Exhibit 10.5

 

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, 2011, between RES-CARE, INC., a Kentucky corporation (the “Company”),
and PATRICK G. KELLEY (the “Employee”).

 

RECITALS:

 

WHEREAS, the Company and Employee previously entered into that certain
Employment Agreement effective January 1, 2008, as amended (the “Prior
Agreement”);

 

WHEREAS, the initial term of the Prior Agreement is scheduled to expire on
December 31, 2011;

 

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, 2011 (the
“Commencement Date”), and ending on December 31, 2015, subject to earlier
termination only in accordance with the express provisions of this Employment
Agreement (“Initial Term”).  This Employment Agreement shall be automatically
extended for successive periods of one (1) year each (the “Additional Term(s)”)
on the same terms and conditions unless not less than sixty (60) days prior to
the last day of the Initial Term or the then effective Additional Term, as
applicable, either the Company or Employee gives written notice to the other of
such party’s intent to not so extend the 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.

 

2.         Duties.

 

(a)        Employment as Chief Operating Officer.  During the Term, the Employee
shall serve as the Chief Operating Officer of the Company.  During the Term,
subject to the supervision and control of the President and Chief Executive
Officer of the Company

 

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(the “President”), or his designee, the Employee shall have the responsibility
for management and oversight of the Residential Services, Workforce Services and
Youth Services Segments of the Company and all of the operations of the Company
and its subsidiaries within those Residential Services, Workforce Services and
Youth Services Segments, including without limitation (i) the provision of
quality care for the clients provided services by the operations within the
Residential Services, Workforce Services and Youth Services Segments, (ii) the
provision of quality management services to entities or operations managed by
the Residential Services, Workforce Services and Youth Services Segments,
(iii) the compliance by such operations with all laws, regulations and
rules applicable to such operations, and (iv) the financial performance of such
operations and the Residential Services, Workforce Services and Youth Services
Segments as a whole.  The Employee shall perform such additional duties as may
be prescribed from time to time by the President or his designee, 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 may 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 President 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 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

 

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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 $400,000.  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. The Base Salary may be
adjusted from time to time for changes in the Employee’s responsibilities or for
market conditions.

 

(b)        Incentive Plan.  During the Term, the Employee shall be eligible for
incentive compensation in accordance with the Res-Care, Inc. Non-Equity
Incentive Plan (the “Incentive Plan”).  Shortly after the beginning of each
calendar year, the Company’s Board of Directors will establish a target of
earnings before taxes, interest, depreciation and amortization of the Company
and its subsidiaries on a consolidated basis, determined in accordance with
generally accepted accounting principles consistently applied (“EBITDA”), for
such calendar year (the “Annual EBITDA Target”).  In no event shall Employee
earn any amount under the Incentive Plan for any calendar year during the Term
unless the actual Company EBITDA for such calendar year equals or exceeds ninety
percent (90%) of the Annual EBITDA Target for such calendar year.  For all
purposes of this Employment Agreement, in determining the actual EBITDA of the
Company and its subsidiaries for each calendar year, the Executive Compensation
Committee of the Board of Directors (the “Compensation Committee”) may make such
good faith adjustments to EBITDA as it determines in its sole discretion are
appropriate to reflect non-recurring or unusual items, including, without
limitation, to give effect on a pro forma basis to any acquisition of stock or
assets of other persons by the Company or a subsidiary thereof. 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 Approved Professional Performance
Percentage and the Approved Company Performance Percentage (as determined below)
for such calendar year.  The maximum percentage of the Approved Professional
Performance Percentage for Employee shall be thirty percent (30%) and the
maximum percentage of the Approved Company Performance Percentage shall be
seventy percent (70%).  The sum of the Approved Professional Performance
Percentage and the Approved 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)         Not later than March 15 of each calendar year, the Compensation
Committee shall establish the professional performance criteria for Employee for
such calendar year to be used in calculating the Approved Professional
Performance Percentage.  The professional performance criteria for Employee for

 

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the calendar year 2011 are set forth on Exhibit A attached hereto.  The Approved
Professional Performance Percentage for each calendar year during the Term shall
be equal to (A) thirty percent (30%) multiplied by (B) the ratio of the number
of professional performance criteria satisfied by Employee for the calendar year
to the total number of professional performance criteria for the calendar year. 
However, notwithstanding anything in this Employment Agreement to the contrary,
the Approved Professional Performance Percentage shall be zero unless the actual
Company EBITDA for the respective calendar year equals or exceeds ninety percent
(90%) of the Annual EBITDA Target for such calendar year.

 

(ii)        If the Company and its subsidiaries meet or exceed the Annual EBITDA
Target for a calendar year, the Approved Company Performance Percentage for such
calendar year shall be seventy percent (70%).  Notwithstanding anything in this
Employment Agreement to the contrary, the Approved Company Performance
Percentage shall be zero unless the actual Company EBITDA for the respective
calendar year equals or exceeds the Annual EBITDA Target 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 3.  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 in the year following
the year for which it is earned, and not later than the later of
(x) seventy-four (74) days after the end of the applicable calendar year or
(y) the date of date of delivery to the Company of the audited consolidated
financial statements of the Company and its subsidiaries for such calendar year,
provided that Employee remains employed through December 31 of the year for
which the incentive bonus is earned.  Any amounts earned by the Employee under
the Incentive Plan shall be hereinafter referred to as the “Incentive Bonus.”

 

(c)        Grant of Stock Options.

 

(i)         Primary Grant.  As an inducement for the execution of this
Employment Agreement by the Employee, on the date of approval by the
Compensation Committee, which date shall not be more than sixty (60) days after
the Execution Date (the “Grant Date”), the Employee shall be granted options to
purchase four hundred seventy-six (476) shares of the Class A common stock,
$0.01 par value per share, of Onex Rescare Holdings Corp., a Delaware
corporation and the parent corporation of the Company (“Onex Rescare”).  Such
stock options (the “Primary Options’) shall be granted pursuant to and, to the
extent not expressly inconsistent herewith, governed by the Onex Rescare
Holdings Corp. Stock Option Plan (the “Stock Plan”) and the Nonstatutory Stock
Option Agreement in the form attached hereto as Exhibit B.  Provided the

 

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Employee shall continue to be employed hereunder, twenty percent (20%) of the
Primary Options shall vest and be exercisable on each of the first five (5)
anniversaries of the Grant Date (with such number of shares to be adjusted in
accordance with the terms of the Stock Plan for stock splits, stock dividends,
recapitalizations and the like).  Any Primary Options that shall not be vested
at the effective date of termination of the Employee’s employment hereunder
shall expire and any vested Primary Options shall expire in accordance with the
terms of the Stock Plan.  The Primary Options shall have an exercise price equal
to $5,000 per share.

 

(ii)        Extra Grant.  As a further inducement for the execution of this
Employment Agreement by the Employee, on the Grant Date, the Employee shall be
granted options to purchase seventy-one (71) shares of the Class A common stock,
$0.01 par value per share, of Onex Rescare.  Such stock options (the “Extra
Options”) shall be granted pursuant to and, to the extent not expressly
inconsistent herewith, governed by the Stock Plan and the Nonstatutory Stock
Option Agreement in the form attached hereto as Exhibit C (the “Extra Option
Agreement”).  All of the Extra Options shall be fully vested on the Grant Date. 
However, the Extra Options may only be exercised to the extent that the Equity
Value Per Share (as defined in the Extra Option Agreement) at the time of
exercise is at least three hundred percent (300%) of the Equity Value Per Share
at the Closing Date (as defined in the Extra Option Agreement).  The number of
Extra Option shares will be adjusted in accordance with the terms of the Stock
Plan for stock splits, stock dividends, recapitalizations and the like.  Any
Extra Options shall expire in accordance with the terms of the Stock Plan.  The
Extra Options shall have an exercise price equal to $5,000 per share.

 

(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.

 

(e)        Out-of-Pocket Expenses.  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 President.  Any reimbursements made under this
Section 3(e) will be paid no later than the last day of the Employee’s taxable
year following the taxable year in which the expense is incurred.

 

(f)         Withholding of Taxes; Income Tax Treatment.  If, upon the payment of
any compensation or benefit to the Employee under this Employment Agreement

 

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(including, without limitation, in connection with the grant of any stock
options 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.

 

(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

 

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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 President, 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
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.

 

Provided that, for purposes of the timing of payments triggered by the Date of
Termination under Section 5, Date of Termination shall not be considered to have
occurred until the date the Employee and the Company reasonably anticipate that
(i) Employee will not perform any further services for the Company or any other
entity considered a single employer with the Company under Section 414(b) or
(c) of the Internal Revenue Code of 1986, as amended (“Code”) (but substituting
fifty percent (50%) for eighty percent (80%) in the application thereof) (the
“Employer Group”), or (ii) the level of bona fide services Employee will perform
for the Employer Group after that date will permanently decrease to less than
fifty percent (50%) of the average level of bona fide services performed over
the previous thirty-six (36) months (or if shorter over the duration of
service).  For this purpose, service performed as an employee or as an
independent contractor is counted, except that service as a member of the board
of directors of an Employer Group entity is not counted unless termination
benefits under this Employment Agreement are aggregated for purposes of
Section 409A of the Code

 

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with benefits under any other Employer Group plan or agreement in which Employee
also participates as a director.  Employee will not be treated as having a
termination of Employee’s employment while Employee is on military leave, sick
leave or other bona fide leave of absence if the leave does not exceed six
(6) months or, if longer, the period during which Employee has a reemployment
right under statute or contract.  If a bona fide leave of absence extends beyond
six (6) months, Employee’s employment will be considered to terminate on the
first day after the end of such six (6) month period, or on the day after
Employee’s statutory or contractual reemployment right lapses, if later.  The
Company will determine when Employee’s Date of Termination occurs based on all
relevant facts and circumstances, in accordance with Treasury Regulation
Section 1.409A-1(h).

 

5.         Compensation upon Termination or During Disability; Change of
Control.

 

(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.  During any period of disability and prior to termination
pursuant to Section 4(b) by reason of disability, Employee shall be compensated
as provided in this paragraph (b).  During any waiting period prior to receiving
short or long-term disability payments, Employee shall be required to use
available Paid Time Off (“PTO”).  After available PTO is exhausted, Employee
shall be required to use Emergency Leave Reserve (“ELR”) time.  Once Employee
has exhausted any available ELR, Employee shall continue to be paid Employee’s
then current Base Salary until short-term disability payments to Employee
commence under any plan or program then provided and funded by the Company.  If
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, Employee shall be paid at regular payroll intervals the difference
between the periodic installments of Employee’s then current Base Salary that
would have otherwise been payable and the disability benefit paid from such
disability plan or program.  Upon termination pursuant to Section 4(b) hereof,
the above provisions of this paragraph (b) shall no longer apply and Employee
shall be entitled to any earned but unpaid Incentive Bonus for any calendar year
ended prior to the date Employee’s period of disability commenced.

 

(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 and paragraph (g) of this Section 5 shall not be applicable, the Employee
shall

 

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receive an amount equal to twice his then current Base Salary which amount shall
be payable in equal monthly installments during the period commencing with the
Date of Termination and ending on March 15 of the calendar year immediately
following the Date of Termination.  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.

 

(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 receive an amount equal to twice his then current Base Salary
which amount shall be payable in equal monthly installments during the period
commencing with the Date of Termination and ending on March 15 of the calendar
year immediately following the Date of Termination 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)        Change of Control.  If a Change of Control (as defined below) has
occurred with respect to the Company and within two (2) years after the
occurrence of such Change of Control, the Employee’s employment shall be
terminated by the Company without Cause, then Employee shall be entitled to
receive a lump sum payment equal to the Employee’s then current Base Salary
multiplied by two (2).  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 and a pro-rated Incentive Bonus for the current calendar year for
the period ending on the Date of Termination.  For purposes of this paragraph
(g), “Change of Control” means (i) an event or series of events which have the
effect of any “person” as such term is used in Section 13(d) and 14(d) of the
Exchange Act, other than (x) Onex Corporation, Onex Partners III LP or any of
their respective affiliates (as defined in Rule 12b-2 under the Exchange Act) or
any group including any of the foregoing and (y) any trustee or other fiduciary
holding securities of the Company under any employee benefit plan of the
Company, becoming the “beneficial owner” as defined in Rule 13d-3 under the
Exchange Act, directly or indirectly, of securities of the Company representing
fifty percent (50%) or more of the combined voting power of the Company’s then
outstanding capital stock; (ii) any merger, consolidation, share exchange,
recapitalization or other transaction in which any person

 

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other than Onex Corporation, Onex Partners III LP or any of the respective
affiliates or any group including any of the foregoing becomes the beneficial
owner of securities of the Company representing fifty percent (50%) or more of
the combined voting power of the Company’s then outstanding capital stock;
(iii) all or substantially all of the business of the Company is disposed of
pursuant to a partial or complete liquidation, sale of assets, or otherwise. 
Such lump sum payment will be paid to the Employee not later than seventy-four
(74) days after Employee’s Date of Termination, provided that if the Change in
Control is not a “Change in Ownership,” “Change in Effective Control” or “Change
in Asset Control” as each is defined in the final Treasury Regulations under
Section 409A of the Code, the severance payment will not be paid in a lump sum
and will instead be paid over regular pay periods for two (2) years after the
Date of Termination.

 

(h)        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 (g) 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.

 

(i)         Payment of Incentive Bonus.  If Employee will be paid an earned but
unpaid Incentive Bonus for any calendar year ending prior to Employee’s Date of
Termination under the above provisions of this Section 5, the Incentive Bonus
for the prior calendar year will be paid at the normal time as paid to employees
whose employment has not terminated. If Employee is due a pro-rated Incentive
Bonus for the calendar year in which Employee’s Date of Termination occurs, the
pro-rated bonus for the year of the Date of Termination shall be paid in the
calendar year after year the Date of Termination occurs, and at the normal
payment timing for Incentive Bonus payments, and such pro-rata bonus shall be
based on whether the actual performance measures for such Incentive Bonus period
were met at the normal time for measuring such performance measures.

 

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.

 

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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 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 Chief
Operating Officer, (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 twenty four (24) 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.

 

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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 expiration thereof until twenty four (24) months after the last day
of employment of Employee by any Res-Care Company.

 

(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 fifty (50) 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;

 

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

 

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(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.

 

(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
Workforce Services and Youth Services Segments, 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 and no
bond or other security shall be required in connection therewith.  If any
provision of this Section 7 is invalid in part or in whole, it shall be deemed
to have 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.

 

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(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.  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):

 

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:

 

Patrick G. Kelley

103 Oak Hill Court

Mount Washington, Kentucky 40047

 

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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.

 

17.       Six Month Delay.  Notwithstanding anything herein to the contrary, if
the Employee is a “specified employee” within the meaning of Treasury Regulation
Section 1.409A-1(i) (or any successor thereto) on Employee’s Date of
Termination, any severance payment that is in excess of the amount that
qualifies as separation pay under Treasury Regulation Section 1.409A-1(b)(9), or
that does not qualify as separation pay, shall not begin to be paid until six
(6) months after Employee’s Date of Termination.  The Company shall determine,
consistent with any guidance issued under Section 409A of the Code, the portion
of severance payments that are required to be delayed, if any.

 

18.       409A Compliance.  The Employee and the Company agree and confirm that
this Employment Agreement is intended by both parties to provide for
compensation that is exempt from Section 409A of the Code as separation pay (up
to the Section 409A limit), and to be compliant with Section 409A of the Code
with respect to additional severance compensation and bonus compensation.  This
Employment Agreement shall be interpreted, construed, and administered in
accordance with this agreed intent, provided that the Company does not promise
or warrant any tax treatment of compensation hereunder.  Employee is responsible
for obtaining

 

15

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advice regarding all questions to federal, state, or local income, estate,
payroll, or other tax consequences arising from participation herein.  This
Employment Agreement shall not be amended or terminated in a manner that would
accelerate or delay payment of severance pay or bonus pay except as permitted
under Treasury Regulations under Section 409A of the Code.

 

 

[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:

5/1/11

 

By:

/s/ Ralph G. Gronefeld, Jr.

 

 

 

 

Ralph G. Gronefeld, Jr.

 

 

 

 

President and Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Date:

4/4/11

 

/s/ Patrick G. Kelley

 

 

 

Patrick G. Kelley

 

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