Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”), is entered into as of this 28th
day of September, 2015 (the “Effective Date”) by and between The Providence
Service Corporation, a Delaware corporation, with its corporate headquarters
located at 64 East Broadway Blvd., Tucson, Arizona, 85701 (the “Company”), and
David Shackelton, an individual currently residing at
----------------------------------- (“Employee”).

 

BACKGROUND

 

WHEREAS, the Company desires to employ and appoint Employee as the Company’s
Senior Vice President and Chief Financial Officer;

 

WHEREAS, effective as of the Effective Date, the Company’s Board of Directors
(the “Board”) has appointed Employee as Senior Vice President and Chief
Financial Officer, and Employee desires to accept such employment and position;
and

 

WHEREAS, the Company and Employee are entering into this Agreement to set out
the agreement between them regarding the terms of Employee’s employment.

 

NOW, THEREFORE, in consideration of the facts, mutual promises and covenants
contained herein and intending to be legally bound hereby, the parties hereto
agree as of the Effective Date:

 

1. Employment and Term. The Company hereby agrees to employ Employee and
Employee hereby agrees to work in the employ of the Company. Such employment
will have a term (the “Term”) commencing as of the Effective Date and, if not
previously terminated in accordance with the terms of this Agreement, ending at
the close of business on December 31, 2017. Employee’s employment may continue
hereunder following the Term. Employee’s employment, whether during the Term or
thereafter, shall be subject in all respects to the terms and conditions set
forth in this Agreement, as well as to all of the Company’s policies and rules
that are binding on executive employees generally.

 

2. Office and Duties.

 

(a) During the Term, Employee shall serve as the Senior Vice President and Chief
Financial Officer of the Company, and shall report directly to the Company’s
Chief Executive Officer (the “CEO”) and be subject to the CEO’s supervision and
direction.

 

(b) In his capacity as Senior Vice President and Chief Financial Officer of the
Company, Employee shall have such authority, perform such duties, discharge such
responsibilities and render such services as are designated from time to time by
the CEO or the Board of Directors of the Company (the “Board”).

 

(c) While employed by the Company or any Affiliate (as hereinafter defined),
Employee shall render his services diligently, faithfully and to the best of his
ability, and shall devote substantially all of his working time, energy, skill
and best efforts to the performance of his duties hereunder, in a manner that
will further the business and interests of the Company.

 

(d) While employed by the Company or any Affiliate, Employee shall not be
engaged in any business activity which, in the reasonable judgment of the CEO or
the Board, conflicts with Employee’s duties hereunder, whether or not such
activity is in breach of Section 7 or pursued for pecuniary advantage.

 

3. Compensation.

 

(a) Base Salary. In consideration of the services rendered by Employee to the
Company during the Term, effective as of the Effective Date, Employee shall
receive an annual base salary of Four Hundred Fifty Thousand and 00/100 Dollars
($450,000.00) (the “Base Salary”), payable in equal periodic installments in
accordance with the Company’s regular payroll practices in effect from time to
time.

 

 
 

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(b) Bonus Plans/Incentive Compensation Programs.

 

(i) In addition to the annual Base Salary, during the Term, Employee shall be
eligible to participate in bonus plans or incentive compensation programs, if
any, as may be approved by the Board from time to time (“Bonus”).

 

(ii) For calendar year 2015, Employee will participate in the following Bonus
program: Employee shall be paid an amount equal to twenty-five percent (25%) of
the 2015 Pre-CFO Base Salary upon the achievement of one hundred percent (100%)
of the Company’s budgeted EBITDA performance for 2015. The “2015 Pre-CFO Base
Salary” shall mean the Base Salary to which Employee was entitled starting on
January 1, 2015 and ending on August 5, 2015. Employee shall be paid an amount
equal to seventy-five percent (75%) of the 2015 CFO Aggregate Base Salary upon
the achievement of one hundred percent (100%) of the Company’s budgeted EBITDA
performance for 2015, and up to an additional twenty-five percent (25%) of the
2015 Aggregate Base Salary if the Company exceeds such budgeted performance,
with the precise amount of such additional Bonus to be calculated on a basis
consistent with additional EBITDA-based bonus opportunity payments made to other
executive officers of the Company in respect of 2015. For the purposes hereof,
Employee’s “2015 CFO Aggregate Base Salary” shall mean the total Base Salary to
which Employee was entitled starting on August 6, 2015 and ending on December
31, 2015. Unless otherwise specified in respect of a Bonus, (x) the Bonus shall
be paid, net of any required withholdings, during calendar year 2016 promptly
following the completion and filing of the Company’s annual audited financial
statements for 2015, and (y) Employee’s rights to receive the Bonus shall be
contingent upon being employed by the Company on the date that payment of the
Bonus is due, except as otherwise expressly provided in this Agreement. Employee
hereby acknowledges and agrees that the amount to which Employee is entitled
under this Section 3(b)(ii) is in lieu of any amounts that Employee would
otherwise have been entitled to receive in connection with his employment for
the calendar year 2015 with the Company as Head of Corporate Development.

 

(iii) For both the 2016 and 2017 calendar years, Employee shall be eligible to
receive a Bonus. The percentage of the Base Salary such Bonuses represent as
well as the goals to be achieved before such Bonuses are paid out will be
determined by the Board or compensation committee of the Board.

 

(c) Benefits.

 

(i) During his employment hereunder, Employee also shall be entitled to
participate in all fringe benefits, if any, as may be in effect from time to
time that are generally available to the Company’s senior executive officers,
and such other fringe benefits as the Board and/or Compensation Committee shall
deem appropriate, subject to eligibility requirements thereof (collectively, the
“Benefits”).

 

(ii) During the Term, in addition to the foregoing Benefits, the Company shall,
subject to the terms hereof (including as set forth in Section 3(c)(iii)), use
its reasonable efforts to procure and maintain term life insurance (“Life
Insurance”) on the life of Employee (if such term insurance is not already in
effect on the date of this Agreement). Such Life Insurance shall be in the
amount of Nine Hundred Thousand and 00/100 Dollars ($900,000.00). Employee shall
be the owner of the Life Insurance policy and shall have the absolute right to
designate the beneficiaries thereunder. The premiums in respect of such Life
Insurance policy shall be paid by the Company for the shorter of (A) the period
of five (5) years commencing on the later of (1) the date of this Agreement and
(2) the date the Life Insurance goes into effect and (B) the period Employee is
employed by the Company hereunder; premiums in respect thereof shall thereafter
be paid by Employee.

 

(iii) Employee agrees to submit to any physical examination required by the
insurer of any such policy and will otherwise cooperate with the Company in
connection with any life insurance on Employee’s life the Company may wish to
obtain, provided, however, that the results of any such physical examination
shall not be shared with the Company or used in any way in connection with
Employee’s employment other than the procurement of insurance pursuant to this
Subsection. Employee agrees to execute any HIPAA or other privacy waiver in
favor of the Company that the Company considers necessary or appropriate for
sharing of such information, or to waive the coverage otherwise under this
Section 3(c). In the event Employee is determined to be suffering from a
congenital defect or other illness or condition which would preclude the Company
from obtaining the insurance referred to in the preceding paragraph at a cost
substantially equivalent to the cost of obtaining such insurance for a healthy
individual of Employee’s age and gender, the Company shall, in lieu of
purchasing the insurance in the amount set forth in the preceding paragraph,
purchase the amount of insurance, if any, that can be purchased at a cost
substantially equivalent to the cost of obtaining such insurance for a healthy
individual of Employee’s age and gender.

 

 
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(d) Vacation. During his employment hereunder, Employee shall be entitled to the
number of paid vacation days in each calendar year as determined by the Company
from time to time for its senior executive officers. Vacation days which are not
used during any calendar year may not be accrued or carried over to the next
year, nor shall Employee be entitled to compensation for unused vacation days.

 

(e) Business Expenses. During his employment hereunder, the Company shall pay or
reimburse Employee for all reasonable expenses incurred or paid by Employee in
the performance of Employee’s duties hereunder, upon timely presentation of
expense statements or vouchers and such other information as the Company may
reasonably require and in accordance with the generally applicable policies and
practices of the Company, in each case to the extent such expenses are
consistent with Company policies; provided that the Company may at any time,
further limit, or eliminate, Employee’s right to incur such expenses. Any
reimbursement due hereunder shall be separately requested and paid as soon as
practicable and in any case within one (1) year after Employee incurs the
expense for which reimbursement is requested.

 

(f) Withholding. All payments made pursuant to this Agreement shall be subject
to such withholding taxes as may be required by any applicable law.

 

4. Representations of Employee. Employee represents to the Company that: (a)
there are no restrictions, agreements or understandings whatsoever to which
Employee is a party that would prevent, or make unlawful, Employee’s execution
of this Agreement and his employment hereunder; (b) Employee’s execution of this
Agreement and Employee’s employment hereunder shall not constitute a breach of
any contract, agreement or understanding, oral or written, to which Employee is
a party, or by which Employee is bound; and (c) Employee is of full capacity,
free and able to execute this Agreement and to enter into this Agreement with
the Company.

 

5. Termination. This Agreement and Employee’s employment hereunder shall
continue during the Term and thereafter until terminated as provided herein.
Upon termination of this Agreement and Employee’s employment hereunder, Employee
shall immediately resign from any officer, director or other position in which
he is serving on behalf of the Company or any Affiliate, and shall tender his
resignation as a director of any and all Affiliates of the Company.

 

(a) Termination by Company for Cause. The Company shall have the right, during
the Term and thereafter, to terminate this Agreement and Employee’s employment
hereunder at any time for “Cause”, effective immediately or as of a date
specified by the Company in a notice of termination. For purposes of this
Agreement, the term “Cause” shall mean the following:

 

(i) Employee commits fraud or theft against the Company or any of its
subsidiaries, affiliates, joint ventures and related organizations, including
any entity managed by the Company (collectively referred to as “Affiliates”), or
is convicted of, or pleads guilty or nolo contendere to, a felony or any crime
involving fraud or moral turpitude;

 

(ii) In carrying out his duties hereunder, Employee engages in conduct that
constitutes gross neglect or willful misconduct and that results, in either
case, in material financial or reputational harm to the Company or its
Affiliates;

 

(iii) Employee materially breaches any provision of this Agreement (including
but not limited to the restrictive covenants contained in Section 7) or breaches
any fiduciary duty or duty of loyalty owed to the Company or its Affiliates or
shareholders;

 

(iv) Employee engages in any wrongful or questionable conduct which does or
which is reasonably likely to bring the Company or its Affiliates into public
disgrace or embarrassment, or which is reasonably likely to cause one or more of
its customers or clients to cease doing business with, or reduce the amount of
business with, the Company or its Affiliates;

 

 
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(v) Employee repeatedly neglects or refuses to perform his duties or
responsibilities as directed by the CEO or the Board or any committee
established by the Board, or violates any express direction of any lawful rule,
regulation or policy established by the Company, the CEO, the Board or any
committee established by the Board which is consistent with the scope of
Employee’s duties under this Agreement, and such failure, refusal or violation
continues uncured for a period ten (10) days after written notice from the
Company to Employee specifying the failure, refusal or violation and the
Company’s intention to terminate this Agreement for Cause;

 

(vi) Employee commits any act or omission resulting in or intended to result in
direct material personal gain to Employee at the expense of the Company or its
Affiliates; or

 

(vii) Employee materially compromises trade secrets or other confidential and
proprietary information of the Company or its Affiliates.

 

Action or inaction by Employee shall not be considered “willful” unless done or
omitted by him intentionally and without his reasonable belief that his action
or inaction was in the best interests of the Company or its Affiliates, and
shall not include failure to act by reason of total or partial incapacity due to
physical or mental illness.

 

(b) Termination upon Death/Termination by Company upon Disability of Employee.
Employee’s employment will terminate upon his death. The Company shall have the
right to terminate this Agreement and Employee’s employment hereunder at any
time upon the Disability of Employee. The term, “Disability”, as used herein,
means any physical or mental illness, disability or incapacity which prevents
Employee from performing the essential functions of his job, with or without
reasonable accommodations, hereunder for a period of not less than one hundred
fifty (150) consecutive days or for an aggregate of one hundred eighty (180)
days during any period of twelve (12) consecutive months. Periods where Employee
can perform the essential functions of his job with a reasonable accommodation
shall not be included in the determination of a Disability hereunder. During any
period of Disability, Employee agrees to submit to reasonable medical
examinations upon the reasonable request, and at the expense, of the Company.

 

(c) Termination By Company Without Cause. The Company shall have the right to
terminate this Agreement and Employee’s employment hereunder at any time without
Cause and/or without the occurrence of Employee’s death or Disability by giving
written notice which shall be effective on the date specified in such notice of
termination.

 

(d) Termination by Employee; Termination Following Term. In the event Employee
terminates his employment, whether or not during the Term, or if the Company
terminates this Agreement and Employee’s employment hereunder effective
following the end of the Term, Employee shall give the Company not less than
sixty (60) days prior written notice of termination. Upon a termination of
Employee’s employment with the Company under this Section 5(d), the effective
date of termination shall be the date set forth in Employee’s resignation notice
(assuming such date is in compliance with the notice provisions of this Section
5(d)) or an earlier date as determined by the Company after the Company’s
receipt of such notice, in its sole discretion, but not earlier than the date on
which the Company learned of Employee’s decision to terminate his employment.

 

(e) Notice of Termination. Any termination, except for death, pursuant to this
Section 5 shall be communicated by a Notice of Termination. For purposes of this
Agreement, a “Notice of Termination” shall mean a written notice which shall
indicate those specific termination provisions in this Agreement relied upon and
which sets forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Employee’s employment under the provisions so
indicated. The Notice of Termination shall also set forth that Employee’s
employment is terminated and be delivered in accordance with the terms of this
Agreement.

Notwithstanding anything to the contrary set forth herein, Sections 7, 8 and 9
shall survive the end of the Term and/or the termination of Employee’s
employment hereunder for any reason, and shall remain in full force and effect
thereafter.

 

 
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6. Payments Upon Termination and Change in Control.

 

(a) Termination for Cause. In the event Employee’s employment hereunder is
terminated for Cause at any time, whether or not during the Term, all of
Employee’s rights to his Base Salary, Benefits and Bonus, if any, shall
immediately terminate as of the date of such termination, except that Employee
shall be entitled to any earned and unpaid portion of Employee’s Base Salary and
accrued Benefits up to the date of termination, less all deductions or offsets
for amounts owed by Employee to the Company. Employee shall not be entitled to
any Bonus, prorated or otherwise. The Company shall have no further obligations
to Employee under this Agreement.

 

(b) Termination Due to Death or Disability. In the event Employee’s employment
hereunder is terminated at any time, whether or not during the Term, due to his
death or Disability, all of Employee’s rights to his Base Salary, Benefits
(except to the extent that any Benefits are expressly available following
termination of employment) and Bonus, if any, shall immediately terminate as of
the effective date of such termination, except that Employee (or, in the event
that Employee’s employment hereunder is terminated due to Employee’s death,
Employee’s heirs, personal representatives or estate) shall be entitled to any
earned and unpaid portion of Employee’s Base Salary, any Bonus (if earned)
relating to a fiscal year which was completed before Employee’s death or
Disability and accrued Benefits up to the date of termination, in each case less
all deductions or offsets for amounts owed by Employee to the Company. Subject
to the provisions of the applicable Company stock option or stock incentive
plan, should Employee’s death occur within one (1) year following his
termination for Disability, but prior to his exercise of any options vested at
the date of termination, Employee’s estate shall be entitled to exercise
Employee’s options for the earlier of (i) the remainder of the one (1) year
period or (ii) the date upon which the option would have expired by its terms.
The foregoing clause (ii) shall apply to the extent needed to avoid adverse tax
consequences under Section 409A of the Internal Revenue Code of 1986, as amended
(the “Code”). The Company shall have no further obligations to Employee under
this Agreement.

 

(c) Termination By the Company Without Cause. If, during the Term, the Company
terminates Employee’s employment other than for Cause or the occurrence of
Employee’s death or Disability, Employee shall be entitled to continue to
receive (i) any Bonus (if earned) relating to a fiscal year which was completed
before the effectiveness of such termination (payable as set forth in Section
3(b)), (ii) any Bonus for the fiscal year through the date of effectiveness of
such termination, to the extent earned, pro-rated (based on a percentage defined
by a fraction, the numerator of which is the number of days during the fiscal
year prior and through the date of effectiveness of the termination, and the
denominator of which is three hundred sixty-five (365)), payable following the
completion and filing of the Company’s annual audited financial statements in
respect of such fiscal year, and (iii) an amount equal to twelve months of
Employee’s Base Salary in effect as of the date of effectiveness of such
termination (in the case of clause (iii), Employee’s Base Salary will be paid in
periodic payments which correspond to the Company’s regular payroll periods)
(the period during which Employee’s Base Salary will continue as provided in
this Clause (iii), the “Post Employment Payment Period”); provided that any
payments set out in clauses (i), (ii) and (iii) shall only be made so long as
Employee is not in breach of this Agreement and shall be net of appropriate tax
and other withholdings. Notwithstanding the foregoing, the Company may suspend
payments of such Bonus or Base Salary until seven (7) days following the date on
which Employee executes and delivers to the Company a general release of all
claims relating to Employee’s employment and termination from employment (the
“General Release”) in a form provided by the Company (which General Release
shall not affect any rights Employee may have under COBRA or under any vested
award previously issued to Employee by the Company under any Company benefit
plan) assuming such General Release is not revoked during such seven (7) day
period and assuming Employee is not in breach of this Agreement. Employee
understands that if the conditions set forth in the preceding sentence are not
met, Employee shall not be entitled to a Bonus or any payments of Base Salary
relating to periods of time following the effective date of the termination of
Employee’s employment under this Section 6(c) or otherwise. The Company shall
have no further obligations to Employee under this Agreement. Notwithstanding
any other provision in this Agreement to the contrary, by notice to Employee
during the Post-Employment Payment Period, the Company may elect to continue to
pay Employee’s Base Salary for any additional period ending no later than the
second anniversary of the effectiveness of termination of Employee’s employment
hereunder by the Company without Cause (“Continuing Payment Period”).

 

(d) Termination By Employee During Term. In the event Employee terminates his
employment during the Term, all of Employee’s rights to his Base Salary,
Benefits (except to the extent any Benefits are expressly available following
such event) and Bonus, if any, shall immediately terminate as of the effective
date of termination, except that Employee shall be entitled to any earned and
unpaid portion of his Base Salary and accrued Benefits up to the date of
termination. Employee shall not be entitled to any Bonus, prorated or otherwise.
The Company shall have no further obligations to Employee under this Agreement.

 

 
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(e) Payment Upon Change in Control. Notwithstanding any other provision in this
Agreement to the contrary, if a “Change in Control” of the Company (as defined
herein) shall occur during the Term, and after such Change in Control but prior
to the end of the Term the Company terminates Employee’s employment without
Cause with such termination being effective during the Term, in lieu of any
other amounts payable under this Agreement, Employee shall be entitled to
receive (i) an amount equal to twelve months of Employee’s Base Salary in effect
as of the date of effectiveness of such termination in a lump sum payment,
payable immediately upon cessation of employment, and (ii) a pro-rata portion of
the Bonus, contingent on the Company’s achievement of any performance criteria
relating to such Bonus, payable promptly following completion and filing of the
Company’s year-end audit for the applicable year (such payments shall be net of
appropriate tax and other withholdings, and are referred to collectively as the
“Change in Control Payments”); provided, however, that if such Change in Control
Payments, either alone or together with other payments or benefits, either cash
or non-cash, that Employee has the right to receive from the Company, including,
but not limited to, accelerated vesting or payment of any deferred compensation,
options, stock appreciation rights or any benefits payable to Employee under any
plan for the benefit of employees, which would constitute an “excess parachute
payment” (as defined in Section 280G of the Code), then such Change in Control
Payments or other benefits shall be reduced to the largest amount that will not
result in receipt by Employee of an excess parachute payment. A Change in
Control will have no other effect on this Agreement, which will remain in full
force and effect.

 

(i) Definition of Change in Control. For purposes of this Agreement, the term
“Change in Control” shall mean an event or events, in which:

 

(A) any “person” as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the “1934 Act”) (other than (1) the Company,
(2) any subsidiary of the Company, (3) any trustee or other fiduciary holding
securities under an employee benefit plan of the Company or of any subsidiary of
the Company or (4) any company owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company), is or becomes the “beneficial owner” (as
defined in Section 13(d) of the 1934 Act), together with all affiliates and
Associates (as such terms are used in Rule 12b-2 of the General Rules and
Regulations under the 1934 Act) of such person, directly or indirectly, of
securities of the Company representing 50% or more of the combined voting power
of the Company’s then outstanding securities;

 

(B) the consummation of a merger or consolidation of the Company with any other
company, other than (1) a merger or consolidation which would result in the
holders of voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity), in combination with
the ownership of any trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any subsidiary of the Company, having at
least 50% of the combined voting power of the voting securities of the Company
or such surviving entity outstanding immediately after such merger or
consolidation or (2) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) after which no “person”
(with the method of determining “beneficial ownership” used in clause (A) of
this definition) owns more than 50% of the combined voting power of the
securities of the Company or the surviving entity of such merger or
consolidation; or

 

(C) the Company consummates its liquidation or sale or disposition by the
Company of all or substantially all of the Company’s assets.

 

(f) Recognition. Employee recognizes and accepts that the Company shall not, in
any case, be responsible for any additional amount, severance pay, termination
pay, severance obligation or other payments or damages whatsoever arising from
the termination of Employee’s employment above and beyond those specifically
provided for herein.

 

 
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7. Restrictive Covenants.

 

(a) Business of the Company. The term “Business of the Company”, as used in this
Section 7, shall mean the provision by the Company or its Affiliates of social
services, counseling, client monitoring and mentoring, substance abuse treatment
and counseling, school support services, case management and foster care
services to children, adults and families in community based settings such as a
client’s home, school or workplace, intake, assessment and referral, case
management and network management services to governmental agencies and provider
networks, and educational tutoring, job readiness and private parole or
probation, non-emergency medical transportation, health risk assessments and any
other business in which the Company or its Affiliates have been, plan or have
planned to be engaged during Employee’s employment with the Company or its
Affiliates.

 

(b) Non-Competition. During Employee’s employment with the Company or any of its
Affiliates and thereafter, as applicable, during (i) the Post-Employment Payment
Period or, if applicable, during the Continuing Payment Period (as defined in
Section 6(c)) or (ii) the two (2) year period following the effectiveness of the
Company’s termination of Employee for Cause or Employee’s termination of his
employment hereunder, Employee will not, in any capacity (including, but not
limited to, owner, partner, member shareholder, consultant, advisor, financier,
agent, employee, officer, director, manager or otherwise), directly or
indirectly, for his own account or for the benefit of any natural person,
corporation, partnership, trust, estate, joint venture, sole proprietorship,
association, cooperative or other entity (any of the foregoing, a “Person”),
establish, engage in, finance, advise, work for, or be connected with, except as
an employee of the Company, any business in competition with the Business of the
Company if such business competes with the Business of the Company or any
Affiliate in any country, State, county, or municipality where the Company or
its Affiliates conduct business, are preparing to conduct business or have
conducted business during Employee’s employment with the Company or any of its
Affiliates (a “Competitive Business”). Notwithstanding the foregoing, (A)
nothing in this Section 7(b) shall preclude Employee from serving in any
capacity (i.e., whether as an employee, partner, principal, member, investor,
consultant or otherwise) to or in respect of a business or entity (including,
without limitation, an investment trust or investment partnership) that provides
investment services or is otherwise engaged in the business of investing capital
for third parties, or any manager or affiliate of any of the foregoing (any such
entity, manager or affiliate hereafter called an “Investment Firm”), so long as
Employee does not have personal, direct and material responsibilities for the
day to day operations of any Competitive Business in which such Investment Firm
has made or directed an investment and (B) this Section 7(b) shall not apply,
and therefore Employee shall not be subject to any covenant in this Section
7(b), in the event that, within one (1) year following the effectiveness of a
Change in Control (I) Employee is terminated by the Company during or following
the Term without Cause or (II) the Term has expired and Employee’s employment
with the Company is terminated due to resignation by Employee at a time that the
Company has no basis to terminate Employee with Cause.   

 

(c) Non-Solicitation/Non-Piracy. During Employee’s employment with the Company
or any of its Affiliates and for a period of two (2) years thereafter, Employee
will not, directly or indirectly, for his own account or for the benefit of any
Person or entity:

 

(i) solicit, service, supply or sell to, contact, or aid in the solicitation,
servicing, supplying or selling to any Person or entity which is or was a
customer, prospective customer, client, prospective client, contractor,
subcontractor or supplier of the Company or its Affiliates within three (3)
years prior to Employee’s termination of employment (“Company
Customers/Clients”), for the purpose of (A) selling services or goods in
competition with the Business of the Company; (B) inducing Company
Customers/Clients to cancel, transfer or cease doing business in whole or in
part with the Company or any of its Affiliates or (C) inducing Company
Customers/Clients to do business with any Person in competition with the
Business of the Company; or

 

(ii) solicit, aid in solicitation of, induce, contact for the purpose of,
encourage or in any way cause any employee of the Company or any of its
Affiliates to leave the employ of the Company or its Affiliates, or otherwise
interfere with such employee’s relationship with the Company or any of its
Affiliates.

 

 
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(d) Non-Disclosure. Other than in furtherance of the Business of the Company, in
the ordinary course in Employee’s capacity as an employee hereunder, Employee
will not, at any time, except with the express prior written consent of the
Board, directly or indirectly, disclose, communicate or divulge to any Person,
or use for the benefit of any Person, any secret, confidential or proprietary
knowledge or information relating to the Company or any of its Affiliates
including, but not limited to, customer and client lists, customer and client
accounts and information, prospective client, customer, contractor or
subcontractor lists and information, services, techniques, methods of operation,
pricing, costs, sales, sales strategies or methods, marketing, marketing
strategies or methods, products, product development, research, know-how,
policies, financial information, financial condition, business strategies or
plans or other information of the Company or its Affiliates which is not
generally available to the public. Upon the expiration or termination of
Employee’s employment with the Company or any Affiliate, Employee shall
immediately deliver to the Company all memoranda, books, papers, letters and
other data (whether in written form or computer stored), and all copies of same,
which were made by Employee or came into Employee’s possession or under his
control at any time prior to the expiration or termination of Employee’s
employment, and which in any way relate to the business, assets or properties of
the Company or any of its Affiliates as conducted or as planned to be conducted
by the Company or its Affiliates; provided that Employee can keep such documents
and information as are pertinent to the terms of his employment and the
compensation payable to him in respect thereof subject to other restrictions and
provisions set forth in this Section 7.

 

(e) Intellectual Property. Employee will promptly communicate to the Company, in
writing when requested, all software, designs, techniques, concepts, methods and
ideas, other technical information, marketing strategies and other ideas and
creations pertaining to the Business of the Company which are conceived of or
developed by Employee alone or with others, at any time (during or after
business hours) while Employee is employed by the Company or any of its
Affiliates. Employee acknowledges that all of those ideas and creations are
inventions and works for hire, and will be the Company’s or its Affiliates’
exclusive property. Employee will sign any documents which the Company deems
necessary to confirm its ownership of those ideas and creations and Employee
will cooperate with the Company to facilitate the ability of the Company to own
or exploit all of those ideas and creations.

 

(f) Non-Disparagement. Employee will not at any time publish or communicate
disparaging or derogatory statements or opinions about the Company or its
Affiliates, including but not limited to, disparaging or derogatory statements
or opinions about the Company’s or its Affiliates’ management, products or
services to any third party. It shall not be a breach of this Section 7(f) for
Employee to testify truthfully in any judicial or administrative proceeding or
to make statements or allegations in legal filings, including, without
limitation, any such filings made by Employee to enforce his rights against the
Company or any of its affiliates, that are based on Employee’s reasonable belief
and are not made in bad faith.

 

(g) Enforcement. Employee acknowledges that the covenants and agreements of this
Section 7 (the “Covenants”) herein are of a special and unique character, which
gives them peculiar value, the loss of which cannot be reasonably or adequately
compensated for in an action at law. Employee further acknowledges that any
breach or threat of breach by him of any of the Covenants will result in
irreparable injury to the Company for which money damages could not be adequate
to compensate the Company. Therefore, in the event of any such breach or
threatened breach, the Company shall be entitled, in addition to all other
rights and remedies which the Company may have at law or in equity, to have an
injunction issued by any competent court enjoining and restraining Employee
and/or all other Persons involved therein from committing a breach or continuing
such breach. The remedies granted to the Company in this Agreement are
cumulative and are in addition to remedies otherwise available to the Company at
law or in equity. The Covenants contained in this Section 7 are independent of
any other provision of this Agreement, and the existence of any claim or cause
of action which Employee or any such other Person may have against the Company
shall not constitute a defense or bar to the enforcement of any of the
Covenants. If the Company is obliged to resort to litigation to enforce any of
the Covenants which has a fixed term, then such term shall be extended for a
period of time equal to the period during which a breach of such Covenant was
occurring, beginning on the date of a final court order (without further right
of appeal) holding that such a breach occurred, or, if later, the last day of
the original fixed term of such Covenant.

 

(h) Acknowledgements. Employee expressly acknowledges that the Covenants are a
material part of the consideration bargained for by the Company and, without the
agreement of Employee to be bound by the Covenants, the Company would not have
agreed to enter into this Agreement. Employee further acknowledges and agrees
that the Business of the Company and its services are highly competitive, and
that the Covenants contained in this Section 7 are reasonable and necessary to
protect the Company’s legitimate business interests. In addition, Employee
acknowledges that in the event his employment with the Company terminates, he
will still be able to earn a livelihood without violating this Agreement, and
that the Covenants contained in this Section 7 are material conditions to his
employment and continued employment with the Company.

 

 
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(i) Scope. If any portion of any Covenant or its application is construed to be
invalid, illegal or unenforceable, then the remaining portions and their
application shall not be affected thereby, and shall be enforceable without
regard thereto. If any of the Covenants is determined to be unenforceable
because of its scope, duration, geographical area or similar factor, then the
court or other trier of fact making such determination shall modify, reduce or
limit such scope, duration, area or other factor, and enforce such Covenant to
the extent it believes such factor(s) to be lawful and appropriate.

 

(j) Costs; Expenses in the Event of Breach. In the event that Employee breaches
or attempts to breach the Covenants contained, the Company shall be entitled to
reimbursement from Employee for all costs and expenses associated with any
successful action to enforce any of the Covenants, including but not limited to
reasonable attorneys’ fees and costs of litigation. Should the Company file an
action against Employee relating to a breach of the Covenants, and a court of
competent jurisdiction determines that Employee did not breach any of the
Covenants, Employee shall be entitled to reimbursement from the Company of all
costs and expenses associated with defending against such action asserting a
breach, including reasonable attorneys’ fees and costs.

 

8. Section 409A of the Code.

 

(a) Amounts payable under this Agreement are intended either to be exempt from
the rules of Section 409A of the Code or to satisfy those rules and shall be
construed accordingly. The Company shall not be liable to Employee with respect
to any adverse tax consequences arising under Section 409A or other provision of
the Code by reason of the operation of this Agreement or any benefit provided to
Employee under any employee benefit plan sponsored or maintained by the Company,
in either case, in accordance with its terms.

 

(b) If any provision of this Agreement contravenes any regulations or Treasury
guidance promulgated under Code Section 409A or could cause an amount payable
hereunder to be subject to the interest and penalties under Code Section 409A,
such provision of this Agreement shall be deemed automatically modified to
maintain, to the maximum extent practicable, the original intent of the
applicable provision without violating the provisions of Code Section 409A. A
termination of employment shall not be deemed to have occurred for purposes of
any provision of this Agreement providing for the payment of any amounts or
benefits upon or following a termination of employment unless such termination
is also a “Separation from Service” within the meaning of Code Section 409A and,
for purposes of any such provision of this Agreement, references to a
“termination,” “termination of employment” or like terms shall mean Separation
from Service.

 

(c) Notwithstanding any provisions of this Agreement to the contrary, if
Employee is a “specified employee” (as such term is defined for purposes of Code
Section 409A), no payment of amounts not exempt from Code Section 409A shall be
made under Section 6(c) or 6(e) hereof prior to the six (6) month anniversary of
Employee’s separation of service to the extent such six (6) month delay in
payment is required to comply with Code Section 409A. To the extent that this
Section 8(c) applies to any Severance Payment under Section 6(c) hereof, and the
actions described in this sentence do not cause adverse tax consequences to be
imposed under the Code, the Company shall, as soon as practicable following
Employee’s termination of employment, and after Employee executes and does not
revoke the General Release, deposit an amount equal to the gross amount of such
Severance Payment into an irrevocable Rabbi Trust in the form prescribed by
Internal Revenue Service Revenue Procedure 92-64. Such Rabbi Trust shall be
established and maintained by the Company, at its own expense, pending the
distribution of such amount to Employee under this Agreement. The Trustee shall
be a financial institution selected by the Company and the Trustee shall invest
all amounts deposited therein with the purpose of preserving the Trust
principal. All principal and income from the Rabbi Trust shall be paid to
Employee on the first day following the six-month anniversary of Employee’s
Separation from Service. The Trustee shall withhold or cause to be withheld all
withholding taxes as may be required by applicable law.

 

9. Miscellaneous.

 

(a) Indulgences, Etc. Neither the failure, nor any delay, on the part of either
party to exercise any right, remedy, power or privilege under this Agreement
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, remedy, power or privilege preclude any other or further exercise of
the same, or of any other right, remedy, power or privilege, nor shall any
waiver of any right, remedy, power or privilege with respect to any occurrence
be construed as a waiver of such right, remedy, power or privilege with respect
to any other occurrence. No waiver shall be effective unless it is in writing
and is signed by the party asserted to have granted such waiver.

 

 
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(b) Controlling Law; Consent to Arbitration; Service of Process.

 

(i) This Agreement and all questions relating to its validity, interpretation,
performance and enforcement (including, without limitation, provisions
concerning limitations of actions), shall be governed by and construed in
accordance with the laws of the State of Arizona (notwithstanding any conflict
of laws doctrines of such state or other jurisdiction to the contrary), and
without the aid of any canon, custom or rule of law requiring construction
against the draftsman.

 

(ii) Except to the extent provided for in Section 7 above (relating to
injunctive relief and other equitable remedies), the Company and Employee agree
that any claim, dispute or controversy arising under or in connection with this
Agreement, or otherwise in connection with Employee’s employment by the Company
or termination of his employment (including, without limitation, any such claim,
dispute or controversy arising under any federal, state or local statute,
regulation or ordinance or any of the Company’s employee benefit plans, policies
or programs) shall be resolved solely and exclusively by binding, confidential,
arbitration. The arbitration shall be held in Tucson, Arizona (or at such other
location as shall be mutually agreed by the parties). The arbitration shall be
conducted in accordance with the National Rules for the Resolution of Employment
Disputes of the American Arbitration Association (the “AAA”) in effect at the
time of the arbitration, except that the arbitrator shall be selected by
alternatively striking from a list of five arbitrators supplied by the AAA. All
fees and expenses of the arbitration, including a transcript if either requests,
shall be borne equally by the parties, however, all costs for the services of
the arbitrator shall be borne solely by the Company.

 

(iii) Each party is responsible for the fees and expenses of its own attorneys,
experts, witnesses, and preparation and presentation of proofs and post-hearing
briefs (unless the party prevails on a claim for which attorney’s fees are
recoverable under law). In rendering a decision, the arbitrator shall apply all
legal principles and standards that would govern if the dispute were being heard
in court. This includes the availability of all remedies that the parties could
obtain in court. In addition, all statutes of limitation and defenses that would
be applicable in court, will apply to the arbitration proceeding. The decision
of the arbitrator shall be set forth in writing, and be binding and conclusive
on all parties. Any action to enforce or vacate the arbitrator’s award shall be
governed by the Federal Arbitration Act, if applicable, and otherwise by
applicable state law. If either the Company or Employee improperly pursues any
claim, dispute or controversy against the other in a proceeding other than the
arbitration provided for herein, the responding party shall be entitled to
dismissal or injunctive relief regarding such action and recovery of all costs,
losses and attorney’s fees related to such action.

 

(iv) Each of the parties hereto hereby consents to process being served in any
suit, action or proceeding of any nature, by the mailing of a copy thereof by
registered or certified first-class mail, postage prepaid, return receipt
requested, to them at their respective addresses set forth in Section 9(c)
hereof. Each of parties hereto hereby irrevocably waives, to the fullest extent
permitted by applicable law, all claims of error by reason of any such service
pursuant to the terms hereof (but does not waive any right to assert lack of
subject matter jurisdiction) and agrees that such service shall (A) be deemed in
every respect effective service of process in any such suit, action or
proceeding and (B) to the fullest extent permitted by applicable law, be taken
and held to be valid personal service.

 

(v) Nothing in this Section 9(b) shall affect the right of any party hereto to
serve process in any manner permitted by law or affect the right of any party to
bring proceedings against any other party in the courts of any jurisdiction or
jurisdictions.

 

(c) Notices. All notices, requests, demands and other communications required or
permitted under this Agreement shall be in writing and shall be deemed to have
been duly given, made and received only when delivered (personally, by courier
service such as Federal Express, or by other messenger) or when deposited in the
United States mails, registered or certified mail, postage prepaid, return
receipt requested, addressed as set forth below.

 

 
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(i) If to Employee:

 

David Shackelton
---------------------------------------------

---------------------------------------------

 

(ii) If to the Company:

 

The Providence Service Corporation
64 East Broadway Blvd.
Tucson, AZ 85701
Attention: Chief Executive Officer

 

In addition, notice by mail shall be by air mail if posted outside of the
continental United States.

 

Any party may alter the addresses to which communications or copies are to be
sent by giving notice of such change of address in conformity with the
provisions of this Section 9(c) for the giving of notice.

 

(d) Assignment of Agreement. The rights and obligations of both parties under
this Agreement shall inure to the benefit of and shall be binding upon their
heirs, successors and assigns. The Company may assign or otherwise transfer its
rights under this Agreement, including but not limited to all Covenants
contained in Section 7 above, to any successor or affiliated business or
corporation whether by sale of stock, merger, consolidation, sale of assets or
otherwise. This Agreement may not, however, be assigned by Employee to a third
party, nor may Employee delegate his duties under this Agreement.

 

(e) Execution in Counterparts. This Agreement may be executed in any number of
counterparts, including by a counterpart in electronic format, each of which
shall be deemed to be an original as against any party whose signature appears
thereon, and all of which shall together constitute one and the same instrument.
This Agreement shall become binding when one or more counterparts hereof,
individually or taken together, shall bear the signatures of all of the parties
reflected hereon as the signatories.

 

(f) Provisions Separable. The provisions of this Agreement are independent of
and separable from each other, and no provision shall be affected or rendered
invalid or unenforceable by virtue of the fact that for any reason any other or
others of them may be invalid or unenforceable in whole or in part.

 

(g) Entire Agreement. This Agreement contains the entire understanding among the
parties hereto with respect to the subject matter hereof, and supersedes all
prior and contemporaneous agreements and understandings between the parties,
inducements or conditions, express or implied, oral or written, except as herein
contained. The express terms hereof control and supersede any course of
performance and/or usage of the trade inconsistent with any of the terms hereof.
This Agreement may not be modified or amended other than by an agreement in
writing.

 

(h) Section Headings. The section headings in this Agreement are for convenience
only; they form no part of this Agreement and shall not affect its
interpretation.

 

(i) Gender, Etc. Words used herein, regardless of the number and gender
specifically used, shall be deemed and construed to include any other number,
singular or plural, and any other gender, masculine, feminine or neuter, as the
context indicates is appropriate.

 

(j) Independent Review and Consultation. Employee is hereby advised to consult
with an attorney before signing this Agreement. Employee acknowledges that it is
his decision whether or not to do so.

 

 
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(k) Number of Days. In computing the number of days for purposes of this
Agreement, all days shall be counted, including Saturdays, Sundays and holidays;
provided, however, that if the final day of any time period falls on a Saturday,
Sunday or holiday on which entities which are provincially regulated are or may
elect to be closed, then the final day shall be deemed to be the next day which
is not a Saturday, Sunday or such holiday.

 

[Signature Page Follows]

 

 
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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement,
intending to be legally bound hereby, as of the date first above written.

 

 

THE PROVIDENCE SERVICE CORPORATION

 

 

 

 

 

 

 

 

 

 

By:

  /s/ James Lindstrom

 

 

Name:

James Lindstrom

 

 

Title: 

Chief Executive Officer

 

                          DAVID SHACKELTON                       /s/ David
Shackelton  

 

 

 

[Signature Page to Employment Agreement of David Shackelton]