-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UzcaIEqSjjSEvZ4aXRWBCpN3ARH/6hzSkUQd+XXnGlWLjd90TEpGbX56RH1d0Hoq pNantPN21Aw1j2YBhnGtDQ== 0000950152-99-006966.txt : 19990817 0000950152-99-006966.hdr.sgml : 19990817 ACCESSION NUMBER: 0000950152-99-006966 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RES CARE INC /KY/ CENTRAL INDEX KEY: 0000776325 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-NURSING & PERSONAL CARE FACILITIES [8050] IRS NUMBER: 610875371 STATE OF INCORPORATION: KY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-20372 FILM NUMBER: 99691943 BUSINESS ADDRESS: STREET 1: 10140 LINN STATION RD CITY: LOUISVILLE STATE: KY ZIP: 40223 BUSINESS PHONE: 5023942100 MAIL ADDRESS: STREET 1: 10140 LINN STATION RD CITY: LOUISVILLE STATE: KY ZIP: 40223 10-Q 1 RES-CARE INC. 10-Q 1 =============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1999 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ---------------------- --------------- Commission File Number: 0-20372 -------------------- RES-CARE, INC. (Exact name of registrant as specified in its charter) KENTUCKY 61-0875371 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 10140 LINN STATION ROAD 40223 LOUISVILLE, KENTUCKY (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code: (502) 394-2100 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]. The number of shares outstanding of the registrant's common stock, no par value, as of July 31, 1999, was 24,301,149. =============================================================================== 2 INDEX
PAGE PART I. FINANCIAL INFORMATION NUMBER Item 1. Unaudited Financial Statements Condensed Consolidated Balance Sheets as of June 30, 1999 and December 31, 1998.......................................... 2 Condensed Consolidated Statements of Income for the three months ended June 30, 1999 and 1998 and six months ended June 30, 1999 and 1998........................ 3 Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 1999 and 1998........................ 4 Notes to Condensed Consolidated Financial Statements................... 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................................. 9 Item 3. Quantitative and Qualitative Disclosure About Market Risk.............. 17 PART II. OTHER INFORMATION Item 1. Legal Proceedings...................................................... 17 Item 4. Submission of Matters to a Vote of Security Holders.................... 18 Item 5. Other Information...................................................... 19 Item 6. Exhibits and Reports on Form 8-K....................................... 20 Index to Exhibits...................................................... 21 Signatures............................................................. 22
1 3 PART I. FINANCIAL INFORMATION ITEM 1. UNAUDITED FINANCIAL STATEMENTS RES-CARE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) (UNAUDITED)
June 30 December 31 1999 1998 --------- --------- ASSETS Current assets: Cash and cash equivalents $ 19,659 $ 19,956 Accounts and notes receivable, net 147,308 132,707 Refundable income taxes 5,896 100 Deferred income taxes 12,272 9,257 Prepaid expenses and other current assets 6,131 5,307 --------- --------- Total current assets 191,266 167,327 --------- --------- Property and equipment, net 94,210 90,053 Excess of acquisition cost over net assets acquired, net 221,762 213,723 Other assets 27,003 35,005 --------- --------- $ 534,241 $ 506,108 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Trade accounts payable $ 27,633 $ 32,757 Accrued expenses 59,242 42,764 Accrued income taxes -- 3,637 Current portion of long-term debt 4,870 7,080 --------- --------- Total current liabilities 91,745 86,238 --------- --------- Long-term liabilities 11,750 11,943 Long-term debt 278,009 251,682 Deferred income taxes 240 1,658 --------- --------- Total liabilities 381,744 351,521 --------- --------- Commitments and contingencies Shareholders' equity: Preferred shares -- -- Common stock 50,866 50,866 Additional paid-in capital 33,648 31,353 Retained earnings 72,234 76,722 --------- --------- 156,748 158,941 Less cost of common shares in treasury (4,251) (4,354) --------- --------- Total shareholders' equity 152,497 154,587 --------- --------- $ 534,241 $ 506,108 ========= =========
See accompanying notes to unaudited condensed consolidated financial statements. 2 4 RES-CARE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
Three Months Ended Six Months Ended June 30 June 30 ------------------------- ------------------------- 1999 1998 1999 1998 --------- --------- --------- --------- Net revenues $ 208,490 $ 174,732 $ 408,673 $ 323,932 Facility and program expenses 178,735 151,036 350,533 280,822 --------- --------- --------- --------- Facility and program contribution 29,755 23,696 58,140 43,110 Operating expenses (income): Corporate general and administrative 8,225 7,215 16,008 13,490 Depreciation and amortization 5,389 4,652 10,475 8,018 Merger-related charge 20,498 -- 20,498 -- Other income (46) (28) (41) (19) --------- --------- --------- --------- Total operating expenses 34,066 11,839 46,940 21,489 --------- --------- --------- --------- Operating income (loss) (4,311) 11,857 11,200 21,621 Interest, net 4,663 3,640 8,834 5,655 --------- --------- --------- --------- Income (loss) from continuing operations before income taxes (8,974) 8,217 2,366 15,966 Income tax expense (benefit) (2,013) 3,218 2,717 6,311 --------- --------- --------- --------- Income (loss) from continuing operations (6,961) 4,999 (351) 9,655 Gain from sale of unconsolidated affiliate, net of tax 534 -- 534 -- Cumulative effect of accounting change, net of tax -- -- (3,932) -- --------- --------- --------- --------- Net income (loss) $ (6,427) $ 4,999 $ (3,749) $ 9,655 ========= ========= ========= ========= Basic earnings (loss) per share from continuing operations $ (0.29) $ 0.21 $ (0.01) $ 0.40 Gain from sale of unconsolidated affiliate, net of tax 0.02 -- 0.02 -- Cumulative effect of accounting change, net of tax -- -- (0.16) -- --------- --------- --------- --------- Basic earnings (loss) per share $ (0.27) $ 0.21 $ (0.15) $ 0.40 ========= ========= ========= ========= Diluted earnings (loss) per share from continuing operations $ (0.29) $ 0.20 $ (0.01) $ 0.39 Gain from sale of unconsolidated affiliate, net of tax 0.02 -- 0.02 -- Cumulative effect of accounting change, net of tax -- -- (0.16) -- --------- --------- --------- --------- Diluted earnings (loss) per share $ (0.27) $ 0.20 $ (0.15) $ 0.39 ========= ========= ========= ========= Weighted average number of common shares: Basic 24,218 23,944 24,173 23,880 Diluted 24,218 31,380 24,173 31,007
See accompanying notes to unaudited condensed consolidated financial statements. 3 5 RES-CARE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
Six Months Ended June 30 ------------------------- 1999 1998 --------- --------- Cash provided by (used in) operating activities $ (371) $ 13,800 Cash flows from investing activities: Purchase of property and equipment (6,680) (5,967) Acquisitions of businesses, net of cash acquired (13,098) (93,122) Other -- (3,544) --------- --------- Cash used in investing activities (19,778) (102,633) --------- --------- Cash flows from financing activities: Net borrowings (repayments) under notes payable to bank 47,414 46,832 Repayments of notes payable (29,173) (1,397) Proceeds received from exercise of stock options 1,611 1,880 --------- --------- Cash provided by financing activities 19,852 47,315 --------- --------- Decrease in cash and cash equivalents $ (297) $ (41,518) ========= =========
See accompanying notes to unaudited condensed consolidated financial statements. 4 6 RES-CARE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1999 (UNAUDITED) NOTE 1. BASIS OF PRESENTATION Res-Care, Inc. and its subsidiaries (ResCare or the Company) are primarily engaged in the delivery of residential, training, educational and support services to various populations with special needs, including persons with mental retardation and other developmental disabilities and at-risk and troubled youth. These services have in the past traditionally been provided by state and local government agencies and not-for-profit organizations. The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X and do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of financial condition and results of operations for the interim periods have been included. Operating results for the periods ended June 30, 1999 are not necessarily indicative of the results that may be expected for the year ending December 31, 1999. For further information, refer to the consolidated financial statements and footnotes thereto in ResCare's annual report on Form 10-K for the year ended December 31, 1998. NOTE 2. MERGER On June 28, 1999, ResCare completed a merger with PeopleServe, Inc. (PeopleServe), which primarily operates facilities and programs for persons with mental retardation and other developmental disabilities. In the merger, the Company issued a total of 5.2 million common shares. The merger has been accounted for as a pooling of interests. Accordingly, the Company's consolidated financial statements for all periods presented have been restated to include the combined financial results of ResCare and PeopleServe. For further information regarding the merger, refer to the Company's final Proxy Statement/Prospectus dated May 3, 1999 as filed with the Securities and Exchange Commission. Reference is also made to Item 5 of this Report which contains restated quarterly financial information for all interim periods in 1998 and the first quarter of 1999. 5 7 The operating results of the separate companies were as follows:
Three Months Ended Six Months Ended June 30 June 30 1999 1998 1999 1998 --------- --------- --------- --------- (In thousands) Net revenues: ResCare ............................ $ 157,644 $ 129,595 $ 308,136 $ 235,533 PeopleServe ........................ 50,846 45,137 100,537 88,399 --------- --------- --------- --------- $ 208,490 $ 174,732 $ 408,673 $ 323,932 ========= ========= ========= ========= Income (loss) from continuing operations: ResCare ............................ $ 6,133 $ 4,256 $ 11,871 $ 8,093 PeopleServe ........................ 561 743 1,433 1,562 Merger-related charge, net of tax .. (13,655) -- (13,655) -- --------- --------- --------- --------- $ (6,961) $ 4,999 $ (351) $ 9,655 ========= ========= ========= ========= Net income (loss): ResCare ............................ $ 6,667 $ 4,256 $ 8,473 $ 8,093 PeopleServe ........................ 561 743 1,433 1,562 Merger-related charge, net of tax .. (13,655) -- (13,655) -- --------- --------- --------- --------- $ (6,427) $ 4,999 $ (3,749) $ 9,655 ========= ========= ========= =========
In connection with the merger, ResCare recorded a pretax merger-related charge of $20.5 million during the second quarter of 1999. This consists primarily of $7.3 million in severance and employee-related costs (principally related to the elimination of PeopleServe's corporate offices and various other administrative costs), $2.8 million in lease termination costs, $3.0 million in information system conversion and integration costs and $4.5 million in transaction costs, including investment banking, legal, accounting and other professional fees and transaction costs. NOTE 3. LONG-TERM DEBT Long-term debt consists of the following:
June 30 December 31 1999 1998 --------------- ------------ (In thousands) Revolving credit facilities with banks................................. $ 134,607 $ 87,193 6% convertible subordinated notes due 2004, net of unamortized discount of $2,531 and $2,765 in 1999 and 1998..................................................... 106,829 106,595 5.9% convertible subordinated notes due 2005........................... 22,000 22,000 Notes payable.......................................................... 11,455 24,340 Obligations under capital leases....................................... 7,966 18,608 Other.................................................................. 22 26 --------------- ---------------- 282,879 258,762 Less current portion.............................................. 4,870 7,080 --------------- ---------------- $ 278,009 $ 251,682 =============== ================
6 8 On June 28, 1999, the Company amended its credit agreement with a group of banks to permit the merger with PeopleServe and amend certain financial covenants. NOTE 4. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share from continuing operations:
Three Months Ended Six Months Ended June 30 June 30 -------------------------- --------------------------- 1999 1998 1999 1998 ------------ ------------ ------------ ------------ (In thousands) Income (loss) available to shareholders for basic earnings per share........................... $ (6,961) $ 4,999 $ (351) $ 9,655 Interest expense, net of income tax effect, on convertible subordinated notes.................. -- 1,309 -- 2,437 ------------ ------------ ------------ ------------ Income (loss) available to shareholders after assumed conversion of convertible subordinated notes................................. $ (6,961) $ 6,308 $ (351) $ 12,092 ============ ============ ============ ============ Weighted average number of common shares used in basic earnings per share................... 24,218 23,944 24,173 23,880 Effect of dilutive securities: Stock options .................................... -- 770 -- 790 Convertible subordinated notes..................... -- 6,666 -- 6,337 ------------ ------------ ------------ ------------ Weighted average number of common shares and dilutive potential common shares used in diluted earnings per share...................... 24,218 31,380 24,173 31,007 ============ ============ ============ ============
The average shares listed below were not included in the computation of diluted earnings per share because to do so would have been antidilutive for the periods presented.
Convertible Stock Subordinated Notes Options ------------------ ------- (In thousands) Six months ended June 30, 1999.......................... 6,666 987 Three months ended June 30, 1999........................ 6,666 882
NOTE 5. ACCOUNTING CHANGE Effective January 1, 1999, the Company adopted the provisions of Statement of Position (SOP), 98-5, Reporting on the Costs of Start-up Activities. SOP 98-5 requires that all costs of start-up activities and organization costs be expensed as incurred. Adoption of SOP 98-5 also required the write-off of the unamortized value of such costs previously capitalized. The write-off of $3.9 million ($0.16 per basic share and $0.12 per diluted share, using the weighted average common shares for the first quarter of 1999), net of tax, is reflected in the consolidated statement of income as the cumulative effect of an accounting change. The effect of adopting SOP 98-5 on income before income taxes and net income for the second quarter of 1999 was determined to be immaterial. 7 9 NOTE 6. SEGMENT INFORMATION The following table sets forth information about reportable segment profit or loss.
Other Disabilities Job Youth All Consolidated QUARTER ENDED JUNE 30: Services Corps Services Other (1) Totals - ---------------------- -------- ----- -------- --------- ------ (In thousands) 1999 Net revenues ............ $162,847 $ 32,709 $ 12,934 $ -- $208,490 Segment profit (loss) ... 19,729 3,290 1,702 (8,534) 16,187 1998 Net revenues ............ $141,786 $ 24,015 $ 8,931 $ -- $174,732 Segment profit (loss) ... 15,824 2,620 984 (7,571) 11,857 SIX MONTHS ENDED JUNE 30: 1999 Net revenues ............ $319,273 $ 63,783 $ 25,617 $ -- $408,673 Segment profit (loss) ... 38,936 6,506 2,890 (16,634) 31,698 1998 Net revenues ............ $264,892 $ 42,618 $ 16,422 $ -- $323,932 Segment profit (loss) ... 29,202 4,758 1,773 (14,112) 21,621
(1) All Other is comprised of corporate general and administrative expenses and corporate depreciation and amortization. The merger-related charge recorded in the second quarter of 1999 is excluded from the calculation of segment loss for the 1999 periods presented. 8 10 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Res-Care, Inc. (ResCare or the Company) receives revenues primarily from the delivery of residential, training, education and support services to populations with special needs. The Company has three reportable operating segments: (i) disabilities services; (ii) Job Corps program; and (iii) other youth services programs. Management's discussion and analysis of each segment follows. MERGER AND ACQUISITIONS On June 28, 1999, ResCare completed a merger with PeopleServe, Inc. (PeopleServe), which primarily operates facilities and programs for persons with mental retardation and other developmental disabilities. In the merger, ResCare issued a total of 5.2 million common shares in exchange for preferred stocks, common stock, and options and warrants which were issued and outstanding prior to the merger. The merger has been accounted for as a pooling of interests. Accordingly, the Company's consolidated financial statements and all financial information included herein have been restated to include the combined financial results of ResCare and PeopleServe. For further information regarding the merger, refer to the Company's final Proxy Statement/Prospectus dated May 3, 1999 as filed with the Securities and Exchange Commission. In connection with the merger, ResCare recorded a pretax merger-related charge of $20.5 million during the second quarter of 1999. This consists primarily of $7.3 million in severance and employee-related costs (principally related to the elimination of PeopleServe's corporate offices and various other administrative costs), $2.8 million in lease termination costs, $3.0 million in information system conversion and integration costs and $4.5 million in transaction costs, including investment banking, legal, accounting and other professional fees and transaction costs. Through June 30, 1999, approximately $12.1 million of the charge had been utilized through $7.8 million in cash payments (principally severance and transaction costs) and $4.3 million in asset write-downs. The Company believes the remaining balance of accrued merger-related cost of $8.4 million at June 30, 1999 represents its remaining cash obligations and expects the balance to be substantially paid by the end of 1999. In addition to the PeopleServe transaction, during the second quarter of 1999, the Company's Division for Persons with Disabilities completed four acquisitions representing programs and facilities serving approximately 200 individuals with special needs. In total during the second quarter of 1999, the Division for Persons with Disabilities began serving nearly 4,400 new consumers. 9 11 RESULTS OF OPERATIONS QUARTER ENDED JUNE 30, 1999 COMPARED TO QUARTER ENDED JUNE 30, 1998 As a result of the transactions described above and a full quarter of operations for some 1998 acquisitions, the Company achieved record revenues during the second quarter of 1999. Total net revenues in 1999 increased 19%, or $33.8 million, to $208.5 million compared to $174.7 million in 1998. Net loss for the first quarter of 1999, including the merger-related charge, was $6.4 million, compared to net income of $5.0 million for the same period in 1998. Income from continuing operations before the merger-related charge increased 34% over 1998. The contribution each segment made to this growth is discussed below. Disabilities Services Disabilities services net revenues increased 15%, or $21.0 million, to $162.8 million in the second quarter of 1999 compared to $141.8 million in 1998. Revenues increased primarily as a result of the effects of a full quarter of operating results from programs added during the last half of 1998. As a percentage of net revenues, disabilities services facility and program expenses decreased from 86.1% in 1998 to 85.0% in 1999. Overall segment profit increased 25%, or $3.9 million, over 1998 due principally to the volume and efficiencies achieved through the 1998 acquisitions. Job Corps Program Job Corps net revenues in 1999 increased 36%, or $8.7 million, to $32.7 million compared to $24.0 million in 1998. Additionally, segment profit increased 26%, or $670,000 from 1998 to 1999. The increases in both revenues and profitability resulted primarily from the addition of the contract to manage the Treasure Island Job Corps center commencing in the second quarter of 1999 and a full quarter of operating results from the Earle C. Clements Job Corps center contract awarded during the second quarter of 1998. Other Youth Services Programs Other youth services net revenues in 1999 increased 45%, or $4.0 million, to $12.9 million compared to $8.9 million in 1998. Revenues increased primarily as a result of the effects of a full quarter of operating results from some programs added during 1998. Segment profit increased 73% from $1.0 million in 1998 to $1.7 million in 1999 also as a result of the acquisitions and improvements realized in operations acquired in 1998. Corporate Expenses Corporate general and administrative expenses increased 14%, or $1.0 million, in the second quarter of 1999 compared to 1998. Payroll and payroll-related expenses represented the majority of the increase due primarily to the addition of support staff and increases in staff salaries. Corporate general and administrative expenses in 1999 decreased as a percentage of total net revenues to 3.9% from 4.1% in 1998. Interest expense in 1999 increased $900,000 to $4.9 million compared to $4.0 million for 1998. The increase resulted primarily from borrowings under the Company's credit facilities. 10 12 As a result of the loss incurred for the first quarter of 1999 due primarily to the merger-related charge, the Company recorded an income tax benefit of $2.0 million in 1999 compared to tax expense of $3.2 million in 1998. SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998 In addition to the PeopleServe merger, during the first six months of 1999, the Company completed seven acquisitions and added two new contracts representing programs and facilities serving approximately 1,700 individuals with special needs. Total net revenues in 1999 increased 26%, or $84.8 million, to $408.7 million compared to $323.9 million in 1998. Net loss for the first half of 1999, including the merger-related charge, was $3.7 million, compared to net income of $9.6 million for the same period in 1998. Income from continuing operations before the merger-related charge increased 38% over 1998. The contribution each segment made to this growth is discussed below. Disabilities Services Disabilities services net revenues increased 21%, or $54.4 million, to $319.3 million in the first six months of 1999 compared to $264.9 million in 1998. Revenues increased primarily as a result of the effects of a full six months of operating results from programs added during the last half of 1998. As a percentage of net revenues, disabilities services facility and program expenses decreased from 86.5% in 1998 to 85.0% in 1999. Overall segment profit increased 33%, or $9.7 million, over 1998 due principally to the volume and efficiencies achieved through the 1998 acquisitions. Job Corps Program Job Corps net revenues in 1999 increased 50% to $63.8 million compared to $42.6 million in 1998. Additionally, segment profit increased 37%, or $1.7 million, from 1998 to 1999. The increases in both revenues and profitability resulted primarily from the addition of the contract to manage the Treasure Island Job Corps center commencing in the second quarter of 1999 and the addition of the Earle C. Clements Job Corps center contract awarded in the second quarter of 1998. Other Youth Services Programs Other youth services net revenues in 1999 increased 56%, or $9.2 million, to $25.6 million compared to $16.4 million in 1998. Revenues increased primarily as a result of the effects of a full six months of operating results from programs added during the last half of 1998. Segment profit increased 61% from $1.8 million in 1998 to $2.9 million in 1999 also as a result of the acquisitions and improvements realized in operations acquired in 1998. Corporate Expenses Corporate general and administrative expenses increased 19%, or $2.5 million, in the first six months of 1999 compared to 1998. Payroll and payroll-related expenses represented the majority of the increase due primarily to the addition of support staff and increases in salaries. Also contributing to the increase is the lease expense associated with the company-wide deployment of computer workstations in 1999 as part of the Company's Year 2000 remediation efforts. Corporate general and administrative expenses in 1999 decreased as a percentage of total net revenues to 3.9% from 4.2% in 1998. 11 13 Interest expense in 1999 increased $2.6 million to $9.4 million compared to $6.8 million for 1998. The increase resulted primarily from interest on the convertible subordinated notes issued in the March 1998 acquisition of Normal Life, Inc. as well as borrowings under the Company's credit facilities. Interest income in 1999 decreased $600,000 to $500,000 from $1.1 million for 1998. This decrease was due primarily to the use of the proceeds from the issuance in late 1997 of the convertible subordinated notes. As a result of the loss incurred for the first half of 1999 due primarily to the merger-related charge, income tax expense decreased to $2.7 million in 1999 compared to $6.3 million in 1998. LIQUIDITY AND CAPITAL RESOURCES For the first half of 1999, cash used in operating activities was $371,000 compared to cash provided of $13.8 million in the second half of 1998, a decrease of $14.2 million, due primarily to the increase in accounts receivable. This increase in accounts receivable is primarily related to delays in payment from certain state Medicaid programs as well as the time required for payments to commence in acquired operations. For the first half of 1999, cash used in investing activities was $19.8 million compared to $102.6 million in the second half of 1998, a decrease of $82.8 million. The decrease was due primarily to the Company's use of stock to finance its merger with PeopleServe and a corresponding reduction in cash financed acquisitions. Cash used in investing activities for the first half of 1998 includes funds used in the acquisition of Normal Life, Inc. For the first half of 1999, cash provided by financing activities was $19.9 million compared to $47.3 million in the second half of 1998, a decrease of $27.4 million, due primarily to long-term borrowings for the Normal Life and other acquisitions during the first quarter of 1998, offset by the borrowings necessary in 1999 to fund working capital needs primarily resulting from the increase in accounts receivable noted above. At June 30, 1999, the Company had $54.2 million available on its line-of-credit and $19.7 million in cash and cash equivalents. Outstanding at that date were irrevocable standby letters of credit in the principal amount of $14.2 million issued in connection with workers' compensation insurance and certain facility leases. Net days revenue in accounts receivable was 64 days at June 30, 1999, compared to 61 days at December 31, 1998. The increase is primarily related to delays in payment from certain state Medicaid programs as well as the time required for payments to commence in acquired operations. The Company has historically satisfied its working capital requirements, capital expenditures and scheduled debt payments from its operating cash flow and utilization of its credit facility. Cash requirements for the acquisition of new business operations have generally been funded through a combination of these sources, as well as the issuance of long-term obligations and common stock. The Company believes that cash generated from operations and availability under its existing credit facility will continue to be sufficient to meet its working capital, planned capital expenditure, business acquisition and scheduled debt repayment requirements for at least the next twelve months. 12 14 YEAR 2000 ISSUE Assessment and Remediation Plans In response to the Year 2000 issue, the Company established a task force to address Year 2000 issues in the following specific areas: (i) information systems; (ii) medical equipment and physical facilities; and (iii) third party relationships. Information Systems: The Company has completed its assessment of the capability of its information systems to meet Year 2000 processing requirements. Based on this assessment, the Company determined that it was required to modify or replace certain portions of its information systems. The Company has focused a significant portion of its internal remediation efforts on the aspects of information systems that affect revenue generation. Management has acquired and is installing a Year 2000 compliant software program which will be utilized to generate substantially all invoices electronically and monitor accounts receivable. A significant number of the Company's operations are currently utilizing the software and installation and testing for the remaining operations is expected to be completed by November 30, 1999. The Company has completed the requisite upgrades to its general ledger and payroll systems and believes these systems are currently Year 2000 compliant. Substantially all desktop computers, network devices and related software have been tested and those found to be noncompliant have been replaced. The Company plans to rely principally on its own staff resources for Year 2000 remediation of its information systems. Medical Equipment and Physical Facilities: The effort to identify potential Year 2000 problems within the Company's medical equipment and physical facilities is ongoing. Vendors, manufacturers and others with whom the Company conducts business, and where the interruption of such business could have a material adverse effect on the Company, have been contacted, and cost effective efforts are being made to remediate or minimize possible problems. The Company believes that it will be able to remediate any Year 2000 problems in its medical equipment and physical facilities sufficiently in advance of January 1, 2000. The target date for completing all such remedial measures is November 30, 1999. The Company presently believes that with appropriate and timely modifications and replacements, the Year 2000 issue will not pose significant operational problems for the Company. The Company plans to rely principally on its own staff resources for Year 2000 remediation of medical equipment and physical facilities. Third Party Relationships: The Company continues to assess the Year 2000 compliance capability of its significant third party payors and vendors. Because a substantial portion of the Company's revenues are derived from Medicaid programs, to the extent that certain federal and state and local governmental agencies are noncompliant, the Company's cash flows, liquidity and financial condition could be materially adversely affected. The Health Care Financing Administration has issued guidance requiring state Medicaid agencies to certify that the state's Medicaid Management Information Systems, and mission-critical interfaces, were Year 2000 compliant by March 31, 1999. The Company has received representations from its third party payroll processor, as well as its significant relationship banks, that their systems will be Year 2000 compliant. There can be no assurance that the systems of these third parties will be compliant and will not have a material adverse effect on the Company's operations. An inventory of significant third party payors and vendors is in process, and questionnaires were mailed during 13 15 March 1999 requesting representations regarding their Year 2000 readiness. The Company anticipates completing its assessment and any necessary actions by November 30, 1999. Contingency Plans The Company has not established a formal contingency plan to address failures in the Company's Year 2000 assessment and remediation plan. The Company's task force has completed plans for significant portions of the three areas described in this section, as well as other less significant areas within the Company. Contingency plans will be developed for any area of the Year 2000 remediation effort where such effort is incomplete, the consequence of a possible Year 2000 problem is materially adverse and a viable contingency plan is possible and economically reasonable. As the Company contacts third party reimbursement sources, it is developing contingency plans to receive temporary reimbursement in the event of system failures by these entities. The Company's contingency plans will also cover failures by suppliers and vendors. Further, each of the Company's operating units has plans to handle emergency situations such as a loss of utility services or supplies. Year 2000 Risk The Company believes the greatest risk posed by the Year 2000 issue is the timely reimbursement by third party governmental payors. Management believes that delays in the collection of accounts receivable potentially represent significant operational risk with respect to the Year 2000 issue. Should cash collections on accounts receivable from third party payors be significantly delayed, the Company's working capital could be materially adversely affected. Management continues to evaluate its financing needs, including needs arising from Year 2000 problems. While the Company could utilize its existing revolving credit facility to fund working capital needs, the Company could also be forced to seek additional external financing. Use of funding sources for working capital could also materially adversely affect plans to expand the Company's business through internally-generated growth or acquisitions. No assurance can be given that additional financing to support working capital, growth or acquisitions would be available to the Company. Further, in an environment of significant collection delays, the Company may elect to temporarily reduce its internal growth or acquisition activities. Effect of Merger with PeopleServe As part of the integration of the systems and facilities of PeopleServe with those of ResCare, the Company has addressed the Year 2000 issues of PeopleServe in the same three areas discussed above. The significant information systems of PeopleServe are being discontinued and the data is being incorporated into ResCare's information systems. Further, the medical equipment, physical facilities and third party relationships of PeopleServe have been assessed concurrently with those of ResCare. The Company presently believes that the merger with PeopleServe will not materially increase the Company's Year 2000 risks beyond those already described above. The cost of remediation efforts with respect to PeopleServe is not expected to be material. 14 16 Cost of Plan The total cost of modifying and replacing information systems is currently expected to range from $3 million to $4 million. Certain of these costs will be capitalized and amortized over a three to five year period. Other costs to remediate the Year 2000 issue will be expensed as incurred. The most significant portion of the total estimated cost (generally attributable to replacement equipment) is being leased under an operating lease over a base term of 60 months. At June 30, 1999, the Company had deployed replacement equipment with a value of approximately $2.4 million under this operating lease. The total cost of modifying and replacing medical equipment and physical facility components is not expected to be material. The Company believes that the total costs associated with replacing and modifying its current systems will not have a material adverse effect on its results of operations or liquidity. The costs of the project and the date on which the Company believes that it will substantially complete the Year 2000 modifications are based on management's best estimates using information currently available. Actual results could differ from those estimates. CERTAIN RISK FACTORS The Company's growth in revenues and earnings per share has been directly related to significant increases in the number of individuals served in its Division for Persons with Disabilities and its Division for Youth Services. This growth is primarily dependent upon development-driven activities, including the acquisitions of other businesses and facilities and of management contract rights to operate facilities, the award of contracts to open new facilities or start new operations or to assume management of facilities previously operated by governmental agencies or other organizations, and the extension and renewal of contracts previously awarded to the Company. The Company often makes forward-looking statements regarding its development activities. Increases in the Company's future revenues depend significantly upon the success of these development activities, and in particular on the Company's ability to obtain licenses and other rights to provide services to the special needs populations it serves. Future revenues also depend on the Company's ability to delivery quality services, to maintain high levels of occupancy in its residential programs and high utilization levels in other programs, as well as to maintain and renew its existing services contracts and its existing leases. The Company actively seeks acquisitions of other companies, facilities and assets as a means of increasing the number of individuals served. Changes in the market for such business opportunities, including increased competition for and pricing of acquisition prospects, could also adversely affect the timing and/or viability of future development activities. Additionally, many of the Company's contracts to provide disabilities and youth services and to operate Job Corps centers are subject to state or federal government procurement rules and procedures; changes in procurement policies that may be adopted by one or more of these agencies may adversely affect the Company's abilities to obtain and retain these contracts. Revenues of the Company's Division for Persons with Disabilities are highly dependent on reimbursement under federal and state Medicaid programs. Generally, each state has its own Medicaid reimbursement regulations and formula. The Company's revenues and operating profitability are dependent upon the Company's ability to maintain its existing reimbursement levels and to obtain periodic increases in reimbursement rates. Changes in the manner in which Medicaid reimbursement rates are established in one or more of the states in which the Company conducts its operations could adversely affect revenues and profitability. Other changes in the manner in which federal and state reimbursement programs are operated and in the manner in 15 17 which billings/costs are reviewed and audited could also affect revenues and operating profitability. The Company's cost structure and ultimate operating profitability are significantly dependent on its labor costs, the availability of qualified personnel in each geographic area and the effective utilization of its labor force, and may be adversely affected by a variety of factors, including local competitive forces, changes in minimum wages or other direct personnel costs, strikes or work stoppages by certain of its employees represented by labor unions, the Company's future effectiveness in managing its direct service staff, and changes in consumer services models, such as the trends toward supported living and managed care. Additionally, the Company's continued expansion of its business and its ability to serve populations utilizing the Company's core competencies, are dependent upon the continuation of current trends toward downsizing, privatization and consolidation and the Company's ability to tailor its service models to meet the changing needs of these populations and the requirements of government payors. The Company's future operating performance will be subject to a variety of political, economic, social and legal pressures, including desires of governmental agencies to reduce costs and increase levels of services, federal, state and local budgetary constraints and actions brought by advocacy groups and the courts to change existing service delivery systems. Material changes resulting from these trends and pressures could adversely affect the demand for and reimbursement of the Company's services and its operating flexibility, and ultimately its revenues and profitability. As discussed above under "Year 2000 Issue", the Company's operations and liquidity may also be significantly affected by the ability of third party governmental payors to timely reimburse the Company for the services it provides to many of its consumers. FORWARD-LOOKING STATEMENTS Certain statements contained in this Quarterly Report on Form 10-Q which are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act (the Act). In addition, certain statements in future filings by the Company with the Securities and Exchange Commission, in press releases, and in oral and written statements made by or with the approval of the Company which are not statements of historical fact constitute forward-looking statements within the meaning of the Act. Examples of forward-looking statements include, but are not limited to: (1) projections of revenues, income or loss, earnings or loss per share, capital structure and other financial items; (2) statements of plans and objectives of the Company or its management or Board of Directors; (3) statements of future actions or economic performance; and (4) statements of assumptions underlying such statements. Words such as "believes," "anticipates," "expects," "intends," "plans," "targeted," and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Forward-looking statements involve risks and uncertainties which may cause actual results to differ materially from those in such statements. Some of the events or circumstances that could cause actual results to differ from those discussed in the forward-looking statements are discussed in the "Certain Risk Factors" and "Year 2000 Issue" sections above. Such forward-looking statements speak only as of the date on which such statements are made, and the Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made to reflect the occurrence of unanticipated events. 16 18 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK While the Company is exposed to changes in interest rates as a result of its outstanding variable rate debt, the Company does not currently utilize any derivative financial instruments related to its interest rate exposure. The Company believes that its exposure to market risk will not result in a material adverse effect on the Company's consolidated financial condition, results of operations or liquidity. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS From time to time, the Company (or a provider with whom the Company has a management agreement), becomes a party to legal and/or administrative proceedings involving state program administrators and others that, in the event of unfavorable outcomes, may adversely affect revenues and period to period comparisons. In August 1998, with the approval of the State of Indiana, the Company relocated approximately 100 individuals from three of its larger facilities to community-based settings. In June 1999, the owner of these facilities filed suit against the Company in U.S. District Court, Southern District of Indiana, alleging in connection therewith breach of contract, conversion and fraudulent concealment and seeking damages of approximately $54 million. Management believes that this lawsuit is without merit and will defend it vigorously. The Company does not believe the ultimate resolution of this matter is likely to have a material adverse effect on its consolidated financial condition, results of operations or liquidity. The Texas Attorney General, on behalf of the Texas Department of Human Services, filed suit in the District Court of Harris County, Texas seeking civil penalties of approximately $2.7 million in connection with the operation of one group home in Texas. The complaint alleges that the Company failed to ensure that the needs of the individuals residing in this home were being adequately assessed and provided for, including appropriate medical care. The Company does not believe that the Attorney General has a factual basis to seek civil penalties in this amount and, for this and other reasons, does not believe that the ultimate resolution of this matter with the State is likely to have a material adverse effect on its consolidated financial condition, results of operations or liquidity. In addition, the Company is a party to various other legal proceedings arising out of the operation of its facilities and programs and arising in the ordinary course of business. The Company believes that most of these claims are without merit. Further, many of such claims may be covered by insurance. The Company does not believe the results of these proceedings or claims, individually or in the aggregate, are likely to have a material adverse effect on its consolidated financial condition, results of operations or liquidity. 17 19 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) The regular annual meeting of shareholders of ResCare was held in Louisville, Kentucky on June 14, 1999. Represented at the meeting, either in person or by proxy, were 17,339,785 voting shares out of a total of 18,986,349 voting shares outstanding. The matters voted upon at the meeting are described in (c) below. (b) Proxies for the meeting were solicited pursuant to Section 14(a) of the Securities Exchange Act of 1934 and there was no solicitation in opposition to management's nominees as listed in the proxy statement. (c) Three proposals were submitted to a vote of stockholders as follows: 1. The stockholders approved the issuance of ResCare common shares in connection with the merger of its wholly-owned subsidiary, Res-Care Sub, Inc., with PeopleServe, Inc. and in exchange for PeopleServe, Inc. stock options: Votes For Proposal 15,311,456 Votes Against Proposal 30,728 Votes Abstaining 106,359 Broker Non-votes 1,891,242 2. The stockholders approved the election of the following persons as directors of the Company:
NAME FOR WITHHELD James R. Fornear 17,286,763 53,022 Ronald G. Geary 17,287,301 52,484 E. Halsey Sandford 17,284,804 54,981 Spiro B. Mitsos 17,285,254 54,531 Seymour L. Bryson 17,309,604 30,181 W. Bruce Lunsford 17,184,376 155,409 Olivia F. Kirtley 17,308,616 31,169
3. To approve the proposal to ratify the selection of KPMG LLP as the Company's independent auditors for the fiscal year ending December 31, 1999: Votes For Proposal 17,320,504 Votes Against Proposal 10,534 Votes Abstaining 8,747 18 20 ITEM 5. OTHER INFORMATION The following unaudited consolidated statements of income of ResCare have been restated to reflect the inclusion of the results of operations of PeopleServe for all periods presented. This information is provided supplementally and is not a required part of this Quarterly Report on Form 10-Q.
Quarter Ended ------------------------------------------------------------------------ 3/31/99 12/31/98 9/30/98 6/30/98 3/31/98 --------- --------- --------- --------- --------- (In thousands, except per share data) Net revenues $ 200,183 $ 195,738 $ 186,580 $ 174,732 $ 149,200 Facility and program expenses 171,798 166,970 160,303 151,036 129,786 --------- --------- --------- --------- --------- Facility and program contribution 28,385 28,768 26,277 23,696 19,414 Operating expenses (income): Corporate general and administrative 7,783 7,325 6,776 7,215 6,275 Depreciation and amortization 5,086 5,576 4,967 4,652 3,366 Other (income) expense 5 39 (327) (28) 9 --------- --------- --------- --------- --------- Total operating expenses 12,874 12,940 11,416 11,839 9,650 --------- --------- --------- --------- --------- Operating income 15,511 15,828 14,861 11,857 9,764 Interest, net 4,171 4,359 3,878 3,640 2,015 --------- --------- --------- --------- --------- Income from continuing operations before income taxes 11,340 11,469 10,983 8,217 7,749 Income tax expense 4,730 4,698 4,474 3,218 3,093 --------- --------- --------- --------- --------- Income from continuing operations 6,610 6,771 6,509 4,999 4,656 Cumulative effect of accounting change, net of tax of $2,226 (3,932) -- -- -- -- --------- --------- --------- --------- --------- Net income $ 2,678 $ 6,771 $ 6,509 $ 4,999 $ 4,656 ========= ========= ========= ========= ========= Basic earnings per share from continuing operations $ 0.27 $ 0.28 $ 0.27 $0.21 $ 0.20 Cumulative effect of accounting change, net of tax (0.16) -- -- -- -- --------- --------- --------- --------- --------- Basic earnings per share $ 0.11 $ 0.28 $ 0.27 $ 0.21 $ 0.20 ========= ========= ========= ========= ========= Diluted earnings per share from continuing operations $ 0.25 $ 0.25 $ 0.25 $ 0.20 $ 0.19 Cumulative effect of accounting change, net of tax (0.12) -- -- -- -- --------- --------- --------- --------- --------- Diluted earnings per share $ 0.13 $ 0.25 $ 0.25 $ 0.20 $ 0.19 ========= ========= ========= ========= ========= Weighted average number of common shares: Basic 24,128 24,071 23,974 23,944 23,814 Diluted 31,883 31,784 31,251 31,380 30,629
19 21 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 10.1 1999A Amendment to Loan Instruments by and between PNC Bank, National Association; the Banks identified on Schedule 1 thereto; and Res-Care, Inc., dated June 28, 1999. 10.2 1999B Amendment to Loan Instruments by and between PNC Bank, National Association; the Banks identified on Schedule 1 thereto; and Res-Care, Inc., dated June 28, 1999. 27.1 Financial Data Schedule - June 30, 1999 27.2 Financial Data Schedule - June 30, 1998 (Restated) (b) Reports on Form 8-K: On July 13, 1999, the Company filed a report on Form 8-K to report that the Company had completed the merger with PeopleServe, Inc. In connection with the transaction, Vincent D. Pettinelli, the principal stockholder of PeopleServe, received approximately 2.3 million common shares and was elected to the board of directors of Res-Care effective August 1, 1999. This Form 8-K stated that the financial statements required by Item 7 of Form 8-K would be filed within 60 days of the due date of the initial filing as required by the instructions to Form 8-K. 20 22 INDEX TO EXHIBITS EXHIBIT NUMBER DESCRIPTION OF DOCUMENT - ------ ----------------------- 10.1 1999A Amendment to Loan Instruments by and between PNC Bank, National Association; the Banks identified on Schedule 1 thereto; and Res-Care, Inc., dated June 28, 1999. 10.2 1999B Amendment to Loan Instruments by and between PNC Bank, National Association; the Banks identified on Schedule 1 thereto; and Res-Care, Inc., dated June 28, 1999. 27.1 Financial Data Schedule - June 30, 1999 27.2 Financial Data Schedule - June 30, 1998 (Restated) 21 23 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. RES-CARE, INC. Registrant Date: AUGUST 13, 1999 By: /s/ Ronald G. Geary -------------------- --------------------------- Ronald G. Geary Chairman, President and Chief Executive Officer Date: AUGUST 13, 1999 By:/s/ Ralph G. Gronefeld, Jr. -------------------- --------------------------- Ralph G. Gronefeld, Jr. Executive Vice President of Finance & Administration and Chief Financial Officer 22 EX-10.1 2 EXHIBIT 10.1 1 Exhibit 10.1 1999A AMENDMENT TO LOAN INSTRUMENTS This 1999A Amendment to Loan Instruments (this "Amendment" or the "1999A Amendment"), is made and entered into as of the __ day of June, 1999, by and among (i) PNC BANK, NATIONAL ASSOCIATION, in its capacity as the administrative bank hereunder (in such capacity the "Administrative Bank"); (ii) the Banks identified on SCHEDULE I hereto (all of such Banks are hereinafter collectively referred to as the "Banks", and each is hereinafter individually referred to as a "Bank"); and (iii) RES-CARE, INC., a Kentucky corporation with principal office and place of business in Louisville, Kentucky ("Res-Care") and each of the Consolidated Subsidiaries of Res-Care identified on SCHEDULES II AND IIA hereto (Res-Care and each Consolidated Subsidiary, a "Borrower," and all of the foregoing collectively, the "Borrowers"). PRELIMINARY STATEMENT A. Res-Care and certain other Existing Borrowers (defined herein) obtained from the Administrative Bank and certain of the Banks credit accommodations pursuant to a Loan Agreement dated as of December 23, 1996 (the "1996 Loan Agreement") including the following: (i) a revolving line of credit in the principal amount of Sixty Five Million Dollars ($65,000,000) (the "Original Revolving Credit Facility"), (ii) a commitment to issue letters of credit for the account of the Borrowers in an aggregate outstanding amount of up to Ten Million Dollars ($10,000,000) and (iii) a swing revolving line of credit in the principal amount of Seven Million Five Hundred Thousand Dollars ($7,500,000) (the "Original Swing Line Credit Facility"). B. Res-Care and certain other Existing Borrowers and the Administrative Bank and certain of the Banks amended the 1996 Loan Agreement pursuant to a First Amendment to Loan Instruments dated as of June 23, 1997 (the "First Amendment to Loan Instruments"), providing for, among other things, (i) the increase of the principal amount of the Original Revolving Credit Facility to One Hundred Million Dollars ($100,000,000), (ii) the increase of the principal amount of the Original Swing Line Credit Facility to Twelve Million Five Hundred Thousand Dollars ($12,500,000), (iii) the amendment of certain financial covenants and (iv) the addition of certain New Borrowers as parties to the Loan Instruments. C. Res-Care and certain other Existing Borrowers and the Administrative Bank and certain of the Banks further amended the 1996 Loan Agreement pursuant to a Second Amendment to Loan Instruments dated as of November 20, 1997 (the "Second Amendment to Loan Instruments"), providing for, among other things, (i) the consent of the Banks to the Borrowers' incurring of subordinated indebtedness, (ii) the amendment of certain financial covenants and (iii) the addition of certain other New Borrowers as parties to the Loan Instruments. D. Res-Care and certain other Existing Borrowers and the Administrative Bank and 2 certain of the Banks further amended the 1996 Loan Agreement pursuant to a Third Amendment to Loan Instruments dated as of March 12, 1998 (the "Third Amendment to Loan Instruments"), providing for, among other things, the Existing Borrowers to add certain New Borrowers and to make certain other amendments. The 1996 Loan Agreement, as amended by the First Amendment to Loan Instruments, the Second Amendment to Loan Instruments and the Third Amendment to Loan Instruments, is referred to as the "Old Loan Agreement." E. Res-Care and certain other Existing Borrowers and the Administrative Bank and certain of the Banks amended and restated the Old Loan Agreement pursuant to the 1998 Amended and Restated Loan Agreement dated as of June 30, 1998 (the "Loan Agreement"), providing for, among other things, (i) the increase of the principal amount of the Original Revolving Credit Facility to One Hundred Seventy Five Million Dollars ($175,000,000), (ii) the increase of the principal amount of the Original Swing Line Credit Facility to Fifteen Million Dollars ($15,000,000), (iii) the creation of a new revolving credit facility in the principal amount of Twenty Five Million Dollars ($25,000,000) with a 364-day term, (iv) the amendment of certain financial covenants and (v) the addition of certain New Borrowers as parties to the Loan Instruments. Each capitalized term used herein, unless otherwise expressly defined herein, shall have the meaning set forth in the Loan Agreement. F. Res-Care has entered into an agreement to acquire all of the stock of PeopleServe, Inc. PeopleServe provides residential, vocational and other training, education, support and related programs and services (including habilitation, rehabilitation and required medical services) to persons with developmental and other neurological disabilities (including individuals with mental retardation, dual diagnosis, acquired brain injury and other special needs) in the following states: Delaware, Florida, Indiana, Maryland, Missouri, Nevada, New Jersey, New Mexico, North Carolina, Ohio, Texas, West Virginia and Washington, D.C. G. Res-Care and the Existing Borrowers wish to amend the Loan Agreement and the Loan Instruments to (i) amend certain financial covenants, (ii) to amend the Pricing Levels, which are used in determining applicable interest rates and fees and (iii) to make certain other amendments. The Administrative Bank and the Banks are agreeable to such amendments, upon satisfaction of the terms and conditions set forth herein. Now, therefore, in consideration of the premises and the mutual covenants and agreements set forth herein and in the Loan Agreement and for other good and valuable consideration, the mutuality, receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: I. AMENDMENTS TO LOAN AGREEMENT A. SECTION 1 - DEFINITIONS AND CROSS REFERENCE. The following definitions and provisions of Section 1 of the Loan Agreement are hereby amended and restated as follows: "1.27 "Cash Flow from Operations" means the sum of the amounts for the 2 3 period in question of (i) Net Income, (ii) Interest Expense, (iii) provisions for taxes based on income, (iv) depreciation, amortization and other non-cash charges to Net Income, and (v) Operating Lease/Rental Expense minus non-cash credits to Net Income, of the Borrowers on a consolidated basis in accordance with GAAP, determined as of the end of each month, for the previous 12 months. The Borrowers may include in the calculation of "Cash Flow from Operations" the sum of (i), (ii), (iii), (iv) and (v) for the 12 months preceding the date of calculation for any entity that has been acquired in a Permitted Business Combination; provided, however, that: (a) until such time as section (b) below is applicable, if the portion of the sum of (i), (ii), (iii), (iv) and (v) that is based upon pre-acquisition unaudited financial results of entities acquired in Permitted Business Combinations (the "Pre-Acquisition Cash Flow from Operations") equals or exceeds twenty five percent (25%) (the "Cash Flow from Operations Limitation") of the total "Cash Flow from Operations" of the Borrowers for the period being measured, then the calculation of total "Cash Flow from Operations" may include the portion of the Pre-Acquisition Cash Flow from Operations that is equal to the Cash Flow from Operations Limitation but must exclude the portion of Pre-Acquisition Cash Flow from Operations that exceeds the Cash Flow from Operations Limitation; (b) if the calculation of "Cash Flow from Operations" is performed at any time from the beginning of the seventh month after the date of acquisition of an entity until the end of the twelfth month following the acquisition, the calculation with respect to such entity shall be based upon the actual financial results of such entity for the period occurring after the acquisition, annualized on a 12-month basis; (c) Net Income for purposes of the calculation of Cash Flow from Operations shall not include any Net Income of a Borrower derived from such Borrower's ownership of a Person that is not a Consolidated Subsidiary except to the extent such Borrower has received a distribution of such Net Income from such Person; and (d) Net Income for purposes of the calculation of "Cash Flow from Operations" may include an adjustment, subject to the approval of the Administrative Bank in its discretion exercised reasonably, to increase Net Income by the amount of certain extraordinary or non-recurring expenses as were incurred by entities acquired in Permitted Business Combinations during the 12 months preceding the date of calculation, to the extent that the Borrowers have demonstrated to the reasonable satisfaction of the Administrative Bank that such extraordinary or non-recurring expenses will not continue during the period after the acquisition. 1.53 "Existing Borrowers" means any and all Borrowers party to the Loan Agreement as of June 30, 1998, but does not currently include the entities 3 4 listed on SCHEDULE IIB attached to the 1999A Amendment. 1.60 "Fixed Charge Coverage Ratio" means, as of any Date of Determination thereof, the ratio of (i) the Borrowers' Cash Flow from Operations to (ii) the sum of the Borrowers' Interest Expense, Operating Lease/Rental Expense and Current Maturities of Long Term Debt. 1.74 "Letter of Credit Subfacility" means the commitment of PNC, to issue Letters of Credit for the account for Res-Care or a Subsidiary up to an aggregate amount at any one time outstanding of Twenty Five Million Dollars ($25,000,000). The Letter of Credit Subfacility is a sublimit of Revolving Credit Facility A. 1.85 "New Borrowers" means certain Subsidiaries created or acquired since June 30, 1998, specifically identified as all of the entities on SCHEDULE IIA attached to the 1999A Amendment. 1.96 "Pricing Level I" means the Pricing Level that will be in effect for the applicable Pricing Period if, as at the relevant Date of Determination, the ratio of the Borrowers' Adjusted Indebtedness as measured on such Date of Determination, to the Borrowers' Cash Flow from Operations as measured on such Date of Determination, is less than 2.50 to 1.00. 1.97 "Pricing Level II" means the Pricing Level that will be in effect for the applicable Pricing Period if, as at the relevant Date of Determination, the ratio of the Borrowers' Adjusted Indebtedness as measured on such Date of Determination, to the Borrowers' Cash Flow from Operations as measured on such Date of Determination, is equal to or greater than 2.50 to 1.00, but is less than 3.00 to 1.00. 1.98 "Pricing Level III" means the Pricing Level that will be in effect for the applicable Pricing Period if, as at the relevant Date of Determination, the ratio of the Borrowers' Adjusted Indebtedness as measured on such Date of Determination, to the Borrowers' Cash Flow from Operations as measured on such Date of Determination, is equal to or greater than 3.00 to 1.00, but is less than 3.50 to 1.00. 1.99 "Pricing Level IV" means the Pricing Level that will be in effect for the applicable Pricing Period if, as of the relevant Date of Determination, the ratio of the Borrowers' Adjusted Indebtedness as measured on such Date of Determination, to the Borrowers' Cash Flow from Operations as measured on such Date of Determination, is equal to or greater than 3.50 to 1.00, but less than 4.00 to 1.00. 1.100 "Pricing Level V" means the Pricing Level that will be in effect 4 5 for the applicable Pricing Period if, as of the relevant Date of Determination, the Borrowers' Adjusted Indebtedness as measured on such Date of Determination, to the Borrowers' Cash Flow from Operations as measured on such Date of Determination, is equal to or greater than 4.00 to 1.00, but less than 4.50 to 1.00. 1.101 "Pricing Level VI" means the Pricing Level that will be in effect for the applicable Pricing Period if, as of the relevant Date of Determination, the Borrowers' Adjusted Indebtedness as measured on such Date of Determination, to the Borrowers' Cash Flow from Operations as measured on such Date of Determination, is equal to or greater than 4.50 to 1.00, but less than 5.00 to 1.00. 1.102 "Pricing Level VII" means the Pricing Level that will be in effect for the applicable Pricing Period if, as of the relevant Date of Determination, the Borrowers' Adjusted Indebtedness as measured on such Date of Determination, to the Borrowers' Cash Flow from Operations as measured on such Date of Determination, is equal to or greater than 5.00 to 1.00." The following definitions and provisions are hereby added to Section 1 of the Loan Agreement as follows: "1.147 "1999A Amendment" means the 1999A Amendment to Loan Instruments made and entered into as of June __, 1999, by and among the Banks, the Administrative Bank and the Borrowers. 1.148 "1999A Amendment Closing Date" means the date on which the 1999A Amendment to Loan Instruments has been executed and delivered by the parties thereto, June __, 1999. The closing of the 1999A Amendment shall not occur unless the acquisition of PeopleServe also occurs. 1.149 "Adjusted Indebtedness" means, with respect to the Borrowers on a consolidated basis in accordance with GAAP, (i) all indebtedness for borrowed money, including, without limitation, all Revolving Credit Loans, all Swing Line Loans, all reimbursement obligations of the Borrowers in respect of all letters of credit, including the Letters of Credit, issued for the account of the Borrowers, (ii) that portion of obligations with respect to Capital Leases which is properly classified as a liability on a balance sheet in conformity with GAAP, (iii) notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money, (iv) any obligation owed for all or any part of the deferred purchase price of property or services which purchase price is (y) due more than six months from the date of incurrence of the obligation in respect thereof, or (z) evidenced by a note or similar written instrument, but excluding trade payables incurred in the ordinary course of business, (v) all indebtedness secured by any lien on any property or asset owned by the Borrowers regardless of whether the indebtedness secured thereby shall have been assumed by the Borrowers or is non-recourse to the credit of the Borrowers but 5 6 only to the extent of the fair market value of any such property or assets, (vi) all other Contingent Obligations of the Borrowers not otherwise included in clauses (i) through (v) of this Section and (vii) Operating Lease/Rental Expense multiplied by 8; PROVIDED, HOWEVER Adjusted Indebtedness shall be reduced by an amount equal to the difference (if positive) between (i) the value of the Borrowers' cash and marketable securities and (ii) $10,000,000. 1.150 "Adjusted Senior Indebtedness" means, with respect to the Borrowers on a consolidated basis in accordance with GAAP, all Adjusted Indebtedness, excluding, however, all (i) Convertible Subordinated Notes, (ii) Convertible Subordinated Notes (Normal Life) and (iii) other subordinated indebtedness which may be excluded from the calculation of "Adjusted Senior Indebtedness" by written consent of the Administrative Bank." B. SECTION 2.1A - REVOLVING CREDIT FACILITY A - REVOLVING CREDIT FACILITY A LOAN COMMITMENTS. Section 2.1A of the Loan Agreement is hereby amended and restated by replacing subparagraph (iv) at the end of such section with the following: "(iv) At no time shall the Banks be required to make Revolving Loans under Revolving Credit Facility A if the making of such Revolving Loans would cause the ratio of Adjusted Indebtedness as of the end of any rolling twelve (12) month period ending during one of the periods set forth below to Cash Flow from Operations for such rolling twelve (12) month period to exceed the applicable ratio:
PERIOD APPLICABLE RATIO 3/31/99-12/31/99 5.50 to 1.0 1/01/00-12/30/00 5.25 to 1.0 12/31/00 and thereafter 5.00 to 1.0"
C. SECTION 2.1B - REVOLVING CREDIT FACILITY B - REVOLVING CREDIT FACILITY B LOAN COMMITMENTS. Section 2.1B of the Loan Agreement is hereby amended and restated by replacing subparagraph (ii) at the end of such section with the following: "(ii) At no time shall the Banks be required to make Revolving Loans under Revolving Credit Facility B if the making of such Revolving Loans would cause the ratio of Adjusted Indebtedness as of the end of any rolling twelve (12) month period ending during one of the periods set forth below to Cash Flow from Operations for such rolling twelve (12) month period to exceed the applicable ratio: 6 7
PERIOD APPLICABLE RATIO 3/31/99-12/31/99 5.50 to 1.0 1/01/00-12/30/00 5.25 to 1.0 12/31/00 and thereafter 5.00 to 1.0"
D. SECTION 2.7 - LETTERS OF CREDIT. Section 2.7A(i) is hereby amended and restated as follows: "(i) The Borrowers may not request that PNC issue any Letter of Credit if, after giving effect to such issuance, (y) the total Letter of Credit Usage would exceed Twenty Million Five Dollars ($25,000,000.00), or (z) the Total Utilization of Revolving Credit Facility A Loan Commitments would exceed the Revolving Credit Facility A Loan Commitments, as the amount available under such Revolving Credit Facility A Loan Commitments may be reduced from time to time pursuant to Section 2.4C hereof." E. SECTION 8.2 -INDEBTEDNESS, ETC. Section 8.2 of the Loan Agreement is hereby amended and restated as follows: "8.2 INDEBTEDNESS, ETC. The Borrowers will not, without the prior written consent of the Majority Banks, directly or indirectly, create, incur, assume, guarantee, agree to purchase or repurchase or provide funds in respect of, or otherwise become liable with respect to any Indebtedness other than: (i) The Revolving Credit Facilities; (ii) The Swing Line Credit Facility; (iii) The Capital Leases in the aggregate amount not exceeding Twenty Five Million Dollars ($25,000,000); (iv) Current liabilities of the Borrowers (other than for borrowed money) incurred in the ordinary course of their businesses and in accordance with customary trade practices; (v) Purchase money indebtedness incurred or assumed by the Borrowers in connection with acquisition of tangible and intangible personal and real property (acquired in a Permitted Business Combination that meets the requirements of Section 8.11 hereof or in circumstances other than in connection with a Permitted Business Combination), to the extent that such tangible and intangible personal and real property are to be used by the Borrowers in businesses permitted under Section 8.5 hereof, in an aggregate principal amount not to exceed Seven Million Five Hundred Thousand Dollars ($7,500,000); (vi) Unsubordinated promissory notes or other evidence of 7 8 unsubordinated indebtedness issued by one or more of the Borrowers as all or part of the Business Combination Consideration in connection with a Permitted Business Combination that meets the requirements of Section 8.11 hereof in an aggregate principal amount not to exceed Twelve Million Five Hundred Thousand Dollars ($12,500,000); (vii) Promissory notes or other evidence of indebtedness that has been subordinated to the Obligations owed to the Banks, in a form acceptable to the Administrative Bank, issued by one or more of the Borrowers as all or part of the Business Combination Consideration in connection with a Permitted Business Combination that meets the requirements of Section 8.11 hereof; (viii) The advances, loans and guarantees permitted under Section 8.12 hereof; (ix) Convertible Subordinated Notes that meet all of the following criteria: (a) The principal amount of such Convertible Subordinated Notes may not exceed $115,000,000; and (b) Neither the Convertible Subordinated Notes nor the Indenture may be amended in any manner that could reasonably be expected to be adverse to the interests of the Banks without prior written consent of the Administrative Bank; and (x) the Convertible Subordinated Notes (Normal Life) that meet the following criteria: (a) The principal amount of such Convertible Subordinated Notes (Normal Life) may not, in the aggregate, exceed $22,000,000; and (b) The Convertible Subordinated Notes (Normal Life) may not be amended in any manner that could reasonably be expected to be adverse to the interests of the Banks without prior written consent of the Administrative Bank." F. SECTION 8.7 - RATIO OF ADJUSTED INDEBTEDNESS TO CASH FLOW FROM OPERATIONS. Section 8.7 of the Loan Agreement is hereby amended and restated as follows: "8.7 RATIO OF ADJUSTED INDEBTEDNESS TO CASH FLOW FROM OPERATIONS. The Borrowers shall not permit, for any rolling twelve (12) month period ending during one of the periods set forth below, the ratio of Adjusted Indebtedness as of the end of such rolling twelve (12) month period to Cash Flow from Operations 8 9 for such rolling twelve (12) month period to exceed the applicable ratio:
PERIOD APPLICABLE RATIO 3/31/99-12/31/99 5.50 to 1.0 1/01/00-12/30/00 5.25 to 1.0 12/31/00 and thereafter 5.00 to 1.0"
G. SECTION 8.8 - RATIO OF ADJUSTED SENIOR INDEBTEDNESS TO CASH FLOW FROM OPERATIONS. Section 8.8 of the Loan Agreement is hereby amended and restated as follows: "8.8 RATIO OF ADJUSTED SENIOR INDEBTEDNESS TO CASH FLOW FROM OPERATIONS. The Borrowers shall not permit, for any rolling twelve (12) month period ending during one of the periods set forth below, the ratio of Adjusted Senior Indebtedness as of the end of any such rolling twelve (12) month period to Cash Flow from Operations for such rolling twelve (12) month period to exceed the applicable ratio:
PERIOD APPLICABLE RATIO 3/31/99-12/31/99 4.50 to 1.0 1/01/00 and thereafter 4.25 to 1.0"
H. SECTION 8.9 - RATIO OF DEBT TO CAPITALIZATION. Section 8.9 of the Loan Agreement is hereby amended and restated as follows: "8.9 RATIO OF DEBT TO CAPITALIZATION. The Borrowers shall not permit, for any calendar month, the ratio of Debt as of the end of such calendar month to Capitalization as of the end of such calendar month to exceed the applicable ratio:
PERIOD APPLICABLE RATIO 3/31/99-12/31/99 .70 to 1.0 1/01/00-12/30/00 .675 to 1.0 12/31/00 and thereafter .60 to 1.0
Notwithstanding the foregoing, if Res-Care engages in a public offering of common stock subsequent to the 1999A Amendment Closing Date that results in Res-Care receiving net proceeds in excess of $10,000,000, the applicable ratios set forth in this Section 8.9 shall be modified to reduce such applicable ratios by an amount equal to the difference between (i) the ratio of Debt to Capitalization as of the end of the calendar month immediately prior to the offering of common stock and (ii) the ratio of Debt to Capitalization as of the end of the calendar month immediately following the offering of common stock. However, such an 9 10 offering of common stock shall not (i) cause the applicable ratios under this Section 8.9 to be reduced below .60 to 1.0 prior to 12/31/00 or (ii) cause the applicable ratios to be less than .50 to 1.0 after 12/31/00. Further notwithstanding the foregoing, if the Convertible Subordinated Notes shall be converted to equity at any time, the foregoing shall be modified to substitute the following as the applicable ratios:
PERIOD APPLICABLE RATIO 3/31/99-12/31/99 .60 to 1.0 1/01/00-12/30/00 .55 to 1.0 12/31/00 and thereafter .50 to 1.0"
I. APPROVAL AND WAIVER OF CERTAIN REQUIREMENTS OF SECTION 8.11 IN REGARD TO BUSINESS COMBINATION WITH PEOPLESERVE,INC. The Administrative Bank and the Banks approve Res-Care's Business Combination with PeopleServe, Inc. (to be accounted for as a pooling of interests), and waive the current $15,000,000 per transaction limitation of Section 8.11(v) of the Loan Agreement with respect to such Business Combination and waive the $100,000,000 aggregate limitation of Section 8.11(iv) of the Loan Agreement with respect to Business Combinations occurring between July 1, 1998 and June 30, 1999. J. SECTION 8.11 - PERMITTED BUSINESS COMBINATIONS. Section 8.11 of the Loan Agreement is hereby amended and restated as follows: "8.11 PERMITTED BUSINESS COMBINATIONS. Res-Care and its Subsidiaries shall not, without the prior written consent of the Majority Banks (as defined in Section 15.11 hereof), engage in any Business Combination unless all of the following conditions are met, in which case the proposed Business Combination shall be deemed a "Permitted Business Combination": (i) the Business Combination shall be with a Person that is engaged in a business of the type described in Section 8.5 hereof; (ii) the Business Combination shall be accomplished through consensual (non-hostile) agreement with the seller; (iii) the Business Combination shall result in Res-Care being the surviving entity such that it reports the results of the acquisition on a consolidated basis in accordance with GAAP or the equity basis of accounting in accordance with GAAP; (iv) the Business Combination Consideration associated with the 10 11 proposed Business Combination plus the aggregate Business Combination Consideration associated with Permitted Business Combinations that have been completed in the current Loan Year does not exceed One Hundred Fifty Million Dollars ($150,000,000); (v) the Business Combination Consideration associated with the proposed Business Combination does not exceed Twenty Million Dollars ($20,000,000); and (vi) if the Business Combination involves acquisition of interests in a Person that will not treated be as a Consolidated Subsidiary of Res-Care subsequent to the Business Combination, the aggregate amount of Business Combination Consideration associated with all such Business Combinations in any Fiscal Year cannot exceed Three Million Dollars ($3,000,000)." K. SECTION 8.12 - LOANS, ADVANCES AND GUARANTIES BY BORROWERS. Section 8.12 of the Loan Agreement is hereby amended and restated by deleting the words "One Million Five Hundred Thousand Dollars ($1,500,000)" and substituting "Five Million Dollars ($5,000,000)" therefor. Section 8.12 is further amended to add the following at the end thereof: "Notwithstanding the foregoing, upon consummation of the PeopleServe, Inc. acquisition by Res-Care, the guaranties delivered by Voca Corp., Voca Corporation of North Carolina, Voca Corporation of Ohio, Voca Corporation of Washington D.C. and Voca Corporation of West Virginia, Inc. in favor of National City Bank guarantying repayment of reimbursement obligations on a letter of credit issued by National City and in favor of Chase Manhattan Trust Company, National Association, guarantying repayment of amounts due with respect to certain Mortgage Notes (collectively, the "Voca Guaranties"), shall be treated as "guaranties" under this Section 8.12 but the aggregate amount thereof (i) shall not be included for purposes of the $5,000,000 limitation on guaranties under the first paragraph of Section 8.12 or as "undeferred" obligations, and (ii) shall not be included for purposes of the $7,500,000 limitation on assumption or guaranties of minimum working capital obligations under the second paragraph of Section 8.12. The Voca Guaranties shall not be considered "Indebtedness" for purpose of calculating "Indebtedness" for use in connection with Pricing Levels and financial covenants herein." L. SCHEDULE I - LIST OF BANKS. SCHEDULE I to the Loan Agreement is hereby amended and replaced in its entirety by SCHEDULE I attached to this Amendment. M. SCHEDULE IA - 1999A AMENDMENT CLOSING FEES. SCHEDULE IA to is hereby added to the Loan Agreement. N. SCHEDULE II - LIST OF BORROWERS OTHER THAN RES-CARE. 11 12 SCHEDULE II to the Loan Agreement is hereby amended and replaced in its entirety by SCHEDULE II attached to this Amendment O. SCHEDULE IIA - LIST OF NEW BORROWERS. SCHEDULE IIA containing a list of New Borrowers as of the 1999A Amendment Closing Date, is hereby added to the Loan Agreement by SCHEDULE IIA attached to this Amendment. P. SCHEDULE IIB - LIST OF CERTAIN ENTITIES WHICH CURRENTLY ARE NOT INCLUDED IN DEFINITION OF BORROWERS OR NEW BORROWERS. SCHEDULE IIB is hereby amended and replaced in its entirety by SCHEDULE IIB attached hereto. Q. SCHEDULE 6.13 - CONSOLIDATED SUBSIDIARIES OF RES-CARE, INC. SCHEDULE 6.13 is hereby amended and restated in its entirety by Schedule 6.13 attached hereto. R. RATIFICATION. The Loan Agreement, as amended by this Amendment, remains in full force and effect and the Borrowers reaffirm and ratify their obligations under the Loan Agreement, as amended by this Amendment. II. STOCK PLEDGE AGREEMENT (RES-CARE) A. EXHIBIT A TO STOCK PLEDGE AGREEMENT (RES-CARE). EXHIBIT A to the Stock Pledge Agreement (Res-Care) is amended and restated in its entirety by EXHIBIT A to this Amendment. B. DELIVERY OF STOCK CERTIFICATES OF NEW BORROWERS TO ADMINISTRATIVE BANK. Res-Care covenants to deliver or to cause to be delivered all common stock of the New Borrowers (which common stock is specifically identified in Exhibit A hereto) to the Administrative Bank on the 1999A Amendment Closing Date. C. RATIFICATION. The Stock Pledge Agreement (Res-Care), as amended by this Amendment, remains in full force and effect and Res-Care reaffirms and ratifies its obligations under the Stock Pledge Agreement, as amended by this Amendment. III. AMENDMENT AND RATIFICATION OF SECURITY AGREEMENTS Each of the Security Agreements remains in full force and effect and each Borrower reaffirms and ratifies its obligations under the Security Agreement to which it is a party. Each Borrower agrees that the Security Agreement to which it is a party shall continue to secure all indebtedness of the Borrower to the Banks evidenced by the Revolving Credit Notes, the Swing Line Note, the Applications and Agreements for Letters of Credit and the Loan Agreement, all as they may be amended by this Amendment. Additionally, each of the New 12 13 Borrowers, as of the date of the 1999A Amendment, shall have executed and delivered to the Administrative Bank a Security Agreement and UCC-1 financing statements in favor of the Banks, in form and substance satisfactory to the Banks. IV. RATIFICATION OF OTHER LOAN INSTRUMENTS The Borrowers hereby reaffirm and ratify all of their obligations under the other Loan Instruments not expressly modified hereinabove. V. CLOSING CONDITIONS The establishment of the Revolving Credit Facility by the Banks in favor of the Borrowers, the obtaining of the Revolving Credit Loans and/or Letters of Credit by the Borrowers thereunder, the making of the Swing Line Loans by PNC to the Borrowers, all as amended by this Amendment, are subject to the satisfaction of all the following conditions (in addition to the conditions set forth in the Loan Agreement): A. CONDITIONS TO CLOSING OF THIS AMENDMENT. The obligation of the Banks to make the Revolving Credit Loans to the Borrowers and to make the Swing Line Loans to the Borrowers are subject to the condition that, in addition to the satisfaction of the conditions precedent specified in Section 5.1 of the Loan Agreement, and with respect to the Swing Line Loan, the conditions precedent specified in Section 3.1D of the Loan Agreement, as of the 1999A Amendment Closing Date, the Banks shall have received the following from the Borrowers, dated the 1999A Amendment Closing Date or such other date as shall be acceptable to the Banks: (1) This Amendment, duly executed and delivered by the each of the Borrowers. (2) Stock certificates evidencing all of the issued and outstanding shares of the common stock of all New Borrowers identified on SCHEDULE IIA, and executed blank stock powers appended thereto. (3) Security Agreements, executed and delivered by all New Borrowers identified on SCHEDULE IIA. (4) UCC-1 financing statements appropriate for filing in filing offices designated by the Administrative Bank, executed and delivered by all New Borrowers identified on SCHEDULE IIA. (5) [New Stock Pledge Agreements, executed and delivered by any first tier Subsidiaries that own stock of second tier Subsidiaries that are New Borrowers]. 13 14 (6) A Certificate of the Secretary or Assistant Secretary of Res-Care certifying as to the authenticity, completeness and accuracy of, and attaching copies of any amendments to the Articles of Incorporation or Bylaws since June 30, 1998, and Resolutions of the Board of Directors of Res-Care authorizing such Borrower's execution, delivery and performance of this Amendment and any other Loan Instruments to which such Borrower is a party, and certifying the names and true signatures of the officers of such Borrower authorized to execute and deliver the Loan Instruments to which the Borrower is a party, on behalf of such Borrower. (7) A Certificate of the Secretary or Assistant Secretary of each New Borrower certifying as to the authenticity, completeness and accuracy of, and attaching copies of their respective Certificates of Incorporation and Bylaws, together with any amendments thereto, and Resolutions of the Board of Directors of each New Borrower authorizing such New Borrower's execution, delivery and performance of this Amendment and any other Loan Instruments to which such New Borrower is a party, and certifying the names and true signatures of the officers of such New Borrower authorized to execute and deliver the Loan Instruments to which the New Borrower is a party, on behalf of such New Borrower. (8) An opinion from counsel to the Borrowers, in form and substance satisfactory to the Banks, giving substantially the same opinions as were given in connection with the execution and delivery of the Loan Agreement dated as of June 30, 1998, but to be given with respect to the execution and delivery of this Amendment and related documents. (9) Such other documents as the Administrative Bank may reasonably request. B. 1999A AMENDMENT CLOSING FEES. The Borrowers shall pay to the Administrative Bank on the 1999A Amendment Closing Date, for the benefit of the Banks, closing fees in regard to the 1999A Amendment in the total amount of $250,000. Upon receipt of such moneys, the Administrative Bank shall remit the closing fees set forth in SCHEDULE IA hereof to the Banks. The Borrowers shall have no liability to any Bank for any closing fees paid to the Administrative Bank which the Administrative Bank does not properly remit to such Bank pursuant to SCHEDULE IA, and such Bank's sole remedy in respect thereof shall be against the Administrative Bank. Pursuant to this Section of this Amendment and Section 15.10 of the Loan Agreement, the Borrowers also agree to pay to the Administrative Bank on the 1999A Amendment Closing Date the reasonable fees and expenses of the Administrative Bank's counsel in negotiating, drafting and closing this Amendment and related documents. VI. REPRESENTATIONS AND WARRANTIES A. REPRESENTATIONS AND WARRANTIES OF BORROWER AND CONSOLIDATED SUBSIDIARIES. To induce the Banks to enter into this Amendment, the Borrowers represent and warrant to the Banks as follows: (1) Each Borrower has full power, authority, and capacity to enter into 14 15 this Amendment, and this Amendment constitutes the legal, valid and binding obligations of each Borrower, enforceable against each in accordance with its terms. (2) No Event of Default under the Loan Agreement or any of the other Loan Instruments has occurred which continues unwaived by the Banks, and no event which with the passage of time, the giving of notice or both would constitute an Event of Default, exists as of the date hereof. (3) The person executing this Amendment on behalf of each Borrower is duly authorized to do so. Each such person has been duly authorized pursuant to resolutions of the Borrowers approved by the directors of the Borrowers to execute and deliver minor amendments to the Loan Instruments of the sort set forth in this Amendment without the necessity of further action by the respective boards of directors. (4) The representations and warranties made by each Borrower in all of the Loan Instruments are hereby remade and restated as of the date hereof. (5) There are no material actions, suits, legal, equitable, arbitration or administrative proceedings pending or threatened against any Borrower, the adverse determination of which could have a material adverse effect on the Loan Instruments, the business operations or financial condition of the Borrowers or the ability of the Borrowers to fulfill their obligations under the Loan Instruments. VII. LEGAL EFFECT OF THIS AMENDMENT. Although this Amendment is to be executed by the Banks and the Borrowers prior to the consummation of the acquisition of PeopleServe, Inc. by Res-Care, this Amendment shall not have legal effect until such time as the such acquisition has been consummated. To the extent that this Amendment involves execution and delivery of documents and stock certificates by PeopleServe, Inc. and its subsidiaries, such documents and stock certificates shall be executed and delivered to the Administrative Bank contemporaneous with or within seven days after the consummation of the PeopleServe, Inc. acquisition. VIII. MISCELLANEOUS. The provisions of Section XV of the Loan Agreement are hereby incorporated by reference and made applicable to this Amendment as fully as if set forth herein verbatim. Notwithstanding anything herein to the contrary, the parties acknowledge that General Health Corporation is not in good standing under the laws of the state of Arizona. The Borrowers covenant to provide a good standing certificate within 30 days after the 1999A Amendment Closing Date. IN WITNESS WHEREOF, the Borrowers, the Administrative Bank and the Banks have each caused this Amendment to be duly executed as of the date and year first hereinabove written. 15 16 RES-CARE, INC. (a "Borrower") ------------------------------------ By: Authorized Officer Name: Ralph G. Gronefeld Assistant Treasurer 16 17 COMMUNITY ALTERNATIVES INDIANA, INC. COMMUNITY ALTERNATIVES NEBRASKA, INC. COMMUNITY ADVANTAGE, INC. TEXAS HOME MANAGEMENT, INC. CAPITAL TX INVESTMENTS, INC. THM HOMES, INC. RES-CARE NEW MEXICO, INC. RES-CARE OHIO, INC. CATX PROPERTIES, INC. RES-CARE CALIFORNIA, INC. COMMUNITY ALTERNATIVES VIRGINIA, INC. RSCR CALIFORNIA, INC. RES-CARE KANSAS, INC. RES-CARE ILLINOIS, INC. RES-CARE OKLAHOMA, INC. RES-CARE TENNESSEE, INC. RES-CARE TRAINING TECHNOLOGIES, INC. YOUTHTRACK, INC. RES-CARE PREMIER, INC. RES-CARE NEW JERSEY, INC. COMMUNITY ALTERNATIVES KENTUCKY, INC. ALTERNATIVE YOUTH SERVICES, INC. COMMUNITY ALTERNATIVES TEXAS PARTNERS, INC. RSCR WEST VIRGINIA, INC. COMMUNITY ALTERNATIVES MISSOURI, INC. f/k/a RAIMENT, INC. RES-CARE AVIATION, INC. COMMUNICATIONS NETWORK CONSULTANTS, INC. THE ACADEMY FOR INDIVIDUAL EXCELLENCE, INC. RES-CARE OTHER OPTIONS, INC. SOUTHERN HOME CARE SERVICES, INC. GENERAL HEALTH CORPORATION d/b/a Arizona Youth Associates, Inc. BALD EAGLE ENTERPRISES, INC. BRINKLEY GROUP HOMES, INC. NORMAL LIFE, INC. NORMAL LIFE OF SOUTHERN INDIANA, INC. NORMAL LIFE OF CENTRAL INDIANA, INC. NORMAL LIFE OF LOUISIANA, INC. NORMAL LIFE OF LAFAYETTE, INC. NORMAL LIFE OF LAKE CHARLES, INC. RES-CARE FLORIDA, INC. 17 18 NORMAL LIFE OF KENTUCKY, INC. NORMAL LIFE OF NORTH TEXAS, INC. NORMAL LIFE OF NEW MEXICO, INC. NORMAL LIFE OF TENNESSEE, INC. CAREERS IN PROGRESS, INC. NORMAL LIFE FAMILY SERVICES, INC. NORMAL LIFE OF CALIFORNIA, INC. NORMAL LIFE OF GEORGIA, INC. NORMAL LIFE MANAGEMENT, INC. NL DELAWARE, INC. NORMAL LIFE OF OHIO, INC. BOLIVAR DEVELOPMENT TRAINING CENTER, INC. HYDESBURG ESTATES, INC. OAK WOOD SUITES OF BOLIVAR, INC. WILLARD ESTATES, INC. BOLIVAR ESTATES, INC. SKYVIEW ESTATES, INC. RIVER BLUFF ESTATES, INC. MEADOW LANE ESTATES, INC. EBENEZER ESTATES, INC. HILLSIDE ESTATES, INC. PEBBLE CREEK ESTATES, INC. FORT MASON ESTATES, INC. SHA-REE ESTATES, INC. BAKER MANAGEMENT, INC. MISSOURI PROGRESSIVE SERVICES, INC. OAKVIEW ESTATES OF BOLIVAR, INC. UPWARD BOUND, INC. INDIVIDUALIZED SUPPORTED LIVING, INC. RES-CARE WASHINGTON, INC. RES-CARE ALABAMA, INC. TANGRAM REHABILITATION NETWORK, INC. BUMPERSHOOT ENTERPRISES, INC. RS PALMER CORPORATION d/b/a TEXAS LIVING CENTERS ALTERNATIVE CHOICES, INC. ROCKCREEK, INC. ACCESS, INC. RESCARE PREMIER CANADA, INC. OPTIMAL SPACE, INC. J&J CARE CENTERS, INC. RAISE GEAUGA, INC. COMMUNITY ALTERNATIVES ILLINOIS, INC. GENERAL HEALTH CORPORATION d/b/a ARIZONA YOUTH ASSOCIATES (each a "Borrower") 18 19 - ----------------------------- By: Authorized Officer Name: Ralph G. Gronefeld Assistant Treasurer of each Borrower listed above beginning with Community Alternatives Indiana, Inc. and ending with General Health Corporation d/b/a Arizona Youth Associates, on behalf of each such Borrower CREATIVE NETWORKS, LLC an Arizona limited liability company (a "Borrower") By: Authorized Officer NORMAL LIFE OF INDIANA a general partnership (a "Borrower") By: NORMAL LIFE OF SOUTHERN INDIANA, INC. one of its General Partners By: Authorized Officer and By: NORMAL LIFE OF CENTRAL INDIANA, INC. its other General Partner By: Authorized Officer TEXAS COMMUNITY ALTERNATIVES LIMITED PARTNERSHIP (a Borrower) By: COMMUNITY ALTERNATIVES TEXAS PARTNER, INC. 19 20 its General Partner By: Authorized Officer 20 21 PEOPLESERVE, INC. P.S.I. HOLDINGS, INC. VOCA CORP. VOCA CORPORATION OF AMERICA VOCA CORPORATION OF FLORIDA VOCA CORPORATION OF INDIANA VOCA OF INDIANA LLC VOCA CORPORATION OF MARYLAND VOCA CORPORATION OF NEW JERSEY VOCA CORPORATION OF NORTH CAROLINA VOCA CORPORATION OF OHIO VOCA CORPORATION OF WASHINGTON D.C. VOCA CORPORATION OF WEST VIRGINIA, INC. VOCA RESIDENTIAL SERVICES, INC. EDUCARE COMMUNITY LIVING CORPORATION - AMERICA EDUCARE COMMUNITY LIVING CORPORATION - GULF COAST EDUCARE COMMUNITY LIVING CORPORATION - MISSOURI EDUCARE COMMUNITY LIVING CORPORATION - TEXAS EDUCARE COMMUNITY LIVING CORPORATION - NEW MEXICO EDUCARE COMMUNITY LIVING CORPORATION - NORTH CAROLINA EDUCARE COMMUNITY LIVING CORPORATION - NEVADA THE CITADEL GROUP, INC. B.W.J. OPPORTUNITY CENTERS, INC. (each a "Borrower") ------------------------------------------- By: Authorized Officer Name: Title: listed above beginning with PeopleServe, Inc. and ending with B.W.J. Opportunity Centers, Inc., on behalf of each such Borrower 21 22 PNC BANK, NATIONAL ASSOCIATION as Administrative Bank By: Benjamin A. Willingham Vice President PNC BANK, NATIONAL ASSOCIATION as a Bank By: Benjamin A. Willingham Vice President 22 23 AMSOUTH BANK ("AmSouth") - ------------------------------------------- By: Cathy Wind Its: Vice President 23 24 BANQUE PARIBAS ("Paribas") - -------------------------------------------- David Canavan Its: ---------------------------------------- 24 25 BANK ONE, KENTUCKY, NA ("Bank One") - ------------------------------------------- By: Todd D. Munson Senior Vice President 25 26 FIRST AMERICAN NATIONAL BANK ("First American") - ------------------------------------------- By: Kent Wood Vice President 26 27 FIRST UNION NATIONAL BANK ("First Union") - ------------------------------------------- By: Valerie Cline Director 27 28 FIRSTAR BANK, N.A. ("Firstar") - ------------------------------------------ By: Toby Rau Assistant Vice President 28 29 FLEET NATIONAL BANK ("Fleet") - ------------------------------------------- By: Ginger Stolzenthaler Senior Vice President 29 30 KEY CORPORATE CAPITAL, INC. ("Key") - ------------------------------------------- By: Mark Mullen Vice President 30 31 NATIONAL CITY BANK OF KENTUCKY ("National City") - ------------------------------------------ By: Deroy Scott Vice President 31 32 SUNTRUST BANK, NASHVILLE, N.A. ("SunTrust") - ------------------------------------------- By: W. Brooks Hubbard Its: 32 33 UNION BANK OF CALIFORNIA ("Union Bank") - ------------------------------------------- By: Lynn Vine Vice President 33 34 WACHOVIA BANK, N.A. ("Wachovia") - ------------------------------------------ By: John Tibe Assistant Vice President 34 35 SCHEDULE I ADMINISTRATIVE BANK PNC BANK, NATIONAL ASSOCIATION ("PNC") 500 West Jefferson Street Louisville, KY 40202 Attn: Benjamin A. Willingham, Vice President LIST OF BANKS AMSOUTH BANK ("AmSouth") 333 Union Street 2nd Floor Nashville, TN 37021 Attn: Cathy Wind, Vice President BANK ONE, KENTUCKY, NA ("Bank One") 416 West Jefferson Louisville, Kentucky 40202 Attn: Todd D. Munson, Senior Vice President BANQUE PARIBAS ("Paribas") 787 Seventh Avenue New York, NY 10019 Attn: David Canavan FIRST AMERICAN NATIONAL BANK ("First American") First American Center Nashville, TN 37237 Attn: Kent Wood, Vice President FIRSTAR BANK, N.A. ("Firstar") One Financial Square Louisville, KY 40202 FIRST UNION NATIONAL BANK ("First Union") One 1st Union Center 301 S. College Street Charlotte, NC 28288-0735 Attn: Valerie Cline, Director FLEET NATIONAL BANK ("Fleet") 35 36 1 Federal Street Boston, MA 02110 Attn: Ginger Stolzenthaler, Vice President KEY CORPORATE CAPITAL, INC. ("Key") 525 Vine Street Cincinnati, OH 40202 Attn: Mark Mullen, Vice President NATIONAL CITY BANK OF KENTUCKY ("National City") 101 South Fifth Street Louisville, KY 40202 Attn: Deroy Scott, Vice President PNC BANK, NATIONAL ASSOCIATION ("PNC") 500 West Jefferson Street Louisville, KY 40202 Attn: Benjamin A. Willingham, Vice President SUNTRUST BANK, NASHVILLE, N.A. ("SunTrust") 201 Fourth Avenue North, 3rd Floor Nashville, TN 37219 Attn: W. Brooks Hubbard UNION BANK OF CALIFORNIA, NATIONAL ASSOCIATION ("Union Bank") 445 S. Figueroa 16th Floor Los Angeles, CA 90071 Attn: Virginia Hart, Vice President WACHOVIA BANK, N. A. ("Wachovia") 191 Peachtree Street, 29th Floor Atlanta, Georgia 30303-1757 Attn: John Tibe 36 37 SCHEDULE IA SCHEDULE OF 1999A AMENDMENT CLOSING FEES The Banks identified below will receive a payment of 1999A Amendment Closing Fees under this SCHEDULE IA, based upon the total commitments of each Bank under the Loan Agreement, multiplied by 125/1000 of one percent (0.125%), as set forth in the table below. The aggregate Closing Fees payable under this SCHEDULE IA total $250,000 ($200,000,000 x 0.125%).
APPLICABLE NAME OF BANK COMMITMENT PERCENTAGE CLOSING FEE - ------------ ---------- ---------- ----------- PNC $ 30,000,000 15.00% $ 37,500.00 Bank One 25,000,000 12.50% 31,250.00 National City 25,000,000 12.50% 31,250.00 SunTrust 20,000,000 10.00% 25,000.00 First Union 17,500,000 8.75% 21,875.00 Wachovia 15,000,000 7.50% 18,750.00 AmSouth 12,500,000 6.25% 15,625.00 Key 12,500,000 6.25% 15,625.00 Firstar 12,500,000 6.25% 15,625.00 Banque Paribas 7,500,000 3.75% 9,375.00 First American 7,500,000 3.75% 9,375.00 Fleet 7,500,000 3.75% 9,375.00 Union Bank 7,500,000 3.75% 9,375.00 Totals 200,000,000 100.00% 250,000.00
37 38 SCHEDULE II LIST OF BORROWERS OTHER THAN RES-CARE, INC. 1. COMMUNITY ALTERNATIVES INDIANA, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("CAI"). 2. COMMUNITY ALTERNATIVES NEBRASKA, INC., a Delaware corporation, with principal office and place of business in Louisville, Kentucky ("CAN"). 3. COMMUNITY ADVANTAGE, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("CA"). 4. TEXAS HOME MANAGEMENT, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("THM"). 5. CAPITAL TX INVESTMENTS, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("CTXI"). 6. THM HOMES, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("THMH"). 7. RES-CARE NEW MEXICO, INC., a Delaware corporation with principal office and place of business of Louisville, Kentucky ("RCNM"). 8. RES-CARE OHIO, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("RCO"). 9. CATX PROPERTIES, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("CATXP"). 10. RES-CARE CALIFORNIA, INC., d/b/a RCCA Services, a Delaware corporation with principal office and place of business in Louisville, Kentucky ("RCC"). 11. COMMUNITY ALTERNATIVES VIRGINIA, INC. f/k/a RES-CARE FLORIDA, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("CAV"). 12. RSCR CALIFORNIA, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("RSCRC"). 13. RES-CARE KANSAS, INC., a Delaware corporation with principal office and 38 39 place of business in Louisville, Kentucky ("RCK"). 14. RES-CARE ILLINOIS, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("RCI"). 15. RES-CARE OKLAHOMA, INC. a Delaware corporation with principal office and place of business in Louisville, Kentucky ("RCOK"). 16. RES-CARE TENNESSEE, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("RCT"). 17. RES-CARE TRAINING TECHNOLOGIES, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("RCTT"). 18. YOUTHTRACK, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("YT"). 19. RES-CARE PREMIER, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("RCP"). 20 RES-CARE NEW JERSEY, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("RCNJ"). 21 COMMUNITY ALTERNATIVES KENTUCKY, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("CAK"). 22 ALTERNATIVE YOUTH SERVICES, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("AYS") 23 COMMUNITY ALTERNATIVES TEXAS PARTNER, INC. (f/k/a Community Alternatives Virginia, Inc.), a Delaware corporation with principal office and place of business in Louisville, Kentucky ("CATP"). 24 RSCR WEST VIRGINIA, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("RSCRWV"). 25 COMMUNITY ALTERNATIVES MISSOURI, INC. f/k/a RAIMENT, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("R"). 26 RES-CARE AVIATION, INC., a Kentucky corporation with principal office and place of business in Louisville, Kentucky ("RCA"). 27 COMMUNICATIONS NETWORK CONSULTANTS, INC., a Rhode Island corporation with principal office and place of business in Louisville, Kentucky ("CNC"). 28 THE ACADEMY FOR INDIVIDUAL EXCELLENCE, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("AIE"). 39 40 29 RES-CARE OTHER OPTIONS, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("ROO"). 30 SOUTHERN HOME CARE SERVICES, INC. d/b/a Eldercare, a Georgia corporation with principal office and place of business in Louisville, Kentucky ("SHCS"). 31. GENERAL HEALTH CORPORATION d/b/a Arizona Youth Associates, Inc., an Arizona corporation with principal office and place of business in Louisville, Kentucky ("AYA") 32. BALD EAGLE ENTERPRISES, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("BEE"). . 33. BRINKLEY GROUP HOMES, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("BGH") . 34. CREATIVE NETWORKS, LLC, an Arizona limited liability company with principal office and place of business in Louisville, Kentucky ("CN"). 35. NORMAL LIFE, INC., a Kentucky corporation with principal office and place of business in Louisville, Kentucky ("NL"). 36. NORMAL LIFE OF SOUTHERN INDIANA, INC., an Indiana corporation with principal office and place of business in Louisville, Kentucky ("NLSI"). 37. NORMAL LIFE OF CENTRAL INDIANA, INC., successor by merger of Normal Life of Terre Haute, Inc. and Normal Life of Sheridan, Inc., an Indiana corporation with principal office and place of business in Louisville, Kentucky ("NLCI"). 38. NORMAL LIFE OF LOUISIANA, INC., a Louisiana corporation with principal office and place of business in Louisville, Kentucky ("NLL"). 39. NORMAL LIFE OF LAFAYETTE, INC., a Louisiana corporation with principal office and place of business in Louisville, Kentucky ("NLLAF"). 40. NORMAL LIFE OF LAKE CHARLES, INC., a Louisiana corporation with principal office and place of business in Louisville, Kentucky ("NLLC"). 41. RES-CARE FLORIDA, INC., f/k/a NORMAL LIFE OF FLORIDA, INC., a Florida corporation with principal office and place of business in Louisville, Kentucky ("NLF"). 42. NORMAL LIFE OF KENTUCKY, INC., a Kentucky corporation with principal 43 NORMAL LIFE OF NORTH TEXAS, INC., a Texas corporation with principal 40 41 office and place of business in Louisville, Kentucky ("NLK"). 44. NORMAL LIFE OF NEW MEXICO, INC., a New Mexico corporation with principal office and place of business in Louisville, Kentucky ("NLNM"). 45. NORMAL LIFE OF TENNESSEE, INC., a Tennessee corporation with principal office and place of business in Louisville, Kentucky ("NLT"). 46. CAREERS IN PROGRESS, INC., a Louisiana corporation with principal office and place of business in Louisville, Kentucky ("CP"). 47. NORMAL LIFE FAMILY SERVICES, INC. a Louisiana corporation with principal office and place of business in Louisville, Kentucky ("NLFS"). 48. NORMAL LIFE OF INDIANA, a general partnership a corporation duly organized and existing under the laws of the state of Indiana, with principal office and place of business in Louisville, Kentucky ("NLIND"). 49. NORMAL LIFE OF CALIFORNIA, INC., a California corporation with principal office and place of business in Louisville, Kentucky ("NLC"). 50. NORMAL LIFE OF GEORGIA, INC., a Georgia corporation with principal office and place of business in Louisville, Kentucky ("NLG"). 51. NORMAL LIFE MANAGEMENT, INC., a Kentucky corporation with principal office and place of business in Louisville, Kentucky ("NLM"). 52. NL DELAWARE, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("NLD"). 53. NORMAL LIFE OF OHIO, INC., an Ohio corporation with principal office and place of business in Louisville, Kentucky ("NLO"). 54. BOLIVAR DEVELOPMENT TRAINING CENTER, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("BSTC"). 55. HYDESBURG ESTATES, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("HE"). 56. OAK WOOD SUITES OF BOLIVAR, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("OWSB"). 57. WILLARD ESTATES, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("WE"). 41 42 58. BOLIVAR ESTATES, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("BE"). 59. SKYVIEW ESTATES, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("SE"). 60. RIVER BLUFF ESTATES, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("RBE"). 61. MEADOW LANE ESTATES, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("MLE"). 62. EBENEZER ESTATES, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("EE"). 63. HILLSIDE ESTATES, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("HE"). 64. PEBBLE CREEK ESTATES, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("PCE"). 65. FORT MASON ESTATES, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("FME"). 66. SHA-REE ESTATES, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("SRE"). 67. BAKER MANAGEMENT, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("BM"). 68. MISSOURI PROGRESSIVE SERVICES, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("MPS"). 69. OAKVIEW ESTATES OF BOLIVAR, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("OEB"). 70. UPWARD BOUND, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("UB"). 71. INDIVIDUALIZED SUPPORTED LIVING, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("ISL"). 72. RES-CARE WASHINGTON, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("RCWASH"). 42 43 73. RES-CARE ALABAMA, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("RCALA"). 43 44 SCHEDULE II.A LIST OF NEW BORROWERS as of June __, 1999 74. TANGRAM REHABILITATION NETWORK, INC., a Texas corporation with principal office and place of business in Louisville, Kentucky. 75. TEXAS COMMUNITY ALTERNATIVES LIMITED PARTNERSHIP, a Kentucky limited partnership with principal office and place of business in Louisville, Kentucky. 76. BUMPERSHOOT ENTERPRISES, INC., a California corporation with principal office and place of business in Louisville, Kentucky. 77. RS PALMER CORPORATION d/b/a TEXAS LIVING CENTERS, a Texas corporation with principal office and place of business in Louisville, Kentucky. 78. ALTERNATIVE CHOICES, INC., a California corporation with principal office and place of business in Louisville, Kentucky. 79. ROCKCREEK, INC., a California corporation with principal office and place of business in Louisville, Kentucky. 80. ACCESS, INC., a North Carolina corporation with principal office and place of business in Louisville, Kentucky. 81. RESCARE PREMIER CANADA, INC., an Ontario (Canada) corporation with principal office and place of business in Louisville, Kentucky. 82. OPTIMAL SPACE, INC., an Ontario (Canada) corporation with principal office and place of business in Ontario, Canada. 83. J&J CARE CENTERS, INC., a California corporation with principal office and place of business in Louisville, Kentucky. 84. RAISE GEAUGA, INC., an Ohio corporation with principal office and place of business in Louisville, Kentucky. 85. COMMUNITY ALTERNATIVES ILLINOIS, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky. 86. PEOPLESERVE, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky. 87. P.S.I. HOLDINGS, INC., an Ohio corporation with principal office and place of business in Louisville, Kentucky. 44 45 88. VOCA CORP., an Ohio corporation with principal office and place of business in Louisville, Kentucky. 89. VOCA CORPORATION OF AMERICA., an Ohio corporation with principal office and place of business in Louisville, Kentucky. 90. VOCA CORPORATION OF FLORIDA, a Florida corporation with principal office and place of business in Louisville, Kentucky. 91. VOCA CORPORATION OF INDIANA, an Indiana corporation with principal office and place of business in Louisville, Kentucky. 92. VOCA OF INDIANA, LLC, an Indiana limited liability company with principal office and place of business in Louisville, Kentucky. 93. VOCA CORPORATION OF MARYLAND, a Maryland corporation with principal office and place of business in Louisville, Kentucky. 94. VOCA CORPORATION OF NEW JERSEY, a New Jersey corporation with principal office and place of business in Louisville, Kentucky. 95. VOCA CORPORATION OF NORTH CAROLINA, a North Carolina corporation with principal office and place of business in Louisville, Kentucky. 96. VOCA CORPORATION OF OHIO, an Ohio corporation with principal office and place of business in Louisville, Kentucky. 97. VOCA CORPORATION OF WASHINGTON D.C., a District of Columbia corporation with principal office and place of business in Louisville, Kentucky. 98. VOCA CORPORATION OF WEST VIRGINIA, INC., a West Virginia corporation with principal office and place of business in Louisville, Kentucky. 99. VOCA RESIDENTIAL SERVICES, INC., an Ohio corporation with principal office and place of business in Louisville, Kentucky. 100. EDUCARE COMMUNITY LIVING CORPORATION - AMERICA, a Delaware corporation with principal office and place of business in Louisville, Kentucky. 101. EDUCARE COMMUNITY LIVING CORPORATION - GULF COAST, a Texas corporation with principal office and place of business in Louisville, Kentucky. 102. EDUCARE COMMUNITY LIVING CORPORATION - MISSOURI, a Missouri corporation with principal office and place of business in Louisville, Kentucky. 45 46 103. EDUCARE COMMUNITY LIVING CORPORATION - TEXAS, a Texas corporation with principal office and place of business in Louisville, Kentucky. 104. EDUCARE COMMUNITY LIVING CORPORATION - NEW MEXICO, a New Mexico corporation with principal office and place of business in Louisville, Kentucky. 105. EDUCARE COMMUNITY LIVING CORPORATION - NORTH CAROLINA, a North Carolina corporation with principal office and place of business in Louisville, Kentucky. 106. EDUCARE COMMUNITY LIVING CORPORATION - NEVADA, a Nevada corporation with principal office and place of business in Louisville, Kentucky. 107. THE CITADEL GROUP, INC., a Texas corporation with principal office and place of business in Louisville, Kentucky. 108. B.W.J. OPPORTUNITY CENTERS, INC., a Texas corporation with principal office and place of business in Louisville, Kentucky. 46 47 SCHEDULE II.B Certain Entities which Currently are not Included in Definition of "Existing Borrowers" or "New Borrowers" (1) Employ - Ability Unlimited, Inc., a New Jersey non-profit corporation. Refraining from including those entities within the definition of "New Borrowers", "Existing Borrowers" or "Borrowers" does not prevent the Banks from later exercising any rights under the Loan Instruments to require them to become Borrowers. 47 48 SCHEDULE 1.32 CONTINGENT OBLIGATIONS OF RES-CARE, INC. 48 49 SCHEDULE 6.7 INDEBTEDNESS [TANGRAM INDEBTEDNESS] [PEOPLESERVE CAPITAL LEASES] 49 50 SCHEDULE 6.13 CONSOLIDATED SUBSIDIARIES OF RES-CARE, INC. 1. COMMUNITY ALTERNATIVES INDIANA, INC. State of incorporation: Delaware Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: None Qualified to do business in: Indiana Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC Filing Locations: (i) Kentucky Secretary of State, (ii) Delaware Secretary of State and (iii) Indiana Secretary of State 2. COMMUNITY ALTERNATIVES NEBRASKA, INC. State of incorporation: Delaware Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Lincoln, Nebraska Qualified to do business in: Nebraska Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC Filing Locations: (i) Kentucky Secretary of State, (ii) Nebraska Secretary of State and (iii) Delaware Secretary of State 3. COMMUNITY ADVANTAGE, INC. State of incorporation: Delaware Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: (i) Longmont, Colorado, (ii) Brighton, Colorado, (iii) Greeley, Colorado, (iv) Weld County, Adams County, Boulder, Jefferson, Thornton, and Evans Counties, Colorado. Qualified to do business in: Colorado Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC Filing Locations: (i) Kentucky Secretary of State, (ii) Colorado Secretary of State and (iii) Delaware Secretary of State 4. TEXAS HOME MANAGEMENT, INC. State of incorporation: Delaware Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: various in Texas (59 group homes) Qualified to do business in: Texas 50 51 Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC Filing Locations: (i) Kentucky Secretary of State, (ii) Texas Secretary of State and (iii) Delaware Secretary of State 5. CAPITAL TX INVESTMENTS, INC. State of incorporation: Delaware Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: owns property in various Texas locations - (i) Bexar County, (ii) Tarrant, (iii) Angelina, (iv) Travis, (v) Caldwell, (vi) Harris, (vii) Nacogdoches, (viii) Anderson, (ix) Parker, (x) Gonzalez and (xi) Plano Counties Qualified to do business in: Texas Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC Filing Locations: (i) Kentucky Secretary of State, (ii) Texas Secretary of State and (iii) Delaware Secretary of State 6. THM HOMES, INC. State of incorporation: Delaware Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: owns property in various Texas locations: (i) Lubbock, (ii) Bexar, (iii) Williamson, (iv) Taylor, (v) Tarrant and (vi) Anderson Counties Qualified to do business in: Texas Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC Filing Locations: (i) Kentucky Secretary of State, (ii) Texas Secretary of State and (iii) Delaware Secretary of State 7. RES-CARE NEW MEXICO, INC. State of incorporation: Delaware Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: (i) Albuquerque, (ii) Rosewell, (iii) Clovis, (iv) Santa Fe, (v) LasVegas, (vi) Espanola, and (vii) Rio Rancho, New Mexico Qualified to do business in: New Mexico Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC Filing Locations: (i) Kentucky Secretary of State and (ii) New Mexico Secretary of State 8. RES-CARE OHIO INC. State of incorporation: Delaware Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky 51 52 Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: (i) Fairfield, (ii) Williamsburg, (iii) Hamilton, (iv) Middletown, (v) Cincinnati area, (vi) Xenia, (vii) Menton, (viii) Lake County and (ix) Geauga County, Ohio Qualified to do business in: Ohio Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC Filing Locations: (i) Kentucky Secretary of State, (ii) Ohio Secretary of State and (iii) Delaware Secretary of State 9. CATX PROPERTIES, INC. State of incorporation: Delaware Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: owns property in various Texas locations - Wichita and Tarrant Counties Qualified to do business in: Texas Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC Filing Locations: (i) Kentucky Secretary of State, (ii) Texas Secretary of State and (iii) Delaware Secretary of State 10. RES-CARE CALIFORNIA, INC. D/B/A RCCA SERVICES State of incorporation: Delaware Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: (i) Sacramento, (ii) San Mateo, (iii) Sutter, (iv) Nevada, (v) Placer and (vi) Santa Clara Counties, CA Qualified to do business in: California Any name, other than name of Corporation, used for conducting business in the last five (5) years: RCCA Services UCC Filing Locations: (i) Kentucky Secretary of State, (ii) California Secretary of State and (iii) Delaware Secretary of State 11. COMMUNITY ALTERNATIVES VIRGINIA (F/K/A RES-CARE FLORIDA, INC.) State of incorporation: Delaware Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: none Qualified to do business in: Virginia Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC Filing Locations: (i) Kentucky Secretary of State, (ii) Florida Secretary of State and (iii) Delaware Secretary of State 52 53 12. RSCR CALIFORNIA, INC. State of incorporation: Delaware Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: (i) Los Angeles, (ii) San Bernardino, (iii) San Luis Obispo and (iv) Orange Counties Qualified to do business in: California Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC Filing Locations: (i) Kentucky Secretary of State (ii) Delaware Secretary of State and (iii) California Secretary of State 13. RES-CARE KANSAS, INC. State of incorporation: Delaware Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: (i) Sherman, (ii) Neosho, (iii) Stafford , (iv) Cowley (v) Sedgwick, (vi) Crawford, (vii) LaBette Counties, Kansas Qualified to do business in: Kansas Any name, other than name of Corporation, used for conducting business in the last five (5) years: Connections, Pathways, Life Choices UCC Filing Locations: (i) Kentucky Secretary of State, (ii) Kansas Secretary of State and (iii) Delaware Secretary of State 14. RES-CARE ILLINOIS, INC. State of incorporation: Delaware Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: (i) Jackson and (ii) Vermilion Counties, Illinois Qualified to do business in: Illinois Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC Filing Locations: (i) Kentucky Secretary of State, (ii) Delaware Secretary of State and (iii) Illinois Secretary of State 15. RES-CARE OKLAHOMA, INC. State of incorporation: Delaware Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: (i) Tulsa, (ii) Seminole, (iii) Oklahoma, (iv) Rogers, (v) Creek and (vi) Garfield Counties, Oklahoma Qualified to do business in: Oklahoma Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC Filing Locations: (i) Kentucky Secretary of State, (ii) Delaware Secretary of State 53 54 and (iii) County Clerk of Oklahoma County, Oklahoma 16. RES-CARE TENNESSEE, INC. State of incorporation: Delaware Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: (i) Nashville, (ii) Jackson (Madison County), (iii) Knox County, (iv) Haywood County, (v) Hamilton County, (vi) Madison County, (vii) Hardeman County, (viii) Shelby County, (ix) Sumner County, (x) Wilson County, (xi) Smyrna County and (xii) Davidson County, Tennessee Qualified to do business in: Tennessee Any name, other than name of Corporation, used for conducting business in the last five (5) years: Res-Care Other Options UCC Filing Locations: (i) Kentucky Secretary of State, (ii) Tennessee Secretary of State and (iii) Delaware Secretary of State 17. RES-CARE TRAINING TECHNOLOGIES, INC. State of incorporation: Delaware Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Qualified Location of registered agent in Kentucky: Louisville Locations of operations: Louisville Qualified to do business in: Kentucky only Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC Filing Locations: (i) Clerk of Jefferson County, Kentucky and (ii) Delaware Secretary of State 18. YOUTHTRACK, INC. State of incorporation: Delaware Location of principal office and records: 10140 Linn Station Road Louisville Kentucky Qualified/not qualified to do business in Kentucky: Qualified Locations of operations: (i) Arapahoe, (ii) Denver, (iii) Mesa, (iv) El Paso, (v) Jefferson , (vi) Garfield Counties, Colorado, (vii) Brigham City, Utah, (viii) St. Augustine Florida, (ix) Puerto Rico. Qualified to do business in: Colorado, Kentucky, Puerto Rico, Utah, Idaho, Arizona, Nevada, Florida Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC Filing Locations: (i) Clerk of Jefferson County, Kentucky, (ii) Colorado Secretary of State, (iii) Delaware Secretary of State and (iv) Utah Secretary of State 19. RES-CARE PREMIER, INC. State of incorporation: Delaware Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky 54 55 Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: (i) St. Louis, Missouri, (ii) Cape Giradeau, Missouri, (iii) Chicago, Illinois, (iv) Plantation, Florida, (v) Altoona, Iowa Qualified to do business in: Massachusetts, Illinois, Florida, Missouri and Iowa Any name, other than name of Corporation, used for conducting business in the last five (5) years: Victorian Acres UCC Filing Locations: (i) Kentucky Secretary of State (ii) Delaware Secretary of State, (iii) Missouri Secretary of State, (iii) Clerk of St. Louis County, Missouri and (iv) Secretary of State of Illinois 20. RES-CARE NEW JERSEY, INC. State of incorporation: Delaware Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: (i) Mercer, (ii) Burlington, (iii) Middlesex, (iv) Warren, (v) Ocean, (vi) Union, (vii) Monmouth, and (viii) Somerset Counties; Towns of: (i) Hillsborough, (ii) Howell, (iii) Perberton,, (iv) Chatsworth and (v) Trenton Qualified to do business in: New Jersey Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC Filing Locations: (i) Kentucky Secretary of State, (ii) Delaware Secretary of State and (iii) New Jersey Secretary of State 21. COMMUNITY ALTERNATIVES KENTUCKY, INC. State of incorporation: Delaware Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Qualified Locations of operations: (i) Bowling Green, (ii) Frankfort, (iii) Morehead, (iv) Owensboro, (v) Louisville, (vi) Elizabethtown, (vii) Symsonia, and (viii) Madisonville, Kentucky Counties: (i) Franklin, (ii) Fayette, (iii) Warren, (iv) Daviess, (v) Jefferson, (vi) Hardin, (vii) Mason, (viii) Rowan, (ix) Montgomery, (x) Carter, (xi) Morgan, (xii) Hoskins, (xiii) Livingston, (xiv) Graves, (xv) Calloway, (xvi) Fulton, (xvii) Marshall, and and (xviii) McCracken Qualified to do business in: No other states Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC Filing Locations: (i) Clerk of Jefferson County, Kentucky, (ii) Kentucky Secretary of State and (iii) Delaware Secretary of State 22. ALTERNATIVE YOUTH SERVICES, INC. State of incorporation: Delaware Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Qualified Locations of operations: Kentucky, Tennessee, Lawrence County, Ohio, Georgia, Jackson, Mississippi and Hinds County, Madison County, and Rankin County, 55 56 Mississippi. Qualified to do business in: (i) Georgia, (ii) Ohio, (iii) Tennessee, (iv) Kentucky, (v) Maryland, (vi) California (vii) Mississippi, (viii) Washington D.C., and (ix) Indiana Any name, other than name of Corporation, used for conducting business in the last five (5) years: In Maryland - d/b/a Res-Care Other Options, Inc., Magnolia Academy (Tenn.) Georgia Center for Youth, Kentucky SAFE, Ohio SAFE, Children's Sanctuary, New Summit School, Community Youth Service. UCC Filing Locations: (i) Clerk of Jefferson County, Kentucky, (ii) Kentucky Secretary of State, (iii) Delaware Secretary of State, (iv) Maryland Secretary of State (v) Tennessee Secretary of State, (vi) Ohio Secretary of State (vii) Clerk of Lawrence County, Ohio, (viii) Clerk of Superior Court of Fulton County, Georgia, (ix) Mississippi Secretary of State and (x) Arizona Secretary of State. 23. COMMUNITY ALTERNATIVES VIRGINIA, INC. (K/N/A COMMUNITY ALTERNATIVES TEXAS PARTNERS, INC. State of incorporation: Delaware Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: None yet Qualified to do business in: Virginia and Texas Any name, other than name of Corporation, used for conducting business in the last five (5) years: Community Alternatives Virginia, Inc. UCC Filing Locations: (i) Kentucky Secretary of State, (ii) Delaware Secretary of State and (iii) State Corporation Commission of Virginia 24. RSCR WEST VIRGINIA, INC. State of incorporation: Delaware Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: West Virginia - various Qualified to do business in: West Virginia Any name, other than name of Corporation, used for conducting business in the last five (5) years: Yellow Springs UCC Filing Locations: (i) Kentucky Secretary of State, (ii) West Virginia Secretary of State and (iii) Delaware Secretary of State 25. COMMUNITY ALTERNATIVES MISSOURI, INC. F/K/A RAIMENT, INC. State of incorporation: Missouri Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Polk, Green, Marion, Ralls, Adair, Sullivan and Cape Girardeau Counties, Missouri Qualified to do business in: N/A Any name, other than name of Corporation, used for conducting business in the last five (5) years: Raiment, Inc. 56 57 UCC Filing Locations: (i) Kentucky Secretary of State, (ii) Missouri Secretary of State and (iii) County Recorder of St. Francois and Cape Girardeau, Missouri 26. RES-CARE AVIATION, INC. State of incorporation: Kentucky Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: N/A Locations of operations: Kentucky Qualified to do business in: N/A Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC Filing Locations: Clerk of Jefferson County, Kentucky 27. COMMUNICATIONS NETWORK CONSULTANTS, INC. State of incorporation: Rhode Island Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: N/A Locations of operations: Yancey, Mitchell, Madison, Buncombe, Jackson, Haywood, Transylvania, Henderson, Ashe, Alleghany, Watauga, Wilkes, Avery, Burke, Caldwell, McDowell, Alexander, Cleveland, Rutherford, Polk, Catawba, Surrey, Yadkin, Iredell, Foryth, Stokes, Davie, Rowan, Cabarrus, Stanley, Union, Mecklenburg, Guilford, Alamance, Caswell, Orange, Person, Chatham, Durham, Wake, Sampson, Duplin, Nash, Edgecombe, Wayne, Pender, New Hanover and Brunswick Counties, North Carolina Qualified to do business in: North Carolina and Virginia Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC Filing Locations: (i) Kentucky Secretary of State, (ii) Rhode Island Secretary of State (iii) North Carolina Secretary of State 28. THE ACADEMY FOR INDIVIDUAL EXCELLENCE, INC. State of incorporation: Delaware Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Qualified Locations of operations: Kentucky Qualified to do business in: No other state Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC Filing Locations: (i) Clerk of Jefferson County, Kentucky and (ii) Delaware Secretary of State 29. RES-CARE OTHER OPTIONS, INC. State of incorporation: Delaware Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: (i) Montgomery and Philadelphia Counties, Pennsylvania, (ii) 57 58 Durham, Davidson, Orange, Person, Chatam, Wake Cumberland, Forsyth and Stokes Counties, North Carolina, (iii) Oregon Secretary of State Qualified to do business in: (i) Oregon, (ii) North Carolina, (iii) Pennsylvania and (iv) Maryland. Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC Filing Locations: (i) Kentucky Secretary of State, (ii) Delaware Secretary of State, (iii) Secretary of the Commonwealth of Pennsylvania, (iv) Prothonotary of Montgomery and Philadelphia Counties, Pennsylvania, and (v) North Carolina Secretary of State THE FOLLOWING (#30-71) ARE BORROWERS THAT JOINED IN THE LOAN DOCUMENTS EFFECTIVE WITH THE THIRD AMENDMENT TO LOAN INSTRUMENTS (3/12/98). 30. SOUTHERN HOME CARE SERVICES, INC. State of incorporation: Georgia Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: (i) Georgia and (ii) South Carolina Qualified to do business in (other than state of incorporation): South Carolina Any name, other than name of Corporation, used for conducting business in the last five (5) years: L. Miller Management, Eldercare UCC filing locations: (i) Kentucky Secretary of State, (ii) Clerk of the Superior Court of Fulton County Georgia, (iii) South Carolina Secretary of State 31. GENERAL HEALTH CORPORATION State of incorporation: Arizona Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Arizona Qualified to do business in (other than state of incorporation): None Any name, other than name of Corporation, used for conducting business in the last five (5) years: Arizona Youth Associates, Inc. UCC Filing Locations: (i) Kentucky Secretary of State, (ii) Arizona Secretary of State 32. BALD EAGLE ENTERPRISES, INC. State of incorporation: Missouri Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Missouri Qualified to do business in (other than state of incorporation): None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State and (ii) Missouri Secretary of State 58 59 33. BRINKLEY GROUP HOMES, INC. State of incorporation: Missouri Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Sullivan County, Missouri Qualified to do business in (other than state of incorporation): None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State, (ii) Missouri Secretary of State and (iii) Clerk of Sullivan County, Missouri 34. CREATIVE NETWORKS, LLC State of formation: Arizona Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Arizona Qualified to do business in (other than state of incorporation): None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State, (ii) Arizona Secretary of State 35. NORMAL LIFE, INC. State of incorporation: Kentucky Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: N/A, Kentucky corporation Locations of operations: KY Qualified to do business in (other than state of incorporation): None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing location: Clerk of Jefferson County, Kentucky 36. NORMAL LIFE OF SOUTHERN INDIANA, INC. State of incorporation: Indiana Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: (i) Vanderburgh County, Indiana and (ii) Warwick County, Indiana Qualified to do business in (other than state of incorporation): None Any name, other than name of Corporation, used for conducting business in the last five (5) years: Normal Life of Indiana, Inc. UCC filing locations: (i) Kentucky Secretary of State, (ii) Indiana Secretary of State and (iii) Clerk of Vanderburgh County, Indiana 37. NORMAL LIFE OF CENTRAL INDIANA, INC. State of incorporation: Indiana 59 60 Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: (i)Vigo, (ii) Hamilton, (iii) Clay and (iv) Montgomery Counties, Indiana Qualified to do business in (other than state of incorporation): Any name, other than name of Corporation, used for conducting business in the last five (5) years: Normal Life of Sheridan, Inc.; Normal Life of Terre Haute, Inc. (merger) UCC filing locations: (i) Kentucky Secretary of State, (ii) Indiana Secretary of State, (iii) Clerk of Vigo County, Indiana and (iv) Clerk of Hamilton County, Indiana 38. NORMAL LIFE OF LOUISIANA, INC. State of incorporation: Louisiana Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: (i) Jefferson Parish, (ii) Orleans Parish and (iii) St. Bernard Parish, Louisiana Qualified to do business in (other than state of incorporation): None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State and (ii) Clerk of Jefferson Parish, Louisiana 39. NORMAL LIFE OF LAFAYETTE, INC. State of incorporation: Louisiana Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: (i) Lafayette Parish and (ii) St. Landry Parish, Louisiana Qualified to do business in (other than state of incorporation): None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State and (ii) Clerk of Lafayette Parish, Louisiana 40. NORMAL LIFE OF LAKE CHARLES, INC. State of incorporation: Louisiana Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: (i) Calcasieu Parish, (ii) Beauregard Parish and (iii) Vernon Parish, Louisiana Qualified to do business in (other than state of incorporation): None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State and (ii) Clerk of Calcasieu Parish, Louisiana 60 61 41. RES-CARE FLORIDA, INC., F/K/A NORMAL LIFE OF FLORIDA, INC. State of incorporation: Florida Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: (i) Pinellas and (ii) Hillsborough Counties, Florida Qualified to do business in (other than state of incorporation): None Any name, other than name of Corporation, used for conducting business in the last five (5) years: Normal Life of Florida, Inc. UCC filing locations: (i) Kentucky Secretary of State, (ii) Florida Secretary of State, (iii) Clerk of Pinellas County, Florida and (iv) Clerk of Hillsborough County, Florida 42. NORMAL LIFE OF KENTUCKY, INC. State of incorporation: Kentucky Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: N/A, Kentucky corporation Locations of operations: Jefferson County, Kentucky Qualified to do business in (other than state of incorporation): None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Jefferson County, Kentucky 43. NORMAL LIFE OF NORTH TEXAS, INC. State of incorporation: Texas Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: (i) Cameron, (ii) Val Verde, (iii) Tarrant, (iv) Collin, (v) Walde, (vi) Medina, (vii) El Paso, (viii) Bell, (ix) Navarro and (x) Dallas Counties, Texas. Qualified to do business in (other than state of incorporation): None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State and (ii) Texas Secretary of State 44. NORMAL LIFE OF NEW MEXICO, INC. State of incorporation: New Mexico Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: None Qualified to do business in (other than state of incorporation): None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State and (ii) New Mexico Secretary of State 45. NORMAL LIFE OF TENNESSEE, INC. State of incorporation: Tennessee 61 62 Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: None Qualified to do business in (other than state of incorporation): None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State and (ii) Tennessee Secretary of State 46. CAREERS IN PROGRESS, INC. State of incorporation: Louisiana Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Jefferson Parish, Louisiana Qualified to do business in (other than state of incorporation): None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State and (ii) Clerk of Jefferson Parish, Louisiana 47. NORMAL LIFE FAMILY SERVICES, INC. State of incorporation: Louisiana Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Jefferson Parish, Louisiana Qualified to do business in (other than state of incorporation): None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State and (ii) Clerk of Jefferson Parish, Louisiana 48. NORMAL LIFE OF INDIANA, a general partnership State of formation: Indiana Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: (i) Vanderburgh, (ii) Vigo, (iii) Hamilton, (iv) Warrick, (v) Clay and (vi) Montgomery Counties, Indiana. Qualified to do business in (other than state of incorporation): None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State, (ii) Indiana Secretary of State, (iii) Clerk of Vanderburgh County, Indiana, (iv) Clerk of Vigo County, Indiana and (v) Clerk of Hamilton County, Indiana 49. NORMAL LIFE OF CALIFORNIA, INC. 62 63 State of incorporation: California Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: (i) San Louis Obispo and (ii) Ventura Counties, California. Qualified to do business in (other than state of incorporation): None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State and (ii) California Secretary of State 50. NORMAL LIFE OF GEORGIA, INC. State of incorporation: Georgia Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: (i) Fulton, (ii) Loundes, (iii) DeKalb, (iv) Gwinett, (v) Douglas and (vi) Forsyth Counties, Georgia. Qualified to do business in (other than state of incorporation): None Any name, other than name of Corporation, used for conducting business in the last five (5) years: UCC filing locations: (i) Kentucky Secretary of State and (ii) Clerk of Superior Court of Fulton County, Georgia 51. NORMAL LIFE MANAGEMENT, INC. State of incorporation: Kentucky Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: N/A, Kentucky corporation Locations of operations: None Qualified to do business in (other than state of incorporation): None Any name, other than name of Corporation, used for conducting business in the last five (5) years: UCC filing locations: Jefferson County, Kentucky 52. NL OF DELAWARE, INC. State of incorporation: Delaware Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Location of Operations: Delaware Qualified to do business in (other than state of incorporation): None Any name, other than name of Corporation, used for conducting business in the last five (5) years: UCC filing locations: (i) Kentucky Secretary of State and (ii) Delaware Secretary of State 53. NORMAL LIFE OF OHIO, INC. State of incorporation: Ohio Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky 63 64 Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: None Qualified to do business in (other than state of incorporation): None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State, (ii) Ohio Secretary of State and (iii) Clerk of Cuyahoga County, Ohio 54. BOLIVAR DEVELOPMENTAL TRAINING CENTER, INC. State of incorporation: Missouri Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Polk County, Missouri Qualified to do business in (other than state of incorporation): None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State, (ii) Missouri Secretary of State and (iii) Clerk of Polk County, Missouri 55. HYDESBURG ESTATES, INC. State of incorporation: Missouri Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Marion County, Missouri Qualified to do business in (other than state of incorporation): None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State, (ii) Missouri Secretary of State, and (iii) Clerk of Marion County, Missouri 56. OAKWOOD SUITES OF BOLIVAR, INC. State of incorporation: Missouri Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Marion County, Missouri Qualified to do business in (other than state of incorporation): None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State, (ii) Missouri Secretary of State and (iii) Clerk of Marion County, Missouri 57. WILLARD ESTATES, INC. State of incorporation: Missouri Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified 64 65 Locations of operations: Greene County, Missouri Qualified to do business in (other than state of incorporation): None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State, (ii) Missouri Secretary of State, and (iii) Clerk of Greene County, Missouri 58. BOLIVAR ESTATES, INC. State of incorporation: Missouri Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Polk County, Missouri Qualified to do business in (other than state of incorporation): None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State, (ii) Missouri Secretary of State and (iii) Clerk of Polk County, Missouri 59. SKYVIEW ESTATES, INC. State of incorporation: Missouri Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Marion County, Missouri Qualified to do business in (other than state of incorporation): None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State, (ii) Missouri Secretary of State and (iii) Clerk of Marion County, Missouri 60. RIVER BLUFF ESTATES, INC. State of incorporation: Missouri Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Polk County, Missouri Qualified to do business in (other than state of incorporation): None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State, (ii) Missouri Secretary of State and (iii) Clerk of Polk County, Missouri 61. MEADOW LANE ESTATES, INC. State of incorporation: Missouri Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Adair County, Missouri 65 66 Qualified to do business in (other than state of incorporation): None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State; (ii) Missouri Secretary of State; and (iii) Clerk of Adair County, Missouri 62. EBENEZER ESTATES, INC. State of incorporation: Missouri Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Greene County, Missouri Qualified to do business in (other than state of incorporation): None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State, (ii) Missouri Secretary of State and (iii) Clerk of Greene County, Missouri 63. HILLSIDE ESTATES, INC. State of incorporation: Missouri Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Polk County, Missouri Qualified to do business in (other than state of incorporation): None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State, (ii) Missouri Secretary of State and (iii) Clerk of Polk County, Missouri 64. PEBBLE CREEK ESTATES, INC. State of incorporation: Missouri Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Polk County, Missouri Qualified to do business in (other than state of incorporation): None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State, (ii) Missouri Secretary of State and (iii) Clerk of Polk County, Missouri 65. FORT MASON ESTATES, INC. State of incorporation: Missouri Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Ralls County, Missouri Qualified to do business in (other than state of incorporation): None 66 67 Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State, (ii) Missouri Secretary of State and (iii) Clerk of Ralls County, Missouri 66. SHA-REE ESTATES, INC. State of incorporation: Missouri Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Polk County, Missouri Qualified to do business in (other than state of incorporation): None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State, (ii) Missouri Secretary of State and (iii) Clerk of Polk County, Missouri 67. BAKER MANAGEMENT, INC. State of incorporation: Missouri Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Polk County, Missouri Qualified to do business in (other than state of incorporation): None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State; (ii) Missouri Secretary of State; and (iii) Clerk of Polk County, Missouri 68. MISSOURI PROGRESSIVE SERVICES, INC. State of incorporation: Missouri Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Polk County, Missouri Qualified to do business in (other than state of incorporation): None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State; (ii) Missouri Secretary of State; and (iii) Clerk of Polk County, Missouri 69. OAKVIEW ESTATES OF BOLIVAR, INC. State of incorporation: Missouri Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Polk County, Missouri Qualified to do business in (other than state of incorporation): None Any name, other than name of Corporation, used for conducting business in the last five 67 68 (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State, (ii) Missouri Secretary of State and (iii) Clerk of Polk County, Missouri 70. UPWARD BOUND, INC. State of incorporation: Missouri Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Marion County, Missouri Qualified to do business in (other than state of incorporation): None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State, (ii) Missouri Secretary of State and (iii) Clerk of Marion County, Missouri 71. INDIVIDUALIZED SUPPORTED LIVING, INC. State of incorporation: Missouri Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Marion, Adair, Polk and Greene County, Missouri Qualified to do business in (other than state of incorporation): None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State, (ii) Missouri Secretary of State and (iii) Clerk of Marion County, Missouri THE FOLLOWING (#72-73) ARE BORROWERS THAT JOINED IN THE LOAN DOCUMENTS EFFECTIVE WITH THE 1998 AMENDED AND RESTATED LOAN AGREEMENT (6/30/98): 72. RES-CARE WASHINGTON, INC. State of incorporation: Delaware Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Seattle, Washington, and Puyallup, Washington Qualified to do business in (other than state of incorporation): Washington Any name, other than name of Corporation, used for conducting business in the last five (5) years: Creative Living Service UCC filing locations: (i) Kentucky Secretary of State and (ii) Washington Secretary of State 73. RES-CARE ALABAMA, INC. State of incorporation: Delaware Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Birmingham, Demopolis, Jasper, Hoover, Lyndon, and Irondale 68 69 Qualified to do business in (other than state of incorporation): Alabama Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State, (ii) Alabama Secretary of State, (iii) Clerk of Walker County (iv) Clerk of Jefferson County and (v) Clerk of Marengo County THE FOLLOWING (#74-85) ARE BORROWERS THAT JOINED IN THE LOAN DOCUMENTS EFFECTIVE WITH THE 1999A AMENDED AND RESTATED LOAN AGREEMENT (6/_/99): 74. TANGRAM REHABILITATION NETWORK, INC. State of incorporation: Texas Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Maxwell, San Marcos, Seguin, Texas (counties - Guadalupe, Hays, and Caldwell) Qualified to do business in: N/A Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State, (ii) Texas Secretary of State. 75. TEXAS COMMUNITY ALTERNATIVES LIMITED PARTNERSHIP State of partnership: Kentucky Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: OK (various) Qualified to do business in: Texas Any name, other than name of Corporation, used for conducting business in the last five (5) years: Texas Home Management, Inc.; RSCR Texas, Inc.; Community Alternatives Texas, Inc.; Willows Developmental Center; Canton Residential Center; Childrens Center of Austin; Alternative Business Service UCC filing locations: (i) Jefferson County, Kentucky (ii) Kentucky Secretary of State, (iii) Texas Secretary of State. 76. BUMPERSHOOT ENTERPRISES, INC. State of incorporation: California Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Riverside, CA Qualified to do business in: N/A Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State, (ii) California Secretary of State 77. RS PALMER CORPORATION D/B/A TEXAS LIVING CENTERS 69 70 State of incorporation: Texas Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Garland, Mesquite, Dallas, Rowlett, Texas (counties - Dallas and Rockwall) Qualified to do business in: N/A Any name, other than name of Corporation, used for conducting business in the last five (5) years: Texas Living Centers UCC filing locations: (i) Kentucky Secretary of State, (ii) Texas Secretary of State. 78. ALTERNATIVE CHOICES, INC. State of incorporation: California Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Grand Terrace, CA Qualified to do business in: N/A Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State, (ii) California Secretary of State. 79. ROCKCREEK, INC. State of incorporation: California Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Los Angeles and San Bernardino Counties, CA Qualified to do business in: N/A Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State, (ii) California Secretary of State. 80. ACCESS, INC. State of incorporation: North Carolina Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Hickory, NC Qualified to do business in: N/A Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State, (ii) North Carolina Secretary of State and (iii) Catawba County, North Carolina. 81. RESCARE PREMIER CANADA, INC. State of incorporation: Ontario, Canada Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified 70 71 Locations of operations: Ontario, Niagara-on-the-Lake Qualified to do business in: N/A Any name, other than name of Corporation, used for conducting business in the last five (5) years: Anagram UCC filing locations: (i) Kentucky Secretary of State, (ii) Ontario, Canada. 82. OPTIMAL SPACE, INC. State of incorporation: Ontario, Canada Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Ontario, Niagara-on-the-Lake Qualified to do business in: N/A Any name, other than name of Corporation, used for conducting business in the last five (5) years: UCC filing locations: (i) Kentucky Secretary of State, (ii) Ontario, Canada. 83. J&J CARE CENTERS, INC. State of incorporation: California Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Penryn, CA (Placer County) Qualified to do business in: N/A Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State, (ii) California Secretary of State. 84. RAISE GEAUGA, INC. State of incorporation: Ohio Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Geauga County Qualified to do business in: N/A Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State, (ii) Ohio Secretary of State and (iii) Geauga County, Ohio 85. COMMUNITY ALTERNATIVES ILLINOIS, INC. State of incorporation: Delaware Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Vermilion and Jackson Counties Qualified to do business in: Illinois Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A 71 72 UCC filing locations: (i) Kentucky Secretary of State, (ii) Delaware Secretary of State and (iii) Illinois Secretary of State 86. PEOPLE SERVE, INC. State of incorporation: Delaware Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky 40223 Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Multiple locations in Ohio Qualified to do business in: Ohio Any name, other than name of Corporation, used for conducting business in the last five (5) years: VOCA Holdings, Inc. UCC filing locations: (i) Kentucky Secretary of State, (ii) Delaware Secretary of State and (iii) Ohio Secretary of State. 87. P.S.I. HOLDINGS, INC. State of incorporation: Ohio Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky 40223 Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: None Qualified to do business in: None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State and (ii) Ohio Secretary of State. 88. VOCA CORP State of incorporation: Ohio Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky 40223 Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: New Castle Co., DE., Seneca Co., OH, Franklin Co., OH, Montgomery Co., OH, Madison Co., OH, Ottawa Co., OH, Gallia Co., OH, Lawrence Co., OH, Carrsee Co., OH, Stark Co., OH, and Higland Co., OH Qualified to do business in: Delaware, Washington D.C., Indiana, Maryland, Missouri, New Jersey, North Carolina, Tennessee, West Virginia. Any name, other than name of Corporation, used for conducting business in the last five (5) years: VOCA Corporation UCC filing locations: (i) Kentucky Secretary of State, (ii) Ohio Secretary of State and (iii) Delaware Secretary of State. 72 73 89. VOCA CORPORATION OF AMERICA State of incorporation: Ohio Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky 40223 Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: None Qualified to do business in: None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State and (ii) Ohio Secretary of State. 90. VOCA CORPORATION OF FLORIDA State of incorporation: Florida Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky 40223 Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Wauchula, Lake Worth Port, Charlotte and St. Petersburg, Florida Qualified to do business in: None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State and (ii) Florida Secretary of State 91. VOCA CORPORATION OF INDIANA State of incorporation: Indiana Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky 40223 Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Indianapolis, Ft. Wayne (Allen Co.), Whitley Co., Koscuslco Co., Muncie (Delaware Co.) Jefferson Co., Dearborn Co., Jennings Co., Wayne Co. Qualified to do business in: None Any name, other than name of Corporation, used for conducting business in the last five (5) years: RMS of Indiana, Inc. UCC filing locations: (i) Kentucky Secretary of State and (ii) Indiana Secretary of State. 92. VOCA OF INDIANA LLC State of incorporation: Indiana Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky 40223 Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: None Qualified to do business in: None Any name, other than name of Corporation, used for conducting business in the last five 73 74 (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State, and (ii) Indiana Secretary of State. 93. VOCA CORPORATION OF MARYLAND State of incorporation: Maryland Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky 40223 Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Lanham, Laurel, Hyattsville, and Adelphi, Maryland Qualified to do business in: None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State, and (ii) Maryland Department of Assessments and Taxation. 94. VOCA CORPORATION OF NEW JERSEY State of incorporation: New Jersey Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky 40223 Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Medford (Burlington Co.), W. Trenton, Tabernacle (Burlington Co.), Seaville (Cape May Co.), Cherry Hill, Cumberland, Hamilton, Ewing Township, Manchester Township and Marlton (Burlington Co.), New Jersey. Qualified to do business in: None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State and (ii) New Jersey 95. VOCA CORPORATION OF NORTH CAROLINA State of incorporation: North Carolina Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky 40223 Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Charlotte, Raleigh, Greensboro, Durham, Smithfield, Sanford, Boone, Wilkesboro, Apex, Banner Elk, Hickory Hudson, Morganton, Shelby, Forest City, Gastonia, Ashurtle, Dallas, Lincolnton, Granite Falls, Rutherfordton, Holly Springs, Furguay Varina and Apex, North Carolina. Qualified to do business in: None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State and (ii) North Carolina Secretary of State. 74 75 96. VOCA CORPORATION OF OHIO State of incorporation: Ohio Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky 40223 Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Cadiz, Masillon, St. Clairsville, Canton, Louisville, Columbus, Marietta, Marion, Ohio. Qualified to do business in: None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State and (ii) Ohio Secretary of State. 97. VOCA CORPORATION OF WASHINGTON, D.C. State of incorporation: D.C. Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky 40223 Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: D.C. Qualified to do business in: None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State, and (ii) District of Columbia. 98. VOCA CORPORATION OF WEST VIRGINIA, INC., State of incorporation: W.Va. Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky 40223 Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Beckley, Princeton, Accoville, Lewisburg, Morgantown, Clarksburg, Fairmont, Huntington, Charleston, Summersville, Kenova, Amberstdale and Oak Hill, West Virginia Qualified to do business in: None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State, and (ii) West Virginia Secretary of State. 99. VOCA RESIDENTIAL SERVICES, INC. State of incorporation: Ohio Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky 40223 Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Qualified to do business in: IN, DC, NC 75 76 Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State and (ii) Ohio Secretary of State. 100. EDUCARE COMMUNITY LIVING CORPORATION - AMERICA State of incorporation: Delaware Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky 40223 Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: None Qualified to do business in: Texas Any name, other than name of Corporation, used for conducting business in the last five (5) years: EduCare Community Living Corporation UCC filing locations:(i) Kentucky Secretary of State and (ii) Delaware Secretary of State. 101. EDUCARE COMMUNITY LIVING CORPORATION - GULF COAST State of incorporation: Texas Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky 40223 Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Houston, League City, Katy, Cypress, Alvin, Pearland and Friendwood, TX. Qualified to do business in: None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State, (ii) Texas Secretary of State. 102. EDUCARE COMMUNITY LIVING CORPORATION - MISSOURI State of incorporation: Missouri Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky 40223 Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Aurora, Bolivia, Jefferson City, El Dorado, Clinton and Joplin, Missouri Qualified to do business in: None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State, (ii) Missouri Secretary of State. 103. EDUCARE COMMUNITY LIVING CORPORATION - TEXAS State of incorporation: Texas Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky 40223 Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Austin, San Antonio, Beaumont, Flower Mountain, Denton, 76 77 Ft. Worth, Sequin, Dallas, El Paso, Grand Prairie, Edinburg, Paris, McAllen, Live Oak, Converse, Krum, Alvarado, Sanger and Cleburne, Texas. Qualified to do business in: None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State, (ii) Texas Secretary of State. 104. EDUCARE COMMUNITY LIVING CORPORATION - NEW MEXICO State of incorporation: New Mexico Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky 40223 Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Las Cruces, Albuquerque, Alamagordo, Rio Rancho, Carlsbad and Farmington, New Mexico Qualified to do business in: None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State, and (ii) New Mexico Secretary of State. 105. EDUCARE COMMUNITY LIVING CORPORATION - NORTH CAROLINA State of incorporation: North Carolina Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky 40223 Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Apex, Raleigh, Burlington, Rocky Mount, Concord, Kannapolis, Charlotte, Greensboro, Stanfield, Cary, Garner, Roanoke, Rapids, Eden, Gastonia, and Mattews, North Carolina Qualified to do business in: None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State, (ii) North Carolina Secretary of State. 106. EDUCARE COMMUNITY LIVING CORPORATION - NEVADA State of incorporation: Nevada Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky 40223 Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Carson City, Reno, Elks, Fallon, Sparks, and Las Vegas, Nevada Qualified to do business in: None Any name, other than name of Corporation, used for conducting business in the last five 77 78 (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State, (ii) Nevada Secretary of State. 107. THE CITADEL GROUP, INC. State of incorporation: Texas Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky 40223 Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: Angleton, Austin, El Paso, Brownsville, Ft. Worth, Rosenberg, Edenberg, San Antonio, and Texas City, Texas. Qualified to do business in: Any name, other than name of Corporation, used for conducting business in the last five (5) years: Citadel Mental Health Service UCC filing locations: (i) Kentucky Secretary of State, (ii) Texas Secretary of State. 108. B.W.J. OPPORTUNITY CENTER, INC. State of incorporation: Texas Location of principal office and records: 10140 Linn Station Road Louisville, Kentucky 40223 Qualified/not qualified to do business in Kentucky: Not qualified Locations of operations: None Qualified to do business in: None Any name, other than name of Corporation, used for conducting business in the last five (5) years: N/A UCC filing locations: (i) Kentucky Secretary of State, (ii) Texas Secretary of State. 78 79 EXHIBIT A Exhibit A to Stock Pledge Agreement (Res-Care) between Res-Care, Inc. and PNC Bank, National Association, AS ADMINISTRATIVE BANK I. PLEDGED SHARES DELIVERED TO ADMINISTRATIVE BANK AS OF 12/31/96 [CAPTION] NUMBER CERTIFICATE OF CONSOLIDATED SUBSIDIARY NUMBER SHARES OWNED BY ----------------------- ------ ------ -------- Community Alternatives Indiana, Inc. 1 1,000 Res-Care, Inc. Community Alternatives Nebraska, Inc. 1 1,000 Res-Care, Inc. Community Advantage, Inc. 1 1,000 Res-Care, Inc. Texas Home Management, Inc. 1 1,000 Res-Care, Inc. Capital TX Investments, Inc. 1 1,000 Res-Care, Inc. THM Homes, Inc. 1 1,000 Res-Care, Inc. Res-Care New Mexico, Inc. 1 1,000 Res-Care, Inc. Res-Care Ohio, Inc. 1 1,000 Res-Care, Inc. Community Alternatives of Texas, Inc. 1 1,000 Res-Care, Inc. CATX Properties, Inc. 1 1,000 Res-Care, Inc. Res-Care California, Inc. 1 1,000 Res-Care, Inc. Res-Care Florida, Inc. 1 1,000 Res-Care, Inc. RSCR California, Inc. 1 1,000 Res-Care, Inc. Res-Care Kansas, Inc. 1 1,000 Res-Care, Inc.
79 80
Res-Care Illinois, Inc. 1 1,000 Res-Care, Inc. RSCR Texas, Inc. 1 1,000 Res-Care, Inc. Res-Care Oklahoma, Inc. 1 1,000 Res-Care, Inc. Res-Care Tennessee, Inc. 1 1,000 Res-Care, Inc. Res-Care Training Technologies, Inc. 1 1,000 Res-Care, Inc. Youthtrack, Inc. 1 800 Res-Care, Inc. Res-Care Premier, Inc. 1 1,000 Res-Care, Inc. Res-Care New Jersey, Inc. 1 1,000 Res-Care, Inc. Community Alternatives Kentucky, Inc. 1 1,000 Res-Care, Inc. Alternative Youth Services, Inc. 1 1,000 Res-Care, Inc. Community Alternatives Virginia, Inc. 1 1,000 Res-Care, Inc. RSCR West Virginia, Inc. 1 1,000 Res-Care, Inc. Community Alternatives Missouri, Inc. f/k/a 1 500 Res-Care, Inc. Raiment, Inc. Res-Care Aviation, Inc. 1 1,000 Res-Care, Inc. Communication Network Consultants, Inc. 1 100 Res-Care, Inc. II. PLEDGED SHARES DELIVERED TO ADMINISTRATIVE BANK AT SECOND AMENDMENT CLOSING DATE The Academy for Individual Excellence, Inc. 1 1,000 Res-Care, Inc. Res-Care Other Options, Inc. 1 1,000 Res-Care, Inc. III. PLEDGED SHARES DELIVERED TO ADMINISTRATIVE BANK AS OF THIRD AMENDMENT CLOSING DATE (3/12/98) Southern Home Care Services, Inc. 2 1,543 Res-Care, Inc. Normal Life, Inc. 97 906,833 Res-Care, Inc. IV. PLEDGED SHARES DELIVERED TO ADMINISTRATIVE BANK AS OF 1999A AMENDMENT CLOSING DATE (6/__/99)
80 81 Tangram 1111 Res-Care, Inc. Palmer 1111 4 1,000 Normal Life of Texas, Inc. Alternative Choices 1111 2 10,000 RSCR California, Inc. Rockcreek 1111 3 200 RSCR California, Inc. Access 1111 6 16,500 Community Network Consultants Communications Network Consultants 1111 Res-Care, Inc. Optimal Space 1111 Res-Care, Inc. J & J 1111 4 20,000 Res-Care, Inc. Raise Geauga 1111 2 100 Res-Care Ohio, Inc. Community Alt. Illinois 1111 1 1,000 Res-Care, Inc. General Health 1111 10 4,000 Alternative Youth Services, Inc. Bumpershoot 1111 4 3 RSCR California, Inc.
81 EX-10.2 3 EXHIBIT 10.2 1 Exhibit 10.2 1999B AMENDMENT TO LOAN INSTRUMENTS This 1999B Amendment to Loan Instruments (this "Amendment" or the "1999B Amendment"), is made and entered into as of the 28th day of June, 1999, by and among (i) PNC BANK, NATIONAL ASSOCIATION, in its capacity as the administrative bank hereunder (in such capacity the "Administrative Bank"); (ii) the Banks identified on SCHEDULE I hereto (all of such Banks are hereinafter collectively referred to as the "Banks", and each is hereinafter individually referred to as a "Bank"); and (iii) RES-CARE, INC., a Kentucky corporation with principal office and place of business in Louisville, Kentucky ("Res-Care") and each of the Consolidated Subsidiaries of Res-Care identified on SCHEDULE II hereto (Res-Care and each Consolidated Subsidiary, a "Borrower," and all of the foregoing collectively, the "Borrowers"). PRELIMINARY STATEMENT A. Res-Care and certain other Existing Borrowers (defined herein) obtained from the Administrative Bank and certain of the Banks credit accommodations pursuant to a Loan Agreement dated as of December 23, 1996 (the "1996 Loan Agreement") including the following: (i) a revolving line of credit in the principal amount of Sixty Five Million Dollars ($65,000,000) (the "Original Revolving Credit Facility"), (ii) a commitment to issue letters of credit for the account of the Borrowers in an aggregate outstanding amount of up to Ten Million Dollars ($10,000,000) and (iii) a swing revolving line of credit in the principal amount of Seven Million Five Hundred Thousand Dollars ($7,500,000) (the "Original Swing Line Credit Facility"). B. Res-Care and certain other Existing Borrowers and the Administrative Bank and certain of the Banks amended the 1996 Loan Agreement pursuant to a First Amendment to Loan Instruments dated as of June 23, 1997 (the "First Amendment to Loan Instruments"), providing for, among other things, (i) the increase of the principal amount of the Original Revolving Credit Facility to One Hundred Million Dollars ($100,000,000), (ii) the increase of the principal amount of the Original Swing Line Credit Facility to Twelve Million Five Hundred Thousand Dollars ($12,500,000), (iii) the amendment of certain financial covenants and (iv) the addition of certain New Borrowers as parties to the Loan Instruments. C. Res-Care and certain other Existing Borrowers and the Administrative Bank and certain of the Banks further amended the 1996 Loan Agreement pursuant to a Second Amendment to Loan Instruments dated as of November 20, 1997 (the "Second Amendment to Loan Instruments"), providing for, among other things, (i) the consent of the Banks to the Borrowers' incurring of subordinated indebtedness, (ii) the amendment of certain financial covenants and (iii) the addition of certain other New Borrowers as parties to the Loan Instruments. D. Res-Care and certain other Existing Borrowers and the Administrative Bank and certain of the Banks further amended the 1996 Loan Agreement pursuant to a Third Amendment 2 to Loan Instruments dated as of March 12, 1998 (the "Third Amendment to Loan Instruments"), providing for, among other things, the Existing Borrowers to add certain New Borrowers and to make certain other amendments. The 1996 Loan Agreement, as amended by the First Amendment to Loan Instruments, the Second Amendment to Loan Instruments and the Third Amendment to Loan Instruments, is referred to as the "Old Loan Agreement." E. Res-Care and certain other Existing Borrowers and the Administrative Bank and certain of the Banks amended and restated the Old Loan Agreement pursuant to the 1998 Amended and Restated Loan Agreement dated as of June 30, 1998 (the "Loan Agreement"), providing for, among other things, (i) the increase of the principal amount of the Original Revolving Credit Facility to One Hundred Seventy Five Million Dollars ($175,000,000), (ii) the increase of the principal amount of the Original Swing Line Credit Facility to Fifteen Million Dollars ($15,000,000), (iii) the creation of a new revolving credit facility in the principal amount of Twenty Five Million Dollars ($25,000,000) with a 364-day term, (iv) the amendment of certain financial covenants and (v) the addition of certain New Borrowers as parties to the Loan Instruments. Each capitalized term used herein, unless otherwise expressly defined herein, shall have the meaning set forth in the Loan Agreement. F. Res-Care and certain other Existing Borrowers and the Administrative Bank and certain of the Banks further amended the Loan Agreement pursuant to a 1999A Amendment to Loan Instruments dated as of June 28, 1999 (the "1999A Amendment to Loan Instruments"), providing for, among other things, (i) the amendment of certain financial covenants, (ii) the amendment of Pricing Levels, which are used in determining applicable interest rates and fees and (iii) to certain other amendments necessitated by Res-Care's acquisition of PeopleServe. G. Res-Care and the Existing Borrowers wish to amend the Loan Agreement and the Loan Instruments to (i) reduce the Revolving Credit Facility B Loan Commitments from $25,000,000 to $24,062,500 (subject to future increase back to $25,000,000) and (ii) to extend the term of Revolving Credit Facility B for an additional 364 days. Now, therefore, in consideration of the premises and the mutual covenants and agreements set forth herein and in the Loan Agreement and for other good and valuable consideration, the mutuality, receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: I. AMENDMENTS TO LOAN AGREEMENT A. SECTION 1 - DEFINITIONS AND CROSS REFERENCE. The following definitions and provisions of Section 1 of the Loan Agreement are hereby amended and restated as follows: 1.115 "Revolving Credit Facility B" means the revolving line of credit established by the Banks in favor of the Borrowers originally in the principal amount of Twenty Five Million Dollars ($25,000,000), reduced to Twenty Four Million Sixty Two Thousand Five Hundred Dollars ($24,062,500) as of the 1999B Amendment to Loan Instruments Closing Date, pursuant 3 to which the Borrowers may obtain Revolving Credit Loans from the Banks during the term of Revolving Credit Facility B upon the terms and conditions set forth in this Loan Agreement. 1.117 "Revolving Credit Facility B Loan Commitments" means each Bank's commitment to maintain or make Revolving Credit Loans under Revolving Credit Facility B as set forth in Section 2.2 hereof. Schedule 2.1 reflects the Revolving Credit Facility B Loan Commitments as of the 199b Amendment to Loan Instruments Closing Date. The total Revolving Credit Facility B Loan Commitments may be increased to $25,000,000 if an existing or a new Bank agrees to assume an additional Revolving Credit Facility B Loan Commitment in the amount of $937,500 subsequent to the 1999B Amendment to Loan Instruments Closing Date. "1.118 "Revolving Credit Facility B Termination Date" means the Revolving Credit Facility B Termination Date then in effect, which shall be the earliest of (i) June 28, 2000, subject to extension thereof as provided in Section 2.1C hereof, (ii) the date as of which the Obligations shall have become immediately due and payable pursuant to Section 9 of the Loan Agreement and (iii) the date on which all of the Obligations are paid in full (including, without limitation, the repayment, expiration, termination or cash collateralization of Letters of Credit pursuant to this Loan Agreement) and the Revolving Credit Facility B Loan Commitments are reduced to zero." The following definitions and provisions are hereby added to Section 1 of the Loan Agreement as follows: 1.151 "1999B Amendment" means the 1999B Amendment to Loan Instruments made and entered into as of June 28, 1999, by and among the Banks, the Administrative Bank and the Borrowers. 1.152 "1999B Amendment Closing Date" means the date on which the 1999B Amendment to Loan Instruments has been executed and delivered by the parties thereto, June 28, 1999. B. SECTION 2.1B REVOLVING CREDIT FACILITY B - REVOLVING CREDIT FACILITY B LOAN COMMITMENTS. Section 2.1B is hereby amended and restated as follows: "B. REVOLVING CREDIT FACILITY B - REVOLVING CREDIT FACILITY B LOAN COMMITMENTS. Each Bank severally agrees, subject to the limitations set forth below with respect to the maximum amount of Revolving Credit Loans permitted to be outstanding from time to time under Revolving Credit Facility B, to lend to the Borrowers from time to time during the period from the Closing Date to but excluding the Revolving Credit Facility B Termination Date an aggregate amount not exceeding its Revolving Credit Facility Pro Rata Share of the aggregate Revolving Credit Facility B Loan Commitments. The amount of each Bank's Revolving Credit Facility B Loan Commitment is set forth opposite its name on SCHEDULE 2.1 annexed to this Loan Agreement. The aggregate amount of the Revolving Credit Facility B Loan Commitments is $24,062,500 as of the 1999B Amendment to Loan Instruments Closing Date; provided that the aggregate amount of the Revolving Credit Facility B Loan Commitments 4 may be increased to $25,000,000 if an existing or a new Bank agrees to assume an additional Revolving Credit Facility B Loan Commitment in the amount of $937,500 subsequent to the 1999B Amendment to Loan Instruments Closing Date. Because the Banks had initially approved aggregate Revolving Credit Facility B Loan Commitments in the amount of $25,000,000, the Banks agree that such increase may be effected without the need for further approval of any entities other than the Administrative Bank and Res-Care. The amount of the Revolving Credit Facility B Loan Commitments shall be reduced from time to time by the amount of any reductions that are made pursuant to Section 2.4C hereof (it being understood that all references to the Revolving Credit Facility B Loan Commitments of the Banks set forth in this Loan Agreement shall mean the initial Revolving Credit Facility B Loan Commitments of the Banks set forth on SCHEDULE 2.1 annexed to this Loan Agreement as reduced by the voluntary reductions of the Revolving Credit Facility B Loan Commitments effected by the Borrowers pursuant to Section 2.4C of the Loan Agreement). Each Bank's Revolving Credit Facility B Loan Commitment shall expire on the Revolving Credit Facility B Termination Date and all Revolving Credit Loans under Revolving Credit Facility B shall be paid in full no later than that date. Amounts borrowed under this Section 2.lB may be repaid and reborrowed to but excluding the Revolving Credit Facility B Termination Date, subject to the provisions of Section 2.4C hereof. Anything contained in this Loan Agreement to the contrary notwithstanding, the Revolving Credit Loans under Revolving Credit Facility B and the Revolving Credit Facility B Loan Commitments shall be subject to the following limitations: (i)The Total Utilization of Revolving Credit Facility B Loan Commitments shall not exceed the aggregate Revolving Credit Facility B Loan Commitments; and (ii) At no time shall the Banks be required to make Revolving Loans under Revolving Credit Facility B if the making of such Revolving Loans would cause the ratio of Adjusted Indebtedness as of the end of any rolling twelve (12) month period ending during one of the periods set forth below to Cash Flow from Operations for such rolling twelve (12) month period to exceed the applicable ratio:
PERIOD APPLICABLE RATIO ------ ---------------- 3/31/99-12/31/99 5.50 to 1.0 1/01/00-12/30/00 5.25 to 1.0 12/31/00 and thereafter 5.00 to 1.0"
C. SCHEDULE 2.1. Schedule 2.1 to the Loan Agreement is replaced by Schedule 2.1 attached hereto. D. RATIFICATION. The Loan Agreement, as amended by this Amendment, remains in full force and effect and the Borrowers reaffirm and ratify their obligations under the Loan Agreement, as amended by this Amendment. 5 II. STOCK PLEDGE AGREEMENT (RES-CARE) The Stock Pledge Agreement (Res-Care), as amended by this Amendment, remains in full force and effect and Res-Care reaffirms and ratifies its obligations under the Stock Pledge Agreement, as amended by this Amendment. III. AMENDMENT AND RATIFICATION OF SECURITY AGREEMENTS Each of the Security Agreements remains in full force and effect and each Borrower reaffirms and ratifies its obligations under the Security Agreement to which it is a party. Each Borrower agrees that the Security Agreement to which it is a party shall continue to secure all indebtedness of the Borrower to the Banks evidenced by the Revolving Credit Notes, the Swing Line Note, the Applications and Agreements for Letters of Credit and the Loan Agreement, all as they may be amended by this Amendment. IV. RATIFICATION OF REVOLVING CREDIT B NOTES The Borrowers hereby confirm and agree that the Revolving Credit B Notes have been extended to June 28, 2000, by virtue of the amendment of the term Revolving Credit Facility B Termination Date" set forth herein; with the exception of the Revolving Credit B Note in favor of Banque Paribas, which is not extended. The Borrowers hereby reaffirm and ratify all of their obligations under the Revolving B Notes as extended. V. RATIFICATION OF OTHER LOAN INSTRUMENTS The Borrowers hereby reaffirm and ratify all of their obligations under the other Loan Instruments not expressly modified hereinabove. VI. CLOSING CONDITIONS The establishment of the Revolving Credit Facility by the Banks in favor of the Borrowers, the obtaining of the Revolving Credit Loans and/or Letters of Credit by the Borrowers thereunder, the making of the Swing Line Loans by PNC to the Borrowers, all as amended by this Amendment, are subject to the satisfaction of all the following conditions (in addition to the conditions set forth in the Loan Agreement): A. CONDITIONS TO CLOSING OF THIS AMENDMENT. The obligation of the Banks to make the Revolving Credit Loans to the Borrowers and to make the Swing Line Loans to the Borrowers are subject to the condition that, in addition to the satisfaction of the conditions precedent specified in Section 5.1 of the Loan Agreement, and with respect to the Swing Line Loan, the conditions precedent specified in Section 3.1D of the Loan Agreement, as of the 1999B Amendment Closing Date, the Banks shall have received the following from the Borrowers, dated the 1999B Amendment Closing Date or such other date as shall be acceptable to the Banks: (1) This Amendment, duly executed and delivered by the each of the 6 Borrowers. (2) A Certificate of the Secretary or Assistant Secretary of Res-Care certifying as to the authenticity, completeness and accuracy of, and attaching copies of any amendments to the Articles of Incorporation or Bylaws since June 30, 1998, and Resolutions of the Board of Directors of Res-Care authorizing such Borrower's execution, delivery and performance of this Amendment and any other Loan Instruments to which such Borrower is a party, and certifying the names and true signatures of the officers of such Borrower authorized to execute and deliver the Loan Instruments to which the Borrower is a party, on behalf of such Borrower. (3) A Certificate of the Secretary or Assistant Secretary of each other Borrower certifying as to the authenticity, completeness and accuracy of, and attaching copies of their respective Certificates of Incorporation and Bylaws, together with any amendments thereto, and Resolutions of the Board of Directors of each Borrower authorizing such Borrower's execution, delivery and performance of this Amendment and any other Loan Instruments to which such Borrower is a party, and certifying the names and true signatures of the officers of such Borrower authorized to execute and deliver the Loan Instruments to which the Borrower is a party, on behalf of such Borrower. (4) An opinion from counsel to the Borrowers, in form and substance satisfactory to the Banks, giving substantially the same opinions as were given in connection with the execution and delivery of the Loan Agreement dated as of June 30, 1998, but to be given with respect to the execution and delivery of this Amendment and related documents. (5) Such other documents as the Administrative Bank may reasonably request. VII. REPRESENTATIONS AND WARRANTIES A. REPRESENTATIONS AND WARRANTIES OF BORROWER AND CONSOLIDATED SUBSIDIARIES. To induce the Banks to enter into this Amendment, the Borrowers represent and warrant to the Banks as follows: (1) Each Borrower has full power, authority, and capacity to enter into this Amendment, and this Amendment constitutes the legal, valid and binding obligations of each Borrower, enforceable against each in accordance with its terms. (2) No Event of Default under the Loan Agreement or any of the other Loan Instruments has occurred which continues unwaived by the Banks, and no event which with the passage of time, the giving of notice or both would constitute an Event of Default, exists as of the date hereof. (3) The person executing this Amendment on behalf of each Borrower is duly authorized to do so. Each such person has been duly authorized pursuant to resolutions of 7 the Borrowers approved by the directors of the Borrowers to execute and deliver minor amendments to the Loan Instruments of the sort set forth in this Amendment without the necessity of further action by the respective boards of directors. (4) The representations and warranties made by each Borrower in all of the Loan Instruments are hereby remade and restated as of the date hereof. (5) There are no material actions, suits, legal, equitable, arbitration or administrative proceedings pending or threatened against any Borrower, the adverse determination of which could have a material adverse effect on the Loan Instruments, the business operations or financial condition of the Borrowers or the ability of the Borrowers to fulfill their obligations under the Loan Instruments. VIII. MISCELLANEOUS. The provisions of Section XV of the Loan Agreement are hereby incorporated by reference and made applicable to this Amendment as fully as if set forth herein verbatim. RES-CARE, INC. (a "Borrower") ------------------------------ By: Authorized Officer Name: Ralph G. Gronefeld Assistant Treasurer 8 COMMUNITY ALTERNATIVES INDIANA, INC. COMMUNITY ALTERNATIVES NEBRASKA, INC. COMMUNITY ADVANTAGE, INC. TEXAS HOME MANAGEMENT, INC. CAPITAL TX INVESTMENTS, INC. THM HOMES, INC. RES-CARE NEW MEXICO, INC. RES-CARE OHIO, INC. CATX PROPERTIES, INC. RES-CARE CALIFORNIA, INC. COMMUNITY ALTERNATIVES VIRGINIA, INC. RSCR CALIFORNIA, INC. RES-CARE KANSAS, INC. RES-CARE ILLINOIS, INC. RES-CARE OKLAHOMA, INC. RES-CARE TENNESSEE, INC. RES-CARE TRAINING TECHNOLOGIES, INC. YOUTHTRACK, INC. RES-CARE PREMIER, INC. RES-CARE NEW JERSEY, INC. COMMUNITY ALTERNATIVES KENTUCKY, INC. ALTERNATIVE YOUTH SERVICES, INC. COMMUNITY ALTERNATIVES TEXAS PARTNERS, INC. RSCR WEST VIRGINIA, INC. COMMUNITY ALTERNATIVES MISSOURI, INC. f/k/a RAIMENT, INC. RES-CARE AVIATION, INC. COMMUNICATIONS NETWORK CONSULTANTS, INC. THE ACADEMY FOR INDIVIDUAL EXCELLENCE, INC. RES-CARE OTHER OPTIONS, INC. SOUTHERN HOME CARE SERVICES, INC. GENERAL HEALTH CORPORATION d/b/a Arizona Youth Associates, Inc. BALD EAGLE ENTERPRISES, INC. BRINKLEY GROUP HOMES, INC. NORMAL LIFE, INC. NORMAL LIFE OF SOUTHERN INDIANA, INC. NORMAL LIFE OF CENTRAL INDIANA, INC. NORMAL LIFE OF LOUISIANA, INC. NORMAL LIFE OF LAFAYETTE, INC. NORMAL LIFE OF LAKE CHARLES, INC. RES-CARE FLORIDA, INC. 9 NORMAL LIFE OF KENTUCKY, INC. NORMAL LIFE OF NORTH TEXAS, INC. NORMAL LIFE OF NEW MEXICO, INC. NORMAL LIFE OF TENNESSEE, INC. CAREERS IN PROGRESS, INC. NORMAL LIFE FAMILY SERVICES, INC. NORMAL LIFE OF CALIFORNIA, INC. NORMAL LIFE OF GEORGIA, INC. NORMAL LIFE MANAGEMENT, INC. NL DELAWARE, INC. NORMAL LIFE OF OHIO, INC. BOLIVAR DEVELOPMENT TRAINING CENTER, INC. HYDESBURG ESTATES, INC. OAK WOOD SUITES OF BOLIVAR, INC. WILLARD ESTATES, INC. BOLIVAR ESTATES, INC. SKYVIEW ESTATES, INC. RIVER BLUFF ESTATES, INC. MEADOW LANE ESTATES, INC. EBENEZER ESTATES, INC. HILLSIDE ESTATES, INC. PEBBLE CREEK ESTATES, INC. FORT MASON ESTATES, INC. SHA-REE ESTATES, INC. BAKER MANAGEMENT, INC. MISSOURI PROGRESSIVE SERVICES, INC. OAKVIEW ESTATES OF BOLIVAR, INC. UPWARD BOUND, INC. INDIVIDUALIZED SUPPORTED LIVING, INC. RES-CARE WASHINGTON, INC. RES-CARE ALABAMA, INC. TANGRAM REHABILITATION NETWORK, INC. BUMPERSHOOT ENTERPRISES, INC. RS PALMER CORPORATION d/b/a TEXAS LIVING CENTERS ALTERNATIVE CHOICES, INC. ROCKCREEK, INC. ACCESS, INC. RESCARE PREMIER CANADA, INC. OPTIMAL SPACE, INC. J&J CARE CENTERS, INC. RAISE GEAUGA, INC. COMMUNITY ALTERNATIVES ILLINOIS, INC. GENERAL HEALTH CORPORATION d/b/a ARIZONA YOUTH ASSOCIATES (each a "Borrower") 10 - ----------------------------- By: Authorized Officer Name: Ralph G. Gronefeld Assistant Treasurer of each Borrower listed above beginning with Community Alternatives Indiana, Inc. and ending with General Health Corporation d/b/a Arizona Youth Associates, on behalf of each such Borrower CREATIVE NETWORKS, LLC an Arizona limited liability company (a "Borrower") By: Authorized Officer NORMAL LIFE OF INDIANA a general partnership (a "Borrower") By: NORMAL LIFE OF SOUTHERN INDIANA, INC. one of its General Partners By: Authorized Officer and By: NORMAL LIFE OF CENTRAL INDIANA, INC. its other General Partner By: Authorized Officer TEXAS COMMUNITY ALTERNATIVES LIMITED PARTNERSHIP (a Borrower) By: COMMUNITY ALTERNATIVES TEXAS PARTNER, INC. its General Partner 11 By: Authorized Officer 12 PEOPLESERVE, INC. P.S.I. HOLDINGS, INC. VOCA CORP. VOCA CORPORATION OF AMERICA VOCA CORPORATION OF FLORIDA VOCA CORPORATION OF INDIANA VOCA OF INDIANA LLC VOCA CORPORATION OF MARYLAND VOCA CORPORATION OF NEW JERSEY VOCA CORPORATION OF NORTH CAROLINA VOCA CORPORATION OF OHIO VOCA CORPORATION OF WASHINGTON D.C. VOCA CORPORATION OF WEST VIRGINIA, INC. VOCA RESIDENTIAL SERVICES, INC. EDUCARE COMMUNITY LIVING CORPORATION - AMERICA EDUCARE COMMUNITY LIVING CORPORATION - GULF COAST EDUCARE COMMUNITY LIVING CORPORATION - MISSOURI EDUCARE COMMUNITY LIVING CORPORATION - TEXAS EDUCARE COMMUNITY LIVING CORPORATION - NEW MEXICO EDUCARE COMMUNITY LIVING CORPORATION - NORTH CAROLINA EDUCARE COMMUNITY LIVING CORPORATION - NEVADA THE CITADEL GROUP, INC. B.W.J. OPPORTUNITY CENTERS, INC. (each a "Borrower") - ------------------------------------------- By: Authorized Officer Name: Title: listed above beginning with PeopleServe, Inc. and ending with B.W.J. Opportunity Centers, Inc., on behalf of each such Borrower 13 PNC BANK, NATIONAL ASSOCIATION as Administrative Bank By: Benjamin A. Willingham Vice President PNC BANK, NATIONAL ASSOCIATION as a Bank By: Benjamin A. Willingham Vice President 14 AMSOUTH BANK ("AmSouth") - ------------------------------------------- By: Cathy Wind Its: Vice President 15 BANQUE PARIBAS ("Paribas") - -------------------------------------------- David Canavan Its: --------------------------------------- 16 BANK ONE, KENTUCKY, NA ("Bank One") - ------------------------------------------- By: Todd D. Munson Senior Vice President 17 FIRST AMERICAN NATIONAL BANK ("First American") - ------------------------------------------- By: Kent Wood Vice President 18 FIRST UNION NATIONAL BANK ("First Union") - ------------------------------------------- By: Valerie Cline Director 19 FIRSTAR BANK, N.A. ("Firstar") - ------------------------------------------ By: Toby Rau Assistant Vice President 20 FLEET NATIONAL BANK ("Fleet") - ------------------------------------------- By: Ginger Stolzenthaler Senior Vice President 21 KEY CORPORATE CAPITAL, INC. ("Key") - ------------------------------------------- By: Mark Mullen Vice President 22 NATIONAL CITY BANK OF KENTUCKY ("National City") - ------------------------------------------ By: Deroy Scott Vice President 23 SUNTRUST BANK, NASHVILLE, N.A. ("SunTrust") - ------------------------------------------- By: W. Brooks Hubbard Its: 24 WACHOVIA BANK, N.A. ("Wachovia") - ------------------------------------------ By: John Tibe Assistant Vice President 25 UNION BANK OF CALIFORNIA ("Union Bank") - ------------------------------------------- By: Virginia Hart Vice President 26 SCHEDULE I ADMINISTRATIVE BANK PNC BANK, NATIONAL ASSOCIATION ("PNC") 500 West Jefferson Street Louisville, KY 40202 Attn: Benjamin A. Willingham, Vice President LIST OF BANKS AMSOUTH BANK ("AmSouth") 333 Union Street 2nd Floor Nashville, TN 37021 Attn: Cathy Wind, Vice President BANK ONE, KENTUCKY, NA ("Bank One") 416 West Jefferson Louisville, Kentucky 40202 Attn: Todd D. Munson, Senior Vice President BANQUE PARIBAS ("Paribas") 787 Seventh Avenue New York, NY 10019 Attn: David Canavan FIRST AMERICAN NATIONAL BANK ("First American") First American Center Nashville, TN 37237 Attn: Kent Wood, Vice President FIRSTAR BANK, N.A. ("Firstar") One Financial Square Louisville, KY 40202 Attn: Toby Rau, Assistant Vice President FIRST UNION NATIONAL BANK ("First Union") One 1st Union Center 301 S. College Street Charlotte, NC 28288-0735 Attn: Valerie Cline, Director FLEET NATIONAL BANK ("Fleet") 27 1 Federal Street Boston, MA 02110 Attn: Ginger Stolzenthaler, Vice President KEY CORPORATE CAPITAL, INC. ("Key") 525 Vine Street Cincinnati, OH 40202 Attn: Mark Mullen, Vice President NATIONAL CITY BANK OF KENTUCKY ("National City") 101 South Fifth Street Louisville, KY 40202 PNC BANK, NATIONAL ASSOCIATION ("PNC") 500 West Jefferson Street Louisville, KY 40202 Attn: Benjamin A. Willingham, Vice President SUNTRUST BANK, NASHVILLE, N.A. ("SunTrust") P.O. Box 305110 Nashville, TN 37230-5110 Attn: W. Brooks Hubbard UNION BANK OF CALIFORNIA, NATIONAL ASSOCIATION ("Union Bank") 445 S. Figueroa 16th Floor Los Angeles, CA 90071 Attn: Virginia Hart, Vice President WACHOVIA BANK, N. A. ("Wachovia") 191 Peachtree Street, 29th Floor Atlanta, Georgia 30303-1757 Attn: John Tibe 28 SCHEDULE II LIST OF BORROWERS OTHER THAN RES-CARE, INC. 1. COMMUNITY ALTERNATIVES INDIANA, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("CAI"). 2. COMMUNITY ALTERNATIVES NEBRASKA, INC., a Delaware corporation, with principal office and place of business in Louisville, Kentucky ("CAN"). 3. COMMUNITY ADVANTAGE, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("CA"). 4. TEXAS HOME MANAGEMENT, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("THM"). 5. CAPITAL TX INVESTMENTS, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("CTXI"). 6. THM HOMES, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("THMH"). 7. RES-CARE NEW MEXICO, INC., a Delaware corporation with principal office and place of business of Louisville, Kentucky ("RCNM"). 8. RES-CARE OHIO, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("RCO"). 9. CATX PROPERTIES, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("CATXP"). 10. RES-CARE CALIFORNIA, INC., d/b/a RCCA Services, a Delaware corporation with principal office and place of business in Louisville, Kentucky ("RCC"). 11. COMMUNITY ALTERNATIVES VIRGINIA, INC. f/k/a RES-CARE FLORIDA, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("CAV"). 12. RSCR CALIFORNIA, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("RSCRC"). 13. RES-CARE KANSAS, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("RCK"). 14. RES-CARE ILLINOIS, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("RCI"). 29 15. RES-CARE OKLAHOMA, INC. a Delaware corporation with principal office and place of business in Louisville, Kentucky ("RCOK"). 16. RES-CARE TENNESSEE, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("RCT"). 17. RES-CARE TRAINING TECHNOLOGIES, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("RCTT"). 18. YOUTHTRACK, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("YT"). 19. RES-CARE PREMIER, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("RCP"). 20 RES-CARE NEW JERSEY, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("RCNJ"). 21 COMMUNITY ALTERNATIVES KENTUCKY, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("CAK"). 22 ALTERNATIVE YOUTH SERVICES, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("AYS") 23 COMMUNITY ALTERNATIVES TEXAS PARTNER, INC. (f/k/a Community Alternatives Virginia, Inc.), a Delaware corporation with principal office and place of business in Louisville, Kentucky ("CATP"). 24 RSCR WEST VIRGINIA, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("RSCRWV"). 25 COMMUNITY ALTERNATIVES MISSOURI, INC. f/k/a RAIMENT, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("R"). 26 RES-CARE AVIATION, INC., a Kentucky corporation with principal office and place of business in Louisville, Kentucky ("RCA"). 27 COMMUNICATIONS NETWORK CONSULTANTS, INC., a Rhode Island corporation with principal office and place of business in Louisville, Kentucky ("CNC"). 28 THE ACADEMY FOR INDIVIDUAL EXCELLENCE, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("AIE"). 30 29 RES-CARE OTHER OPTIONS, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("ROO"). 30 SOUTHERN HOME CARE SERVICES, INC. d/b/a Eldercare, a Georgia corporation with principal office and place of business in Louisville, Kentucky ("SHCS"). 31. GENERAL HEALTH CORPORATION d/b/a Arizona Youth Associates, Inc., an Arizona corporation with principal office and place of business in Louisville, Kentucky ("AYA") 32. BALD EAGLE ENTERPRISES, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("BEE"). . 33. BRINKLEY GROUP HOMES, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("BGH") . 34. CREATIVE NETWORKS, LLC, an Arizona limited liability company with principal office and place of business in Louisville, Kentucky ("CN"). 35. NORMAL LIFE, INC., a Kentucky corporation with principal office and place of business in Louisville, Kentucky ("NL"). 36. NORMAL LIFE OF SOUTHERN INDIANA, INC., an Indiana corporation with principal office and place of business in Louisville, Kentucky ("NLSI"). 37. NORMAL LIFE OF CENTRAL INDIANA, INC., successor by merger of Normal Life of Terre Haute, Inc. and Normal Life of Sheridan, Inc., an Indiana corporation with principal office and place of business in Louisville, Kentucky ("NLCI"). 38. NORMAL LIFE OF LOUISIANA, INC., a Louisiana corporation with principal office and place of business in Louisville, Kentucky ("NLL"). 39. NORMAL LIFE OF LAFAYETTE, INC., a Louisiana corporation with principal office and place of business in Louisville, Kentucky ("NLLAF"). 40. NORMAL LIFE OF LAKE CHARLES, INC., a Louisiana corporation with principal office and place of business in Louisville, Kentucky ("NLLC"). 41. RES-CARE FLORIDA, INC., f/k/a NORMAL LIFE OF FLORIDA, INC., a Florida corporation with principal office and place of business in Louisville, Kentucky ("NLF"). 42. NORMAL LIFE OF KENTUCKY, INC., a Kentucky corporation with principal office and place of business in Louisville, Kentucky ("NLK"). 43 NORMAL LIFE OF NORTH TEXAS, INC., a Texas corporation with principal office and place of business in Louisville, Kentucky ("NLNT"). 31 44. NORMAL LIFE OF NEW MEXICO, INC., a New Mexico corporation with principal office and place of business in Louisville, Kentucky ("NLNM"). 45. NORMAL LIFE OF TENNESSEE, INC., a Tennessee corporation with principal office and place of business in Louisville, Kentucky ("NLT"). 46. CAREERS IN PROGRESS, INC., a Louisiana corporation with principal office and place of business in Louisville, Kentucky ("CP"). 47. NORMAL LIFE FAMILY SERVICES, INC. a Louisiana corporation with principal office and place of business in Louisville, Kentucky ("NLFS"). 48. NORMAL LIFE OF INDIANA, a general partnership a corporation duly organized and existing under the laws of the state of Indiana, with principal office and place of business in Louisville, Kentucky ("NLIND"). 49. NORMAL LIFE OF CALIFORNIA, INC., a California corporation with principal office and place of business in Louisville, Kentucky ("NLC"). 50. NORMAL LIFE OF GEORGIA, INC., a Georgia corporation with principal office and place of business in Louisville, Kentucky ("NLG"). 51. NORMAL LIFE MANAGEMENT, INC., a Kentucky corporation with principal office and place of business in Louisville, Kentucky ("NLM"). 52. NL DELAWARE, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("NLD"). 53. NORMAL LIFE OF OHIO, INC., an Ohio corporation with principal office and place of business in Louisville, Kentucky ("NLO"). 54. BOLIVAR DEVELOPMENT TRAINING CENTER, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("BSTC"). 55. HYDESBURG ESTATES, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("HE"). 56. OAK WOOD SUITES OF BOLIVAR, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("OWSB"). 57. WILLARD ESTATES, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("WE"). 32 58. BOLIVAR ESTATES, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("BE"). 59. SKYVIEW ESTATES, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("SE"). 60. RIVER BLUFF ESTATES, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("RBE"). 61. MEADOW LANE ESTATES, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("MLE"). 62. EBENEZER ESTATES, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("EE"). 63. HILLSIDE ESTATES, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("HE"). 64. PEBBLE CREEK ESTATES, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("PCE"). 65. FORT MASON ESTATES, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("FME"). 66. SHA-REE ESTATES, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("SRE"). 67. BAKER MANAGEMENT, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("BM"). 68. MISSOURI PROGRESSIVE SERVICES, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("MPS"). 69. OAKVIEW ESTATES OF BOLIVAR, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("OEB"). 70. UPWARD BOUND, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("UB"). 71. INDIVIDUALIZED SUPPORTED LIVING, INC., a Missouri corporation with principal office and place of business in Louisville, Kentucky ("ISL"). 72. RES-CARE WASHINGTON, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("RCWASH"). 73. RES-CARE ALABAMA, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky ("RCALA"). 33 SCHEDULE II.A LIST OF NEW BORROWERS as of June __, 1999 74. TANGRAM REHABILITATION NETWORK, INC., a Texas corporation with principal office and place of business in Louisville, Kentucky. 75. TEXAS COMMUNITY ALTERNATIVES LIMITED PARTNERSHIP, a Kentucky limited partnership with principal office and place of business in Louisville, Kentucky. 76. BUMPERSHOOT ENTERPRISES, INC., a California corporation with principal office and place of business in Louisville, Kentucky. 77. RS PALMER CORPORATION d/b/a TEXAS LIVING CENTERS, a Texas corporation with principal office and place of business in Louisville, Kentucky. 78. ALTERNATIVE CHOICES, INC., a California corporation with principal office and place of business in Louisville, Kentucky. 79. ROCKCREEK, INC., a California corporation with principal office and place of business in Louisville, Kentucky. 80. ACCESS, INC., a North Carolina corporation with principal office and place of business in Louisville, Kentucky. 81. RESCARE PREMIER CANADA, INC., an Ontario (Canada) corporation with principal office and place of business in Louisville, Kentucky. 82. OPTIMAL SPACE, INC., an Ontario (Canada) corporation with principal office and place of business in Ontario, Canada. 83. J&J CARE CENTERS, INC., a California corporation with principal office and place of business in Louisville, Kentucky. 84. RAISE GEAUGA, INC., an Ohio corporation with principal office and place of business in Louisville, Kentucky. 85. COMMUNITY ALTERNATIVES ILLINOIS, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky. 86. PEOPLESERVE, INC., a Delaware corporation with principal office and place of business in Louisville, Kentucky. 87. P.S.I. HOLDINGS, INC., an Ohio corporation with principal office and place of business in Louisville, Kentucky. 34 88. VOCA CORP., an Ohio corporation with principal office and place of business in Louisville, Kentucky. 89. VOCA CORPORATION OF AMERICA., an Ohio corporation with principal office and place of business in Louisville, Kentucky. 90. VOCA CORPORATION OF FLORIDA, a Florida corporation with principal office and place of business in Louisville, Kentucky. 91. VOCA CORPORATION OF INDIANA, an Indiana corporation with principal office and place of business in Louisville, Kentucky. 92. VOCA OF INDIANA, LLC, an Indiana limited liability company with principal office and place of business in Louisville, Kentucky. 93. VOCA CORPORATION OF MARYLAND, a Maryland corporation with principal office and place of business in Louisville, Kentucky. 94. VOCA CORPORATION OF NEW JERSEY, a New Jersey corporation with principal office and place of business in Louisville, Kentucky. 95. VOCA CORPORATION OF NORTH CAROLINA, a North Carolina corporation with principal office and place of business in Louisville, Kentucky. 96. VOCA CORPORATION OF OHIO, an Ohio corporation with principal office and place of business in Louisville, Kentucky. 97. VOCA CORPORATION OF WASHINGTON D.C., a District of Columbia corporation with principal office and place of business in Louisville, Kentucky. 98. VOCA CORPORATION OF WEST VIRGINIA, INC., a West Virginia corporation with principal office and place of business in Louisville, Kentucky. 99. VOCA RESIDENTIAL SERVICES, INC., an Ohio corporation with principal office and place of business in Louisville, Kentucky. 100. EDUCARE COMMUNITY LIVING CORPORATION - AMERICA, a Delaware corporation with principal office and place of business in Louisville, Kentucky. 101. EDUCARE COMMUNITY LIVING CORPORATION - GULF COAST, a Texas corporation with principal office and place of business in Louisville, Kentucky. 102. EDUCARE COMMUNITY LIVING CORPORATION - MISSOURI, a Missouri corporation with principal office and place of business in Louisville, Kentucky. 35 103. EDUCARE COMMUNITY LIVING CORPORATION - TEXAS, a Texas corporation with principal office and place of business in Louisville, Kentucky. 104. EDUCARE COMMUNITY LIVING CORPORATION - NEW MEXICO, a New Mexico corporation with principal office and place of business in Louisville, Kentucky. 105. EDUCARE COMMUNITY LIVING CORPORATION - NORTH CAROLINA, a North Carolina corporation with principal office and place of business in Louisville, Kentucky. 106. EDUCARE COMMUNITY LIVING CORPORATION - NEVADA, a Nevada corporation with principal office and place of business in Louisville, Kentucky. 107. THE CITADEL GROUP, INC., a Texas corporation with principal office and place of business in Louisville, Kentucky. 108. B.W.J. OPPORTUNITY CENTERS, INC., a Texas corporation with principal office and place of business in Louisville, Kentucky. 36 SCHEDULE II.B Certain Entities which Currently are not Included in Definition of "Existing Borrowers" or "New Borrowers" (1) Employ - Ability Unlimited, Inc., a New Jersey non-profit corporation. Refraining from including those entities within the definition of "New Borrowers", "Existing Borrowers" or "Borrowers" does not prevent the Banks from later exercising any rights under the Loan Instruments to require them to become Borrowers. 37 SCHEDULE 2.1 SCHEDULE OF REVOLVING LOAN COMMITMENTS AND REVOLVING CREDIT FACILITY PRO RATA SHARES The maximum amount of the Revolving Credit Facility A Loan Commitments is $175,000,000. The maximum amount of the Revolving Credit Facility B Loan Commitments is $25,000,000; provided, however that the Revolving Credit Facility B Loan Commitments shall be reduced to $24,062,500 as of the 1999B Amendment to Loan Instruments Closing Date and shall remain at such level unless and until an existing or a new Bank agrees to assume an additional Revolving Credit Facility B Loan Commitment in the amount of $937,500, in which case the total Revolving Credit Facility B Loan Commitments shall be restored to $25,000,000.
NAME OF BANK REVOLVING REVOLVING REVOLVING REVOLVING REVOLVING TOTAL CREDIT FACILITY CREDIT CREDIT CREDIT CREDIT LOAN A LOAN FACILITY A FACILITY B FACILITY B FACILITY B COMMITMENTS* COMMITMENTS PRO RATA LOAN PRO RATA PRO RATA SHARE COMMITMENTS* SHARE** SHARE*** PNC 26,250,000 15.00% 3,750,000 15.59% 15.00% 30,000,000 Bank One 21,875,000 12.50% 3,125,000 12.99% 12.50% 25,000,000 National City 21,875,500 12.50% 3,125,000 12.99% 12.50% 25,000,000 SunTrust 17,500,000 10.00% 2,500,000 10.39% 10.00% 20,000,000 First Union 15,312,500 8.75% 2,187,500 9.10% 8.75% 17,500,000 Wachovia 13,125,000 7.50% 1,875,000 7.80% 7.50% 15,000,000 AmSouth 10,937,500 6.25% 1,562,500 6.49% 6.25% 12,500,000 Key 10,937,500 6.25% 1,562,500 6.49% 6.25% 12,500,000 Firstar 10,937,500 6.25% 1,562,500 6.49% 6.25% 12,500,000 Banque Paribas 6,562,500 3.75% 0 .0% .0% 6,562,500 First American 6,562,500 3.75% 937,500 3.89% 3.75% 7,500,000 Fleet 6,562,500 3.75% 937,500 3.89% 3.75% 7,500,000 Union Bank 6,562,500 3.75% 937,500 3.89% 3.75% 7,500,000 --------- ---- ------- ---- ---- --------- TOTAL $175,000.000 100.00% $ 24,062,500 100.00% 100.00% $199,062,500 ============ ====== ============ ====== ====== ============
38 * Total Revolving Credit Facility B Loan Commitments may be increased to $25,000,000 and total Loan Commitments may be increased to $200,000,000 if an existing or a new Bank agrees to assume an additional Revolving Credit Facility B Loan Commitment in the amount of $937,500. **Revolving Credit Facility B Pro Rata Shares as of 1999B Amendment to Loam Instruments Closing Date. ***Revolving Credit Facility B Pro Rata Shares if an existing or a new Bank agrees to assume an additional Revolving Credit Facility B Loan Commitment in the amount of $937,500. EX-27.1 4 EXHIBIT 27.1
5 1,000 6-MOS DEC-31-1999 JAN-01-1999 JUN-30-1999 19,659 0 147,308 0 0 191,266 128,960 34,750 534,241 91,745 0 0 0 50,866 101,631 534,241 0 408,673 0 350,533 20,498 0 8,834 2,366 2,717 (351) 0 534 (3,932) (3,749) (0.15) (0.15)
EX-27.2 5 EXHIBIT 27.2
5 1,000 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 28,175 0 109,330 0 0 153,358 92,502 21,383 444,618 83,227 0 0 0 50,866 87,857 444,618 0 323,932 0 280,822 0 0 5,655 15,966 6,311 9,655 0 0 0 9,655 0.40 0.39
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