Exhibit 10.16


 


FORM OF DIRECTOR UNIT
SUBSCRIPTION AGREEMENT


 


(Preferred
Units, Class A Units and Class E Units)


 


THIS DIRECTOR UNIT SUBSCRIPTION AGREEMENT
(this “Agreement”) is made as of                              ,
among NMH Investment, LLC, a Delaware limited liability company (the “Company”),
Jeffry A. Timmons (the “Director”) and Fiddlewood Farms Investments,
LLC, a New Hampshire limited liability company controlled by the Director and
his spouse (“FFI”).


 


WHEREAS, on the terms and subject to the conditions
hereof, the Director desires to subscribe for, and to assign to his designee,
FFI, the Director’s right to acquire from the Company, and the Company desires
to issue and sell to FFI, as the assignee and designee of the Director, the
Company’s Participating Preferred Units (the “Preferred Units”), Class A
Common Units (the “Class A Units”) and Class E Common Units (the “Class
E Units”, and together with the Preferred Units and the Class A Units, the “Units”),
in each case in the amounts set forth on Schedule I, as hereinafter set
forth; and


 


WHEREAS, this Agreement is one of several
agreements entered into or being entered into by the Company with certain
persons who are or will be key employees and/or directors of the Company or one
or more of its subsidiaries as part of an equity purchase plan designed to
comply with Rule 701 promulgated under the Securities Act (as defined below);


 


NOW, THEREFORE, in order to implement the
foregoing and in consideration of the mutual representations, warranties, covenants
and agreements contained herein, the parties hereto agree as follows:


 


1.                                       Definitions.


 


1.1                                 Agreement.
The term “Agreement” shall have the meaning set forth in the preface.


 


1.2                                 Applicable
Percentage. The term “Applicable Percentage” shall mean, with respect to
FFI’s Class E Units, the percentage set forth in the applicable table under the
heading “Applicable Percentage,” as more specifically determined in accordance
with the schedule set forth as Exhibit 1.2, attached hereto and incorporated
herein by this reference.


 


1.3                                 Board.
The “Board” shall mean the Company’s Management Committee.


 


1.4                                 Cause.
The term “Cause” shall mean a termination of the Director’s service as a member
of the Board due to (i) the commission by the Director of an act of fraud or
embezzlement, (ii) the indictment or conviction of the Director for (x) a
felony or (y) a crime involving moral turpitude or a plea by Director of guilty
or nolo contendere involving such a crime (to the extent it gives rise to an
adverse effect on the business or reputation of the Company or any of its
subsidiaries), (iii) the willful misconduct by the Director in the performance
of Director’s duties, including any willful misrepresentation or willful
concealment by Director on any report submitted to the Company (or any of its
securityholders or


 

















 


subsidiaries) which is not of a de minimis nature, (iv) the willful
failure of the Director to render services to the Company or any of its
subsidiaries in accordance with Director’s service which failure amounts to a
material neglect of the Director’s duties to the Company or any of its
subsidiaries or (v) the material breach by Director or FFI of any of the
provisions of any agreement between Director or FFI, on the one hand, and the
Company or a securityholder or an affiliate of the Company, on the other hand.


 


1.5                                 Closing.
The term “Closing” shall have the meaning set forth in Section 2.2.


 


1.6                                 Closing
Date. The term “Closing Date” shall have the meaning set forth in
Section 2.2.


 


1.7                                 Company.
The term “Company” shall have the meaning set forth in the preface.


 


1.8                                 Cost.
The term “Cost” shall mean the price per Unit paid by FFI as proportionately
adjusted for all subsequent distributions of Units and other recapitalizations
and less the amount of any tax distributions made with respect to the Units
pursuant to Section 4.4(j) of the LLC Agreement.


 


1.9                                 Disability.
The term “Disability” of the Director shall mean the inability of the Director
to perform the essential functions of Director’s job, with or without
reasonable accommodation, by reason of a physical or mental infirmity, for a
continuous period of six months. The period of six months shall be deemed
continuous unless Director returns to work for at least 30 consecutive business
days during such period and performs during such period at the level and
competence that existed prior to the beginning of the six-month period. The
date of such Disability shall be on the first day of such six-month period.


 


1.10                           Director.
The term “Director” shall have the meaning set forth in the preface.


 


1.11                           Director
Group. The term “Director Group” shall have the meaning set forth in
Section 4.1(a).


 


1.12                           Fair
Market Value. The term “Fair Market Value” used in connection with the
value of Units shall mean the average of the closing prices of the sales of the
Company’s Units on all securities exchanges on which the Units may at the time
be listed, or, if there have been no sales on any such exchange on any day, the
average of the highest bid and lowest asked prices on all such exchanges at the
end of such day or, if on any day the Units are not so listed, the average of
the representative bid and asked prices quoted in the NASDAQ System as of 4:00
P.M., New York time, or, if on any day the Units are not quoted in the NASDAQ System,
the average of the highest bid and lowest asked prices on such day in the
domestic over-the-counter market as reported by the National Quotation Bureau
Incorporated or any similar successor organization, in each such case averaged
over a period of 21 days consisting of the day as of which the Fair Market
Value is being determined and the 20 consecutive business days prior to such
day. If at any time the Units are not listed on any securities exchange or
quoted in the NASDAQ System or the over-the-counter market, the Fair Market
Value shall be the fair value of the Units determined in good faith by the
Board using its reasonable business judgment (valuing the


 

















 


Company and its subsidiaries as a going concern; disregarding any
discount for minority interest or marketability of the Units, whether due to
transfer restrictions or the lack of a public market for the Units; taking into
account the Preferred Priority Return (as defined in the LLC Agreement);
without taking into account the effect of any contemporaneous repurchase of
Units at less than Fair Market Value under Section 4) after consultation with
an independent appraiser, accountant or investment banking firm (the “Valuation
Expert”); provided that (i) the Board shall only be obligated to consult a
Valuation Expert once annually absent special circumstances (as determined in
good faith by the Board) and (ii) if FFI disagrees in good faith with the Board’s
determination and such dispute involves an amount in excess of $250,000, FFI
shall notify the Company in writing of such disagreement within ten (10)
business days of receipt of the Board’s determination of the fair market value
of such Units, in which event a second Valuation Expert (the “Arbiter”)
selected by mutual agreement of FFI and the Board shall make a determination of
the fair market value thereof (valuing the Company and its subsidiaries as set
forth above) solely by (i) reviewing a single written presentation timely made
by each of the Company and FFI setting forth their respective resolutions of
the dispute and the bases therefor and (ii) accepting either FFI’s or the
Company’s proposed resolution of the dispute. For the avoidance of doubt, the
determination of Fair Market Value of any Unit shall be based on the amounts
distributable in respect of such Unit under the terms of the LLC Agreement,
including any adjustments necessary to reflect the portion of any tax
distributions that were previously made in respect of such Unit but not charged
against other distributions in respect of such Unit.


 


Within five (5) business days after the
Company’s receipt of FFI’s written notice of disagreement, the Company shall
make available to FFI all data (including reports of employees and outside
advisors) relied upon by the Board in making its determination. FFI’s and the
Company’s written presentations must be submitted to the Arbiter within 30 days
of the Arbiter’s engagement, written notice of which shall be delivered by the
Company to FFI. The Arbiter shall notify FFI and the Company of its decision
within 40 days of its engagement. If FFI’s proposed resolution is accepted, the
Company also shall pay all of FFI’s reasonable out-of-pocket fees and expenses
(including reasonable fees and expenses of counsel and one Valuation Expert)
incurred in connection with the arbitration. Each of the Company and FFI agrees
to execute, if requested by the Arbiter, a reasonable engagement letter with
the Arbiter.


 


1.13                           Financing
Default. The term “Financing Default” shall mean an event which would
constitute (or with notice or lapse of time or both would constitute) an event
of default under any of the following as they may be amended from time to time:
(i) the Credit Agreement dated as of June 26, 2006 among National Mentor
Holdings, Inc. (“NMH”), NMH Holdings, LLC, the lenders party thereto and
JPMorgan Chase Bank, N.A. as sole administrative agent for such lenders, and
the Indenture, dated as of the date hereof, among NMH, the Guarantors (as
defined in the Indenture), and U.S. Bank National Association, as trustee, and
the Senior Subordinated Notes issued by NMH pursuant to the Indenture
(collectively, the “Financing Agreements”), and any extensions,
renewals, refinancings or refundings thereof in whole or in part; (ii) any
other agreement under which an amount of indebtedness of the Company or any of
its subsidiaries in excess of $5,000,000 is outstanding as of the time of the
aforementioned event, and any extensions, renewals, refinancings or refundings
thereof in whole or in part; (iii) restrictive financial covenants contained in
the LLC Agreement of the Company or NMH’s


 

















 


organizational documents; (iv) any amendment of, supplement to or other
modification of any of the instruments referred to in clauses (i) through (iii)
above; and (v) any of the securities issued pursuant to or whose terms are
governed by the terms of any of the agreements set forth in clauses (i) through
(iv) above, and any extensions, renewals, refinancings or refundings thereof in
whole or in part.


 


1.14                           LLC
Agreement. The term “LLC Agreement” means the Second Amended and Restated
Limited Liability Company Agreement, dated as of December 11, 2006, by and
among the Company, Vestar and the other Members of the Company a party thereto,
as amended from time to time in accordance with the provisions thereof.


 


1.15                           Permitted
Transferee. The term “Permitted Transferee” means any transferee of Units
pursuant to clauses (f) or (g) of the definition of “Exempt Employee Transfer”
as defined in the Securityholders Agreement. For purposes of the Securityholders
Agreement, the “Family Group” of FFI shall be the Director’s “Family Group”, as
defined in the Securityholders Agreement.


 


1.16                           Person.
The term “Person” shall mean any individual, corporation, partnership, limited
liability company, trust, joint stock company, business trust, unincorporated
association, joint venture, governmental authority or other entity of any
nature whatsoever.


 


1.17                           Public
Offering. The term “Public Offering” shall have the meaning set forth in
the Securityholders Agreement.


 


1.18                           Preferred
Units. The term “Preferred Units” shall have the meaning set forth in the
recitals.


 


1.19                           Purchase
Price. The term “Purchase Price” shall have the meaning set forth in
Section 2.1.


 


1.20                           Sale
of the Company. The term “Sale of the Company” shall have the meaning set
forth in the Securityholders Agreement, except that transactions with a Person
or Persons that are a wholly owned Subsidiary (as defined in the
Securityholders Agreement) of Vestar and/or Vestar/NMH Investors, LLC or NMH
Investment, LLC shall be excluded.


 


1.21                           Securities
Act. The term “Securities Act” shall mean the Securities Act of 1933, as
amended, and all rules and regulations promulgated thereunder, as the same may
be amended from time to time.


 


1.22                           Securityholders
Agreement. The term “Securityholders Agreement” shall mean the
Securityholders Agreement dated as of the Closing Date among Vestar, the
Management Investors and the Company, as it may be amended or supplemented
thereafter from time to time. For purposes of the Securityholders Agreement,
FFI is an “Employee” and the Units are “Employee Securities,” in each case as
those terms are defined in the Securityholders Agreement.


 

















 


1.23                           Termination
Date. The term “Termination Date” means the date upon which Director’s
service as a member of the Board is terminated.


 


1.24                           Vestar.
The term “Vestar” means Vestar Capital Partners V, L.P., a Cayman Islands
exempted limited partnership.


 


2.                                       Subscription
for and Purchase of Units.


 


2.1                                 Purchase
of Units. Pursuant to the terms and subject to the conditions set forth in
this Agreement, FFI hereby subscribes for and agrees to purchase, and the
Company hereby agrees to issue and sell to FFI, on the Closing Date the number
of Preferred Units, Class A Units and Class E Units set forth in Schedule I
attached hereto at the applicable prices per unit and for the aggregate amounts
(the “Purchase Price”) set forth in Schedule I attached hereto.


 


2.2                                 The
Closing. The closing (the “Closing”) of the purchase of Units
hereunder shall take place simultaneously with the execution hereof (the “Closing
Date”). At the Closing, FFI shall deliver to the Company (i) the Purchase
Price, payable by delivery of the amount in cash set forth on Schedule I
attached hereto, by delivery of a cashier’s or certified check or by wire
transfer in immediately available funds and (ii) a writing satisfactory to the
Company and executed by FFI that evidences its acceptance and adoption of all
of the terms and provisions of each of the LLC Agreement and the
Securityholders Agreement.


 


2.3                                 Section
83(b) Election. Within 10 days after the Closing, Director shall provide
the Company with a completed election under Section 83(b) of the Internal
Revenue Code of 1986, as amended, and the regulations promulgated thereunder in
the form of Exhibit A attached hereto. The Company shall timely file (via
certified mail, return receipt requested) such election with the Internal
Revenue Service (“IRS”), and shall provide Director with proof of such
timely filing.


 


2.4                                 Closing
Conditions. Notwithstanding anything in this Agreement to the contrary, the
Company shall be under no obligation to issue and sell to FFI any Units unless
(i) the Director is a member of the Board on the Closing Date; (ii) the
representations of the Director and FFI contained in Section 3 hereof are true
and correct in all material respects as of the Closing Date and (iii) the
Director and FFI are not in breach of any agreement, obligation or covenant
herein required to be performed or observed by the Director or FFI on or prior
to the Closing Date.


 


3.                                       Investment
Representations and Covenants of the Director and FFI.


 


3.1                                 Units
Unregistered. The Director and FFI acknowledge and represent that each has
been advised by the Company that:


 


(a)                                  the
offer and sale of the Units have not been registered under the Securities Act;


 


(b)                                 the
Units must be held indefinitely and FFI must continue to bear the economic risk
of the investment in the Units unless the offer and sale of such Units are


 

















 


subsequently
registered under the Securities Act and all applicable state securities laws or
an exemption from such registration is available;


 


(c)                                  there
is no established market for the Units and it is not anticipated that there
will be any public market for the Units in the foreseeable future;


 


(d)                                 a
notation shall be made in the appropriate records of the Company indicating
that the Units are subject to restrictions on transfer and, if the Company
should at some time in the future engage the services of a securities transfer
agent, appropriate stop-transfer instructions will be issued to such transfer
agent with respect to the Units.


 


3.2                                 Additional
Investment Representations. The Director and FFI represent and warrant
that:


 


(a)                                  FFI’s
financial situation is such that FFI can afford to bear the economic risk of
holding the Units for an indefinite period of time, has adequate means for
providing for FFI’s current needs and contingencies, and can afford to suffer a
complete loss of FFI’s investment in the Units;


 


(b)                                 FFI’s
knowledge and experience in financial and business matters are such that FFI is
capable of evaluating the merits and risks of the investment in the Units;


 


(c)                                  FFI
understands that the Units are a speculative investment which involves a high
degree of risk of loss of FFI’s investment therein, there are substantial
restrictions on the transferability of the Units and, on the Closing Date and
for an indefinite period following the Closing, there will be no public market
for the Units and, accordingly, it may not be possible for FFI to liquidate FFI’s
investment in case of emergency, if at all;


 


(d)                                 the
terms of this Agreement provide that if the Director ceases to be a member of
the Board, the Company and its affiliates have the right to repurchase the
Units at a price which may, under certain circumstances, be less than the Fair
Market Value thereof;


 


(e)                                  FFI
understands and has taken cognizance of all the risk factors related to the
purchase of the Units and, other than as set forth in this Agreement, no
representations or warranties have been made to FFI or FFI’s representatives
concerning the Units or the Company or their prospects or other matters;


 


(f)                                    FFI
has been given the opportunity to examine all documents and to ask questions
of, and to receive answers from, the Company and its representatives concerning
the Company and its subsidiaries, the Securityholders Agreement, the Company’s
organizational documents and the terms and conditions of the purchase of the
Units and to obtain any additional information which FFI deems necessary;


 

















 


(g)                                 all
information which FFI has provided to the Company and the Company’s
representatives concerning FFI and FFI’s financial position is complete and
correct as of the date of this Agreement;


 


(h)                                 FFI
is an “accredited investor” within the meaning of Rule 501(a) under the
Securities Act; and


 


(i)                                     the
sole members of FFI are the Director, his spouse, his two daughters and his two
sons-in-law.


 


4.                                       Certain
Sales and Forfeitures Upon Termination of Employment.


 


4.1                                 Put
Option.


 


(a)                                  If the Director’s service as a
member of the Board terminates due to the Disability or death of the Director
prior to the earlier of (i) a Public Offering or (ii) a Sale of the Company,
the Director, FFI and the Director’s Permitted Transferees (hereinafter
sometimes collectively referred to as the “Director Group”) shall have
the right, subject to the provisions of Section 5 hereof, for 90 days following
the date that is six (6) months after the date of such termination of
employment of the Director, to sell to the Company, and the Company shall be
required to purchase (subject to the provisions of Section 5 hereof), on one
occasion from each member of the Director Group, all (but not less than all) of
the number of Units then held by the Director Group that equals the sum of (i)
the total number of Class A Units collectively held by the Director Group, at a
price per Unit equal to the applicable purchase price determined pursuant to
Section 4.1(c),  (ii) the total number of
Preferred Units collectively held by the Director Group, at a price per Unit
equal to the applicable purchase price determined pursuant to Section 4.1(c)
and (iii) the product of (x) the total number of Class E Units collectively
held by the Director Group and (y) the Applicable Percentage (measured as of
the Termination Date), at a price per Unit equal to the applicable purchase
price determined pursuant to Section 4.1(c). In order to exercise its rights
with respect to the Units pursuant to this Section 4.1(a), the Director Group
shall also be required to simultaneously exercise any similar rights it may
have with respect to any other units of the Company held by the Director Group
in accordance with the terms of the agreements pursuant to which such other
units were purchased from the Company.


 


(b)                                 If the Director Group desires to
exercise its option to require the Company to repurchase Units pursuant to
Section 4.1(a), the members of the Director Group shall send one written notice
to the Company setting forth such members’ intention to collectively sell all
of their Units pursuant to Section 4.1(a), which notice shall include the
signature of each member of the Director Group. Subject to the provisions of
Section 5.1, the closing of the purchase shall take place at the principal
office of the Company on a date specified by the Company no later than the 60th
day after the giving of such notice.


 


(c)                                  In the event of a purchase by
the Company pursuant to Section 4.1(a), the purchase price of any Unit subject
to purchase under Section 4.1(a) shall be Fair Market Value (measured as of the
purchase date); provided that in any case the Board shall have the right, in
its sole discretion, to increase any of the foregoing purchase prices.


 

















 


4.2                                 Call
Options.


 


(a)                                  If the Director’s service as a
member of the Board terminates for any of the reasons set forth in clauses (i),
(ii) or (iii) below prior to a Sale of the Company, the Company shall have the
right and option to purchase for a period of 90 days following the Termination
Date, and each member of the Director Group shall be required to sell to the
Company, any or all of such Units then held by such member of the Director
Group (it being understood that if Units of any class subject to repurchase
hereunder may be repurchased at different prices, the Company may elect to
repurchase only the portion of the Units of such class subject to repurchase
hereunder at the lower price), at a price per unit equal to the applicable
purchase price determined pursuant to Section 4.2(c):


 


(i)                                     if
the Director’s service as a member of the Board is terminated due to the
Disability or death of the Director;


 


(ii)                                  if
the Director’s service as a member of the Board is terminated by the Company
and its subsidiaries without Cause or by the Director for any reason when none
of the circumstances set forth in clauses (i) and (iii) apply;


 


(iii)                               if
the Director’s service as a member of the Board is terminated by the Company or
any of its subsidiaries for Cause.


 


(b)                                 If the Company desires to
exercise one of its options to purchase Units pursuant to this Section 4.2, the
Company shall, not later than 90 days after the Termination Date, send written
notice to each member of the Director Group of its intention to purchase Units,
specifying the number of Units to be purchased (the “Call Notice”). Subject
to the provisions of Section 5, the closing of the purchase shall take place at
the principal office of the Company on a date specified by the Company no later
than the 30th day after the giving of the later of the Call Notice.


 


(c)                                  In the event of a purchase by
the Company pursuant to Section 4.2(a), the purchase price shall be:


 


(i)                                     with
respect to a purchase of all Units, in the case of a termination of the
Director’s service as a member of the Board described in Section 4.2(a)(iii), a
price per Unit equal to the lesser of (A) Fair Market Value (measured as of the
Termination Date) and (B) Cost;


 


(ii)                                  with
respect to a purchase of Preferred Units or Class A Units, in the case of a
termination of the Director’s service as a member of the Board described in
Sections 4.2(a)(i) or Section 4.2(a)(ii), a price per Unit equal to Fair Market
Value (measured as of the Termination Date); and


 


(iii)                               with
respect to a purchase of Class E Units, in the case of a termination of the
Director’s service as a member of the Board described in Section 4.2(a)(i) or
Section 4.2(a)(ii), with respect to the number of Units being purchased which
is the product of (x)


 

















 


the total
number of Units being purchased and (y) the Applicable Percentage (measured as
of the Termination Date), a price per Unit equal to Fair Market Value (measured
as of the Termination Date), and (if the Applicable Percentage (measured as of
the Termination Date) is less than 100%) the purchase price with respect to the
remaining Units being sold shall be a price per Unit equal to the lesser of (A)
Fair Market Value (measured as of the Termination Date) and (B) Cost;


 


provided
that in any case the Board shall have the right, in its sole discretion, to
increase any purchase price set forth above.


 


4.3                                 Obligation
to Sell Several. If there is more than one member of the Director Group,
the failure of any one member thereof to perform its obligations hereunder
shall not excuse or affect the obligations of any other member thereof, and the
closing of the purchases from such other members by the Company shall not
excuse, or constitute a waiver of its rights against, the defaulting member.


 


5.                                       Certain
Limitations on the Company’s Obligations to Purchase Units.


 


5.1                                 Deferral
of Purchases. (a)  Notwithstanding
anything to the contrary contained herein, the Company shall not be obligated
to purchase any Units at any time pursuant to Section 4, regardless of whether
it has delivered a notice of its election to purchase any such Units, (i) to
the extent that the purchase of such Units or the payment to the Company or one
of its subsidiaries of a cash dividend or distribution by a subsidiary of the
Company to fund such purchase (together with any other purchases of Units
pursuant to Section 4 or pursuant to similar provisions in agreements with
other employees of the Company and its subsidiaries of which the Company has at
such time been given or has given notice and together with cash dividends and
distributions to fund such other purchases) would result (A) in a violation of
any law, statute, rule, regulation, policy, order, writ, injunction, decree or
judgment promulgated or entered by any federal, state, local or foreign court
or governmental authority applicable to the Company or any of its subsidiaries
or any of its or their property, (B) after giving effect thereto, in a
Financing Default or (C) adverse accounting treatment for the Company, or (ii)
if immediately prior to such purchase there exists a Financing Default which
prohibits such purchase, dividend or distribution. The Company shall within
fifteen days of learning of any such fact so notify the members of the Director
Group that it is not obligated to purchase units hereunder.


 


(b)                                 Notwithstanding anything to the
contrary contained in Section 4, any Units which a member of the Director Group
has elected to sell to the Company or which the Company has elected to purchase
from members of the Director Group, but which in accordance with Section 5.1(a)
are not purchased at the applicable time provided in Section 4, shall be
purchased by the Company for the applicable purchase price, together with
interest thereon at the Applicable Federal Rate as in effect on the date such
purchase is so deferred on or prior to the fifteenth day after such date or
dates that (after taking into account any purchases (and related dividends and
distributions) to be made at such time pursuant to agreements with other
employees of the Company and its subsidiaries) the purchase of such Units (and
related dividends and distributions) are no longer prohibited under Section
5.1(a), and the Company shall give the members of the Director Group five days
prior notice of any such purchase.


 

















 


5.2                                 Payment
for Units. If at any time the Company elects or is required to purchase any
Units pursuant to Section 4, the Company shall pay the purchase price for the
Units it purchases (i) first, by the cancellation of any indebtedness, if any,
owing from the Director to the Company or any of its subsidiaries (which
indebtedness shall be applied pro rata against the proceeds receivable by each
member of the Director Group receiving consideration in such repurchase) and
(ii) then, by the Company’s delivery of a check or wire transfer of immediately
available funds for the remainder of the purchase price, if any, against
delivery of the certificates or other instruments representing the Units so
purchased, duly endorsed; provided that if any of the conditions set forth in
Section 5.1(a) exists which prohibits such cash payment (either directly or
indirectly as a result of the prohibition of a related cash dividend or
distribution), the portion of the cash payment so prohibited may be made, to
the extent such payment is not prohibited, by the Company’s delivery of a
junior subordinated promissory note (which shall be subordinated and subject in
right of payment to the prior payment of any debt outstanding under the
Financing Agreements and any modifications, renewals, extensions, replacements
and refunding of all such indebtedness) of the Company (a “Junior Subordinated
Note”) in a principal amount equal to the balance of the purchase price,
payable (x) in the event of a termination of employment referenced in Section
4.2(a)(i) and (ii), as soon as the conditions set forth in Section 5.1(a) no
longer exist or (x) in the event of a termination of the Director’s service as
a member of the Board referenced in Section 4.2(a)(iii), on the fifth
anniversary of the issuance thereof, and bearing interest payable annually at
the Applicable Federal Rate on the date of issuance; provided further that if
any of the conditions set forth in Section 5.1(a) exists which prohibits such
payment (or the payment described in the next proviso) by delivery of a Junior
Subordinated Note, the portion of the payment so prohibited may be made, to the
extent such payment is not prohibited, by the Company’s delivery of preferred
units of the Company having an aggregate liquidation preference equal to the
balance of the purchase price; provided further that in the case of a purchase
pursuant to Section 4.2(a)(iii) the Company may elect at any time to deliver a
Junior Subordinated Note in a principal amount equal to all or a portion of the
cash purchase price (in lieu of paying such portion of the purchase price in
cash), which Junior Subordinated Note shall mature on the fifth anniversary of
its issuance and accrue interest annually at the Applicable Federal Rate on the
date of issuance, which interest shall be payable at maturity. The Company
shall use its reasonable efforts to repurchase Units pursuant to Section 4.1(a)
or Section 4.2(a)(i) or Section 4.2(a)(ii) with cash and/or to prepay any
Junior Subordinated Notes or redeem any preferred units issued in connection
with a repurchase of Units pursuant to Section 4.1(a) or Section 4.2(a)(i) or Section
4.2(a)(ii). The Company shall have the right set forth in clause (i) of the
first sentence of this Section 5.2 whether or not the member of the Director
Group selling such units is an obligor of the Company. Any Junior Subordinated
Note (or preferred units issued in lieu thereof) shall become prepayable (or
redeemable) upon a Sale of the Company from net cash proceeds, if any, payable
to the Company or its unitholders; to the extent that sufficient net cash
proceeds are not so payable, the Junior Subordinated Note (or preferred units
issued in lieu thereof) shall be cancelled in exchange for such other non-cash
consideration received by unitholders in the Sale of the Company having a fair
market value equal to the principal of and accrued interest on the note. Any
Junior Subordinated Note (or preferred units issued in lieu thereof) also shall
become prepayable upon the consummation of an initial Public Offering. The
principal of and accrued interest on any such note may be prepaid (and
preferred units issued in lieu thereof may be


 

















 


redeemed) in whole or in part at any time at the option of the Company.
If interest (or cash dividends) is required to be paid on any Junior
Subordinated Note (or preferred units issued in lieu thereof) prior to maturity
and any of the conditions set forth in Section 5.1(a) exists or if any such
cash payment would result in adverse accounting treatment for the Company which
prohibits the payment of such interest (or dividends) in cash, such interest
may be cumulated and accrued until and to the extent that such prohibition no
longer exists.


 


6.                                       Miscellaneous.


 


6.1                                 Transfers
to Permitted Transferees. Prior to the transfer of Units to a Permitted
Transferee (other than a transfer subsequent to a Sale of the Company), the
Director shall deliver to the Company a written agreement of the proposed
transferee (a) evidencing such Person’s undertaking to be bound by the terms of
this Agreement and (b) acknowledging that the Units transferred to such Person
will continue to be Units for purposes of this Agreement in the hands of such
Person. Any transfer or attempted transfer of Units in violation of any
provision of this Agreement or the Securityholders Agreement shall be void, and
the Company shall not record such transfer on its books or treat any purported
transferee of such Units as the owner of such Units for any purpose.


 


6.2                                 Recapitalizations,
Exchanges, Etc., Affecting Units. The provisions of this Agreement shall
apply, to the full extent set forth herein with respect to Units, to any and
all securities of the Company or any successor or assign of the Company
(whether by merger, consolidation, sale of assets or otherwise) which may be
issued in respect of, in exchange for, or in substitution of the Units, by
reason of any dividend payable in units, issuance of units, combination,
recapitalization, reclassification, merger, consolidation or otherwise.


 


6.3                                 Director’s
Employment by the Company. Nothing contained in this Agreement shall be
deemed to (i) obligate the Company or any subsidiary of the Company to employ
the Director in any capacity whatsoever or to prohibit or restrict the Company
(or any such subsidiary) from terminating the employment of the Director at any
time or for any reason whatsoever, with or without Cause, or (ii) require
Director to remain a member of the Board.


 


6.4                                 Cooperation.
The Director and FFI agree to cooperate with the Company in taking action
reasonably necessary to consummate the transactions contemplated by this
Agreement.


 


6.5                                 Binding
Effect. The provisions of this Agreement shall be binding upon and accrue
to the benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns; provided, however, that no Transferee
shall derive any rights under this Agreement unless and until such Transferee
has executed and delivered to the Company a valid undertaking and becomes bound
by the terms of this Agreement; and provided further that Vestar is a third
party beneficiary of this Agreement and shall have the right to enforce the
provisions hereof.


 


6.6                                 Amendment;
Waiver. This Agreement may be amended only by a written instrument signed
by the parties hereto. No waiver by any party hereto of any of the provisions
hereof shall be effective unless set forth in a writing executed by the party
so waiving.


 

















 


6.7                                 Governing
Law. This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware applicable to contracts made
and to be performed therein.


 


6.8                                 Jurisdiction.
Any suit, action or proceeding with respect to this Agreement, or any judgment
entered by any court in respect of any thereof, shall be brought in any court
of competent jurisdiction in the State of Delaware, and each of the Company and
the members of the Director Group hereby submits to the exclusive jurisdiction
of such courts for the purpose of any such suit, action, proceeding or judgment.
Each of the members of the Director Group and the Company hereby irrevocably
waives (i) any objections which it may now or hereafter have to the laying of
the venue of any suit, action or proceeding arising out of or relating to this
Agreement brought in any court of competent jurisdiction in the State of
Delaware, (ii) any claim that any such suit, action or proceeding brought in
any such court has been brought in any inconvenient forum and (iii) any right
to a jury trial.


 


6.9                                 Notices.
All notices and other communications hereunder shall be in writing and shall be
deemed to have been duly given when personally delivered, telecopied (with
confirmation of receipt), one day after deposit with a reputable overnight
delivery service (charges prepaid) and three days after deposit in the U.S.
Mail (postage prepaid and return receipt requested) to the address set forth
below or such other address as the recipient party has previously delivered
notice to the sending party.


 


(a)                                  If to the Company:


 


NMH Investment, LLC

c/o Vestar Capital Partners

245 Park Avenue, 41st Floor

New York, NY  10167

Attn: General Counsel

Telecopy: (212) 808-4922


 


with a copy to:


 


Simpson Thacher &
Bartlett LLP

425 Lexington Avenue

New York, NY 10017-3954

Attn: Peter J. Gordon

Telecopy: (212) 455-2502


 


(b)                                 If to FFI, to the address as
shown on the unit register of the Company.


 


6.10                           Integration.
This Agreement and the documents referred to herein or delivered pursuant
hereto which form a part hereof contain the entire understanding of the parties
with respect to the subject matter hereof and thereof. There are no
restrictions, agreements, promises, representations, warranties, covenants or
undertakings with respect to the subject matter hereof


 

















 


other than those expressly set forth herein and therein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.


 


6.11                           Counterparts.
This Agreement may be executed in separate counterparts, and by different
parties on separate counterparts each of which shall be deemed an original, but
all of which shall constitute one and the same instrument.


 


6.12                           Injunctive
Relief. The Director, FFI and FFI’s Permitted Transferees each acknowledges
and agrees that a violation of any of the terms of this Agreement will cause
the Company irreparable injury for which adequate remedy at law is not
available. Accordingly, it is agreed that the Company shall be entitled to an
injunction, restraining order or other equitable relief to prevent breaches of
the provisions of this Agreement and to enforce specifically the terms and
provisions hereof in any court of competent jurisdiction in the United States
or any state thereof, in addition to any other remedy to which it may be
entitled at law or equity.


 


6.13                           Rights
Cumulative; Waiver. The rights and remedies of the Director, FFI and the
Company under this Agreement shall be cumulative and not exclusive of any
rights or remedies which each would otherwise have hereunder or at law or in
equity or by statute, and no failure or delay by any party in exercising any
right or remedy shall impair any such right or remedy or operate as a waiver of
such right or remedy, nor shall any single or partial exercise of any power or
right preclude such party’s other or further exercise or the exercise of any
other power or right. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of
any preceding or succeeding breach and no failure by any party to exercise any
right or privilege hereunder shall be deemed a waiver of such party’s rights or
privileges hereunder or shall be deemed a waiver of such party’s rights to
exercise the same at any subsequent time or times hereunder.


 


*     *    
*     *     *


 

















 


IN WITNESS
WHEREOF, the parties have executed this Management Unit Subscription Agreement
as of the date first above written.


 


	
   

  	
  NMH INVESTMENT,
  LLC,

  
	
   

  	
  a Delaware
  limited liability company

  
	
   

  
	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  
	
   

  
	
   

  	
  FIDDLEWOOD FARMS
  INVESTMENTS, LLC,

  
	
   

  	
  a Delaware limited liability company

  
	
   

  
	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  
	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  



 

















 


SCHEDULE I




	
  Purchased Units

  	
   

  	
  Number

  	
   

  	
  Price per Unit

  	
   

  	
  Aggregate Amount

  	
   

  
	
  Preferred Units:

  	
   

  	
   

  	
   

  	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
  Class A Units:

  	
   

  	
   

  	
   

  	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
  Class E Units:

  	
   

  	
   

  	
   

  	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
  Total

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
   

  	
   

  



 

















 


EXHIBIT A


 


ELECTION TO
INCLUDE UNITS IN GROSS

INCOME PURSUANT TO SECTION 83(b) OF THE

INTERNAL REVENUE CODE


 


The
undersigned purchased units (the “Units”) of NMH Investment, LLC (the “Company”)
on                              .
The undersigned desires to make an election to have the Units taxed under the
provision of Section 83(b) of the Internal Revenue Code of 1986, as amended (“Code
§83(b)”), at the time the undersigned purchased the Units.


 


Therefore,
pursuant to Code §83(b) and Treasury Regulation §1.83-2 promulgated thereunder,
the undersigned hereby makes an election, with respect to the Units (described
below), to report as taxable income for calendar year           
the excess, if any, of the Units’ fair market value on                              
over the purchase price thereof.


 


The
following information is supplied in accordance with Treasury Regulation
§1.83-2(e):


 


1.                                       The
name, address and social security number of the undersigned:


 


Jeffry A. Timmons

[address]


 


SSN: [Insert number]


 


2.                                       A
description of the property with respect to which the election is being made:                              .


 


3.                                       The
date on which the property was transferred:                              .
The taxable year for which such election is made:  calendar year     .


 


4.                                       The
restrictions to which the property is subject: 
The Class A Common Units and the Class E Common Units are subject to a
time-based vesting schedule. If the undersigned ceases to be employed by the
Company or any of its subsidiaries under certain circumstances, all or a
portion of the Units may be subject to repurchase by the Company at the
original purchase price paid for the Units, regardless of the fair market value
of the Units on the date of such repurchase. The Units are also subject to
transfer restrictions.


 


5.                                       The
aggregate fair market value on                              
of the property with respect to which the election is being made, determined
without regard to any lapse restrictions: $      .


 


6.                                       The
aggregate amount paid for such property: $      .


 

















 


A copy
of this election has been furnished to the Secretary of the Company pursuant to
Treasury Regulations §1.83-2(e)(7).


 


 


	
  Dated: 

  	
   

  	
   

  
	
   

  	
  [Director]

  



 

















 


Exhibit
1.2 to the Director Unit Subscription Agreement 


 


Class E Units


 


With respect to a purchase
of Class E Units pursuant to Section 4.2 in the case of a termination of the
Director’s service as a member of the Board described in Section 4.2(a)(i) or
Section 4.2(a)(ii), the Applicable Percentage shall be determined in accordance
with the following table attached to this Exhibit 1.2 as Annex A based
on the Month (as defined below) during which the service of the Director is
terminated:


 


For purposes of this Exhibit
1.2, “Month” means (i) in the case of Month 1, the period commencing on                               (the “Measurement Date”) and ending on the
calendar day immediately preceding the one-month anniversary of the Measurement
Date, (ii) for Month 2, the period commencing on the one-month anniversary of
the Measurement Date and ending on the calendar day immediately preceding the
two-month anniversary of the Measurement Date and (iii) for each other Month,
the period determined in the manner in which Month 2 was determined,
substituting the number of the month minus one for “one” in the preceding
clause (ii) and substituting the number of the month for “two” in the preceding
clause (ii).


 

















 


Annex A
to Exhibit 1.2


 


	
   

  	
   

  	
  Month During Which

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Service is

  	
   

  	
  Applicable

  	
   

  
	
   

  	
   

  	
  Terminated

  	
   

  	
  Percentage

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  1

  	
   

  	
  0.00

  	
  %

  
	
   

  	
   

  	
  2

  	
   

  	
  0.00

  	
  %

  
	
   

  	
   

  	
  3

  	
   

  	
  0.00

  	
  %

  
	
   

  	
   

  	
  4

  	
   

  	
  0.00

  	
  %

  
	
   

  	
   

  	
  5

  	
   

  	
  0.00

  	
  %

  
	
   

  	
   

  	
  6

  	
   

  	
  0.00

  	
  %

  
	
   

  	
   

  	
  7

  	
   

  	
  0.00

  	
  %

  
	
   

  	
   

  	
  8

  	
   

  	
  0.00

  	
  %

  
	
   

  	
   

  	
  9

  	
   

  	
  0.00

  	
  %

  
	
   

  	
   

  	
  10

  	
   

  	
  0.00

  	
  %

  
	
   

  	
   

  	
  11

  	
   

  	
  0.00

  	
  %

  
	
  End of 1st year

  	
   

  	
  12

  	
   

  	
  0.00

  	
  %

  
	
   

  	
   

  	
  13

  	
   

  	
  20.00

  	
  %

  
	
   

  	
   

  	
  14

  	
   

  	
  21.70

  	
  %

  
	
   

  	
   

  	
  15

  	
   

  	
  23.40

  	
  %

  
	
   

  	
   

  	
  16

  	
   

  	
  25.10

  	
  %

  
	
   

  	
   

  	
  17

  	
   

  	
  26.80

  	
  %

  
	
   

  	
   

  	
  18

  	
   

  	
  28.50

  	
  %

  
	
   

  	
   

  	
  19

  	
   

  	
  30.20

  	
  %

  
	
   

  	
   

  	
  20

  	
   

  	
  31.90

  	
  %

  
	
   

  	
   

  	
  21

  	
   

  	
  33.60

  	
  %

  
	
   

  	
   

  	
  22

  	
   

  	
  35.30

  	
  %

  
	
   

  	
   

  	
  23

  	
   

  	
  37.00

  	
  %

  
	
  End of 2nd year

  	
   

  	
  24

  	
   

  	
  38.70

  	
  %

  
	
   

  	
   

  	
  25

  	
   

  	
  40.40

  	
  %

  
	
   

  	
   

  	
  26

  	
   

  	
  42.10

  	
  %

  
	
   

  	
   

  	
  27

  	
   

  	
  43.80

  	
  %

  
	
   

  	
   

  	
  28

  	
   

  	
  45.50

  	
  %

  
	
   

  	
   

  	
  29

  	
   

  	
  47.20

  	
  %

  
	
   

  	
   

  	
  30

  	
   

  	
  48.90

  	
  %

  
	
   

  	
   

  	
  31

  	
   

  	
  50.60

  	
  %

  
	
   

  	
   

  	
  32

  	
   

  	
  52.30

  	
  %

  
	
   

  	
   

  	
  33

  	
   

  	
  54.00

  	
  %

  
	
   

  	
   

  	
  34

  	
   

  	
  55.70

  	
  %

  
	
   

  	
   

  	
  35

  	
   

  	
  57.40

  	
  %

  
	
  End of 3rd year

  	
   

  	
  36

  	
   

  	
  59.10

  	
  %

  
	
   

  	
   

  	
  37

  	
   

  	
  60.80

  	
  %

  
	
   

  	
   

  	
  38

  	
   

  	
  62.50

  	
  %

  
	
   

  	
   

  	
  39

  	
   

  	
  64.20

  	
  %

  
	
   

  	
   

  	
  40

  	
   

  	
  65.90

  	
  %

  
	
   

  	
   

  	
  41

  	
   

  	
  67.60

  	
  %

  
	
   

  	
   

  	
  42

  	
   

  	
  69.30

  	
  %

  



 

















 


	
   

  	
   

  	
  43

  	
   

  	
  71.00

  	
  %

  
	
   

  	
   

  	
  44

  	
   

  	
  72.70

  	
  %

  
	
   

  	
   

  	
  45

  	
   

  	
  74.40

  	
  %

  
	
   

  	
   

  	
  46

  	
   

  	
  76.10

  	
  %

  
	
   

  	
   

  	
  47

  	
   

  	
  77.80

  	
  %

  
	
  End of 4th year

  	
   

  	
  48

  	
   

  	
  79.50

  	
  %

  
	
   

  	
   

  	
  49

  	
   

  	
  81.20

  	
  %

  
	
   

  	
   

  	
  50

  	
   

  	
  82.90

  	
  %

  
	
   

  	
   

  	
  51

  	
   

  	
  84.60

  	
  %

  
	
   

  	
   

  	
  52

  	
   

  	
  86.30

  	
  %

  
	
   

  	
   

  	
  53

  	
   

  	
  88.00

  	
  %

  
	
   

  	
   

  	
  54

  	
   

  	
  89.70

  	
  %

  
	
   

  	
   

  	
  55

  	
   

  	
  91.40

  	
  %

  
	
   

  	
   

  	
  56

  	
   

  	
  93.10

  	
  %

  
	
   

  	
   

  	
  57

  	
   

  	
  94.80

  	
  %

  
	
   

  	
   

  	
  58

  	
   

  	
  96.50

  	
  %

  
	
   

  	
   

  	
  59

  	
   

  	
  98.20

  	
  %

  
	
  End of 5th year

  	
   

  	
  60

  	
   

  	
  99.90

  	
  %

  
	
   

  	
   

  	
  61 and thereafter

  	
   

  	
  100.00

  	
  %