehabilitation
Institute, Dean of the College of Human Resources, Special Assistant to the
Chancellor, Executive Assistant to the President and Executive Assistant to the
Chancellor.
W. BRUCE LUNSFORD, an attorney and certified public accountant, has
been a director of ResCare sine 1992. He served as Chairman of the Board,
President and Chief Executive Officer of Vencor, Inc., a leading provider of
long-term hospital care to chronically ill patients, from 1985 until January
1999. Vencor filed voluntary petitions for protection under Chapter 11 of the
federal Bankruptcy Code in September 1999. From May 1999 to December 1999, Mr.
Lunsford served as Chairman and Chief Executive Officer of Ventas, Inc., a
health care real estate investment trust that owns 43 long-term acute care
hospitals, 218 nursing facilities and 8 personal care facilities in 36 states.
Mr. Lunsford currently serves as Chairman of the Board of Ventas and is a former
director of Churchill Downs, Incorporated, an operator of thoroughbred racing
tracks, National City Corporation, a financial services company, and Atria
Communities, Inc., which operates assisted and independent living communities.
OLIVIA F. KIRTLEY, a certified public accountant, was appointed a
director of ResCare in October 1998. Ms. Kirtley is currently Vice President of
Vermont American Corporation, a manufacturer and marketer of power tool
accessories, and has served in various capacities including Treasurer, Vice
President-Finance and Chief Financial Officer since 1979. Ms. Kirtley also
currently serves as Immediate Past Chair of the American Institute of Certified
Public Accountants. Ms. Kirtley is a director of Lancer Corporation, a worldwide
manufacturer and distributor of fountain drink and beer dispensing equipment.
VINCENT D. PETTINELLI has served as a director of ResCare since 1999.
Mr. Pettinelli, a founder of PeopleServe, Inc., served as president of
PeopleServe, Inc., a provider of services to persons with mental retardation and
developmental disabilities from 1979 until 1996 when he became chairman of the
board.
Directors of ResCare are elected annually to serve until the next
annual meeting of shareholders and until their successors have been duly elected
and qualified.
During 1999, there were seven meetings of the board of directors.
During this period, each director attended at least 75 percent of all meetings
of the board of directors and of the committees on which he or she served during
the year.
EXECUTIVE OFFICERS OF RESCARE
In addition to Messrs. Geary and Sandford, Jeffrey M. Cross, Paul G.
Dunn and Ralph G. Gronefeld, Jr. are executive officers of ResCare.
Mr. Cross, age 47, has served as Executive Vice President of
Operations, Division for Persons with Disabilities since 1994. He has been
employed with ResCare since 1984 except for a period between 1987 and 1989. He
has served in various administrative positions in ResCare's Division for Persons
with Disabilities. In 1991, he was named Vice President for Operations in
Kentucky and Indiana.
Mr. Dunn, age 34, has served as Executive Vice President, Development,
since 1997 and has responsibility for overseeing all ResCare's development
activities. In addition, since 1999, Mr. Dunn has served as Executive Vice
President for Alternative Youth Services and Youthtrack. From 1992 to 1997,
7
<PAGE> 8
Mr. Dunn was employed by Laidlaw, Inc., most recently as Corporate Director,
Financial Operations for the Laidlaw Medical Transportation, Inc. subsidiary, an
operator of ambulance services.
Mr. Gronefeld, age 41, was named Executive Vice President of Finance
and Administration in May 1998 after serving as Executive Vice President of
Operations for the Division for Youth Services since January 1998 and Vice
President responsible for ResCare's Alternative Youth Services and Youthtrack
subsidiaries since January 1997. Mr. Gronefeld joined ResCare in June 1995 as
Director of Internal Audit and from July 1995 through March 1996, he served as
interim senior administrator for ResCare's west region in its Division for
Persons with Disabilities. From November 1990 until June 1995, Mr. Gronefeld
served as President of Total Color Corporation, a graphic arts firm in
Louisville, Kentucky.
COMMITTEES OF THE BOARD OF DIRECTORS
ResCare's board of directors has an executive committee, an audit
committee, and an executive compensation committee. The board of directors
appoints the members of each committee for a term beginning after the first
regular meeting of the board following the annual meeting and until their
respective successors are elected and qualified.
Executive Committee
The executive committee's primary responsibility is to act as an
interim board on business matters normally brought before the directors. The
executive committee is responsible for developing and monitoring ResCare's
long-range plans, determining the types and frequency of reports required by the
board, reviewing all expansion plans for recommendation to the board, assisting
in monitoring relationships with financial institutions and reviewing
performance evaluations, salary increases and bonuses for key staff members.
Messrs. Fornear, Geary and Sandford currently serve as members of the executive
committee. During 1999, there were six meetings of the executive committee and
all committee members participated in all meetings.
Audit Committee
The audit committee recommends to the board the auditing firm to be
selected each year as independent auditors of ResCare's financial statements and
to perform services related to the audit. The audit committee is also
responsible for:
o reviewing the scope and results of the audit with the
independent auditors;
o reviewing ResCare's financial condition and results of
operations with management and the independent auditors;
o reviewing the adequacy of ResCare's internal accounting
and control procedures;
o reviewing any non-audit services and special engagements
to be performed by the independent auditors and
considering the effect of such performance on the
auditors' independence;
o reviewing financial statements in the annual report to
shareholders;
o reviewing reports of internal audits;
o meeting as necessary with internal and independent
auditors; and
o reviewing accounting and finance human resources and
succession planning.
8
<PAGE> 9
The audit committee also reviews, at least once each year, the terms of
all material transactions and arrangements between ResCare and its affiliates.
Ms. Kirtley and Messrs. Bryson, Lunsford, and Sandford serve as members of the
Audit Committee of which Ms. Kirtley is chair. The Committee met once during
1999 and all committee members participated in the meeting.
Executive Compensation Committee
The executive compensation committee determines the cash and other
incentive compensation, if any, to be paid to ResCare's executive officers. Mr.
Bryson and Ms. Kirtley currently serve as members of the executive compensation
committee and are independent "non-employee directors" (within the meaning of
Rule 16b-3 under the Securities Exchange Act of 1934). The committee met once
during 1999 and all committee members participated in the meeting.
EXECUTIVE COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Lunsford, a director of ResCare, is Chairman of the Board of
Ventas, Inc., a real estate investment trust. Mr. Lunsford owns less than 5 % of
its common stock and less than 1 % of ResCare common shares. Mr. Lunsford served
on the executive compensation committee of the ResCare board of directors until
August 2000. Ronald G. Geary, a director and Chairman of the Board, President
and Chief Executive Officer of ResCare was elected to the board of directors of
Ventas in May 1998. Mr. Geary is the beneficial owner of approximately 5.6 % of
ResCare common shares and less than 1 % of Ventas common stock. Mr. Geary serves
on the executive compensation committee of Ventas.
In October 1998, ResCare acquired the stock of Tangram Rehabilitation
Network, Inc. As part of that transaction, immediately before the closing,
Tangram sold ten real estate properties to Ventas. Tangram then leased the
properties back from Ventas. The lease is for a term of twelve years with
options to renew for four five-year terms. The annual rent is 10.25% of the
sales price annually adjusted based on consumer price index subject to some
limitations specified in the agreement. Messrs. Lunsford and Geary did not
participate when the boards of Ventas and ResCare discussed and voted on the
transaction.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In addition to the relationships and transactions described under
"Executive Compensation Committee Interlocks and Insider Participation," Mr.
Pettinelli has an interest in partnerships that own approximately 60 properties
that are leased to subsidiaries of ResCare or to non-profit agencies with which
subsidiaries of ResCare have management agreements. The leases generally have
terms ranging from 10 to 25 years. Rental under these leases is approximately
$1.0 million annually. In addition, PeopleServe, Inc., a subsidiary of ResCare,
has guaranteed or in some other way agreed to be obligated for the payment of
funds borrowed by these partnerships from third party lenders. Mr. Pettinelli
has agreed to indemnify PeopleServe on its guaranty obligations, and the
indemnification is secured by a pledge of escrowed ResCare common shares or
other securities.
9
<PAGE> 10
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires ResCare's
directors and executive officers and people who own more than 10 percent of
ResCare's common shares to file initial stock ownership reports and reports of
changes in ownership with the Securities and Exchange Commission. Based on a
review of these reports, there were no late filings of the reports.
REPORT ON EXECUTIVE COMPENSATION
Compensation Philosophy and Policies for Executive Officers
The executive compensation committee believes the most effective
executive compensation program aligns the interests of shareholders and
executives. ResCare's primary objective is to provide quality services to people
with special needs while enhancing long-term shareholder value. The executive
compensation committee is committed to a strong, positive link between ResCare's
strategic business goals and its compensation and benefit goals.
ResCare's executive compensation program has been designed to support
the objective of creating shareholder value by:
o providing rewards that are closely linked to individual,
divisional and company-wide performance in achieving
quality of service and financial goals;
o providing compensation opportunities that create an
environment that attracts and retains talented employees
on a long-term basis; and
o directly aligning the interests of executives with the
long-term interests of shareholders by making long-term
stock appreciation a cornerstone of executive compensation
through award opportunities that can result in the
ownership of substantial amounts of the common shares.
The executive compensation committee determined that employment
contracts with executive officers as well as other key employees serve to
attract and retain the high quality employees that ResCare needs. The employment
contracts for the executive officers are described in this Proxy Statement.
ResCare's executive compensation program has three components: base
salary, annual cash incentive (bonus) and long-term incentive opportunity in the
form of incentive and non-qualified stock options. The annual incentive bonus
and the long-term stock-based incentive are related to the performance of the
individual, the applicable operating division, and ResCare in achieving quality
of service and operational goals.
Base Salaries
Individually negotiated employment contracts determine the base
salaries of the named executive officers. The base salaries, which are generally
subject to annual cost-of-living increases, are designed to be market
competitive with other similar companies.
Annual Incentives
Under ResCare's annual bonus plan, ResCare makes awards that are based
on achieving individual, division, and company-wide quality of service and
operational performance goals.
10
<PAGE> 11
Stock Options
ResCare's incentive stock option plan ties the interests of the
executives to the interests of the shareholders and to ResCare's long-term
performance. Grants of options are related to an employee's position,
responsibility and performance.
Executive Compensation
Mr. Sandford's individually negotiated employment agreement established
his compensation for 1999. It provides for a time commitment of 32 hours a week
and a salary of $100,000 to reflect the reduced time commitment. We believe Mr.
Sandford's compensation continues to reflect his performance with ResCare.
Mr. Geary's individually negotiated employment agreement established
his compensation for 1999. In 1995, we had reviewed salary studies which
indicated that ResCare should increase Mr. Geary's compensation and that he
should be granted options, based on comparisons with similar companies. Mr.
Geary's bonuses are based on performance criteria of ResCare that Mr. Geary and
the members of the committee determine before January 1 for the upcoming year.
For 1999, Mr. Geary was entitled to a cash bonus of up to 50 percent of his base
salary based on achieving his performance goals which he waived because of the
subsequent performance of ResCare.
In light of their considerable contributions and value to the
operations of ResCare and as an inducement to them to remain employed by
ResCare, ResCare entered into employment agreements with Messrs. Cross, Dunn and
Gronefeld in 1997. The terms of these contracts are described in this proxy
statement.
Because we do not contemplate that ResCare will pay its executive
officers any compensation that will be subject to the $1 million limitation on
deductions imposed by Section 162(m) of the Internal Revenue Code, we have not
adopted any policies with respect to limiting executive compensation to amounts
that are deductible.
EXECUTIVE COMPENSATION COMMITTEE
Seymour L. Bryson
Olivia F. Kirtley
11
<PAGE> 12
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table provides information concerning compensation
awarded to, earned by or paid to the executive officers of ResCare during the
year ended December 31, 1999.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------- ------------
SECURITIES
UNDERLYING
NAME AND PRINCIPAL POSITION OPTIONS/SAR ALL OTHER
AS OF DECEMBER 31, 1999 YEAR SALARY BONUS (1) (SHARES)(2) COMPENSATION (3)
----------------------- ---- ------ --------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Ronald G. Geary 1999 $314,786 $ 0 0 $36,174
Chairman of the Board, President and 1998 311,279 0 253,100 36,669
Chief Executive Officer 1997 309,752 145,105 90,000 18,585
E. Halsey Sandford 1999 100,000 0 0 10,000
Senior Executive 1998 100,000 0 0 10,173
1997 100,000 0 0 6,000
Jeffrey M. Cross 1999 152,250 0 0 22,838
Executive Vice President Operations 1998 152,267 0 93,700 18,463
Division for Persons with Disabilities 1997 149,034 30,469 38,750 8,941
Paul G. Dunn 1999 155,822 0 0 9,000
Executive Vice President, Development 1998 150,000 0 93,700 17,810
and Alternative Youth Services and 1997 96,346 25,001 37,500 43,268
Youthtrack
Ralph G. Gronefeld, Jr 1999 155,000 0 0 9,300
Executive Vice President Finance & 1998 135,736 0 127,500 9,538
Administration/Chief Financial Officer 1997 84,661 10,296 13,500 0
----------------
</TABLE>
(1) Bonuses paid to the executive officers are based on their employment
agreements. For 1998 and 1999 there were no cash bonuses. In September 1998,
additional options were granted under ResCare's 1998 Omnibus Stock Option
Plan instead of cash bonuses that would have been awarded in February 1999
for the year 1998.
(2) Options reflect the 3-for-2 stock split that was effective in June 1998.
(3) All Other Compensation represents amounts ResCare contributed to the
Retirement Savings Plan, and to the 401(k) Restoration Plan, which is
described later. Mr. Geary's other compensation for 1998 and 1999 includes
$7,241 and $17,287 respectively for personal use of the ResCare corporate
airplane. Mr. Dunn's other compensation for 1997 includes reimbursement for
moving expenses and for 1998 includes forgiveness of the balance of $6,274
due on a loan ResCare made to him when he moved. Mr. Dunn was not eligible
to participate in the Retirement Savings Plan in 1997.
ResCare has established the 401(k) Restoration Plan to permit certain
members of management to defer compensation pre-tax and to permit ResCare to
contribute on behalf of such employees without the restrictions imposed by the
Internal Revenue Code on the tax-qualified Retirement Savings Plan. ResCare's
matching contribution on behalf of each participant matches the employee's
contribution
12
<PAGE> 13
dollar for dollar up to the first 3 percent and one-half of the next 3 percent
of the employee's salary, which is the same as the contribution ResCare makes
for employees who participate in ResCare's Retirement Savings Plan.
Option Grants for 1999
There were no options granted in 1999 to executive officers.
Mr. Cross exercised stock options during the year ending December 31,
1999. The following table indicates the total number of exercisable and
unexercisable stock options on December 31, 1999 held by the executive officers
named in the Summary Compensation Table and the related value of such options
based on the last sales price of the common stock on The Nasdaq National Market
on December 31, 1999 of $12.75 per share.
<TABLE>
<CAPTION>
Aggregated Option Exercises In Last Fiscal Year and Fiscal Year-End Option Values
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT DECEMBER 31, 1999 AT DECEMBER 31, 1999
----------------------------- --------------------------
SHARES
ACQUIRED ON VALUE REALIZED
NAME EXERCISE (#) ($) (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ronald G. Geary 0 0 703,546 shares 0 shares $1,261,759 $ 0
E. Halsey Sandford 0 0 2,025 shares 0 shares 0 0
Jeffrey M. Cross 21,750 307,489 146,305 shares 22,020 shares 67,041 21,500
Paul G. Dunn 0 0 119,980 shares 11,220 shares 0 0
Ralph G. Gronefeld, Jr 0 0 92,400 shares 52,651 shares 16,125 8,062
</TABLE>
---------------
(1) Market value on the date of exercise of shares acquired upon exercise,
less the option exercise price.
Employment Agreements
Mr. Geary has an employment agreement that was signed in 1995 with
ResCare and extends for a five-year term. It expires in September 2000; however,
it automatically renews for one-year periods beginning one year before the
expiration date so that the remaining term equals two years. Under the
agreement, Mr. Geary receives a base salary of $300,000 which is adjusted each
year based on the increase in the consumer price index for Urban Wage Earners
and Clerical Workers. Mr. Geary is eligible for an annual bonus equal to up to
50 percent of his base salary based on performance criteria that Mr. Geary and
the executive compensation committee mutually agree to on or before January 1 of
each year. Mr. Geary waived the cash bonus to which he was entitled for 1999
because of the subsequent performance of ResCare. Effective on the date of the
agreement, Mr. Geary was granted options to purchase 97,500 ResCare common
shares (adjusted for the stock splits) at a price of $16.00 per share which
could be exercised beginning with the date of the grant. In addition, ResCare
will grant options to purchase 112,500 common shares (adjusted for the 3-for-2
split) at the fair market value on the last Thursday of February during each of
the remaining years of the term of the agreement. In May 2000, Mr. Geary
terminated options for 112,500 shares granted under his employment agreement for
February 1998 for consideration of $1.00 and he waived options for
13
<PAGE> 14
112,500 shares that would have been granted for February 2000 under his
employment agreement for consideration of $1.00. ResCare also agreed to
reimburse Mr. Geary for a portion of federal and state income taxes that Mr.
Geary has to pay because of his exercise of options granted in his prior
agreement under a formula outlined in the current agreement. In November 1996,
the agreement was amended to grant Mr. Geary options to purchase 112,797 common
shares at the closing price on the date of the grant, or $15.25, and to delete
ResCare's obligation to reimburse the taxes.
In addition, ResCare provides to Mr. Geary maximum disability insurance
coverage permitted under ResCare's current benefit plan, equips an office in Mr.
Geary's home, pays fees for personal tax and financial planning and for an
annual physical. The agreement also provides that if Mr. Geary's employment is
terminated following a change in the control of ResCare, Mr. Geary will be
entitled to receive the unpaid balance of his full base salary through the
effective termination date of the agreement and for an additional two years. The
agreement may be terminated with or without cause at any time. If it is
terminated without cause, Mr. Geary will continue to receive his base salary for
the balance of the term. He would also receive a prorated bonus earned for that
year plus any unpaid cash bonus for a prior year. If there is a change of
control of ResCare, or if the agreement is terminated without cause, ResCare
will repurchase unexercised vested options.
Mr. Sandford has had an employment agreement with ResCare since March
1, 1992. The agreement was amended as of March 1, 1996 on substantially the same
terms and conditions except that it reduced Mr. Sandford's time commitment to 32
hours a week and established his base salary at $100,000. In January 1998,
ResCare entered into a new employment agreement with Mr. Sandford on basically
the same terms and conditions. The agreement was renewed effective March 1, 1999
and again effective March 1, 2000. Mr. Sandford does not participate in
ResCare's incentive stock option plan or the annual bonus plan.
ResCare has employment agreements with Messrs. Cross, Dunn and
Gronefeld that contain basically the same terms and conditions. The agreements
are for initial terms of three years commencing January 1, 1997, May 1, 1997 and
January 1, 1998 respectively. The agreements for Messrs. Cross, Dunn and
Gronefeld renew automatically for one-year periods after the expiration of their
respective terms unless either ResCare or the employee gives notice of
termination. ResCare may terminate all of the agreements with or without cause
at any time. They provide for base salaries of $150,000, except for Mr.
Gronefeld whose base salary is $155,000, subject to annual increases based on
the consumer price index "All Items" category. Each of these executives also
participates in ResCare's Compensation/Evaluation Bonus Plan and is eligible to
receive an annual bonus of up to 25% of that year's base salary. Under the
agreements, Messrs. Cross and Dunn were granted options on August 15, 1997 to
purchase 37,500 common shares exercisable on August 15, 1998. On August 15,
1998, each of these executives were granted options to purchase 75,000 common
shares that vest in 50% increments on August 15, 1999 and 2000. Under his
agreement, on August 15, 1998, Mr. Gronefeld was granted options to purchase
37,500 common shares exercisable on August 15, 1999. On September 1, 1998, he
was granted options to purchase 75,000 common shares that vest in 50% increments
on September 1, 1999 and 2000. In May 2000, Mr. Gronefeld terminated options for
15,000 shares granted in February 1998 for consideration of $1,500.00 and in
July 2000, he terminated options for 112,500 shares granted in August and
September 1998 for consideration of $1.00. The exercise price for the options
under all of the agreements is the closing sale price of the common shares on
the grant date. On September 1, 1998, Messrs. Dunn and Cross each were granted
options for
14
<PAGE> 15
18,700 common shares instead of a cash bonus for 1998. Mr. Gronefeld received no
cash bonus for 1998 in consideration of a portion of the options granted on
September 1, 1998.
Bonuses awarded under the Compensation/Evaluation Bonus Plan are based
on achieving various individual, department, division and Company goals,
including goals that relate to such matters as quality control compliance,
divisional revenue growth, and budgetary compliance. Bonuses are calculated on
the basis of the percentage of goals met during the year.
If any of the agreements with Messrs. Sandford, Cross, Dunn and
Gronefeld are terminated without cause, the employee will receive the full base
salary for six months after the date of termination, unless the termination is
after a change of control in which case he will receive the full base salary for
one year after termination. In case of termination without cause, Messrs. Cross,
Dunn and Gronefeld will also receive a cash bonus prorated based on the number
of full months that have passed from the immediately preceding January 1 (May 1
for Mr. Dunn) until the date of termination, plus any earned but unpaid cash
bonus from a prior period. If ResCare terminates an executive's employment
agreement for cause, the executive would not be entitled to any compensation
following the date of termination other than the pro rata amount of the then
current base salary through such date. If their employment is terminated for any
reason, Mr. Sandford will be prohibited from competing with ResCare for five
years and Messrs. Geary, Cross, Dunn and Gronefeld will be prohibited for one
year.
COMPENSATION OF DIRECTORS
Directors who are employees of ResCare receive no compensation for
their services as directors. ResCare's non-employee directors, Messrs. Fornear,
Bryson, Lunsford, Pettinelli and Ms. Kirtley, receive an annual retainer of
$6,000 plus $1,000 for each board meeting that they attend and $500 for each
committee meeting they attend as members of committees of the board. In
addition, the non-employee directors have participated in ResCare's 1993
Non-Employee Directors Stock Ownership Incentive Plan and they have each been
granted options to purchase 4,500 ResCare common shares except in 2000, they
were each granted options to purchase 3,600 common shares each year.
In connection with their service as a special committee to evaluate a
proposed transaction involving management of ResCare, in 2000 Ms. Kirtley and
Messrs. Lunsford and Mitsos each received $73,000 from ResCare.
PERFORMANCE GRAPH
The following graph shows the cumulative total shareholder return
experienced by ResCare's shareholders during the period from December 31, 1994
through December 31, 1999, as compared to the Nasdaq Stock Market Index (U.S.
Companies) and the Nasdaq Health Services Index, an index that contained
approximately 79 companies as of December 31, 1999. The Nasdaq Health Services
Index is prepared for Nasdaq by the Center for Research in Security Prices at
the University of Chicago using companies within Standard Industrial
Classification code 80 (Health Care). Upon request, ResCare will promptly
provide to shareholders a list of all companies included in this Index. The
graph assumes the investment on December 31, 1994 of $100 in ResCare common
shares at the closing trading price on that date. Cumulative total shareholder
return for a given period is measured by the dividends paid, assuming dividend
reinvestment, and the change in the share price during that period; the sum of
these
15
<PAGE> 16
two factors is then divided by the per share price at the beginning of that
period. Because ResCare has declared no dividends on its common shares since it
became publicly traded, cumulative total shareholder return on ResCare's common
shares since December 31, 1994 is based on its closing trading price.
1994 1995 1996 1997 1998 1999
------ ------ ------ ------ ------ ------
RSCR 100.00 101.51 159.10 263.64 336.67 173.87
Nasdaq 100.00 141.44 173.92 213.38 299.95 543.07
Nasdaq Health 100.00 126.86 126.66 129.08 110.69 90.34
16
<PAGE> 17
PROPOSAL TO APPROVE THE
2000 STOCK OPTION AND INCENTIVE
COMPENSATION PLAN
(ITEM 2 ON THE PROXY CARD)
The Board of Directors has adopted and recommends that shareholders
approve the ResCare, Inc. 2000 Stock Option and Incentive Compensation Plan. The
2000 Plan would authorize the issuance of 900,000 common shares for stock
options and other stock-based incentive awards to ResCare employees.
Providing executives and other key employees opportunities to receive
awards of stock-based compensation is a cornerstone of ResCare's compensation
program. Making the long-term appreciation of ResCare's common shares an
important component of executive compensation aligns the interests of executives
with the long-term interests of shareholders. Adopting the 2000 Plan will enable
ResCare to continue to award stock-based incentive compensation to its key
employees.
ResCare currently has two stock compensation plans for its employees.
The 1991 Incentive Stock Option Plan authorizes the issuance of up to 3,801,095
shares for employee awards, and the 1998 Omnibus Stock Plan authorizes an
additional 1,125,000 shares for employee awards. Nearly all of the 4,926,095
shares available under these plans are subject to awards to employees that have
been exercised or are currently outstanding, leaving only a nominal number of
the shares available for future grants. A substantial percentage of the shares
available under the 1998 Plan were awarded in 1998 when employees received stock
option grants instead of cash bonuses.
Adopting the 2000 Plan would increase the combined number of common
shares under ResCare's three employee stock compensation plans to 5,826,095
shares. Of these shares, 1,509,616 shares have been issued upon the exercise of
options and are included in total number of common shares issued and outstanding
as of the record date. The 4,316,479 shares subject to future issuance under the
three employee stock compensation plans would represent 17.7% of the common
shares issued and outstanding as of the record date and 13.9% on a fully diluted
basis, assuming the exercise of all outstanding options and the conversion of
all outstanding convertible notes.
PURPOSES OF THE 2000 PLAN
The purposes of the 2000 Plan are to increase growth and profitability,
provide competitive compensation to employees while retaining the benefits of
tax deferral, attract and retain exceptional personnel and encourage excellence
in the performance of individual responsibilities, and motivate key employees to
contribute to ResCare's success.
The 2000 Plan permits grants of stock options (including incentive
stock options and nonqualified stock options), stock appreciation rights,
restricted stock awards and performance awards.
Awards granted under the 2000 Plan must be evidenced by award
agreements that state the terms and conditions of the awards and must otherwise
be consistent with the provisions of the Plan.
17
<PAGE> 18
ADMINISTRATION
The 2000 Plan will be administered by a committee of the board of
directors comprised of two or more directors, who cannot be current or former
employees or officers of ResCare and cannot receive remuneration from ResCare in
any capacity other than as directors. The committee will have full power and
authority to take all actions necessary to carry out the purpose and intent of
the plan, including the authority to grant awards and interpret the plan,
establish rules and regulations, and perform all other acts it believes
reasonable and proper. Subject to the provisions of the Plan, the committee will
have sole discretion to determine those eligible to receive awards, the amount,
type, and timing of each award and the terms and conditions of the respective
award agreements. The committee may modify outstanding awards, accelerate or
change the time of exercise, or waive a lapse of a condition of an award, and
establish conditions for earning awards. Modifications that may materially
adversely affect an award cannot be made without the consent of the holder of
the award.
SHARES SUBJECT TO THE PLAN
The 2000 Plan authorizes the issuance of a maximum of 900,000 common
shares for awards to employees, subject to adjustment as described below. Upon
the adoption of the 2000 Plan, no further grants may be made under ResCare's
prior 1991 and 1998 Plans, however any shares authorized for issuance under
those prior plans and not issued or subject to grants that subsequently expire
or terminate would become available for grants under the 2000 Plan. A maximum of
120,000 common shares subject to awards may be granted during any one fiscal
year to any one individual. If an award granted under the 2000 Plan expires or
terminates without exercise, the shares no longer subject to that award will
again become available for issuance under the Plan.
In the event of a stock dividend, stock split, recapitalization,
merger, consolidation, business combination, or exchange of common shares, the
number of common shares available for awards and subject to outstanding awards
and the price per share of outstanding awards will be adjusted proportionately.
In the event of any distribution to ResCare's shareholders consisting
of securities of any other entity or other assets (other than dividends payable
in cash or ResCare stock) without receipt of consideration by ResCare, the
committee may, in its discretion, appropriately adjust the exercise price
covered by each outstanding award to reflect the effect of such a distribution.
Without the consent of holders of awards, the committee may, in its
discretion, adjust the terms and conditions of, and the criteria included in,
awards in recognition of unusual or nonrecurring events affecting ResCare
whenever the administrator determines that adjustments are appropriate in order
to prevent dilution or enlargement of the benefits intended under the Plan.
Otherwise, the Committee cannot impair or adversely affect the rights of the
recipient of an outstanding award without the recipient's consent.
EMPLOYEES WHO MAY PARTICIPATE IN THE 2000 PLAN
Employees who are expected to contribute substantially to the growth
and profitability of ResCare or its subsidiaries are eligible for selection by
the committee to receive awards granted under the 2000 Plan.
18
<PAGE> 19
GRANT, ISSUANCE AND EXERCISE OF OPTIONS
The exercise price of options intended to qualify as incentive stock
options may be not less than 100 percent of the fair market value of the common
shares as of the date of grant. The purchase price of common shares covered by
each incentive stock option granted to an employee who owns 10 percent or more
of the common shares may not be less than 110 percent of the fair market value
of the common shares on the date of grant. The exercise price of nonqualified
options may be less than fair market value; however, ResCare's present intention
is to grant all options at not less than fair market value. Options may be
exercised during a period of up to 10 years, subject to any conditions on
exercisability imposed at grant by the Committee; options may terminate earlier
due to the termination of the recipient's employment.
To the extent provided by the award agreement, the exercise price of
options can be paid in cash, in common shares having a fair market value equal
to the exercise price that have been owned by the option holder for at least six
months, by electing to have ResCare withhold a number of shares from the option
being exercised that have a fair market value equal to the exercise price, or by
any combination of these methods.
STOCK APPRECIATION RIGHTS ("SARS")
SARs may be granted on such terms and conditions as the committee
determines. SARs entitle the grantee to receive upon exercise, in cash, shares,
or a combination of the two, the excess of (a) the fair market value of a
specified number of ResCare common shares at the time of exercise, over (b) a
specified price not less than 100% of the fair market value of the stock at the
time the SARs were granted. SARs are often granted in tandem with an option.
SARs may not be exercised later than ten years after the date of grant and must
be exercised during employment or at such other time determined by the
committee.
PERFORMANCE SHARES
Performance shares entitle a recipient to receive either common shares
or cash based on the degree of attainment of performance targets over a
performance period established in the award agreement.
RESTRICTED STOCK
Restricted stock may be granted in such form as the committee approves
from time to time. Shares awarded as restricted stock awards are subject to such
conditions, terms, restrictions against transfer, substantial risks or
forfeiture and attainment of performance objectives and for such periods as the
committee determines.
CHANGE OF CONTROL
The committee, in its discretion, may provide in an award agreement
that each outstanding stock option and SAR will become exercisable in full in
the event of a Change of Control. The committee may revoke or limit the
acceleration of exercisability of an option or SAR at any time
19
<PAGE> 20
before and within 20 business days following the date a Change of Control is
approved by the board of directors or otherwise occurs.
In addition, in the event of a Change of Control, each outstanding
award:
o must be assumed by the corporation that succeeds ResCare or
an equivalent option or right must be substituted by the
successor corporation, its parent or subsidiary, or
o otherwise, each outstanding award will become the right to
receive a cash payment in an amount equal to:
o in the case of a tender offer or exchange offer,
the difference between the aggregate exercise price
of the award and the final offer price paid for
each ResCare common share, multiplied by the number
of shares covered by the award, or
o in the case of any other Change of Control, the
difference between the aggregate exercise price of
the award and the aggregate fair market value of
the shares covered by the award, as determined by
the committee at that time.
An award will be considered to have been assumed if the committee
determines, at the time of issuance of the stock or other consideration upon the
Change of Control, that the holder of the award would be entitled to receive
upon exercise the same number and kind of shares of stock or the same amount of
property, cash or securities as the holder would have been entitled to receive
after the effective time of the transaction if, immediately before the effective
time of the transaction, the holder owned the number of common shares covered by
the option or SAR (whether or not the award was then exercisable and after
giving effect to any adjustments in the number of shares covered by the award).
If the consideration to be received in a Change of Control transaction is not
solely common stock of the successor corporation or its parent, the committee
may, with the consent of the successor corporation, provide for the
consideration to be received upon exercise of the option to be solely common
stock of the successor corporation or its parent equal to the fair market value
of the consideration per ResCare common share received in the transaction.
The 2000 Plan defines a "change of control" as:
o a person, other than any trustee or other fiduciary holding
securities under any ResCare's employee benefit plan,
becoming the "beneficial owner," directly or indirectly, of
securities representing 30% or more of the combined voting
power of ResCare's then outstanding capital stock;
o any merger, consolidation, share exchange, recapitalization
or other transaction in which any person becomes the
beneficial owner of securities representing 30% or more of
the combined voting power of ResCare's then outstanding
capital stock;
o the directors who were directors immediately before a
transaction of ResCare or a successor to ResCare ceasing to
constitute a majority of the Board;
o the disposition of ResCare's business pursuant to a partial
or complete liquidation, sale of assets, or otherwise.
TRANSFER RESTRICTIONS
An award granted under the 2000 Plan is not transferable by the grantee
other than to family members or a trust for the benefit of immediate family
members or by will or the laws of descent and
20
<PAGE> 21
distribution, and can be exercised during the award holder's lifetime only by
the grantee or a duly appointed guardian or personal representative or by
transferees authorized under the Plan.
FEDERAL INCOME TAX CONSEQUENCES
GRANTS OF OPTIONS, SARS AND AWARDS
The grant of a nonqualified stock option, incentive stock option, SAR,
performance share, or restricted stock does not result in income for the grantee
or in a deduction for the corporation. In the case of restricted stock, the
stock must be subject to "restrictions on transfer" and a "substantial risk of
forfeiture," to avoid taxation at grant, as intended under the 2000 Plan. A
recipient of restricted stock may elect in the manner prescribed by Section
83(b) of the Internal Revenue Code, to be taxed at grant rather than deferring
taxation until the restrictions lapse.
EXERCISE OF OPTIONS AND SARS AND LAPSE OF RESTRICTIONS OR ATTAINMENT OF
PERFORMANCE CRITERIA
The exercise of a nonqualified stock option results in ordinary income
for the optionee and a deduction for the corporation measured by the difference
between the option price and the fair market value of the shares received at the
time of exercise. Income tax withholding is required.
The exercise of an option in accordance with the incentive stock option
rules does not result in immediate income for the optionee, except that the
excess of the fair market value on the exercise date over the option price of
the shares is an "item of adjustment" for alternative minimum tax purposes. When
an optionee sells shares acquired by exercise of an incentive stock option, the
optionee's gain (the excess of sales proceeds over option price) on the sale
will be taxed as capital gain provided the sale is not within two years after
the date of grant nor within one year after the transfer of shares upon
exercise. If the subsequent sale is before the expiration of either the two-year
or the one-year period, the optionee generally will realize ordinary income in
the year of the disqualifying sale, and ResCare will then be entitled to a
deduction for that spread in value.
Upon the exercise of SARs or the receipt of cash or stock under a
performance share, the grantee recognizes ordinary income and the corporation is
entitled to a deduction measured by the fair market value of the shares plus any
cash received. Income tax withholding is required.
Absent a Section 83(b) election, the grantee of a restricted stock
award recognizes ordinary income and the corporation is entitled to a deduction
at the time the restrictions lapse or at the time the stock becomes
transferable. The amount of income is measured by the fair market value of the
shares at the time of lapse.
The grantee of a restricted stock award may elect to include the fair
market value of the shares at the time of grant in income for the year of the
grant. A Section 83(b) election generally cannot be revoked and must be made in
writing within thirty days of the grant. If an election is made, and the stock
is held for at least one year after grant, any appreciation in value between the
grant date and the lapse of the restrictions, as well as appreciation
thereafter, will be taxed as a capital gain.
21
<PAGE> 22
At the time the employee has ordinary income, ResCare will receive a
tax deduction for restricted stock in the same amount. Income tax withholding is
required, and that income is subject to all applicable payroll taxes.
SUBSEQUENT SALES
Subject to the special rules governing disqualifying dispositions of
incentive stock options a sale of shares more than one year after their receipt
as described above will result in long-term gain to the holder. Under present
law, long-term capital gain is taxed at a maximum rate of 20% compared to the
maximum rate of 39.6% applicable to ordinary income. Capital gain or loss is
measured by the difference between the sale proceeds and the selling
shareholder's tax basis in the stock sold. A recipient of an option, right or
award may include in the tax basis of his or her shares any ordinary income
recognized upon receipt of such shares.
DISALLOWANCE OF DEDUCTIONS
The Code disallows deductions for publicly held corporations with
respect to compensation in excess of $1,000,000 paid to the corporation's chief
executive officer and its four other most highly compensated officers. However,
compensation payable solely on account of attaining one or more performance
goals is not subject to this deduction limitation if the performance goals are
objective, pre-established and determined by a compensation committee comprised
solely of two or more outside directors, the material terms under which the
compensation is to be paid are disclosed to the stockholders and approved by a
majority vote, and the compensation committee certifies that the performance
goals and other material terms were in fact satisfied before the compensation is
paid. Under this exception, the deduction limitation does not apply with respect
to compensation otherwise deductible on account of stock options and stock
appreciation rights granted at fair market value under a plan which limits the
number of shares that may be issued to any individual and which is approved by
the corporation's shareholders. ResCare intends all awards under the 2000 Plan
to meet the performance based compensation exceptions to this deduction limit.
A copy of the 2000 Plan is attached as Appendix A.
THE 2000 STOCK OPTION AND INCENTIVE COMPENSATION PLAN WILL BE APPROVED
IF A MAJORITY OF THE SHARES OF COMMON STOCK REPRESENTED AND ENTITLED TO VOTE AT
THE ANNUAL MEETING AFFIRMATIVELY VOTE FOR APPROVAL OF THE PROPOSAL. THE BOARD OF
DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF THIS PROPOSAL.
22
<PAGE> 23
PROPOSAL TO APPROVE THE 2000 NONEMPLOYEE DIRECTORS STOCK
OWNERSHIP INCENTIVE PLAN
(ITEM 3 ON THE PROXY CARD)
ResCare's 1993 Nonemployee Directors Stock Ownership Incentive Plan
authorized the issuance of up to 90,000 common shares upon the exercise of
options granted automatically to members of the board of directors who are not
ResCare employees. The plan has expired and none of the shares originally
authorized remain available for option grants. The proposed 2000 Nonemployee
Directors Stock Ownership Incentive Plan would authorize an additional 100,000
common shares for option grants to ResCare's nonemployee directors on
substantially the same terms as the 1993 Directors Plan.
GENERAL
The purposes of the 2000 Directors Plan are to advance ResCare's
interests and enhance ResCare's ability to attract and retain persons of
outstanding ability to serve as directors by providing nonemployee directors
with an ownership interest in ResCare.
The 2000 Directors Plan is designed to operate automatically and
require minimal administration. A committee of two or more directors will have
full authority to construe and interpret the 2000 Directors Plan and any award
agreement and to establish, amend and rescind rules and regulations for the
Plan's administration.
The Plan will terminate on the date when all shares available under the
Plan have been acquired pursuant to the exercise of grants, unless the board of
directors terminates the Plan before that date.
The board of directors may, at any time, amend, modify or terminate the
2000 Directors Plan. However, without shareholder approval, no amendment,
modification or termination may (i) materially increase the benefits accruing to
directors under the Plan; (ii) increase the total number of shares that may be
issued under the Plan (other than in accordance with the Plan's anti-dilution
provisions); or (iii) modify the eligibility or other requirements to receive a
grant under the Plan. No amendment, modification or termination of the Plan may
in any manner adversely affect any outstanding grant without the written consent
of the director.
SHARES SUBJECT TO THE PLAN
The 2000 Directors Plan would authorize the issuance of 100,000 common
shares upon the exercise of options, subject to adjustment as described below.
If and to the extent options expire or terminate without having been exercised
in full, the shares subject to the unexercised portion of the option will again
become available for reissuance under the Plan. Shares subject to awards under
the 1993 Directors Plan that expire or terminate before exercise will not become
available to be re-awarded under the 2000 Directors Plan.
In the event of a merger, reorganization, consolidation,
recapitalization, reclassification, split-up, spin-off, separation, liquidation,
share dividend, stock split, reverse stock split, cash dividend, property
23
<PAGE> 24
dividend, share repurchase, share combination, share exchange, issuance of
warrants, rights or debentures, or other change in the corporate structure of
ResCare affecting the shares, the committee administering the 2000 Directors
Plan may substitute or adjust the total number and class of shares or other
stock or securities that may be issued under the Plan, and the number, class
and/or price of shares or other stock or securities subject to outstanding
grants, as the committee determines to be appropriate and equitable to prevent
dilution or enlargement of the rights of directors and to preserve the value of
any outstanding grants.
GRANT, VESTING AND EXERCISE OF OPTIONS
The 2000 Directors Plan automatically grants an option for 4,500 common
shares to each nonemployee director on the first business day of July of each
year. The exercise price equals the closing sale price of ResCare's common
shares as reported on the Nasdaq National Market on the date of grant. Each
option immediately becomes exercisable with respect to 25% of the shares subject
to the option on the date of grant. The option becomes exercisable with respect
to an additional 25% of the shares as of each of the first, second and third
anniversaries of the date of grant as long as the director is continuing to
serve on the board of directors. If a director ceases to serve on the board of
directors for any reason, the director will automatically forfeit the unvested
portion of the option. Each option will expire on the fifth anniversary of the
date on which it was granted.
The exercise price of an option must be paid in full upon exercise in
cash or by delivering shares held at least six months having a fair market value
equal to the exercise price. Any shares delivered to ResCare in payment of the
option exercise price will be valued at their closing sale price as reported on
the Nasdaq National Market on the date preceding the date of exercise.
TERMINATION OF DIRECTOR RELATIONSHIP
If a director ceases to be a member of the board of directors for any
reason other than retirement, death or disability, the director may exercise any
options exercisable on the date of the director's termination of service until
(a) the earlier of 90 days following the termination or (b) the last day of the
term of the options. If a director ceases to be a member of the board of
directors by reason of retirement, death or disability, the director (or the
director's personal representative) may exercise any options exercisable on the
date of the director's termination of service until (a) the earlier of one year
after the termination or (b) the last day of the term of the options.
CHANGE OF CONTROL
If there is a Change of Control of ResCare, all options outstanding on
the date of the Change of Control will become immediately and fully exercisable.
A "change in control" is defined under the Plan as:
o a person, other than any trustee or other fiduciary holding
securities under any ResCare's employee benefit plan,
becoming the "beneficial owner," directly or indirectly, of
securities representing 30% or more of the combined voting
power of ResCare's then outstanding capital stock;
o any merger, consolidation, share exchange, recapitalization
or other transaction in which any person becomes the
beneficial owner of securities representing 30% or more of
the combined voting power of ResCare's then outstanding
capital stock;
24
<PAGE> 25
o the directors who were directors immediately before a
transaction of ResCare or a successor to ResCare ceasing to
constitute a majority of the Board;
o the disposition of ResCare's business pursuant to a partial
or complete liquidation, sale of assets, or otherwise.
If a Change of Control occurs, a director will be entitled to receive,
in lieu of the exercise of an option, a cash payment in an amount equal to the
difference between the aggregate exercise price and:
o in the case of a tender offer or exchange offer, the final
offer price paid per share, multiplied by the number of
shares subject to the option; or
o in the case of any other Change of Control, the aggregate
fair market value of the shares covered by the shares.
TRANSFER RESTRICTIONS
An award granted under the 2000 Directors Plan is not transferable by
the grantee other than to family members or a trust for the benefit of immediate
family members or by will or the laws of descent and distribution, and can be
exercised during the award holder's lifetime only by the grantee or a duly
appointed guardian or personal representative or by transferees authorized under
the Plan.
FEDERAL INCOME TAX CONSEQUENCES
The options granted under the 2000 Directors Plan are not intended to
qualify as incentive stock options under Section 422A of the Code. The grant of
an option pursuant to the Plan generally will have no federal income tax
consequences to ResCare or to the director. However, upon exercise of an option
granted pursuant to the Plan, a director will be deemed to have received
ordinary income in an amount equal to the excess of the fair market value of
ResCare's common shares acquired on the date of exercise over the exercise
price, and ResCare can deduct that amount.
The director's basis in the shares acquired upon the exercise of an
option will be equal to the fair market value of the shares at the date used to
determine the amount to be included in the director's income as ordinary income.
Upon the disposition of shares after they have been held for more than one year,
the director generally will recognize long-term capital gain or capital loss, as
the case may be, to the extent of the difference between the director's basis in
the shares and the sale price.
A copy of the 2000 Non-Employee Directors Plan is attached as Appendix
B.
THE 2000 NONEMPLOYEE DIRECTORS STOCK OWNERSHIP INCENTIVE PLAN WILL BE
APPROVED IF A MAJORITY OF THE SHARES OF COMMON STOCK REPRESENTED AND ENTITLED TO
VOTE AT THE ANNUAL MEETING AFFIRMATIVELY VOTE FOR APPROVAL OF THE PROPOSAL. THE
BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF THIS
PROPOSAL.
25
<PAGE> 26
The following table describes the benefits that will be received by
persons named in the summary compensation table and the non-employee directors
under the proposed plans.
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
2000 Stock Option and 2000 Nonemployee Directors Stock
Incentive Compensation Plan Ownership Incentive Plan
Name and Position Number of Shares Number of Shares
----------------- ---------------- ----------------
<S> <C> <C>
Ronald G. Geary, Chairman, President 112,500(1) --
and Chief Executive Officer
Executive Group(2) 112,500(1) --
Seymour L. Bryson, Director -- 4,500
James R. Fornear, Director -- 4,500
Olivia F. Kirtley, Director -- 4,500
W. Bruce Lunsford, Director -- 4,500
Vincent D. Pettinelli, Director -- 4,500
Non-Executive Director Group -- 22,500
-----------
</TABLE>
(1) Represents annual option grant under Mr. Geary's employment agreement. See
"Executive Compensation - Employment Agreements."
(2) Comprised of the five executive officers named in the Summary Compensation
Table. See "Executive Compensation."
The market value of ResCare common shares subject to options under the
proposed plans as reported on the Nasdaq National Market on July 31, 2000 was
$5.875 per share.
26
<PAGE> 27
SELECTION OF INDEPENDENT AUDITORS
(ITEM 4 ON THE PROXY CARD)
Subject to ratification by shareholders at the annual meeting, the
board of directors has selected the firm of KPMG LLP as the independent auditors
for ResCare to audit its financial statements for the fiscal year ending
December 31, 2000. KPMG LLP has served as the independent auditors for ResCare
for all fiscal years beginning with the fiscal year ending December 31, 1989 and
is, therefore, familiar with the affairs and financial procedures of ResCare. A
representative of KPMG LLP is expected to be present at the annual meeting, will
have the opportunity to make a statement if he or she desires to do so, and will
be available to respond to appropriate questions.
The board of directors recommends that the shareholders vote FOR
ratification of the selection of KPMG LLP as ResCare's independent auditors.
SHAREHOLDERS' PROPOSALS FOR THE 2001 ANNUAL MEETING
Under Rule 14a-8 promulgated under the Exchange Act, ResCare
shareholders may present proposals to be included in the ResCare proxy statement
for consideration at the next annual meeting of its shareholders by submitting
their proposals to ResCare in a timely manner. Any such proposal must comply
with Rule 14a-8.
ResCare's by-laws require shareholders who intend to propose business
for consideration by shareholders at an annual meeting, other than shareholder
proposals that are included in the proxy statement, to give written notice to
the Secretary of ResCare not less than sixty days and not more than ninety days
before the annual meeting. If shareholders receive less than seventy days notice
or prior public disclosure of the date of the meeting, the Secretary of ResCare
must receive notice of business to be proposed not later than the tenth day
following the day on which ResCare mailed or publicly disclosed notice of the
annual meeting. A shareholder must submit a matter to be raised at ResCare's
2001 annual meeting and included in the proxy statement no later than December
15, 2000, based on an expected annual meeting date of May 15, 2001, and must
include a brief description of the business, the reasons for conducting such
business, any material interest the shareholder has in such business, the name
and address of the shareholder as they appear on ResCare's books and the class
and number of ResCare common shares the shareholder beneficially owns.
SEC rules set forth standards for what shareholder proposals ResCare is
required to include in a proxy statement for an annual meeting.
OTHER MATTERS
The board of directors does not know of any other business to be
presented for consideration at the meeting. If other matters properly come
before the meeting, the persons named in the accompanying form of proxy intend
to vote on such matters based on their best judgment.
ResCare will bear the cost of the meeting and the cost of soliciting
proxies, including the cost of mailing the proxy materials. In addition to
solicitation by mail, directors, officers and regular
27
<PAGE> 28
employees of ResCare (none of whom will be specifically compensated for such
services) may solicit proxies by telephone or otherwise. Arrangements will be
made with brokerage houses and other custodians, nominees and fiduciaries to
send proxy cards and proxy materials to the shareholders they represent and
ResCare will reimburse them for their expenses.
ResCare will furnish, without charge, to each person whose proxy is
being solicited, upon request, a copy of its Annual Report on Form 10-K for the
fiscal year ended December 31, 1999, as filed with the Securities and Exchange
Commission, including the financial statements, notes to the financial
statements and the financial schedules contained in the report. ResCare will
also furnish copies of any exhibits to the report upon request, but may charge a
reasonable copying charge. Shareholders should address requests for copies of
any of these materials to Nel Taylor, Vice President of Communications, ResCare,
Inc., 10140 Linn Station Road, Louisville, Kentucky 40223.
By order of the board of directors
SPIRO B. MITSOS
Secretary
-----------------------------
Please date, sign and return the enclosed proxy card in the enclosed
envelope at your earliest convenience. Postage is not required if it is mailed
in the United States.
28
<PAGE> 29
APPENDIX "A"
RES-CARE, INC.
2000 STOCK OPTION AND INCENTIVE COMPENSATION PLAN
Res-Care, Inc. (the "Company") hereby established a stock option and
incentive plan for the benefit of its employees, as set forth below.
SECTION 1 -- PURPOSE
The Company adopts this compensation program for certain key employees
to (a) increase the profitability and growth of the Company; (b) provide
competitive compensation to employees while obtaining the benefits of tax
deferral, (c) attract and retain exceptional personnel and encourage excellence
in the performance of individual responsibilities; and (d) motivate key
employees to contribute to the Company's success.
SECTION 2 -- DEFINITIONS
For purposes of the Plan, the following terms shall have the meanings
below unless the context clearly indicates otherwise:
2.1 "AWARD" means an Incentive Stock Option, a Nonqualified Stock
Option, a Stock Appreciation Right, a Restricted Stock Award, or a Performance
Share Award granted under the Plan.
2.2 "AWARD AGREEMENT" means a written agreement between a Participant
and the Company covering the specific terms and conditions of an Award; where
such an agreement grants only stock options, it may also be referred to as a
"Stock Option Agreement."
2.3 "BOARD" means the Board of Directors of the Company.
2.4 "CHANGE OF CONTROL" means (i) an event or series of events which
have the effect of any "person" as such term is used in Section 13(d) and 14(d)
of the Exchange Act, other than any trustee or other fiduciary holding
securities of the Company under any employee benefit plan of the Company,
becoming the "beneficial owner" as defined in Rule 13d-3 under the Exchange Act,
directly or indirectly, of securities of the Company representing 30% or more of
the combined voting power of the Company's then outstanding capital stock; (ii)
any merger, consolidation, share exchange, recapitalization or other transaction
in which any person becomes the beneficial owner of securities of the Company
representing 30% or more of the combined voting power of the Company's then
outstanding capital stock; (iii) the persons who were Directors immediately
before a transaction shall cease to constitute a majority of the Board of the
Company or any successor to the Company; (iv) the business of the Company is
disposed of pursuant to a partial or complete liquidation, sale of assets, or
otherwise.
2.5 "CODE" means the Internal Revenue Code of 1986, as it may be
amended from time to time.
1
<PAGE> 30
2.6 "COMMITTEE" means the committee appointed by the Board pursuant to
Section 4.1 to administer the Plan
2.7 "COMPANY" shall mean Res-Care, Inc. and its successors.
2.8 "DIRECTOR" means a voting member of the Board, excluding any person
who serves solely in an advisory capacity or as a director emeritus.
2.9 "DISABILITY" means permanent disability within the meaning of
Section 22(e)(3) of the Code. 2.9.
2.10 "EFFECTIVE DATE" shall have the meaning set forth in Section 15.
2.11 "EMPLOYEE" means an employee of the Company or a Subsidiary.
2.12 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
2.13 "FAIR MARKET VALUE" means the closing market price per share of
Stock as reported on the date as of which Fair Market Value is to be determined,
or, if no trades were reported on that date, the closing price on the most
recent trading day immediately preceding such date for which closing price
information is available. In the absence of an established market for the Stock,
the Fair Market Value of the Stock shall be determined in good faith by the
Committee.
2.14 "GRANT DATE" means, with respect to an Award, the date as of which
the Award is granted as stated in the Award Agreement.
2.15 "INCENTIVE STOCK OPTION" means an option to purchase Stock granted
under Section 6 of the Plan that is designated by the Committee as an Incentive
Stock Option and is intended to meet the requirements of Section 422 of the
Code.
2.16 "INDEPENDENT DIRECTOR" means a Director who is not a current or
former employee or officer of the Company or a Subsidiary and who does not
receive any remuneration from the Company or any Subsidiary for service to the
Company or a Subsidiary in any capacity other than as a Director, and otherwise
in accordance with the meaning of Treasury Reg. Section 1.162-27(e)(3).
2.17 "NONQUALIFIED STOCK OPTION" means an option to purchase Stock
granted under Section 6 of the Plan that is not intended to be an Incentive
Stock Option.
2.18 "OPTION" means an Incentive Stock Option or a Nonqualified Stock
Option.
2.19 "OPTION PERIOD" means the period from the Grant Date of an Option
to the date the period for exercise of the Option expires as stated in the Award
Agreement.
2.20 "PARENT" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code, or any successor provision.
2
<PAGE> 31
2.21 "PARTICIPANT" means an Employee who has been granted an Award
under the Plan.
2.22 "PERFORMANCE SHARE" means the grant of contingent shares of Stock
under Section 10 of the Plan.
2.23 "PLAN" means this Res-Care, Inc. 2000 Stock Option and Incentive
Compensation Plan.
2.24 "RESTRICTION PERIOD" means the period of time from the Grant Date
of a Restricted Stock Award to the date when the restrictions placed on the
Stock in the Award Agreement lapse.
2.25 "RESTRICTED STOCK AWARD" or "RESTRICTED STOCK" means a Restricted
Stock Award granted under Section 9 of the Plan.
2.26 "RETIREMENT" means a Participant's Termination of Employment with
the Company or a Subsidiary after attaining age 60 (or earlier with the
Company's or the Subsidiary's consent).
2.27 "STOCK" means the Company's voting common stock of no par value
per share, or such other securities into which the Stock may be converted, by
merger or otherwise.
2.28 "STOCK APPRECIATION RIGHT" or "SAR" means a Stock Appreciation
Right granted under Section 7 of the Plan.
2.29 "SUBSIDIARY" means any corporation which at the time qualifies as
a subsidiary of the Company under the definition of "subsidiary corporation" in
Section 424(f) of the Code.
2.30 "TERMINATION OF EMPLOYMENT" shall be deemed to have occurred at
the close of business on the last day on which an Employee is carried as an
active employee on the records of the Company or a Subsidiary. The Committee
shall determine in accordance with Section 13.2 whether an authorized leave of
absence, or other absence on military or government service, constitutes
severance of the employment relationship between the Company or a Subsidiary and
the Employee.
SECTION 3 -- STOCK SUBJECT TO THE PLAN
3.1 Authorized Stock. Subject to adjustment as provided in Section 11,
the aggregate number of shares of Stock that may be issued pursuant to Awards
under the Plan, and the maximum number of shares that may be issued pursuant to
Incentive Stock Option Awards, shall be 900,000 shares, plus any shares
authorized for issuance and not issued or subject to grants under the Company's
1991 Incentive Stock Plan and 1998 Omnibus Stock Plan (the "Prior Plans") that
expire or terminate. When adopted by the Company's Shareholders, this Plan shall
amend the Prior Plans to immediately terminate the right to make additional
grants under the Prior Plans. Stock delivered under the Plan shall consist of
authorized and unissued stock.
3.2 Effect of Expirations. If any Award granted under the Plan expires
or terminates without exercise, or is cancelled or settled for cash, the Stock
no longer subject to such Award shall be available to be re-awarded under the
Plan. Any Stock withheld by the Company in payment of the
3
<PAGE> 32
exercise price of an Award or to satisfy tax withholding obligations shall be
available to be re-awarded under the Plan.
SECTION 4 -- ADMINISTRATION
4.1 Committee Governance. This Plan shall be administered by the
Committee and in a manner that shall permit Awards to qualify for the exemption
set forth in Rule 16b-3 under the Exchange Act and as performance-based
compensation under Section 162(m) of the Code. The Committee shall consist of
two or more Independent Directors appointed by the Board. The Board shall
determine the number of members of the Committee and shall add or remove members
from the Committee as the Board sees fit, and shall fill any vacancies. The
Committee shall select one of its members as the chairperson of the Committee
and shall hold meetings at such times and places as it may determine. The
Committee may appoint a secretary and, subject to the provisions of the Plan and
to policies determined by the Board, may make such rules and regulations for the
conduct of its business as it shall deem advisable. Written action of the
Committee may be taken by a majority of its members, and actions so taken shall
be fully effective as if taken by a vote of a majority of the members at a
meeting duly called and held. A majority of Committee members shall constitute a
quorum for purposes of meeting. The act of a majority of the members present at
any meeting for which there is a quorum shall be a valid act of the Committee.
4.2 Committee to Interpret Plan. Subject to the provisions of the Plan,
the Committee shall have sole power to (i) construe and interpret the Plan; (ii)
establish, amend or waive rules and regulations for its administration; (iii) to
determine and accelerate the exercisability of any Award or the termination of
any Restriction Period; (iv) to correct inconsistencies in the Plan or in any
Award Agreement, or any other instrument relating to an Award; and (v) subject
to the provisions of Section 11, to amend the terms and conditions of any Award
to the extent such terms and conditions are within the discretion of the
Committee as provided in the Plan. Notwithstanding the foregoing, no action of
the Committee may, without the consent of the person or persons entitled to
exercise any outstanding Award, adversely affect the rights of such person or
persons.
4.3 Exculpation. No member of the Board or the Committee shall be
liable for actions or determinations made in good faith with respect to the
Plan, or for Awards under it.
4.4 Selection of Participants. The Committee shall have the authority
to grant Awards from time to time to such Employees as may be selected by it in
its sole discretion.
4.5 Decisions Binding. All determinations and decisions made by the
Committee pursuant to the Plan, including factual determinations, shall be
final, conclusive and binding on all persons, including the Company, its
Subsidiaries, its shareholders, Participants and their estates and assignees.
4.6 Award Agreements. Each Award under the Plan shall be evidenced by
an Award Agreement which shall be signed by the Chairman or Secretary of the
Committee or by an officer of the Company authorized by the Committee and by the
Participant, and shall contain such terms and conditions as may be approved by
the Committee, which need not be the same in all cases. Any Award Agreement may
be supplemented or amended in writing from time to time as approved by the
Committee, provided that the terms of the Agreement as amended or supplemented,
as well as the
4
<PAGE> 33
terms of the original Award Agreement, are not inconsistent with the provisions
of the Plan. An Employee who receives an Award under the Plan shall not, with
respect to the Award, be deemed to have become a Participant, or to have any
rights with respect to the Award, unless and until the Award Agreement has been
signed by the Chairman or Secretary of the Committee and by the Employee and
delivered to the Committee, and the Employee has otherwise complied with the
applicable terms and conditions of the Award. The Committee may condition any
Award upon the agreement by the Participant to such confidentiality,
non-competition, and non-solicitation covenants as the Committee deems
appropriate.
4.7 Limitation on Awards.
(a) Subject to adjustment as provided in Section 11, the
maximum number of shares of Stock that may be issued pursuant to Awards under
the Plan to any one Participant during any one fiscal year of the Company shall
not exceed 120,000 shares (as adjusted under Section 11). Such limit shall not
be adjusted to restore shares of Stock if an Award received by the Participant
subject to the limit is terminated, surrendered or cancelled.
(b) No part of any Option or SAR Award may be exercised, no
Performance Share shall be issued, and no Restriction Period will lapse to the
extent the exercise, issuance or lapse would cause the Participant to have
compensation from the Company and its affiliated companies for any year in
excess of one million dollars and which is nondeductible by the Company and its
affiliated companies pursuant to Code Section 162(m). Any portion of an Award
that is not exercisable, not issued or for which a Restriction Period does not
lapse because of this limitation shall continue to be exercisable or shall be
issued, or the Restriction Period shall lapse, in any subsequent year in which
the exercise, issuance or lapse would not cause the loss of the Company's or its
affiliated companies' compensation tax deduction, provided such exercise or
issuance occurs before the Award expires, and otherwise complies with the terms
and conditions of the Plan and the Award Agreement.
SECTION 5 -- AWARDS UNDER THE PLAN
Subject to the limitations of the Plan, the Committee may in its sole
and absolute discretion grant Awards in such numbers, upon such terms and at
such times as the Committee shall determine. Employees who are expected to
contribute substantially to the growth and profitability of the Company or a
Subsidiary are eligible for selection by the Committee under Section 4.4 to
receive Awards.
SECTION 6 -- STOCK OPTIONS
6.1 Grant. Both Incentive Stock Options and Nonqualified Stock Options
may be granted under the Plan. If an Option is designated as an Incentive Stock
Option but does not qualify as such under Section 422 of the Code, the Option
(or portion thereof) shall be treated as a Nonqualified Stock Option, and
governed by Section 83 of the Code. All Options granted under the Plan shall be
evidenced by an Award Agreement in such form as the Committee may from time to
time approve. All Options are subject to the terms and conditions of this
Section 6 and such additional terms and conditions contained in the Award
Agreement, which need not be the same in each case, not inconsistent with the
provisions of the Plan, as the Committee finds desirable.
5
<PAGE> 34
6.2 Exercise Price. The exercise price per share of Stock covered by an
Option shall be determined by the Committee, provided that the exercise price
for an Incentive Stock Option shall not be less than 100% of the Fair Market
Value of the Stock on the Grant Date, unless the Incentive Stock Option is
granted to a person who on the Grant Date owns (within the meaning of Section
424 of the Code) stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or any Subsidiary, in which case
the exercise price shall be at least 110% of the Fair Market Value of the Stock
on the Grant Date.
6.3 Option Period. The Option Period shall be determined by the
Committee, and unless otherwise specifically provided in the Award Agreement, no
Option shall be exercisable later than ten years from the Grant Date. No
Incentive Stock Option shall be exercisable later than ten years from the Grant
Date, provided that in the case of an Employee who on the Grant Date owns or is
deemed to own (within the meaning of Section 425(d) of the Code) more than 10%
of the total combined voting power of all classes of stock of the Company or any
Subsidiary, the Incentive Stock Option shall not be exercisable later than five
years from the Grant Date. Options may expire prior to the end of the Option
Period due to the Participant's Termination of Employment as provided in Section
8, or in accordance with any provision of the Award Agreement. No Option may be
exercised at any time unless the Option is valid and outstanding.
6.4 Limitation on Amount of Incentive Stock Options. The aggregate Fair
Market Value (determined as of each Option Grant Date) of Stock with respect to
which a Participant's Incentive Stock Options are exercisable for the first time
during any calendar year (under this and all other stock option plans of the
Company and any Subsidiary) shall not exceed $100,000. Options or portions of
Options exercisable as a result of acceleration under Section 11.2 in excess of
the $100,000 limit described herein shall be treated as Nonqualified Stock
Options.
6.5 Nontransferability of Options. Except as otherwise provided in this
Section 6.5, no Option shall be transferable by a Participant otherwise than by
will or the laws of descent and distribution, and an Option shall be
exercisable, during the Participant's lifetime, only by the Participant (or, in
the event of the Participant's legal incapacity or incompetency, the
Participant's guardian or legal representative). The Committee may in an Award
Agreement allow a Participant, subject to any restrictions under Section 16(b)
of the Exchange Act, to transfer all or part of a Nonqualified Stock Option to
(i) the Participant's spouse or lineal descendants ("Immediate Family Members"),
(ii) trusts for the exclusive benefit of the Participant and/or his Immediate
Family Members, or (iii) a partnership or limited liability company in which the
Participant and/or his Immediate Family Members are the only partners or
members, as applicable. Such transfer may be made by a Participant only if there
is no consideration for the transfer, and subsequent transfers of any Option
shall be prohibited other than in accordance with this Section 6.5 and by will
or the laws of descent and distribution. Following a transfer of an Option, the
Option shall continue to be subject to the same terms and conditions as were
applicable immediately before the transfer, and Termination of Employment or
Service, Retirement, Disability, satisfaction of service requirements or
performance objectives, and other conditions to exercise of an Option shall be
applied with respect to the original Participant. However, for purposes of
exercising the Option, the term Participant shall refer to the transferee. In
addition, for purposes of the death benefit provisions of Section 8, the
Participant's Representative shall be deemed to refer to the transferee, the
personal representative of the transferee's
6
<PAGE> 35
estate, or after final settlement of the transferee's estate, the successor or
successors entitled thereto by law.
6.6 Exercise. An Option may be exercised, so long as it is valid and
outstanding, from time to time in part or as a whole, subject to any limitations
with respect to the number of shares for which the Option may be exercised at a
particular time and to such other conditions (e.g., exercise could be
conditioned on performance) as the Committee in its discretion may specify upon
granting the Option or as otherwise provided in this Section 6.
6.7 Method of Exercise. To exercise an Option, the Participant or the
other person(s) entitled to exercise the Option shall deliver to the Committee
(i) a written notice of exercise in such form as the Committee may prescribe,
specifying the number of full shares to be purchased; (ii) payment in full of
the exercise price in accordance with Section 6.8; and (iii) in the case of
Nonqualified Stock Options, any required withholding taxes as provided in
Section 14. No shares of Stock shall be issued unless the Participant has fully
complied with the provisions of this Section 6.7.
6.8 Payment of Exercise Price. To the extent provided in the Award
Agreement for an Option and subject to the rules of Section 16 of the Exchange
Act and any exchange on which the Stock is traded at any relevant time, payment
of the exercise price may be made (i) in cash; (ii) in shares of Stock (based on
the Fair Market Value of the Stock on the date the Option is exercised)
acceptable to the Committee and owned by the Participant (or jointly by the
Participant and his spouse) for at least six months evidenced by negotiable
certificates or by a written attestation of ownership and consent to issuance,
in satisfaction of the Option or portion thereof being exercised, of only the
net shares of Stock (those equal in value to the difference between the exercise
price and the then Fair Market Value); (iii) by a written election to have the
Company retain that number of shares of Stock subject to the Option having an
aggregate Fair Market Value equal to the aggregate exercise price of the Option,
provided that for Incentive Stock Options, this right must be granted by the
Committee at the time the Option is granted and may not be added in any
modification of the Award Agreement; or (iv) by any combination thereof. If
permitted in the Award Agreement, Restricted Stock (valued as if it were not
subject to restrictions on transfer or possibilities of forfeiture) issued to
the Participant may be tendered as payment of the exercise price of an Option.
If Restricted Stock is tendered as the exercise price of an Option, a number of
shares of Stock issued on exercise of such Option, equal to the number of shares
of Restricted Stock tendered as consideration thereof, shall be subject to the
same restrictions as the Restricted Stock so tendered and shall be held by the
secretary of the Company pursuant to Section 9.1.
SECTION 7 -- STOCK APPRECIATION RIGHTS
7.1 Grant. All Stock Appreciation Rights ("SAR's") granted under the
Plan shall be evidenced by an Award Agreement in such form as the Committee may
from time to time approve. All SARs are subject to the terms and conditions of
this Section 7 and such additional terms and conditions contained in the Award
Agreement, which need not be the same in each case, not inconsistent with the
Plan, as the Committee finds desirable.
7.2 Exercise Price. The exercise price per share of Stock subject to a
SAR shall be determined by the Committee at the time of grant and specified in
the Award Agreement.
7
<PAGE> 36
7.3 Exercise Period. The exercise period shall be determined by the
Committee, and unless otherwise specified in the Award Agreement, no SAR shall
be exercisable later than ten years from the Grant Date. No SAR may be exercised
at any time unless such SAR is valid and outstanding as provided in this Section
7.
7.4 Nontransferability. No SAR shall be transferable other than by will
or by the laws of descent and distribution, and SAR's shall be exercisable,
during the Participant's lifetime, only by the Participant (or, in the event of
the Participant's legal incapacity or incompetency, the Participant's guardian
or legal representative).
7.5 Exercise. An SAR may be exercised, so long as it is valid and
outstanding, from time to time in part or as a whole, subject to any limitations
with respect to the number of shares for which the SAR may be exercised at a
particular time and to such other conditions (e.g., exercise could be
conditioned on performance) as the Committee in its discretion may specify upon
granting the SAR or as otherwise provided in this Section 7.
7.6 Method of Exercise. To exercise an SAR, the Participant or the
other person(s) entitled to exercise the SAR shall give written notice of
exercise to the Committee, specifying the number of full shares with respect to
which the SAR is being exercised, and, if the Award Agreement provides that the
Participant may elect the method of payment, whether the SAR is to be paid in
cash or Stock.
7.7 Payment Upon Exercise. Upon the exercise of an SAR, a Participant
shall be entitled to receive an amount, in cash or whole shares of Stock (or a
combination thereof) as provided in the Award Agreement, equal to the amount by
which the then Fair Market Value of one share of Stock exceeds the exercise
price per share specified in the Award Agreement, multiplied by the number of
shares with respect to which the SAR is exercised. The number of shares of Stock
to be delivered to the Participant upon exercise of an SAR shall be based on the
Fair Market Value of the Stock on the date of exercise. Payment of an SAR shall
be made in cash, shares of Stock, or a combination of cash and shares of Stock,
as provided in the Award Agreement, which may provide the Participant a choice
regarding the form of payment. A certificate or certificates for shares of Stock
acquired upon exercise of an SAR shall be issued in the name of the Participant
and distributed to the Participant as soon as practicable following exercise,
subject to Section 13.3. No fractional shares of Stock will be issuable upon
exercise of an SAR and, unless otherwise provided in the Award Agreement, the
Participant will receive cash in lieu of fractional shares.
SECTION 8 -- LIMITATIONS ON EXERCISE OF OPTIONS AND SARS
AFTER TERMINATION OF EMPLOYMENT OR SERVICE
8.1 After a Participant's Termination of Employment, an Option or SAR
may be exercised, subject to adjustment as provided in Section 11, only to the
extent that the Option or SAR was exercisable immediately before the Termination
of Employment or Service, but in no event after the expiration date of the
Option or SAR as specified in the Award Agreement. Except to the extent that
shorter or longer periods are provided in the Award Agreement, a Participant's
right to exercise an Option or SAR upon Termination of Employment or Service
shall terminate:
(a) At the expiration of one year in the event of Disability
of the Participant; or
8
<PAGE> 37
(b) At the expiration of one year after the Participant's
death if the Participant's Termination of Employment or Service occurs by reason
of death, any Option or SAR exercised under this subparagraph (b) may be
exercised by the legal representative of the estate of the Participant or by the
person or persons who acquire the right to exercise such Option or SAR by
bequest or inheritance; or
(c) No later than three months after the Participant's
Termination of Employment or Service for any reason other than those described
in (a) and (b) above or termination for "Cause" as described in Section 8.2.
8.2 Termination for Cause. If the Committee determines that an
Employee's employment has been terminated for Cause, the Employee shall forfeit
any and all unexercised Option and Stock Appreciation Rights Awards immediately
upon the Termination of Employment. For purposes of this Plan, "Cause" shall
have the definition set forth in the employment agreement between the Company
and the Employee, if any; otherwise, "Cause" shall mean the Employee's (i)
willful failure to substantially perform such Employee's reasonably assigned
duties on behalf of the Company, (ii) repeated gross negligence in performing
such Optionee's duties, (iii) illegal conduct in performing such Employee's
duties, (iv) willful actions contrary to the Company's interest, (v) repeated
refusal to comply with the reasonable and lawful instructions of management of
the company, or (vi) violation of the obligations imposed on the Employee under
any confidentiality or solicitation covenants to which the Employee is bound
under the terms of the Stock Option Agreement or otherwise.
SECTION 9 -- RESTRICTED STOCK AWARDS
9.1 Grant. All Restricted Stock Awards granted under the Plan shall be
evidenced by an Award Agreement in such form as the Committee may from time to
time approve. All Restricted Stock Awards are subject to the terms and
conditions in this Section 9, and such additional terms and conditions contained
in the Award Agreement, which need not be the same in each case, not
inconsistent with the provisions of the Plan, as the Committee finds desirable.
The Company shall issue, in the name of each Participant who is granted a
Restricted Stock Award, a certificate for the shares of Stock granted in the
Award (subject to Section 13.3), as soon as practicable after the Grant Date.
The Secretary of the Company shall hold such certificates for the Participant's
benefit until the Restriction Period lapses or the Restricted Stock is forfeited
to the Company in accordance with the Award Agreement.
9.2 Restriction Period. The Restriction Period shall be determined by
the Committee, and shall commence on the Grant Date and expire at the time
specified in the Award Agreement. The Committee may provide in an Award
Agreement that a Restriction Period that has not otherwise expired will expire
immediately upon the Retirement, death or Disability of the Participant. Unless
otherwise provided in the Award Agreement, in the event of a Participant's
Termination of Employment during the Restriction Period for any reason, the
Participant's rights to the Stock subject to the Restricted Stock Award shall be
forfeited and all such Stock shall immediately be surrendered to the Company.
9.3 Rights of Participant. During the Restriction Period, the
Participant may not sell, transfer, pledge, assign or otherwise dispose of
shares of Restricted Stock. Any attempt by a
9
<PAGE> 38
Participant to sell, transfer, pledge, assign or otherwise dispose of Restricted
Stock shall cause immediate forfeiture of the Award. Except as provided in the
previous sentence and as otherwise provided in the Award Agreement, a
Participant shall have, with respect to Restricted Stock, all of the rights of a
shareholder of the Company, including the right to vote the shares and the right
to receive all dividends and other distributions with respect to such shares,
provided that the Participant has become the holder of record of the Stock. The
Committee may provide in an Award Agreement that dividends paid on Restricted
Stock must be reinvested in shares of Stock, which may or may not be subject to
the same Restriction Period applicable to the original Restricted Stock Award.
In the event of any adjustment as provided in Section 11 or if any securities
are received as a dividend on Restricted Stock, new or additional shares or
securities shall be subject to the same terms and conditions as the original
Restricted Stock.
9.4 Expiration of Restriction Period. At the expiration of the
Restriction Period, the restrictions contained in Section 9.3 and in the Award
Agreement shall, except as otherwise specifically provided in the Award
Agreement, expire, and the Company shall, subject to the provisions of Section
13.3 and the Award Agreement, deliver to the Participant a certificate
evidencing the Participant's ownership of the Stock free of the restrictions.
9.5 Nontransferability. No Restricted Stock Award shall be transferable
other than by will or the laws of descent and distribution until any
restrictions applicable to such Award have lapsed and a certificate evidencing
the Participant's ownership of the stock free of restrictions has been issued.
SECTION 10 -- PERFORMANCE SHARE AWARDS
10.1 Grant. All Performance Share Awards granted under the Plan shall
be evidenced by an Award Agreement in such form as the Committee may from time
to time approve. All Performance Share Awards are subject to the terms and
conditions of this Section 10 and such additional terms and conditions contained
in the Award Agreement, which terms and conditions need not be the same in each
case, not inconsistent with the Plan, as the Committee finds desirable.
10.2 Performance Criteria. The performance criteria for each
Performance Share Award shall be determined by the Committee, and shall may
consist of service requirements and any measures of performance of the Company
or any Subsidiary or such other criteria as the Committee specifies. At the
times specified in the Award Agreement, the Committee shall evaluate actual
performance during such performance period compared to the performance criteria
established for the Award, and shall determine the extent to which a cash or
stock payment is to be made pursuant to the Performance Share Award. The
Committee may provide in an Award Agreement that one or more performance
criteria under an Award will be deemed to have been met upon the Retirement,
death or Disability of the Participant. Unless otherwise provided in the Award
Agreement, in the event of a Participant's Termination of Employment for any
reason before performance criteria have been met, the Participant's rights to
payment of a Performance Share Award shall be forfeited.
10.3 Payment. Performance Share Awards will be paid only after the
Committee determines, in its sole discretion, that the performance criteria
established under Section 10.2 have been achieved, subject to such other terms
and conditions as may be included in the Award Agreement and to the Committee's
right to waive any performance criteria in its discretion. Payment shall be
made, as
10
<PAGE> 39
provided in the Award Agreement (which may provide the Participant a choice
regarding the form of payment), in cash or whole shares of Stock (or a
combination thereof) having a Fair Market Value equal to the number of shares of
Stock represented by the Performance Share Award. A certificate or certificates
for shares of Stock to be issued pursuant to a Performance Share Award shall be
issued in the name of the Participant and distributed to the Participant as soon
as practicable following the Committee's determination that performance criteria
have been met, subject to Section 13.3. No fractional shares of Stock will be
issued in connection with a Performance Share Award and, unless otherwise
provided in the Award Agreement, the Participant will receive cash in lieu of
fractional shares.
10.4 Rights of Participant. A Participant shall not, with respect to a
Performance Share Award or any Stock that may in the future be issued under it,
have any rights as a shareholder of the Company, such as the right to vote the
shares or the right to receive dividends and other distributions, at any time
before the Participant has become the holder of record of the Stock.
10.5 Nontransferability. No Performance Share Award shall be
transferable other than by will or by the laws of descent and distribution.
SECTION 11 - ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, CHANGE OF
CONTROL, OR CERTAIN OTHER TRANSACTIONS
11.1 Changes in Capitalization. In the event of any merger,
reorganization, consolidation, recapitalization, separation, liquidation, stock
dividend, split-up, share combination, or other change in the corporate
structure of the Company affecting the number of shares of Stock or the kind of
shares or securities issuable upon exercise of an option, and subject to Section
11.2, an appropriate and proportionate adjustment shall be made by the Committee
in the number and kind of shares which may be delivered under the Plan, and in
the number and kind of or price of shares subject to outstanding Options;
provided that the number of shares subject to any Option shall always be a whole
number. Any adjustment of an Incentive Stock Option under this Section shall be
made in such a manner so as not to constitute a "modification" within the
meaning of Section 424(h) of the Code. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Stock subject to an Award.
11.2 Change of Control.
(a) Options and SARs. The Committee, in its discretion, may
provide in an Award Agreement that each outstanding Option and SAR shall become
exercisable in full in the event of a Change of Control. In addition, in the
event of a Change of Control, each outstanding Option and SAR (i) shall be
assumed or an equivalent option or right shall be substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation, or (ii) if
the successor corporation does not agree to assume the outstanding Options or
SARs or to substitute equivalent options or rights, then each outstanding Option
or SAR shall be entitled to receive in lieu of the exercise of the Option or
SAR, a cash payment in an amount equal to the difference between the aggregate
exercise price of the Option or SAR and (A) in the case of a tender offer or
exchange offer, the final offer price paid per share of Common Stock, or such
lower price as the Committee may determine is necessary to preserve
11
<PAGE> 40
an Option's ISO status, multiplied by the number of shares of Common Stock
covered by the Option or SAR, or (B) in the case of any other Change of Control,
the aggregate Fair Market Value of the shares covered by the Option or SAR, as
determined by the Committee at such time. The Company shall pay any amount
required under this Section 11.2 within 15 days following the occurrence of the
Change of Control. The Committee shall have the discretion to revoke or limit
the acceleration of exercisability of an Option or SAR at any time before and
within 20 business days following the date a Change of Control is approved by
the Board or otherwise occurs.
(b) Restricted Stock. The Committee, in its discretion, may
provide in an Award Agreement that in the event of a Change of Control, the
Performance Period of any Restricted Stock Award shall lapse.
(c) Assumption of Option or SAR. For purposes of Section
11.2(a), an Option or SAR shall be considered assumed if the Committee
determines, at the time of issuance of the stock or other consideration upon
such Change of Control, that the holder of the Option or SAR would be entitled
to receive upon exercise the same number and kind of shares of stock or the same
amount of property, cash or securities as the holder would have been entitled to
receive after the effective time of the transaction if the holder had been,
immediately before the effective time of the transaction, the holder of the
number of shares of Stock covered by the Option or SAR at such time (whether or
not the Option or SAR was then exercisable and after giving effect to any
adjustments in the number of Shares covered by the Option or SAR as provided in
this Section 11). If the consideration to be received in a Change of Control
transaction is not solely common stock of the successor corporation or its
Parent, the Committee may, with the consent of the successor corporation,
provide for the consideration to be received upon exercise of the Option to be
solely common stock of the successor corporation or its Parent equal to the Fair
Market Value of the consideration per share received by holders of Stock in the
transaction.
11.3 Certain Distributions. In the event of any distribution to the
Company's shareholders of securities of any other entity or other assets (other
than dividends payable in cash or stock of the Company) without receipt of
consideration by the Company, the Committee may, in its discretion,
appropriately adjust the exercise price covered by each outstanding Option or
SAR to reflect the effect of such distribution.
11.4 Other Adjustments. The Committee is authorized to make, in its
sole discretion and without the consent of Participants, adjustments to the
terms and conditions of, and the criteria included in, Awards in recognition of
unusual and nonrecurring events affecting the Company, or changes of applicable
laws, regulations, or accounting principles, whenever the Committee determines
that such adjustments are appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan.
SECTION 12 -- AMENDMENTS AND TERMINATION
12.1 Amendments and Termination. The Committee or the Board may
terminate, suspend, amend or alter the Plan, but no action of the Committee may:
12
<PAGE> 41
(a) Impair or adversely affect the rights of a Participant
under an outstanding Award theretofore granted, without the Participant's
consent, other than as provided in Section 11 or 13.3; or,
(b) Without the approval of the shareholders:
(i) Increase the total amount of Stock which may be
delivered under the Plan pursuant to Incentive Stock Options or the limit in
Section 4.7 on grants to individual Employees, except as is provided in Section
11 of the Plan;
(ii) Decrease the exercise price of any Incentive
Stock Option to less than the exercise price on the date the Option was granted;
or
(iii) Extend the period during which Incentive Stock
Option Awards may be granted, as specified in Section 16.
12.2 Conditions on Awards. In granting an Award, the Committee may
establish any conditions that it determines are consistent with the purposes and
provisions of the Plan, including, without limitation, a condition that the
granting of an Award is subject to the surrender for cancellation of any or all
outstanding Awards held by the Participant. Any new Award made under this
Section may contain such terms and conditions as the Committee may determine,
including an exercise price that is lower than that of any surrendered Award.
12.3 Selective Amendments. Any amendment or alteration of the Plan may
be limited to, or may exclude from its effect, particular classes of
Participants.
SECTION 13 -- GENERAL PROVISIONS
13.1 Unfunded Status of Plan. The Plan is intended to constitute an
"unfunded" plan for incentive compensation, and the Plan is not intended to
constitute a plan subject to the provisions of the Employee Retirement Income
Security Act of 1974, as amended, and shall not extend, with respect to any
payments not yet made to a Participant, any rights that are greater than those
of a general creditor of the Company.
13.2 Transfers, Leaves of Absence and Other Changes in Employment
Status. For purposes of the Plan (i) a transfer of an Employee from the Company
to a Subsidiary or vice versa, or from one Subsidiary to another, or (ii) a
leave of absence not in excess of 90 days duly authorized in writing by the
Company or a Subsidiary for military service, sickness or any other purpose
approved by the Company or a Subsidiary, shall not be Termination of Employment.
The Committee, in its sole discretion subject to the terms of the Award
Agreement, shall determine the disposition of all Awards made under the Plan in
all cases involving any substantial change in employment status other than an
event described in this Section 13.2.
13.3 Restrictions on Distribution of Stock. The Committee may require
Participants receiving Stock pursuant to any Award under the Plan to represent
to and agree with the Company in writing that the Participant is acquiring the
Stock for investment without a view to distribution thereof. No Stock shall be
issued or transferred pursuant to an Award unless the Committee determines, in
13
<PAGE> 42
its sole discretion, that such issuance or transfer complies with all relevant
provisions of law, including but not limited to, the (i) limitations, if any,
imposed in the state of issuance or transfer, (ii) restrictions, if any, imposed
by the Securities Act of 1933, as amended, the Exchange Act, and the rules and
regulations promulgated thereunder, and (iii) requirements of any stock exchange
upon which the Stock may then be listed. The certificates for Stock issued
pursuant to an Award may include any legend that the Committee deems appropriate
to reflect any restrictions on transfer. The Company shall not be obligated to
register any securities covered hereby or to take any affirmative action in
order to facilitate the sale, transfer or other disposition of Stock issued
pursuant to an Award.
13.4 Assignment Prohibited. Subject to the provisions of the Plan and
the Award Agreement, no Award shall be assigned, transferred, pledged or
otherwise encumbered by the Participant otherwise than by will or by the laws of
descent and distribution, and an Award shall be exercisable, during the
Participant's lifetime, only by the Participant. Awards shall not be pledged or
hypothecated in any way, and shall not be subject to any execution, attachment,
or similar process. Any attempted transfer, assignment, pledge, hypothecation or
other disposition of an Award contrary to the provisions of the Plan, or the
levy of any process upon an Award, shall be null, void and without effect.
13.5 Other Compensation Plans. Nothing contained in the Plan shall
prevent the Company from adopting other compensation arrangements, subject to
shareholder approval if such approval is required.
13.6 Limitation of Authority. No person shall at any time have any
right to receive an Award hereunder and no person other than a duly authorized
member of the Committee or an officer of the Committee duly authorized by the
Committee shall have authority to enter into an agreement on behalf of the
Company for the granting of an Award or to make any representation or warranty
with respect thereto. Participants shall have no rights in respect to any Award
except as set forth in the Plan and the applicable Award Agreement.
13.7 No Right to Employment. Neither the action of the Company in
establishing the Plan, nor any action taken by it or by the Board or the
Committee under the Plan or any Award Agreement, nor any provision of the Plan,
shall be construed as giving to any person the right to be retained in the
employ or service of the Company or any other entity as an employee, director or
independent contractor or to interfere in any way with the right of the Company
or any other entity to terminate any person's service or employment at any time.
13.8 Pooling. Notwithstanding anything in the Plan to the contrary, if
any right under or feature of the Plan would cause to be ineligible for pooling
a transaction that would, but for the right or feature hereunder, be eligible
for such accounting treatment, the Board of Directors, upon recommendation of
the Committee, may modify or adjust the right or feature so that the transaction
will be eligible for pooling of interest accounting. Such modification or
adjustment may include payment of cash or issuance to a Participant of Stock
having a Fair Market Value equal to the cash value of such right or feature.
13.9 Not a Shareholder. The person or persons entitled to exercise, or
who have exercised, an Option or SAR shall not be entitled to any rights as a
shareholder of the Company with respect to
14
<PAGE> 43
any Stock to be issued upon such exercise until such persons or persons shall
have become the holder of record of such Stock.
13.10 Severability. If any provision of this Plan is found to be
illegal or unenforceable by any court of law in any jurisdiction, the remaining
provisions hereof and thereof shall be severable and enforceable in accordance
with their terms, and all provisions shall remain enforceable in any other
jurisdiction.
13.11 Headings. The headings in this Plan have been inserted solely for
convenience of reference and shall not be considered in the interpretation or
construction of this Plan.
13.12 Governing Law. The validity, interpretation, construction and
administration of this Plan shall be governed by the laws of the Company's state
of incorporation, as it may change from time to time.
SECTION 14 -- TAXES
14.1 Tax Withholding. All Participants shall make arrangements
satisfactory to the Committee to pay to the Company or a Subsidiary, any
federal, state or local taxes required to be withheld with respect to an Award
issued under the Plan at the time such taxes are required to be withheld. If a
Participant fails to make such tax payments, the Company and its Subsidiary
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment of any kind otherwise due to the Participant, including a
payment related to any Award under the Plan.
14.2 Share Withholding. If permitted by the Committee, a tax
withholding obligation may be satisfied by the Company retaining shares of Stock
with a fair market value equal to the amount required to be withheld.
SECTION 15 -- EFFECTIVE DATE OF PLAN
The Plan shall be effective on the date (the "Effective Date") when the
Board of Directors adopts the Plan, subject to approval of the Plan by a
majority of the total votes eligible to be cast at a meeting of shareholders
following adoption of the Plan by the Board of Directors, which vote shall be
taken within 12 months of the Effective Date. Awards may be granted before
obtaining shareholder approval of the Plan, but any such Awards shall be
contingent upon such shareholder approval being obtained and may not be
exercised before such approval.
SECTION 16 -- TERM OF PLAN
The Plan has no termination date, provided that no Incentive Stock
Option may be issued on or after the tenth anniversary of the Effective Date as
defined in Section 15.
* * * * *
Board Approval: July 21, 2000 _______________
(Secretary's Initials)
Shareholder Approval: September __, 2000 _______________
(Secretary's Initials)
15
<PAGE> 44
APPENDIX "B"
RES-CARE, INC.
2000 NONEMPLOYEE DIRECTORS STOCK OWNERSHIP INCENTIVE PLAN
ARTICLE 1. PURPOSE.
The purpose of this 2000 Nonemployee Directors Stock Ownership
Incentive Plan ("Plan") is to advance the interests of Res-Care, Inc., a
Kentucky corporation ("Company"), and its subsidiaries, by providing nonemployee
directors of the Company with an ownership interest in the Company. The Plan is
also intended to enhance the Company's ability to attract and retain persons of
outstanding ability to serve as directors of the Company.
ARTICLE 2. DEFINITIONS AND CONSTRUCTION.
2.1 Definitions. As used in the Plan, the terms defined
parenthetically, immediately after their use shall have the respective meanings
provided by such definitions, and the terms set forth below shall have the
following meanings (in either case, such meanings shall apply equally to both
the singular and plural forms of the terms defined):
(a) "Award" shall mean a grant of Options under Section 5 of
the Plan.
(b) "Award Date" shall mean the first business day of July of
each calendar year that the Plan is in effect.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Change of Control" means (i) an event or series of events
which have the effect of any "person" as such term is used in Section 13(d) and
14(d) of the Exchange Act, other than any trustee or other fiduciary holding
securities of the Company under any employee benefit plan of the Company,
becoming the "beneficial owner" as defined in Rule 13d-3 under the Exchange Act,
directly or indirectly, of securities of the Company representing 30% or more of
the combined voting power of the Company's then outstanding capital stock; (ii)
any merger, consolidation, share exchange, recapitalization or other transaction
in which any person becomes the beneficial owner of securities of the Company
representing 30% or more of the combined voting power of the Company's then
outstanding capital stock; (iii) the persons who were members of the Board
immediately before a transaction shall cease to constitute a majority of the
Board of the Company or any successor to the Company; (iv) the business of the
Company is disposed of pursuant to a partial or complete liquidation, sale of
assets, or otherwise.
(e) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, or any successor thereto, together with any
regulations promulgated thereunder.
(f) "Committee" shall mean the committee described in
Section 3.1.
1
<PAGE> 45
(g) "Director" shall mean a member of the Board who is not an
employee of the Company or any Subsidiary of the Company.
(h) "Disability" shall mean a physical or mental infirmity
that the Committee determines impairs the Director's ability to perform
substantially his or her duties for a period of 180 consecutive days.
(i) "Effective Date" shall mean the date described in
Section 6.1.
(j) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(k) "Fair Market Value" of the Shares shall mean, as of any
Award Date, the closing sale price of the Shares as reported on the NASDAQ
National Market, or if no such reported sale of the Shares shall have occurred
on such date, on the next preceding date on which there was a reported sale. If
there shall be any material alteration in the present system of reporting sale
prices of the Shares, or if the Shares shall no longer be listed on the NASDAQ
National Market, the Fair Market Value of the Shares as of an Award Date shall
be determined by such method as shall be determined in good faith by the
Committee.
(l) "Option" shall mean an option to purchase Shares granted
pursuant to Article 5.
(m) "Optionee" shall mean a person to whom an option has been
granted under the Plan.
(n) "Option Agreement" shall mean an agreement evidencing the
grant of an Option, as described in Section 5.2.
(o) "Option Exercise Price" shall mean the purchase price per
Share subject to an Option, which shall be the Fair Market Value of the Share on
the Award Date.
(p) "Person" shall have the meaning ascribed to such term in
Section 3(a) (9) of the Exchange Act and as used in Sections 13(d) and 14(d)
thereof, including a "group" as defined in Section 13(d) thereof.
(q) "Plan" shall mean this Res-Care, Inc. 2000 Nonemployee
Directors Stock Ownership Incentive Plan as the same may be amended from time to
time.
(r) "Retirement" shall mean retirement by a Director in
accordance with the terms of the Company's retirement policy applicable to
directors of the Company.
(s) "Shares" shall mean the Company's Common Shares.
(t) "Subsidiary" shall mean, with respect to any company, any
corporation or other Person of which a majority of its voting power, equity
securities, or equity interest is owned directly or indirectly by such company.
2
<PAGE> 46
(u) "Withholding Taxes" shall mean all federal, state and
local income taxes and other amounts as may be required by law to be withheld
with respect to any option exercise, if any.
2.2 Gender and Number. Except where otherwise indicated by the context,
reference to the masculine gender shall include the feminine gender, the plural
shall include the singular and the singular shall include the plural.
2.3 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
ARTICLE 3. ADMINISTRATION.
3.1 The Committee. The Plan is designed to operate automatically and
not require administration. However, to the extent administration is required,
it shall be provided by a committee (the "Committee"). The members of the
Committee shall include two or more members of the Board, and shall be appointed
from time to time by, and shall serve at the discretion of, the Board. If the
Board fails to appoint the Committee, the Board shall administer the Plan.
3.2 Authority of the Committee. Subject to the provisions of the Plan,
the Committee shall have full authority to:
(a) construe and interpret the Plan and any agreement or
instrument entered into under the Plan; and
(b) establish, amend and rescind rules and regulations for the
Plan's administration.
To the extent permitted by law and Rule 16b-3 promulgated under the Exchange
Act, the Committee may delegate its authority as identified herein.
3.3 Decisions Binding. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan, and all related orders or
resolutions of the Board, shall be final, conclusive and binding on all Persons,
including the Company, the Directors and their estates and beneficiaries.
3.4 Section 16 Compliance. It is the intention of the Company that the
Plan and the administration of the Plan comply in all respects with Section 16
of the Exchange Act and the rules and regulations promulgated thereunder. If any
Plan provision, or any aspect of the administration of the Plan, is found not to
be in compliance with Section 16 of the Exchange Act, the provision or aspect of
administration shall be null and void to the extent permitted by law and deemed
advisable by the Committee. In all events the Plan shall be construed in favor
of its meeting the requirements of Rule 16b-3 promulgated under the Exchange
Act.
3
<PAGE> 47
ARTICLE 4. SHARES AVAILABLE UNDER THE PLAN.
4.1 Number of Shares. Subject to adjustment as provided in Section 4.2,
the number of Shares reserved for issuance upon the exercise of options is
100,000 Shares. Any Shares issued under the Plan may consist, in whole or in
part, of authorized and unissued Shares or treasury shares. If and to the extent
options shall expire or terminate for any reason without having been exercised
in full, the Shares associated with such Awards to the extent not fully
exercised shall again become available for Awards under the Plan.
4.2 Adjustments in Authorized Shares and Outstanding Awards. In the
event of a merger, reorganization, consolidation, recapitalization,
reclassification, split-up, spin-off, separation, liquidation, share dividend,
stock split, reverse stock split, cash dividend, property dividend, share
repurchase, share combination, share exchange, issuance of warrants, rights or
debentures, or other change in the corporate structure of the Company affecting
the Shares, the Committee may substitute or adjust the total number and class of
Shares or other stock or securities that may be issued under the Plan, and the
number, class and/or price of Shares. or other stock or securities subject to
outstanding Awards, as it determines to be appropriate and equitable to prevent
dilution or enlargement of the rights of Directors and to preserve, without
exceeding, the value of any outstanding Awards; and further provided, that the
number of Shares or other stock or securities subject to any Award shall always
be a whole number.
ARTICLE 5. AWARDS.
5.1 Automatic Grant of Options. Subject to the terms and provisions of
the Plan, each Director on an Award Date shall automatically receive an option
for 4,500 Shares that is not intended to qualify as an incentive stock option
within" the meaning of Section 422 of the Code.
5.2 Vesting. Subject to Sections 5.4 and 5.7, each Option shall vest
and become exercisable with respect to 25% of the Shares subject thereto
effective immediately as of the Award Date and shall vest and become exercisable
with respect to an additional 25% of the Shares subject thereto effective as of
each of the first, second and third anniversaries of the Award Date; provided,
however, that the Director continues to serve as a member of the Board as of
such dates. If a Director ceases to serve as a member of the Board for any
reason, the Director shall have no rights with respect to that portion of an
option which is not then vested pursuant to the preceding sentence and the
Director shall automatically forfeit that portion of the Option that remains
unvested.
5.3 Option Agreement. Each Award shall be evidenced by an Option
Agreement that shall specify the Option Exercise Price, the duration of the
Option, the number of Shares to which the option relates and such other terms
and conditions not inconsistent with the provisions of this Plan as determined
by the Committee; provided, however, that such terms shall not vary the timing
of Awards, including provisions dealing with exercisability, forfeiture or
termination of such Awards or Options granted thereunder.
5.4 Duration of Options. Subject to Section 5.6, each Option shall
expire on the fifth (5th) anniversary of the Award Date on which it was granted.
4
<PAGE> 48
5.5 Method of Exercise. The exercise of an Option shall be made only by
a written notice delivered in person or by mail to the Secretary of the Company
at the Company's principal executive office, specifying the number of Shares to
be purchased and accompanied by payment therefor and otherwise in accordance
with the Option Agreement pursuant to which the Option was granted. Shares
purchased pursuant to the exercise of an option shall be paid in full upon such
exercise by any one or a combination of the following: (i) in cash; (ii) in
owned by the Optionee (or jointly by the Optionee and his or her spouse) for at
least six months evidenced by negotiable certificates or by a written
attestation of ownership and consent to issuance, in satisfaction of the Option
or portion thereof being exercised, of only the net Shares (those equal in value
to the difference between the Option Exercise Price and the then Fair Market
Value); (iii) by a written election to have the Company retain that number of
Shares subject to the Option having an aggregate Fair Market Value equal to the
aggregate Option Exercise Price; or (iv) by any combination thereof. The written
notice pursuant to this Section 5.5 may also provide instructions from the
Optionee to the Company that upon receipt of the purchase price in cash from the
Optionee's broker or dealer, designated as such on the written notice, in
payment for any Shares purchased pursuant to the exercise of an Option, the
Company shall issue such Shares directly to the designated broker or dealer. Any
Shares transferred to the Company or withheld as payment of the Option Exercise
Price shall be valued at their Fair Market Value on the date preceding the date
of exercise. If requested by the Committee, the Optionee shall deliver the
Option Agreement evidencing the option to the Secretary of the Company who shall
endorse thereon a notation of such exercise and return such Option Agreement to
the Optionee. No fractional shares (or cash in lieu thereof) shall be issued
upon exercise of an Option and the number of Shares that may be purchased upon
exercise shall be rounded down to the nearest number of whole Shares.
5.6 Termination of Director Relationship. If a Director for any reason
other than Retirement, death or Disability shall cease to be a member of the
Board, the outstanding Options of such Director (or portions thereof) that are
vested and exercisable as of the date the Director so ceased to be a member of
the Board may be exercised by such Director at any time prior to the earlier of
the expiration date of the options or the date that is ninety (90) days after
the date on which such Director ceases to be a member of the Board. If a
Director shall cease to be a member of the Board by reason of Retirement, death
or Disability, the outstanding options of such Director (or portions thereof)
that are vested and exercisable as of the date the Director so ceased to be a
member of the Board may be exercised by such Director at any time prior to the
earlier of the expiration date of the Options or the date that is the first
anniversary of the Director's Retirement, death or Disability. Options may be
exercised as provided in this Section 5.6 (x) in the event of the death of a
Director, by the person or persons to whom rights pass by will or by the laws of
descent and distribution, or if appropriate, the legal representative of his
estate and (y) in the event of the Disability of a Director, by the Director, or
if such Director is incapacitated, by his legal representative.
5.7 Effect of Change of Control. Notwithstanding anything contained in
the Plan or an Option Agreement to the contrary, in the event of a Change of
Control, (i) all options outstanding on the date of such Change of Control shall
become immediately and fully exercisable and (ii) an Optionee will be entitled
to receive, in lieu of the exercise of any Option or portion of an Option to the
extent not yet exercised, a cash payment in an amount equal to the difference
between the aggregate Option Exercise Price and (A) in the case of a tender
offer or exchange offer, the final offer price paid per Share, multiplied by the
number of Shares covered by the Option, or (B) in the case of any other Change
of Control, the aggregate Fair Market Value of the Shares covered by the Option.
5
<PAGE> 49
The Company shall pay any amount it must make under this Section 5.7 within 30
days following the occurrence of the Change of Control.
ARTICLE 6. EFFECTIVE DATE, AMENDMENT, MODIFICATION, AND TERMINATION.
6.1 Effective Date. The Plan shall be effective upon the approval by
the affirmative vote of the holders of a majority of the securities of the
Company represented in person or by proxy, and entitled to vote, at a meeting of
shareholders of the Company at which the Plan is submitted for approval.
6.2 Termination Date. The Plan shall terminate on the earliest to occur
of (a) the date when all Shares available under the Plan shall have been
acquired pursuant to the exercise of Awards or (b) such other date as the Board
may determine in accordance with Section 6.3.
6.3 Amendment, Modification and Termination.
(a) Except as provided in Section 6.3(b), the Board may, at
any time, amend, modify or terminate the Plan.
(b) Without the approval of shareholders of the Company, no
amendment, modification or termination may:
(i) materially increase the benefits accruing to
Directors under the Plan;
(ii) increase the total number of Shares that may be
issued under the Plan, except as provided in
Section 4.2; or
(iii) modify the eligibility or other requirements to
receive an Award under the Plan.
6.4 Awards Previously Granted. No amendment, modification or
termination of the Plan shall in any manner adversely affect any outstanding
Award without the written consent of the Optionee.
ARTICLE 7. NON-TRANSFERABILITY.
Except as otherwise provided in this Article 7, no Option shall be
transferable by a Director otherwise than by will or the laws of descent and
distribution, and an Option shall be exercisable, during the Director's
lifetime, only by the Director (or, in the event of the Director's legal
incapacity or incompetency, the Director's guardian or legal representative). A
Director may transfer all or part of a Nonqualified Stock Option to (i) the
Director's spouse or lineal descendants ("Immediate Family Members"), (ii)
trusts for the exclusive benefit of the Director and/or his Immediate Family
Members, or (iii) a partnership or limited liability company in which the
Director and/or his Immediate Family Members are the only partners or members,
as applicable. Such transfer may be made by a Director
6
<PAGE> 50
only if there is no consideration for the transfer, and subsequent transfers of
any Option shall be prohibited other than in accordance with this Article 7 and
by will or the laws of descent and distribution. Following a transfer of an
Option, the Option shall continue to be subject to the same terms and conditions
as were applicable immediately before the transfer, and the conditions to
exercise of an Option upon Termination of Director Relationship or otherwise
provided in this Plan shall be applied with respect to the original Director.
However, for purposes of exercising the Option, the term Director shall refer to
the transferee. In addition, for purposes of the death benefit provisions of
Section 5.6, references to a Director shall be deemed to refer to the
transferee, the personal representative of the transferee's estate, or after
final settlement of the transferee's estate, the successor or successors
entitled thereto by law.
ARTICLE 8. NO RIGHT OF REELECTION.
Neither the Plan nor any action taken under the Plan shall be construed
as conferring upon a Director any right to continue as a director of the
Company, to be renominated by the Board or to be reelected by the shareholders
of the Company.
ARTICLE 9. WITHHOLDING.
Upon the exercise of an Option (a "Taxable Event"), the Optionee shall
pay the Withholding Taxes to the Company prior to the issuance, or release from
escrow, of such Shares. In satisfaction of the obligation to pay Withholding
Taxes to the Company, the Optionee may make a written election (the "Tax
Election") to have withheld a portion of the Shares then issuable to him or her
having an aggregate Fair Market Value, on the date preceding the date of such
issuance, equal to the Withholding Taxes.
ARTICLE 10. INDEMNIFICATION.
No member of the Board or the Committee, nor any officer or employee
acting on behalf of the Board or the Committee, shall be personally liable for
any action, determination or interpretation taken or made with respect to the
Plan, except for liability arising from his or her own willful misfeasance,
gross negligence or reckless disregard of his or her duties. All members of the
Board, the Committee and each and any officer or employee of the company acting
on their behalf shall, to the extent permitted by law, be fully indemnified and
protected by the Company with respect to any such action, determination or
interpretation.
ARTICLE 11. SUCCESSORS.
All obligations of the Company with respect to Awards granted under the
Plan shall be binding on any successor to the Company, whether the existence of
such successor is a result of a direct or indirect purchase, merger,
consolidation or otherwise, of all or substantially all of the business and/or
assets of the Company.
7
<PAGE> 51
ARTICLE 12. GOVERNING LAW.
To the extent not preempted by Federal law, the Plan, and all
agreements under the Plan, shall be governed by, and construed in accordance
with, the laws of the Commonwealth of Kentucky without regard to its conflict of
law rules.
<PAGE> 52
-------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
RES-CARE, INC., 10140 Linn Station Road, Louisville, Kentucky 40223
PROXY -- MEETING OF SHAREHOLDERS
The undersigned, a shareholder of RES-CARE, INC., a Kentucky corporation,
hereby appoints RONALD G. GEARY and E. HALSEY SANDFORD and each of them, the
true and lawful attorneys and proxies with full power of substitution, for and
in the name, place and stead of the undersigned, to vote all of the common
shares of Res-Care which the undersigned would be entitled to vote if
personally present at the Meeting of Shareholders to be held at The Olmsted,
3701 Frankfort Avenue, Louisville, Kentucky on Tuesday, September 26, 2000 at
10:00 a.m. local time, and at any adjournment thereof.
The undersigned hereby instructs said proxies or their substitutes:
1. ELECTION OF DIRECTORS:
Seymour L. Bryson, James R. Fornear, Ronald G. Geary, Olivia F. Kirtley,
W. Bruce Lunsford, Spiro B. Mitsos, E. Halsey Sandford and
Vincent D. Pettinelli
o Vote FOR all nominees listed above o WITHHOLD AUTHORITY to vote for
(except those listed below) all nominees listed above
INSTRUCTION: To withhold authority to vote for any individual nominee write
that nominee's name in the space below.
2. PROPOSAL TO APPROVE THE 2000 STOCK OPTION AND INCENTIVE COMPENSATION PLAN
FOR EMPLOYEES.
o For o Against o Abstain
3. PROPOSAL TO APPROVE THE 2000 NON-EMPLOYEE DIRECTORS STOCK OWNERSHIP
INCENTIVE PLAN.
o For o Against o Abstain
4. PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG LLP AS INDEPENDENT AUDITORS FOR
THE COMPANY FOR THE YEAR ENDING DECEMBER 31, 2000.
o For o Against o Abstain
This Proxy is continued on the reverse side.
Please sign on the reverse side and return promptly.
-------------------------------------------------------------------------------
<PAGE> 53
--------------------------------------------------------------------------------
This Proxy, when properly executed, will be voted in accordance with any
directions given. Unless otherwise specified, the proxy will be voted FOR
Proposals 1, 2, 3 and 4. MANAGEMENT RECOMMENDS A VOTE FOR THE ABOVE MATTERS.
5. DISCRETIONARY AUTHORITY: To vote with discretionary authority with
respect to all other matters which may properly come before the meeting.
The undersigned hereby revokes all proxies heretofore given and ratifies
and confirms all that the proxies appointed hereby, or either of them, or their
substitutes, may lawfully do or cause to be done by virtue thereof. The
undersigned hereby acknowledges receipt of a copy of the Notice of Meeting and
Proxy Statement, both dated August 18, 2000, and a copy of Res-Care's Annual
Report for the period ended December 31, 1999.
Please sign exactly as shares are registered. If shares
are held by joint tenants, all parties in the joint
tenancy must sign. When signing as attorney, executor,
administrator, trustee or guardian, please indicate the
capacity in which signing. If a corporation, please sign
in full corporate name by president or other authorized
officer. If a partnership, please sign in partnership
name by authorized person.
________________________________________________________
Signature Date
________________________________________________________
Signature, if held jointly Date
--------------------------------------------------------------------------------
