Document:

ex10-1.htm

Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”), is entered into as of this 6th day of August, 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 James Lindstrom, an individual residing at ---------------------------------- (“Employee”).

 

BACKGROUND

 

WHEREAS, Employee has served as the Company’s Executive Vice President and Chief Financial Officer since January 14, 2015 pursuant to that certain Employment Agreement, dated January 14, 2015, between Employee and the Company (the “Prior Employment Agreement”);

 

WHEREAS, effective as of the Effective Date, the Company’s Board of Directors (the “Board”) has elected Employee as a director of the Company; and 

 

WHEREAS, effective as of the Effective Date, the Board has appointed Employee as the Company’s Chief Executive Officer, and the Company and Employee are entering into this Agreement to set out the agreement between them regarding the terms of Employee’s employment effective beginning the Effective Date and to replace the Prior Employment Agreement as of such date.

 

NOW, THEREFORE, in consideration of the facts, mutual promises and covenants contained herein and intending to be legally bound hereby, the parties hereto agree that, effective as of the Effective Date, the Prior Employment Agreement is terminated and shall no longer have any force or effect, except as provided in Section 3(c) of the Prior Employment Agreement and with respect to the Restricted Stock Unit Award (as defined in the Prior Employment Agreement) and other provisions of the Prior Employment Agreement expressly relating to the Restricted Stock Unit Award, and hereby further agree:

 

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 Chief Executive Officer of the Company, and shall report directly to the Board and/or an executive committee established by the Board, whether acting as such or through the Chairman of the Board or chairman of such executive committee. 

 

(b) In his capacity as Chief Executive Officer of the Company, Employee shall have such authority, perform such duties, discharge such responsibilities and render such services as are customary for the person serving as chief executive officer of a public company of a similar size, and as are reasonably designated from time to time by 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 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 Six Hundred Fifty Thousand and 00/100 Dollars ($650,000.00) (the “Base Salary”), payable in equal periodic installments in accordance with the Company’s regular payroll practices in effect from time to time. 

 

(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 the period commencing January 14, 2015 and through balance of calendar year 2015, Employee will participate in the following Bonus program: Employee shall be paid an amount equal to seventy-five percent (75%) of the 2015 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 Aggregate Base Salary” shall mean the sum of: (i) the Base Salary to which Employee was entitled under the Prior Employment Agreement and (ii) the Base Salary to which Employee is entitled under this Agreement starting on the Effective Date and ending on December 31, 2015. Unless otherwise specified in respect of a Bonus, (i) 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 (ii) 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.

 

(iii) For the 2016 calendar year, Employee shall be eligible to receive as a Bonus an amount equal to ninety percent (90%) of the Base Salary for such year upon the achievement of goals to 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 One Million Two Hundred Thousand and 00/100 Dollars ($1,200,000.00). 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 the Company and any and all Affiliates of the Company (with such tender being subject to being accepted by the Board).

 

(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; 

 

 

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(iv) Employee engages in any wrongful or questionable conduct which does or which is reasonable likely to bring the Company or its Affiliates into public disgrace or embarrassment, or which is reasonable 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; 

 

(v) Employee repeatedly neglects or refuses to perform his duties or responsibilities as directed by 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 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 (I) the lesser of (A) Employee’s Base Salary that would have been paid from the date of effectiveness of such termination through the end of the Term and (B) Employee’s Base Salary in effect as of the date of effectiveness of such termination, or (II) if greater, at least six (6) 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”).

 

 

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(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.

 

(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 the product of two multiplied by the Base Salary, 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.

 

 

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(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.

 

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, 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 does not have the right to terminate Employee without 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 provide 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.

 

 

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(d) Miscellaneous.

 

(e) 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.

 

(f) 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.

 

 

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(g) 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.

 

(i) If to Employee:

 

James Lindstrom
145 Pecksland Rd., Greenwich, CT 06831

 

(ii) If to the Company:

 

The Providence Service Corporation 
64 East Broadway Blvd.
Tucson, AZ 85701 
Attention: Chairman of the Board of Directors

 

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.

 

(h) 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.

 

(i) Execution in Counterparts. This Agreement may be executed in any number of counterparts, including by facsimile or electronic submission, 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.

 

(j) 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.

 

(k) 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.

 

(l) 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.

 

(m) 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.

 

(n) 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.

 

 

11

 

 

(o) 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]

 

 

12

 

 

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/ Christopher Shackelton                                
Name:  Christopher Shackelton
Title:    Chairman of the Board

 

 

 

JAMES LINDSTROM

 

 

 

  /s/ James Lindstrom                                                         

 

[Signature Page to Employment Agreement of James Lindstrom]ex10-2.htm

Exhibit 10.2

  

 

THE PROVIDENCE SERVICE CORPORATION 

 

2006 LONG-TERM INCENTIVE PLAN

 

___________________________________

 

2015 Holding Company LTI Program

 

(as adopted by the Compensation Committee and effective on August 6, 2015)

___________________________________  

 

                This 2015 Holding Company LTI Program (the “HoldCo LTI Program”) is established as of the date referenced above as a sub-plan to the Providence Service Corporation 2006 Long-term Incentive Plan (as amended and restated effective June 30, 2015 and as thereafter amended from time to time in accordance with its terms, the “2006 Plan”). Accordingly, the terms and conditions of the 2006 Plan shall apply to all Awards hereunder, and shall govern in the event of any inconsistency with the terms set forth below.    

 

1.            Definitions

 

Exhibit 1, which is incorporated by reference, defines the terms used in this HoldCo LTI Program and sets forth certain operational rules related to those terms. Likewise, terms defined in Exhibit 1 of the 2006 Plan have the meanings set forth therein.

 

2.            Purpose 

 

                This HoldCo LTI Program has been established effective August 6, 2015 for the granting of Performance Awards under the 2006 Plan to select key executives of the Company in order to encourage them to achieve goals relating to the long-term interests of the Company and its stockholders.

 

 

3.            Administration

 

The Administrator responsible for the 2006 Plan shall administer this HoldCo LTI Program, and shall have all of the powers and rights set forth within the 2006 Plan, including but not limited to those set forth in Section 3 thereof.

 

 

4.            HoldCo LTI Program Awards 

 

(a)          Determination of Holdco LTI Program Awards.  In its sole and absolute discretion, the Administrator shall award Participation Percentages to the Company’s CEO and any other key Employees in any proportions that the Administrator shall determine. All awards of Participation Percentages shall be made in the form of individual written offer letters (substantially in the form attached as Exhibit 2, each an “LTI Offer Letter”) executed by or on behalf of the Administrator, and each individual Employee who receives such an award; provided that an Employee may only accept such an Award (and thereby become an “LTI Participant” ) by returning a signed copy of the LTI Offer Letter to the Company’s General Counsel within 20 days after such Award Date.  Any LTI Offer Letter that is not finalized within such period shall be null and void. 

 

(i)      The total Participation Percentages awarded on the effective date of this Holdco LTI Program may not exceed eighty percent (80%) of the interests in the Holdco LTI Pool.  The Administrator may thereafter award the remaining Participation Percentages through LTI Offer Letters of Participation Percentages to any Employees whom the Administrator may in its discretion select (including those who have already received Awards hereunder).  If a Participant receives more than one Award hereunder, those Awards shall be treated independently of each other for all purposes. If a Participant forfeits an Award or Awards before the Determination Date, the Administrator may make new Awards hereunder with respect to the forfeited Participation Percentages.

 

 

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(ii)     In no event shall the sum of the Participation Percentages for all LTI Participants exceed one hundred percent (100%) at any time before the Determination Date.

 

(b)          Calculation of HoldCo LTI Pool. As soon as practicable following the Determination Date, but as of the Determination Date, the Administrator shall calculate the amount of the HoldCo LTI Pool, if any, that is associated with each Performance Period.  If the HoldCo LTI Pool as of the Determination Date is greater than zero with respect to any Performance Period, then the LTI Participants holding Awards corresponding to that Performance Period shall be entitled to the payments described in Section 4(c) below.  If the performance of the Company has been such that there is no HoldCo LTI Pool associated with an Award Date (i.e., that the LTI Program Pool is zero), then the LTI Participants holding Awards having that Award Date shall not be entitled to be paid any amounts under this HoldCo LTI Program, and those Awards shall be cancelled and terminated as of the Determination Date, with no amounts being paid to such LTI Participants.  

 

(c)           Share Awards.  In the event that the HoldCo LTI Pool as of the Determination Date is greater than zero for any Award(s), then each LTI Participant holding such an Award shall receive on a date that occurs as soon as reasonably practicable after the Determination Date (the “Issuance Date”), the following equity awards that together have a value (based on the Determination Share Price, without regard to the transfer restrictions set forth in Section 7(c) below, which shall apply to all shares of Stock, including Unrestricted Stock, issued pursuant to any Award) equal to the product of (A) the HoldCo LTI Pool determined for such Award Date, and (B) the LTI Participant’s Participation Percentage for the Award having such an Award Date (the “Issuance Value”):

 

(i)         Unrestricted Stock having a fair market value (based on the Determination Share Price) equal to sixty percent (60%) of the Issuance Value; and 

 

(ii)        Stock Units having a fair market value (based on the Determination Share Price) equal to forty percent (40%) of the Issuance Value, with sixty-two and one-half percent (62.5%) of such Stock Units to become vested and payable in unrestricted Stock on the first anniversary of the Determination Date and with thirty-seven and one-half percent (37.5%) to become vested and payable in unrestricted Stock on the second anniversary date of the Determination Date (each a “Vesting Date”); provided that the LTI Participant has continued Employment from the Award Date through such Vesting Date, or has incurred an earlier Qualified Termination.  

 

Notwithstanding the foregoing, in the event of a Change in Control on or before the Determination Date, the  Administrator shall settle any and all Awards on the closing date of the Change in Control by providing each LTI Participant with cash and/or Unrestricted Stock that together have a fair market value equal to the total amount otherwise payable to the LTI Participant under Sections 4(c)(i) and (ii) above (without any adjustment or delay due to inapplicability of the vesting requirements otherwise applicable after the Determination Date). In the event of a Change in Control after the Determination Date, each LTI Participant shall receive on the closing date of the Change in Control cash and/or Unrestricted Stock that together have a fair market value equal to the total amount otherwise payable to the LTI Participant, after the date of the Change in Control, pursuant to Sections 4(c)(i) and (ii) above (without any adjustment or delay due to inapplicability of the vesting requirements otherwise applicable after the Determination Date).

 

 

2

 

 

(d)          Termination and Forfeiture; Vesting. 

 

(i)            In the event of termination of an LTI Participant’s Employment both more than one year after the Award Date and either, without Cause by the Company, or by reason of the LTI Participant’s death or Disability (a “Qualified Termination”) while holding an outstanding Award, then, with respect to the LTI Participant only, the LTI Participant shall be treated as having continued Employment through each of the dates on which Award payouts occur under Section 4(c) with respect to LTI Participants whose Employment has continued and the LTI Participant (or estate in the event of death) shall be paid any earned portion of any outstanding Award at the same time and on the same basis as though the Participant as described above, except that the amounts payable to an LTI Participant who has incurred a Qualifying Termination before the Determination Date shall be proportionately reduced such that the LTI Participant receives pro rata payments determined by a fraction with a numerator equal to the number of full months from the LTI Participant’s Award Date through the date on which the LTI Participant’s Employment ceases, and a denominator equal to the number of full months from the LTI Participant’s Award Date through the Determination Date. For example, if a Participant’s Employment ends due to a Qualifying Termination in the exact middle of the Performance Period, the LTI Participant would receive (whenever other LTI Participants receive payments) 50% of amounts payable on and after the Determination Date if the LTI Participant had continued Employment.

 

(ii)           If an LTI Participant’s Employment shall cease for any reason other than a Qualified Termination, then any and all of such LTI Participant’s Awards under this HoldCo LTI Program (including any Stock Units that have not previously vested pursuant to the associated award agreement) shall be immediately forfeited at such time and without payment of any consideration to the LTI Participant, and no amounts whatsoever shall thereafter be payable to such LTI Participant pursuant to this HoldCo LTI Program.

 

(iii)          For purposes of this Section 4(d), “Cause” means the following as determined by the Administrator in its sole discretion:

 

(I)        the LTI Participant 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, either a felony, or any crime involving fraud or moral turpitude;

 

(II)       in carrying out the LTI Participant’s duties hereunder, the LTI Participant 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)     the LTI Participant materially breaches any provision of this Agreement or any employment agreement with the Company or its Affiliates (including but not limited to any applicable restrictive covenants) or breaches any fiduciary duty or duty of loyalty owed to the Company or its Affiliates or shareholders; 

 

(IV)       the LTI Participant engages in any wrongful or questionable conduct which does or which is reasonable likely to bring the Company or its Affiliates into public disgrace or embarrassment, or which is reasonable 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; 

 

(V)     the LTI Participant repeatedly neglects or refuses to perform the LTI Participant’s duties or responsibilities as directed by the LTI Participant’s supervisor, 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 Board, any committee established by the Board, or the LTI Participant’s supervisor which is consistent with the scope of the LTI Participant’s duties to the Company and its Affiliates, and such failure, refusal or violation continues uncured for a period ten (10) days after written notice from the Company to the LTI Participant specifying the failure, refusal or violation and the Company’s intention to terminate any or all of the LTI Participant’s Awards for Cause;

 

 

3

 

 

(VI)    the LTI Participant commits any act or omission resulting in or intended to result in direct material personal gain to the LTI Participant at the expense of the Company or its Affiliates, or the customers or the Company or its Affiliates; or

 

(VII)  the LTI Participant materially compromises trade secrets or other confidential and proprietary information of the Company or its Affiliates. 

 

Action or inaction by LTI Participant shall not be considered “willful” unless done or omitted by such participant intentionally and without his reasonable belief that his or her 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 the LTI Participant’s physical or mental illness.

 

 

5.         Continuance of Employment.

 

Neither this HoldCo LTI Program nor the grant of any Award hereunder shall interfere with or limit in any way the right of the Company or any Affiliate to terminate any LTI Participant’s Employment at any time and for any reason (subject to the terms of any employment agreement), nor shall the HoldCo LTI Program or the grant of any Award hereunder impose any obligation on the Company or any Affiliate to continue the Employment of any LTI Participant.

 

 

6.         Requirements of Law.

 

The grant of Awards hereunder and the settlement thereof in accordance with this HoldCo LTI Program and the 2006 Plan shall be subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies as may be required.

 

 

7.            Miscellaneous 

 

(a)          Amendments.  This HoldCo LTI Program, and any LTI Offer Letter entered into with any LTI Participant, may be amended or modified only in writing by the Administrator or the Board; provided that any amendment or modification of any kind which adversely affects an LTI Participant must be consented to by such LTI Participant in writing to be effective as against him or her.

 

(b)          Incorporation of the 2006 Plan; Interpretation by Administrator. This HoldCo LTI Program is subject in all respects to the terms, conditions, limitations and definitions contained in the 2006 Plan.  In the event of any discrepancy or inconsistency between this HoldCo LTI Program and the 2006 Plan, the terms and conditions of the 2006 Plan shall control.  Without limiting the generality of the foregoing, the Administrator may in its sole and absolute discretion interpret the 2006 Plan and this HoldCo LTI Program, and take any other actions and make any other determinations or decisions that it deems necessary or appropriate in connection with the 2006 Plan, the HoldCo LTI Program or the administration or interpretation thereof, with such interpretations, actions, determinations, and decisions to be conclusive and binding on all persons and otherwise accorded the maximum deference permitted by law; provided that the Administrator’s interpretations, actions, determinations, and decisions shall not be entitled to deference on and after a Change in Control except to the extent that such interpretations are made exclusively by members of the Administrator who are individuals who served as Administrator members before the Change in Control.  In the event of any dispute or disagreement as to interpretation of the 2006 Plan or this HoldCo LTI Program or of any rule, regulation or procedure, or as to any question, right or obligation arising from or related to the 2006 Plan or this HoldCo LTI Program, the decision of the Administrator shall, except as provided above, be final and binding upon all persons, and the claims provisions of the 2006 Plan shall be controlling. 

 

 

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(c)           Stock or Stock Unit Issuances.  Any issuance of Unrestricted Stock or Stock Units pursuant to HoldCo LTI Program Awards shall occur pursuant to the 2006 Plan, and shall be subject to all terms and conditions thereof.

 

(d)          Withholding of Tax.  Anything to the contrary notwithstanding, all payments required to be made by the Company pursuant to Awards hereunder shall be subject to the withholding of such amounts as the Company reasonably may determine that it is required to withhold pursuant to applicable federal, state or local law or regulation.  The Company’s obligation to deliver share certificates (or evidence of book entry) to any LTI Participant is subject to and conditioned on tax withholding obligations being satisfied by such LTI Participant, including the terms of the 2006 Plan applicable thereto. 

 

(e)          Anti-Alienation; Non-Assignability; Etc.   Except as otherwise provided by the 2006 Plan, neither an LTI Participant nor any other person shall have any right to sell, assign, transfer, pledge, mortgage, or otherwise encumber, transfer, hypothecate, alienate or convey in advance of actual receipt, the amounts, if any, payable or deliverable hereunder, or any part thereof.  The designation of a death beneficiary by an LTI Participant shall be permissible and shall not constitute a transfer.

 

(f)           Section 409A. If and only to the extent that any compensation provided by this HoldCo LTI Program may result in the application of Section 409A of the Code, then notwithstanding Section 7(a) above, the Company may unilaterally modify the LTI Participant’s Award solely in the least restrictive manner necessary in order, where applicable –

 

(i)      to exclude such compensation from the definition of “deferred compensation” within the meaning of such Section 409A, or 

 

(ii)      to comply with the provisions of Section 409A, other applicable provision(s) of the Code and/or any rules, regulations or other regulatory guidance issued under such statutory provisions and to make such modifications, in each case, without any material diminution in the value of the benefits granted under this HoldCo LTI Program to such LTI Participant. 

 

(g)          Unfunded Nature of Program.   This HoldCo LTI Program is intended to be an unfunded, nonqualified compensation arrangement for purposes of the Code.  Except to the extent that an LTI Participant may otherwise be entitled to preferred status under applicable bankruptcy law, LTI Participants shall have the status of general unsecured creditors of the Company, and the HoldCo LTI Program constitutes a mere promise by the Company to make benefit payments in the future to the extent and consistent with the terms of any Awards hereunder, this HoldCo LTI Program, and the 2006 Plan.

 

(h)          Exclusivity of Documents.  The liability of the Company for the payment of benefits shall be defined only by this HoldCo LTI Program, the 2006 Plan, and the terms of each LTI Participant’s LTI Offer Letter, and the Company shall have no obligation to any person under the 2006 Plan except as expressly provided herein or therein.

 

(i)            Binding Effect.  The provisions of this HoldCo LTI Program shall bind and inure to the benefit of the Company and its successors and assigns, and to the benefit of each LTI Participant and such LTI Participant’s successors and assigns.

 

(j)           Gender.  Where appearing in this HoldCo LTI Program, the masculine gender shall be deemed to include the feminine gender and the singular number shall include the plural, unless the context clearly indicates to the contrary.

 

(k)          Term and Expiration.  This HoldCo LTI Program shall be effective until all LTI Participants have received full settlement of all Awards hereunder.

 

 

5

 

 

Adopted as of August 6, 2015 by the Compensation Committee at a duly held meeting.

 

 

6

 

 

Exhibit 1

 

PROVIDENCE SERVICE CORPORATION

 

2006 LONG-TERM INCENTIVE PLAN

___________________________________ 

 

Definitions

___________________________________

 

 

The following terms, when used in this HoldCo LTI Program, will have the meanings and be subject to the provisions set forth below:

 

“Award Date” means the date of Award set forth in the Participant’s LTI Offer Letter. 

 

“Award Share Price” means the volume weighted average of the Company’s per share price over the 90-day period ending with the Award Date.

 

“Applicable Shares Outstanding” means, as of the Award Date, the sum of the Company’s total shares of Stock outstanding as of the most recent SEC filing period and the number of any unissued shares of Stock from any Company outstanding securities, including any shares of convertible preferred stock which remain subject to conversion and any outstanding options or restricted stock units.

 

“Award Shareholder Value” (“ASV”) means the product of the Award Share Price and the Applicable Shares Outstanding. 

 

“Determination Date” means December 31, 2017 or, if earlier, the date upon which a Change in Control shall occur.

 

“Determination Share Price” means the volume weighted average of the Company’s per share price over prior 90 days ending with the Determination Date.

 

“Determination Shareholder Value” (“DSV”) means the product of the Determination Share Price and the Applicable Shares Outstanding, plus the sum of all cash dividends and securities (valued at the fair market value as of the date of distribution as determined by Board) paid or distributed to owners of the Company’s Stock during the period between the Award Date and the applicable valuation date (but not including any securities or Stock issued under the 2006 Plan to any owner of Company Stock); provided that under no circumstance shall interest or other earnings be credited on such amounts. In the event of a Change of Control, the DSV means the product of the Company’s share price at the date of a Change of Control and the Applicable Shares Outstanding, plus the sum of all cash dividends and securities (valued at the fair market value as of the date of distribution as determined by Board) paid or distributed to owners of the Company’s Stock during the period between the Award Date and the applicable valuation date (but not including any securities or Stock issued under the 2006 Plan to any owner of Company Stock); provided that under no circumstance shall interest or other earnings be credited on such amounts.

 

“Extraordinary Shareholder Value” means DSV less HSV, but shall not be less than zero.

 

“HoldCo LTI Pool” means, as of the Determination Date, a dollar amount calculated by multiplying the Extraordinary Shareholder Value by eight percent (8%); provided that in no event shall the HoldCo LTI Pool be less than zero.  This formula for calculating the HoldCo LTI Pool is the Performance formula determined by the Performance Criteria for purposes of Section 6(a)(6) of the 2006 Plan.

 

“Hurdle Value Share Price” means the value per share calculated by compounding the Award Share Price at 8.0% on an annual basis over the period beginning on the Award date and ending on the Determination Date

 

 

1

 

 

“Hurdle Shareholder Value” (“HSV”) means the product of the Hurdle Value Share Price and the Applicable Shares Outstanding.

 

“LTI Offer Letter” has the meaning set forth in Section 4(a) of this HoldCo LTI Program.

 

“LTI Participant” means an Employee who has received an Award pursuant to this HoldCo LTI Program.

 

“Participation Percentage” means, with respect to each LTI Participant, such LTI Participant’s percentage of the amounts to be paid with respect to the HoldCo LTI Pool as set forth in such LTI Participant’s LTI Offer Letter. 

 

“Performance Period” means, with respect to each Award hereunder, the period commencing on the Award Date and ending on the Determination Date.

 

“Qualified Termination” has the meaning set forth in Section 4(d)(i) of this HoldCo LTI Program.

 

 

2

 

 

Exhibit 2: LTI Offer Letter

 

PROVIDENCE SERVICE CORPORATION

 

2006 LONG-TERM INCENTIVE PLAN

 

___________________________________ 

 

 

2015 HoldCo LTI Program

___________________________________

 

 

 

_______ ___, 2015

 

CONFIDENTIAL 

[Name] 

[Address] 

[City, State  ZIP]

 

 

	
Re:
	
Performance Period ending 12/31/2017

	  	  

 

Dear [Name]: 

 

You have been selected by Providence Service Corporation to be a participant in the Providence Service Corporation 2015 HoldCo LTI Program (the “HoldCo LTI Program”).  Capitalized terms used in this letter have the special meanings set forth in the HoldCo LTI Program.

 

Generally, the HoldCo LTI Program provides that in the event that the Company’s Determination Shareholder Value exceeds the Company’s Hurdle Shareholder Value (based on an 8% compound annual return hurdle) from the Award Date through December 31, 2017 or an earlier Change in Control (the “Performance Period”), then a HoldCo LTI Pool comprising 8% of such Extraordinary Shareholder Value will be formed and allocated to you based on your Participation Percentage designated below.  See Section 4 of the HoldCo LTI Program for special provisions about how awards will be made and settled, the conditions for vesting in them, and the effect of change in control of the Company or a cessation of your Employment.

 

Subject to your acceptance of the terms and conditions of the HoldCo LTI Program, the following terms shall apply to your Award:

 

	 	
●
	
your Award Date shall be _______ __, 2015, 

 

	 	
●
	
the Award Shareholder Value at the start of the Performance Period shall be $______,

 

	 	
●
	
the Hurdle Shareholder Value per share shall be $_____ if the Determination Date is December 31, 2017, and

 

	 	
●
	
your Participation Percentage in the HoldCo LTI Pool, if any, shall be ___ percent (___%). 

 

Before accepting this Award, please consider the terms of this LTI Offer Letter, and the HoldCo LTI Program and the Providence Service Corporation 2006 Long-term Incentive Plan (which are attached for your review and reference).  If there is any inconsistency between this LTI Offer Letter and the HoldCo LTI Program, the terms and conditions of the HoldCo LTI Program shall govern.    

 

 

1

 

 

If you desire to accept this Award, please acknowledge receipt of this LTI Offer Letter and your acceptance of the foregoing terms and conditions for your participation in the HoldCo LTI Program by signing in the space provided below and returning the signed letter within 20 days after the Award Date to the attention of [            ].  Note that the deadline for accepting this LTI Offer Letter is the 20th day after the Award Date designated above. 

 

 

 

	
Yours truly,

	  
	
________________________ 

	
Chairman, Compensation Committee

	  
	
 

	
AGREED TO AND ACCEPTED THIS ___ DAY OF _____, 2015, BY:

	
_________________________

[Name of HoldCo LTI Program Participant]

 

 

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