Exhibit 10.2

 

EMPLOYMENT AGREEMENT

 

                THIS EMPLOYMENT AGREEMENT (“Employment Agreement”) is executed
as of the Execution Date (as defined in Section 1 below) but made effective as
of January 1, 2008, between RES-CARE, INC., a Kentucky corporation (the
“Company”), and PAUL G. DUNN (the “Employee”).

 

RECITALS:

 

WHEREAS, the Company and Employee previously entered into that certain
Employment Agreement effective January 1, 2005 (the “Prior Agreement”);

 

WHEREAS, the initial term of the Prior Agreement is scheduled to expire on
December 31, 2007;

 

WHEREAS, the Company wishes to offer the Employee a new long-term employment
agreement which will supersede the Prior Agreement; and

 

WHEREAS, the Company and the Employee have reached agreement on the terms and
conditions of such agreement.

 

AGREEMENT:

 

NOW, THEREFORE, in consideration of the premises and the mutual agreements set
forth herein, the parties agree as follows:

 

1.             Employment and Term.  The Company hereby employs the Employee,
and the Employee accepts such employment, upon the terms and conditions herein
set forth for an initial term commencing effective January 1, 2008 (the
“Commencement Date”), and ending on December 31, 2011, subject to earlier
termination only in accordance with the express provisions of this Employment
Agreement (“Initial Term”).  At the option of the Company and with the consent
of the Employee, this Employment Agreement may be extended for successive
periods of one (1) year each (the “Additional Term(s)”) on the same terms and
conditions.  The Company’s option to extend this Employment Agreement for any
Additional Term shall be exercisable by written notice to Employee no later than
thirty (30) days prior to the end of the Initial Term or any then effective
Additional Term.  The Initial Term and any effective Additional Terms shall be
collectively referred to as the “Term.”  For purposes of this Employment
Agreement, the term “Execution Date” shall mean the later of (i) the date this
Employment Agreement is signed by the Employee and (ii) the date this Employment
Agreement is signed on behalf of the Company.

 

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2.             Duties.

 

(a)           Employment as President of the Arbor Component of the Employment
and Training Services Group.  During the Term, the Employee shall serve as the
President of the Arbor Component of the Company’s Employment and Training
Services Group (“Arbor Component”), including all of the operations of Arbor
E&T, LLC, a wholly-owned subsidiary of the Company (“Arbor E&T”).  During the
Term, the Employee shall also serve as the President of Arbor E&T.  During the
Term, subject to the supervision and control of the President and Chief
Executive Officer of the Company (the “President”), through the President of the
Company’s Employment and Training Services Group, or the President’s designee
(“Supervising Officer”), the Employee shall have the responsibility for
management and oversight of the Arbor Component and all of the operations of the
Arbor Component, including without limitation (i) the provision of quality care,
management, training and/or educational services for the entities, agencies,
clients, students or other individuals provided services by the operations
within the Arbor Component, (ii) the compliance by such operations with all
laws, regulations and rules applicable to such operations, and (iii) the
financial performance of such operations and the Arbor Component as a whole. 
The Employee shall perform such additional duties as may be prescribed from time
to time by the Supervising Officer or the President, including, without
limitation, serving as an officer or director of the Company and/or one or more
subsidiaries or affiliates of the Company, if elected to such positions, without
any additional salary or other compensation.  The Employee shall serve as a
member of the Resource Center’s Leadership Team and shall, as of the
Commencement Date, be a “named executive officer” for purposes of the Company’s
public filings under the securities laws.  As such, Employee acknowledges and
accepts responsibility, with the other “named executive officers” of the Company
and other officers and employees of the Company, to ensure the Company’s public
filings adequately satisfy all disclosure requirements.  In addition, Employee
acknowledges that Employee’s biography, qualifications and compensation will be
disclosed in such public filings.

 

(b)           Time and Effort.  The Employee shall devote his best efforts on a
full-time basis and all of his business time, energies and talents exclusively
to the business of the Company and to no other business during the Term of this
Employment Agreement; provided, however, that subject to the restrictions in
Section 7 hereof, the Employee may (i) invest his personal assets in such form
or manner as will not require his services in the operation of the affairs of
the entities in which such investments are made and (ii) subject to satisfactory
performance of the duties described in Section 2(a) hereof, devote such time as
may be reasonably required for him to continue to maintain his current level of
participation in various civic and charitable activities.

 

(c)           Employee Certification of Eligibility.  Not less frequently than
annually and upon the termination of the Employee’s employment hereunder for any
reason other than Employee’s death, the Employee shall execute and deliver to
the Supervising Officer and/or any other authorized officer designated by the
Company a certificate (ResCare Annual Employment Re-Certification Eligibility
Form) confirming, to the best of the

 

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Employee’s knowledge, that the Employee remains eligible for employment with the
Company.  This same certificate will certify that the Employee has complied with
applicable laws, regulations and Company policies regarding the provision of
services to clients and billings to its paying agencies, Company policies on
training, Drug and Alcohol-Free Program, Prohibition of Harassment, Affirmative
Action Equal Employment Opportunity and Violence in the Workplace.  This
statement shall state that the Employee is not aware of any such violation by
other employees, independent contractors, vendors, or other individuals
performing services for the Company and its subsidiaries that they did not
report as appropriate.

 

3.             Compensation and Benefits.

 

(a)           Base Salary.  The Company shall pay to the Employee during the
Term an annual salary (the “Base Salary”), which initially shall be $250,000. 
The Base Salary shall be due and payable in substantially equal bi-weekly
installments or in such other installments as may be necessary to comport with
the Company’s normal pay periods for all employees.

 

Provided that this Employment Agreement or Employee’s employment hereunder shall
not have been terminated for any reason, the Base Salary shall be increased,
effective as of the first day of each January, commencing January 1, 2009 by the
greater of (i) five percent (5%) and (ii) the percentage by which the Consumer
Price Index for all Urban Consumers (CPI-U), All-Items, 1982-1984=100, as
published by the Bureau of Labor Statistics (the “CPI”) established for the
month of December immediately preceding the date on which the adjustment is to
be made exceeds the CPI published for the month of December of the immediately
preceding year.  If the Bureau of Labor Statistics suspends or terminates its
publication of the CPI, the parties agree that a reasonably comparable price
index shall be substituted for the CPI.

 

(b)           Incentive Plan.  During the Term, the Employee shall be eligible
for incentive compensation in accordance with the following incentive plan (the
“Incentive Plan”).  Shortly after the beginning of each calendar year, the
Company’s Board of Directors will establish a target of the Company Net Income
(as defined below) for such calendar year (the “Annual Net Income Target”).  In
no event shall Employee earn any amount under the Incentive Plan for any
calendar year during the Term unless the actual Company Net Income for such
calendar year equals or exceeds ninety percent (90%) of the Annual Net Income
Target for such calendar year.  The threshold referred to in the immediately
preceding sentence shall hereinafter be referred to as the “Annual Net Income
Threshold.”  For all purposes of this Employment Agreement, “Company Net Income”
shall mean the net income of the Company and its subsidiaries on a consolidated
basis, determined in accordance with generally accepted accounting principles
consistently applied, as adjusted to exclude (x) any extraordinary non-cash or
nonrecurring non-cash charges or losses incurred by the Company and its
subsidiaries other than in the ordinary course of business, including but not
limited to losses or expenses resulting from redemptions or repayments of
indebtedness, or modifications or

 

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amendments of the Company’s credit facility, in each case net of related tax
benefit, and (y) other appropriate items as determined by the Board of Directors
or the Executive Compensation Committee of the Board of Directors (the
“Compensation Committee”).  The amount payable under the Incentive Plan to
Employee for each full calendar year during the Term shall equal the Base Salary
actually paid to the Employee for such calendar year multiplied by the sum of
the Department Performance Percentage and the Company Performance Percentage (as
determined below) for such calendar year.  Not later than March 15 of each
calendar year, the maximum percentages for each of the Department Performance
Percentage (the “Department Maximum Performance Percentage”) and the Company
Performance Percentage (the “Company Maximum Performance Percentage”) shall be
established by the Compensation Committee for such calendar year within a range
of forty percent (40%) and sixty percent (60%); provided that the sum of such
percentages shall equal one hundred percent (100%) each calendar year.  If the
Compensation Committee shall not timely establish either or both of the
Department Maximum Performance Percentage or the Company Maximum Performance
Percentage for the calendar year 2008, each of such percentages shall be fifty
percent (50%).  If the Compensation Committee shall not timely establish either
or both of the Department Maximum Performance Percentage or the Company Maximum
Performance Percentage for any future calendar year during the Term, the
respective percentages that were applicable for the prior calendar year shall
apply for such calendar year.  The sum of the Department Performance Percentage
and the Company Performance Percentage for each calendar year shall be referred
to herein as the “Incentive Percentage.”  For each calendar year the maximum
Incentive Percentage shall be one hundred percent (100%).

 

(i)            The Department Performance Percentage for each calendar year
during the Term shall be equal to the sum of a specified number of percentages
that are each determined based upon the Company functions for which Employee is
responsible satisfying certain performance criteria in categories established by
the Compensation Committee on an annual basis.  For each calendar year, the
relative weight of the performance criteria as well as the performance criteria
may change for each calendar year and shall be established by the Compensation
Committee at the same time as its establishment of the Company Maximum
Performance Percentage.  The manner in which the percentage for each such
category shall be determined for each calendar year shall be established by the
Compensation Committee at the same time as its establishment of the Company
Maximum Performance Percentage.  Notwithstanding anything in this Employment
Agreement to the contrary, the Department Performance Percentage shall be zero
unless the actual Company Net Income for the respective calendar year equals or
exceeds the Annual Net Income Threshold for such calendar year.

 

(ii)           The Company Performance Percentage shall be determined for each
calendar year during the Term based upon the Company and its subsidiaries having
met or exceeded the Annual Net Income Threshold for such calendar year. 
Notwithstanding anything in this Employment Agreement to the contrary, the
Company Performance Percentage shall be zero unless the actual Company Net

 

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Income for the respective calendar year equals or exceeds the Annual Net Income
Threshold for such calendar year.  The Company Performance Percentage for each
calendar year shall be equal to the Company Maximum Performance Percentage for
such calendar year multiplied by the Net Income Factor (as determined below). 
The excess of the Annual Net Income Target over the Annual Net Income Threshold
shall be referred to as the “Incentive Range.”  The Net Income Factor for each
calendar year shall be equal to:  (A) the amount by which the actual Company Net
Income for the calendar year exceeds the Annual Net Income Threshold for such
calendar year (but not more than the Incentive Range for such calendar year),
divided by (B) the Incentive Range for such calendar year.

 

After any target or percentage described in this paragraph (b) has been
established by the Company’s Board of Directors or Compensation Committee, as
applicable, for any calendar year, such target or percentage shall not be
increased or decreased for such calendar year for purposes of this paragraph
(b) or for purposes of paragraph (c) of this Section 4.  Any annual incentive
earned by the Employee under the Incentive Plan for any calendar year during the
Term shall be paid by the Company in cash to the Employee not later than the
later of (x) seventy-four (74) days after the end of the applicable calendar
year or (y) the date of delivery to the Company of the audited financial
statements of the Company and its subsidiaries for such calendar year.  Any
amounts earned by the Employee under the Incentive Plan shall be hereinafter
referred to as the “Incentive Bonus.”

 

(c)           Restricted Stock Awards.

 

(i)            The restricted shares of common stock of the Company awarded
under this paragraph (c) (collectively, the “Restricted Shares”) shall be
awarded pursuant to and, to the extent not expressly inconsistent herewith,
governed by the Company stock option and incentive compensation plan as in
effect as the effective date of the respective award (the “Stock Plan”).  All
grants described in this paragraph (c) shall be conditioned upon the approval of
the shareholders of the Company at the annual shareholders’ meeting in 2008 of
(A) an increase in the maximum number of shares that may be issued pursuant to
awards under the Stock Plan, or (B) a new or amended plan authorizing grants of
restricted shares of the Company.  The number of Restricted Shares shall be
adjusted in accordance with the terms of the Stock Plan for stock splits, stock
dividends, recapitalizations and the like.  Until and only to the extent the
Restricted Shares shall vest as provided herein, all stock certificates
evidencing the Restricted Shares owned by Employee shall be held by the Company
for the benefit of Employee.  As and to the extent any Restricted Shares shall
vest as provided herein, the Company will promptly deliver certificates
representing such vested shares to Employee.

 

(ii)           Provided Employee shall continue to be employed hereunder,
effective on July 15, 2008, the Company shall award to Employee 5,000 restricted
shares of common stock of the Company.  The restricted shares awarded as

 

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provided in the preceding sentence shall be referred to as the “Fixed Restricted
Shares.”  The Fixed Restricted Shares shall be subject to vesting as provided
below.  Provided Employee shall continue to be employed hereunder, one-fourth
(1/4) of the Fixed Restricted Shares shall vest on June 1, 2009, an additional
one-fourth (1/4) of the Fixed Restricted Shares shall vest on June 1, 2010, an
additional one-fourth (1/4) of the Fixed Restricted Shares shall vest on June 1,
2011, and the final one-fourth (1/4) of the Fixed Restricted Shares shall vest
on June 1, 2012.

 

(iii)          Provided Employee shall continue to be employed hereunder, and
further provided that the applicable Annual Performance Award Test (as defined
below) has been satisfied, on the Performance Award Date (as defined below) each
year during the Term, commencing in 2009, the Company shall award to Employee
that number of shares of common stock of the Company as is equal to $100,000
divided by the Performance Award Price (as defined below), with any fractional
share resulting therefrom being rounded up to one whole share if 0.5 or more and
eliminated if less than 0.5.  For each year, the “Performance Award Date” shall
be that date the Company files its Annual Report on Form 10-K with the
Securities and Exchange Commission for the immediately preceding calendar year. 
Satisfaction of the “Annual Performance Award Test” shall be determined as of
each Performance Award Date and measured based upon the Company Net Income for
the immediately preceding calendar year.  The Annual Performance Award Test
shall be satisfied for a calendar year if (A) the Annual Net Income Target for
the calendar year being measured is at least ten percent (10%) higher than the
actual Company Net Income for the immediately preceding calendar year, and
(B) the actual Company Net Income for the calendar year being measured equals or
exceeds ninety-five percent (95%) of the Annual Net Income Target for the
calendar year being measured.  The “Performance Award Price” shall be equal to
the closing sale price of Company common stock as reported on the Nasdaq
National Market on the respective Performance Award Date (or if the respective
Performance Award Date is not a trading date for the Company common stock, on
the immediately preceding trading date).  Any Restricted Shares awarded pursuant
to this subparagraph (iii) shall be immediately vested in full on the respective
date such shares are awarded.

 

(iv)          Notwithstanding any provision in this paragraph (c) to the
contrary, all of the Restricted Shares that have not been previously vested
shall immediately vest if Employee shall continue to be employed hereunder and
(A) Employee shall die, (B) Employee shall be subject to a “permanent
disability” as described in Section 4(b) hereof, or (C) a Change of Control (as
defined below) has occurred with respect to the Company.  A “Change of Control”
for purposes of this subparagraph (iv) shall have the same meaning as that term
is given in the Stock Plan.

 

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(d)           Participation in Benefit Plans.  During the Term, Employee shall
be entitled to participate in all employee benefit plans and programs (including
but not limited to paid time off policies, retirement and profit sharing plans,
health insurance, etc.) provided by the Company under which the Employee is
eligible in accordance with the terms of such plans and programs.  The Company
reserves the right to amend, modify or terminate in their entirety any of such
programs and plans.  The Company shall pay that portion of the reasonable and
customary costs of an annual executive physical at the Mayo Clinic or other
mutually agreeable medical facility certified by the American Medical
Association which is not paid by the Employee’s health insurance coverage
(whether provided by the Company or Employee’s spouse’s employer).

 

(e)           Out-of-Pocket Expenses; Automobile.  The Company shall promptly
pay the ordinary, necessary and reasonable expenses incurred by the Employee in
the performance of the Employee’s duties hereunder (or if such expenses are paid
directly by the Employee shall promptly reimburse him for such payment),
consistent with the reimbursement policies adopted by the Company from time to
time and subject to the prior written approval by the Supervising Officer. 
During the Term, the Company will provide Employee with a leased vehicle
consistent with its existing policies.

 

(f)            Withholding of Taxes; Income Tax Treatment.  If, upon the payment
of any compensation or benefit to the Employee under this Employment Agreement
(including, without limitation, in connection with the award of any Restricted
Shares or payment of any bonus or benefit), the Company determines in its
discretion that it is required to withhold or provide for the payment in any
manner of taxes, including but not limited to, federal income or social security
taxes, state income taxes or local income taxes, the Employee agrees that the
Company may satisfy such requirement by:

 

(i)            withholding an amount necessary to satisfy such withholding
requirement from the Employee’s compensation or benefit; or

 

(ii)           conditioning the payment or transfer of such compensation or
benefit upon the Employee’s payment to the Company of an amount sufficient to
satisfy such withholding requirement.

 

The Employee agrees that he will treat all of the amounts payable pursuant to
this Employment Agreement as compensation for income tax purposes.

 

4.             Termination.  The Employee’s employment hereunder may be
terminated under this Employment Agreement as follows, subject to the Employee’s
rights pursuant to Section 5 hereof:

 

(a)           Death.  The Employee’s employment hereunder shall terminate upon
his death.

 

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(b)                                 Disability.  The Employee’s employment shall
terminate hereunder at the earlier of (i) immediately upon the Company’s
determination (conveyed by a Notice of Termination (as defined in paragraph
(f) of this Section 4)) that the Employee is permanently disabled, and (ii) the
Employee’s absence from his duties hereunder for 180 days.  “Permanent
disability” for purposes of this Employment Agreement shall mean the onset of a
physical or mental disability which prevents the Employee from performing the
essential functions of the Employee’s duties hereunder, which is expected to
continue for 180 days or more, subject to any reasonable accommodation required
by state and/or federal disability anti-discrimination laws, including, but not
limited to, the Americans With Disabilities Act of 1990, as amended.

 

(c)                                  Cause.  The Company may terminate the
Employee’s employment hereunder for Cause.  For purposes of this Employment
Agreement, the Company shall have “Cause” to terminate the Employee’s employment
because of the Employee’s personal dishonesty, intentional misconduct, breach of
fiduciary duty involving personal profit, conviction of, or plea of nolo
contendere to, any law, rule or regulation (other than traffic violations or
similar offenses) or breach of any provision of this Employment Agreement.

 

(d)                                 Without Cause.  The Company may terminate
the Employee’s employment under this Employment Agreement at any time without
Cause (as defined in paragraph (c) of this Section 4) by delivery of a Notice of
Termination specifying a date of termination at least thirty (30) days following
delivery of such notice.

 

(e)                                  Voluntary Termination.  By not less than
thirty (30) days prior written notice to the Supervising Officer, Employee may
voluntarily terminate his employment hereunder.

 

(f)                                    Notice of Termination.  Any termination
of the Employee’s employment by the Company during the Term pursuant to
paragraphs (b), (c) or (d) of this Section 4 shall be communicated by a Notice
of Termination from the Company to the Employee.  Any termination of the
Employee’s employment by the Employee during the Term pursuant to paragraph
(e) of this Section 4 shall be communicated by a Notice of Termination from
Employee to the Company.  For purposes of this Employment Agreement, a “Notice
of Termination” shall mean a written notice which shall indicate the specific
termination provision in this Employment Agreement relied upon and in the case
of any termination for Cause shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Employee’s
employment.

 

(g)                                 Date of Termination.  The “Date of
Termination” shall, for purposes of this Employment Agreement, mean:  (i) if the
Employee’s employment is terminated by his death, the date of his death; (ii) if
the Employee’s employment is terminated on account of disability pursuant to
Section 4(b) above, thirty (30) days after Notice of Termination is given
(provided that the Employee shall not, during such 30-day period, have returned
to the performance of his duties on a full-time basis), (iii) if the Employee’s

 

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employment is terminated by the Company for Cause pursuant to
Section 4(c) above, the date specified in the Notice of Termination, (iv) if the
Employee’s employment is terminated by the Company without Cause, pursuant to
Section 4(d) above, the date specified in the Notice of Termination, (v) if the
Employee’s employment is terminated voluntarily pursuant to Section 4(e) above,
the date specified in the Notice of Termination, and (vi) if the Employee’s
employment is terminated by reason of an election by either party not to extend
the Term, the last day of the then effective Term.

 

5.                                       Compensation upon Termination or During
Disability.

 

(a)                                  Death.  If the Employee’s employment shall
be terminated by reason of his death during the Term, the Employee shall
continue to receive installments of his then current  Base Salary until the date
of his death and shall receive any earned but unpaid Incentive Bonus for any
calendar year ending prior to the date of his death.

 

(b)                                 Disability.  If the Employee’s employment
shall be terminated by reason of his disability during the Term, the Employee
shall continue to receive installments of his then current Base Salary while
actively at work and until the earlier of (i) the date of termination in
accordance with Section 4(b) of this Employment Agreement or (ii) the date that
short or long-term disability payments to the Employee commence under any plan
or program then provided and funded by the Company.  If the Employee’s
installments of Base Salary cease by reason of clause (ii) of the preceding
sentence but the benefits payable under any such disability plan or program do
not provide 100% replacement of the Employee’s installments of Base Salary
during such period, the Employee shall be paid at regular payroll intervals
until the provisions of clause (i) of the preceding sentence becomes effective,
an amount equal to the difference between the periodic installments of his then
current Base Salary that would have otherwise been payable and the disability
benefit paid from such disability plan or program.  In the event of any such
termination, the Employee shall also receive any earned but unpaid Incentive
Bonus for any calendar year prior to the Date of Termination.  Upon termination
due to death prior to a termination as specified in the preceding provisions of
this paragraph (b), the payment provisions of this paragraph (b) shall no longer
apply and Section 5(a) above shall apply.

 

(c)                                  Cause.  If the Employee’s employment shall
be terminated for Cause, the Employee shall continue to receive installments of
his then current Base Salary only through the Date of Termination and the
Employee shall not be entitled to receive any Incentive Bonus (other than any
earned but unpaid Incentive Bonus for any prior calendar year), and shall not be
eligible for any severance payment of any nature.

 

(d)                                 Without Cause.  If the Employee’s employment
is terminated without Cause, the Employee shall continue to receive installments
of his then current Base Salary until the Date of Termination and for twelve
(12) months thereafter and the Employee shall also be entitled to receive any
earned but unpaid Incentive Bonus for any calendar year ending prior to the Date
of Termination.

 

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(e)                                  Expiration of Term.  If the Employee’s
employment shall be terminated by reason of expiration of the Term by reason of
Employee’s election not to extend the Term, the Employee shall continue to
receive installments of his then current Base Salary until the Date of
Termination and shall also be entitled to receive any earned but unpaid
Incentive Bonus for the last calendar year of the Term. If the Employee’s
employment shall be terminated by reason of expiration of the Term by reason of
the Company’s election not to extend the Term, the Employee shall continue to
receive installments of his then current Base Salary until the Date of
Termination and for twelve (12) months thereafter and shall also be entitled to
receive any earned but unpaid Incentive Bonus for last calendar year of the
Term.

 

(f)                                    Voluntary Termination.  If the Employee’s
employment shall be terminated pursuant to Section 4(e) hereof, the Employee
shall continue to receive installments of his then current Base Salary until the
Date of Termination and the Employee shall not be entitled to receive any then
unpaid Incentive Bonus (other than any earned but unpaid Incentive Bonus for any
calendar year ending prior to the date Employee gives Notice of Termination),
and shall not be entitled to any severance payment of any nature.

 

(g)                                 No Further Obligations after Payment.  After
all payments, if any, have been made to the Employee pursuant to the applicable
provisions of paragraphs (a) through (f) of this Section 5, the Company shall
have no further obligations to the Employee under this Employment Agreement
other than the provision of any employee benefit plan required to be continued
under applicable law or by its terms.

 

6.                                       Duties Upon Termination.  Upon the
termination of Employee’s employment hereunder for any reason whatsoever
(including but not limited to the failure of the parties hereto to agree to the
extension of this Employment Agreement pursuant to Section 1 hereof), Employee
shall promptly (a) comply with his obligation to deliver an executed exit
interview document as provided in accordance with Company policy, and (b) return
to the Company any property of the Company or its subsidiaries then in
Employee’s possession or control, including without limitation, any Confidential
Information (as defined in Section 7(d)(iii) hereof) and whether or not
constituting Confidential Information, any technical data, performance
information and reports, sales or marketing plans, documents or other records,
and any manuals, drawings, tape recordings, computer programs, discs, and any
other physical representations of any other information relating to the Company,
its subsidiaries or affiliates or to the Business (as defined in
Section 7(d)(iv) hereof) of the Company.  Employee hereby acknowledges that any
and all of such documents, items, physical representations and information are
and shall remain at all times the exclusive property of the Company.

 

7.                                       Restrictive Covenants.

 

(a)                                  Acknowledgments.  Employee acknowledges
that (i) his services hereunder are of a special, unique and extraordinary
character and that his position with

 

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the Company places him in a position of confidence and trust with the operations
of the Company, its subsidiaries and affiliates (collectively, the “Res-Care
Companies”) and allows him access to Confidential Information, (ii) the Company
has provided Employee with a unique opportunity as President of the Arbor
Component of the Employment and Training Services Group of the Company,
(iii) the nature and periods of the restrictions imposed by the covenants
contained in this Section 7 are fair, reasonable and necessary to protect and
preserve for the Company the benefits of Employee’s employment hereunder,
(iv) the Res-Care Companies would sustain great and irreparable loss and damage
if Employee were to breach any of such covenants, (v) the Res-Care Companies
conduct and are aggressively pursuing the conduct of their business actively in
and throughout the entire Territory (as defined in paragraph (d)(ii) of this
Section 7), and (vi) the Territory is reasonably sized because the current
Business of the Res-Care Companies is conducted throughout such geographical
area, the Res-Care Companies are aggressively pursuing expansion and new
operations throughout such geographic area and the Res-Care Companies require
the entire Territory for profitable operations.

 

(b)                                 Confidentiality and Non-disparagement
Covenants. Having acknowledged the foregoing, Employee covenants that without
limitation as to time, (i) commencing on the Commencement Date, he will not
directly or indirectly disclose or use or otherwise exploit for his own benefit,
or the benefit of any other Person (as defined in paragraph (d)(v) of this
Section 7), except as may be necessary in the performance of his duties
hereunder, any Confidential Information, and (ii) commencing on the Date of
Termination, he will not disparage or comment negatively about any of the
Res-Care Companies, or their respective officers, directors, employees, policies
or practices, and he will not discourage anyone from doing business with any of
the Res-Care Companies and will not encourage anyone to withdraw their
employment with any of the Res-Care Companies.

 

(c)                                  Covenants.  Having acknowledged the
statements in Section 7(a) hereof, Employee covenants and agrees with the
Res-Care Companies that he will not, directly or indirectly, from the
Commencement Date until the Date of Termination, and for a period of twelve (12)
months thereafter, directly or indirectly (i) offer employment to, hire,
solicit, divert or appropriate to himself or any other Person, any business or
services (similar in nature to the Business) of any Person who was an employee
or an agent of any of the Res-Care Companies at any time during the last twelve
(12) months of Employee’s employment hereunder; or (ii) own, manage, operate,
join, control, assist, participate in or be connected with, directly or
indirectly, as an officer, director, shareholder, partner, proprietor, employee,
agent, consultant, independent contractor or otherwise, any Person which is, at
the time, directly or indirectly, engaged in the Business of the Res-Care
Companies within the Territory.  The Employee further agrees that from the
Commencement Date until the Date of Termination, he will not undertake any
planning for or organization of any business activity that would be competitive
with the Business.  Notwithstanding the foregoing, Employee agrees that if this
Employment Agreement shall be terminated by reason of expiration of the Term
(irrespective of which party elected not to extend the Term), the covenants in
this paragraph (c) shall survive the

 

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expiration thereof until twelve (12) months after the last day of employment of
Employee by any Res-Care Company. Notwithstanding the foregoing, the Employee
shall not be in breach of the covenants in clause (ii) of the first sentence of
this paragraph (c) by reason of the ownership and/or operation by Employee’s
spouse of one or more Goddard School franchises or the provision of financial
assistance or advice and consulting services by Employee with respect to such
ownership and/or operations (provided the same shall not interfere with the
performance of Employee’s duties as provided in Section 2(a) hereof).

 

(d)           Definitions. For purposes of this Employment Agreement:

 

(i)            For purposes of this Section 7, “termination of Employee’s
employment” shall include any termination pursuant to paragraphs (b), (c) and
(d) of Section 4 hereof, the termination of such Employee’s employment by reason
of the failure of the parties hereto to agree to the extension of this Agreement
pursuant to Section 1 hereof or the voluntary termination of Employee’s
employment hereunder.

 

(ii)           The “Territory” shall mean the forty-eight (48) contiguous states
of the United States, the United States Virgin Islands, Puerto Rico, all of the
Provinces of Canada, all the countries of the European Union, Switzerland and
Norway.

 

(iii)          “Confidential Information” shall mean any business information
relating to the Res-Care Companies or to the Business (whether or not
constituting a trade secret), which has been or is treated by any of the
Res-Care Companies as proprietary and confidential and which is not generally
known or ascertainable through proper means. Without limiting the generality of
the foregoing, so long as such information is not generally known or
ascertainable by proper means and is treated by the Res-Care Companies as
proprietary and confidential, Confidential Information shall include the
following information regarding any of the Res-Care Companies:

 

(1)           any patent, patent application, copyright, trademark, trade name,
service mark, service name, “know-how” or trade secrets;

 

(2)           customer lists and information relating to (i) any client of any
of the Res-Care Companies or (ii) any client of the operations of any other
Person for which operations any of the Res-Care Companies provides management
services;

 

(3)           supplier lists, pricing policies, consulting contracts and
competitive bid information;

 

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(4)           records, compliance and/or operational methods and Company
policies and procedures, including manuals and forms;

 

(5)           marketing data, plans and strategies;

 

(6)           business acquisition, development, expansion or capital investment
plan or activities;

 

(7)           software and any other confidential technical programs;

 

(8)           personnel information, employee payroll and benefits data;

 

(9)           accounts receivable and accounts payable;

 

(10)         other financial information, including financial statements,
budgets, projections, earnings and any unpublished financial information; and

 

(11)         correspondence and communications with outside parties.

 

The term “Confidential Information” shall not include the Employee’s telephone
and/or address book and the contents and contact information therein.

 

(iv)          The “Business” of the Res-Care Companies shall mean the business
of providing training or job placement services as provided in the Company’s
Employment and Training Services Group, youth treatment or services, home care
or periodic services to the elderly, services to persons with mental retardation
and other developmental disabilities, including but not limited to persons who
have been dually diagnosed, services to persons with acquired brain injuries, or
providing management and/or consulting services to third parties relating to any
of the foregoing.

 

(v)           The term “Person” shall mean an individual, a partnership, an
association, a corporation, a trust, an unincorporated organization, or any
other business entity or enterprise.

 

(e)           Injunctive Relief, Invalidity of any Provision. Employee
acknowledges that his breach of any covenant contained in this Section 7 will
result in irreparable injury to the Res-Care Companies and that the remedy at
law of such parties for such a breach will be inadequate. Accordingly, Employee
agrees and consents that each of the Res-Care Companies in addition to all other
remedies available to them at law and in equity, shall be entitled to seek both
preliminary and permanent injunctions to prevent and/or halt a breach or
threatened breach by Employee of any covenant contained in this Section 7. If
any provision of this Section 7 is invalid in part or in whole, it shall be
deemed to have

 

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been amended, whether as to time, area covered, or otherwise, as and to the
extent required for its validity under applicable law and, as so amended, shall
be enforceable. The parties further agree to execute all documents necessary to
evidence such amendment.

 

(f)                                    Advice to Future Employers.  If Employee,
in the future, seeks or is offered employment by any other Person, he shall
provide a copy of this Section 7 to the prospective employer prior to accepting
employment with that prospective employer.

 

8.                                       Entire Agreement; Modification; Waiver.
This Employment Agreement constitutes the entire agreement between the parties
pertaining to the subject matter contained in it and supersedes all prior and
contemporaneous agreements, representations, and understandings of the parties,
including but not limited to the Prior Agreement. Notwithstanding the foregoing,
the expiration of the Prior Agreement and the execution of this Employment
Agreement shall not affect Employee’s rights to any unpaid Incentive Bonus (as
defined in the Prior Agreement) that may have been earned by Employee for the
calendar year 2007 or any vesting of any Restricted Shares (as defined in the
Prior Agreement) granted to Employee prior to the Commencement Date. No
supplement, modification, or amendment of this Employment Agreement shall be
binding unless executed in writing by all parties hereto (other than as provided
in the next to last sentence of Section 7(e) hereof). No waiver of any of the
provisions of this Employment Agreement will be deemed, or will constitute, a
waiver of any other provision, whether or not similar, nor will any waiver
constitute a continuing waiver. No waiver will be binding unless executed in
writing by the party making the waiver.

 

9.                                       Successors and Assigns; Assignment.
This Employment Agreement shall be binding on, and inure to the benefit of, the
parties hereto and their respective heirs, executors, legal representatives,
successors and assigns; provided, however, that this Employment Agreement is
intended to be personal to the Employee and the rights and obligations of the
Employee hereunder may not be assigned or transferred by him.

 

10.                                 Notices. All notices, requests, demands and
other communications required or permitted to be given or made under this
Employment Agreement, or any other agreement executed in connection therewith,
shall be in writing and shall be deemed to have been given on the date of
delivery personally or upon deposit in the United States mail postage prepaid by
registered or certified mail, return receipt requested, to the appropriate party
or parties at the following addresses (or at such other address as shall
hereafter be designated by any party to the other parties by notice given in
accordance with this Section):

 

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To the Company:

 

Res-Care, Inc.

9901 Linn Station Road

Louisville, Kentucky 40223

Attn:                    Ralph G. Gronefeld, Jr.,

President and Chief Executive Officer

 

To the Employee:

 

Paul G. Dunn

7621 Yaupon Drive

Austin, Texas 78759

 

11.           Execution in Counterparts. This Employment Agreement may be
executed in multiple counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same document.

 

12.           Further Assurances. The parties each hereby agree to execute and
deliver all of the agreements, documents and instruments required to be executed
and delivered by them in this Employment Agreement and to execute and deliver
such additional instruments and documents and to take such additional actions as
may reasonably be required from time to time in order to effectuate the
transactions contemplated by this Employment Agreement.

 

13.           Severability of Provisions. The invalidity or unenforceability of
any particular provision of this Employment Agreement shall not affect the other
provisions hereof and this Employment Agreement shall be construed in all
respects as if such invalid or unenforceable provisions were omitted.

 

14.           Governing Law; Jurisdiction; Venue. This Employment Agreement is
executed and delivered in, and shall be governed by, enforced and interpreted in
accordance with the laws of, the Commonwealth of Kentucky. The parties hereto
agree that the federal or state courts located in Kentucky shall have the
exclusive jurisdiction with regard to any litigation relating to this Employment
Agreement and that venue shall be proper only in Jefferson County, Kentucky, the
location of the principal office of the Company.

 

15.           Tense; Captions. In construing this Employment Agreement, whenever
appropriate, the singular tense shall also be deemed to mean the plural, and
vice versa, and the captions contained in this Employment Agreement shall be
ignored.

 

16.           Survival. The provisions of Sections 5, 6 and 7 hereof shall
survive the termination, for any reason, of this Employment Agreement, in
accordance with their terms.

 

[Remainder of page intentionally blank – signatures begin on next page.]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement
on the dates set forth below.

 

 

RES-CARE, INC.

 

 

 

 

Date:

  April 11, 2008

 

By:

 /s/ Ralph G. Gronefeld, Jr.

 

 

 

Ralph G. Gronefeld, Jr.

 

 

 

President and Chief Executive Officer

 

 

 

 

 

 

 

 

Date:

  April 11, 2008

 

 /s/ Paul G. Dunn

 

 

 

Paul G. Dunn

 

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