Exhibit 10.3


 


EMPLOYMENT AGREEMENT


 


THIS
EMPLOYMENT AGREEMENT (“Agreement”) is made as of September 7,
2004 by and between Edward Murphy (“Officer”), and National Mentor, Inc.,
a Delaware corporation (“Employer”).


 


WHEREAS,
Employer desires to obtain the services of Officer and Officer desires to
render services to Employer; and


 


WHEREAS,
Employer and Officer desire to set forth the terms and conditions of Officer’s
employment with Employer under this Agreement;


 


NOW,
THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements contained in this Agreement, the parties agree
as follows:


 


STATEMENT OF AGREEMENT


 


1.             Employment. Employer agrees to employ Officer,
and Officer accepts such employment in accordance with the terms of this Agreement,
for an initial term of three years commencing on the date hereof and, unless
terminated earlier in accordance with the terms of this Agreement, ending on
the third anniversary of the date hereof. After the initial term has expired,
this Agreement will renew automatically on the anniversary date of each year
for a oneyear term. If either party desires not to renew the Agreement, they
must provide the other party with written notice of their intent not to renew
the Agreement at least sixty (60) days prior to the next anniversary date. If
Employer chooses not to renew this Agreement, Employer shall continue to pay
Officer the compensation provided for in Section 4(a) of this
Agreement for one year commencing on such anniversary date.


 


2.             Position and Duties of Officer. Until on or about
January 1, 2005, Officer will serve as President of Employer, and
effective on or about January 1, 2005, Officer will serve as President and
Chief Executive Officer of Employer. Officer agrees to serve in such position,
or in such other positions of a similar status or level as Employer determines
from time to time, and to perform the commensurate duties that Employer may
assign from time to time to Officer until the expiration of the term or such
time as Officer’s employment with Employer is terminated pursuant to this
Agreement


 


3.             Time Devoted and Location of Officer.


 


(a)           Subject to Section 3(c),
Officer will devote his full business time and energy to the business affairs
and interests of Employer, and will use his best efforts and abilities to
promote Employer’s interests. Officer agrees that he will diligently


 


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endeavor to perform
services contemplated by this Agreement in a manner consistent with his
position and in accordance with the policies established by the Employer and
provided to Officer from time to time.


 


(b)           Officer’s primary business office and
normal place of work will be located in Boston, Massachusetts.


 


(c)           Officer may serve as an officer,
director, agent or employee of any direct or indirect subsidiary or other
affiliate of Employer, but may not serve as an officer, director, agent or
employee of any other business enterprise without the written approval of
Employer’s board of directors (the “Board”); provided, that Officer may
serve in any capacity with any civic, educational or charitable organization,
or any governmental entity or trade association, without seeking or obtaining
such written approval of the Board, if such activities and services do not
interfere or conflict with the performance of Officer’s duties under this
Agreement.


 


4.             Compensation.


 


(a)           Base Salary. Employer will pay
Officer a base salary in the amount of $290,000 per year (the “Base Salary”),
which amount will be paid in accordance with Employer’s normal payroll schedule less
appropriate withholdings for federal and state taxes and other deductions
authorized by Officer. Such salary will be subject to review and adjustment by
Employer from time to time.


 


(b)           Bonuses. In addition to the
Base Salary, the Board may, in its sole discretion, award a bonus in an amount
up to 40% of the Base Salary then in effect to Officer following the end of
each fiscal year during the period of Officer’s employment hereunder based upon
Officer’s performance and the achievement of other objectives determined by the
Board.


 


(c)           Benefits. Officer will be
eligible to participate in all benefit plans to the same extent as they are
made available to other senior executives of Employer. Officer will receive
separate information detailing the terms of the benefit plans and the terms of
such plans will control. Officer also will be eligible to participate in any
annual incentive plan and stock option plan applicable to Officer by its terms.


 


5.             Expenses. During the term of this Agreement,
Employer will reimburse Officer promptly for all reasonable travel,
entertainment, parking, business meetings and similar expenditures in pursuance
and furtherance of Employer’s business upon receipt of reasonably supporting documentation
as required by Employer’s policies applicable to its officers and employees
generally.


 


6.             Termination.


 


(a)           Termination Due to Resignation and
Termination with Cause. Except as otherwise set forth in this Agreement,
this Agreement, Officer’s employment,


 


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and Officer’s rights to
receive compensation and benefits from Employer, will terminate upon the
occurrence of any of the following events: (i) the effective date of
Officer’s resignation without good reason, or (ii) termination for cause
at the discretion of Employer under the following circumstances: (a) Officer’s
commission of an act of fraud or dishonesty involving his duties on behalf of
Employer; (b) Officer’s willful failure or refusal to faithfully and
diligently perform material duties assigned to Officer consistent with Section 2
above, or other breach of any material term under this Agreement; (c) Officer’s
willful failure or refusal to abide by Employer’s material policies, rules, procedures
or directives; or (d) Officer’s conviction of a felony or a misdemeanor
involving moral turpitude. If Officer is terminated pursuant to this Section 6(a),
Employer’s only remaining financial obligation to Officer under this Agreement
will be to pay any earned but unpaid base salary and accrued but unpaid
vacation and reimbursable travel and entertainment expenses through the date of
Officer’s termination.


 


For the events described
in Sections 6(a)(ii)(b) and (c), Employer will give Officer written
notice of such event and a reasonable opportunity to cure such situation, but
in no event less than thirty (30) days.


 


(b)           Termination Without Cause.
Officer may terminate his employment without cause at any time by giving thirty
(30) days written notice of resignation to Employer. Employer may terminate
this Agreement without cause at any time by giving thirty (30) days prior
written notice to Officer. If Employer terminates this Agreement without cause,
Employer may direct Officer to cease providing services immediately. If
Employer terminates this Agreement without cause, Employer shall continue to
pay Officer the compensation provided for in Section 4(a) of
this Agreement for a period of time equal to the greater of (i) the
remaining term of this Agreement or (ii) two years. No other benefits or
compensation will be paid to Officer if he is terminated pursuant to this Section 6(b) unless
otherwise provided for in the terms of the applicable plan or benefit.


 


(c)           Termination by Officer for Good
Reason. Officer may terminate this Agreement, and his employment with
Employer, for “good reason” upon the occurrence of any of the following:


 


(i)            a requirement by Employer that
Officer relocate his primary business office more than 25 miles from its
current location in order to fulfill Officer’s duties under this Agreement;


 


(ii)           the failure of Employer to comply
with Section 4; or


 


(iii)          any material breach of this Agreement
by Employer; or


 


(iv)          the assignment to Officer of duties
materially inconsistent with his title at such time.


 


Notwithstanding the
foregoing or anything to the contrary, the retention and/or


 


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assumption of duties or
responsibilities by Greg Torres that would otherwise have been duties or responsibilities
of Officer shall not be deemed to constitute, nor shall they be taken into
account in determining whether there has been, “good reason” for purposes of
this Agreement.


 


Prior
to terminating this Agreement pursuant to this Section, Officer shall give to
Employer written notice of his “good reason” for terminating this Agreement and
provide Employer with a reasonable period in which to contest or correct the “good
reason”, but in no event less than thirty (30) days. In the event of a
termination for “good reason” pursuant to this Section, Officer will be
entitled to receive all compensation and benefits provided for in this
Agreement for a termination by Employer without cause.


 


(d)           Automatic Termination. This
Agreement will terminate automatically upon the death or permanent disability
of Officer. Officer will be deemed to be “Disabled” or to suffer from a “Disability”
within the meaning of this Agreement if, because of a physical or mental
impairment, Officer has been unable to perform the essential functions of his
position for a period of 180 consecutive days, or if Officer can reasonably be
expected to be unable to perform the essential functions if his position for
such period. The term “essential duties” is defined as the ability to
consistently perform his assigned duties, including travel requirements.
Subject to continuing coverage under applicable benefit plans, and except as
otherwise provided in this Agreement, if Officer is terminated pursuant to this
Section 6(d), Employer’s only remaining financial obligation to
Officer under this Agreement will be to pay any earned but unpaid base salary
and accrued but unpaid vacation and reimbursable travel and entertainment
expenses through the date of Officer’s termination.


 


(e)           Effect of Termination. Except
as otherwise provided for in this Agreement, upon termination of this
Agreement, all rights and obligations under this Agreement will cease except
for the rights and obligations under Sections 4 and 5 to the extent
Officer has not been compensated or reimbursed for services performed prior to
termination or has not been paid vacation and reimbursable travel and
entertainment expenses accrued through the termination date (the amount of
compensation to be prorated for the portion of the pay period prior to
termination); the rights and obligations under Sections 8, 9 and 10; and
all procedural and remedial provisions of this Agreement. A termination of this
Agreement will constitute a termination of Officer’s employment with Employer.


 


7.             (Intentionally Omitted).


 


8.                                       Protection
of Confidential Information/Non-Competition/Non-Solicitation. 


 


Officer covenants and
agrees as follows:


 


(a)           During Employer’s employment of
Officer and for a period of eighteen (18) months following the termination of
Officer’s employment for any reason, Officer will not use or disclose, directly
or indirectly, for any reason whatsoever or in any


 


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way, other than at
the direction of Employer (with the written consent of National Mentor Holdings, Inc.)
during the course of Officer’s employment, or following the termination of
Officer’s employment after receipt of the prior written consent of Employer,
any confidential information or trade secrets of Employer or its controlled subsidiaries
or affiliates, including, but not limited to, the following: lists of past,
current or potential customers of Employer and its controlled subsidiaries and
affiliates; all systems, manuals, materials, processes and other intellectual
property of any type used by Employer or its controlled subsidiaries and
affiliates in connection with their respective business operations; financial
statements, cost reports and other financial information; contract proposals
and bidding information; rate and fee structures; policies and procedures
developed as part of a confidential business plan; and management systems and
procedures, including manuals and supplements (collectively, the “Confidential
Information”). The obligation not to use or disclose any Confidential
Information will not apply to (i) any Confidential Information known by
Officer before commencing employment with Employer, (ii) Confidential
Information which Officer obtains from a third party, provided Officer has no
actual or constructive knowledge that the third party obtained the Confidential
Information by wrongful or inappropriate means, (iii) following the
termination of the employment of Officer with Employer, to any information that
is or becomes public knowledge through no fault of Officer, and that may be
utilized by the public without any direct or indirect obligation to Employer,
but the termination of the obligation for non-use or nondisclosure by reason of
such information becoming public will extend only from the date such information
becomes public knowledge, or (iv) disclosure compelled by legal process.
The above will be without prejudice to any rights or remedies of Employer under
any state or federal law protecting trade secrets or other information.


 


(b)           Officer covenants and agrees that
during the term of his employment with Employer and for a period of twelve (12)
months immediately following the termination of said employment for any reason,
he will not, directly or indirectly, seek, obtain or accept a “Competitive
Position” in the “Restricted Territory” with a “Competitor”
of Employer.


 


The
following definitions shall apply to this Section:


 


•                                          “Competitor”
means any business, individual, partnership, joint venture, association, firm,
corporation or other entity engaged, wholly or in part, in the provision or
sale of therapeutic foster care or other home or community-based healthcare or
human services (the “Competitive Business”).


 


•                                          “Competitive
Position” means any position (including a consulting position) or
employment with a “Competitor” of Employer in which Officer is engaged in
corporate or operational management of the part of such Competitor’s business
which constitutes a Competitive Business.


 


•                                          “Restricted
Territory” is the geographic area set forth in Exhibit A to
this Agreement. The parties agree to review the geographic area included within
the


 


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Restricted Territory from
time to time at either party’s request and the Restricted Territory will
thereafter be modified so that its coverage extends to, but only to, the
geographic area necessary to protect the interest of the Employer and its
controlled subsidiaries and affiliates engaged in the provision or sale of
therapeutic foster care or other home or community-based healthcare or human
services. No such reformation will be valid unless it is evidenced by written
amendment to this Agreement and signed by both parties.


 


(c)           To protect the goodwill of Employer
and its controlled subsidiaries and affiliates, or the customers of Employer
and its controlled subsidiaries and affiliates, Officer agrees that, for a
period of eighteen months immediately following the termination of his
employment with Employer, he will not, without the prior written permission of
Employer, directly or indirectly, for himself or herself or on behalf of any
other person or entity, solicit, divert away, take away or attempt to solicit
or take away any customer of Employer for purposes of providing or selling or
providing therapeutic foster care or other home or community-based healthcare
or human services if Employer, or the particular controlled subsidiary or
affiliate of Employer, is then still engaged in the sale or provision of such
services at the time of the solicitation. For purposes of this Section 8(c),
“Customer” means any individual or entity to whom Employer or its
controlled subsidiaries or affiliates has provided, or contracted to provide,
therapeutic foster care or other home or community-based healthcare or human
services, and with whom Officer had, alone or in conjunction with others,
Material Contact during the twelve months prior to the termination of her
employment. For purposes of this Section 8(c), Officer had “Material
Contact” with a customer if (i) Officer had business dealings with the
customer on behalf of Employer or its controlled subsidiaries or affiliates; (ii) Officer
was responsible for supervising or coordinating the dealings between the
customer and Employer or its controlled subsidiaries or affiliates; or (iii) Officer
obtained trade secrets or confidential information about the customer as a
result of Officer’s association with Employer or its controlled subsidiaries or
affiliates.


 


(d)           During Employer’s employment of
Officer and for a period of eighteen (18) months following the termination of
Officer’s employment with Employer for any reason, Officer will not solicit for
employment, directly or indirectly, any employee of Employer or any of its
controlled subsidiaries or affiliates who was employed with Employer or its controlled
subsidiaries or affiliates within the one-year period immediately prior to
Officer’s termination.


 


(e)           Employer may, with the prior written
consent of National Mentor Holdings, Inc., waive compliance with one or
more of the covenants of Officer set forth in this Section 8 for the
purpose of facilitating the negotiation of the acquisition of Employer by a
third party. Such a waiver must be made in writing and executed by Employer and
National Mentor Holdings, Inc., and shall be effective only with respect
to the acts specifically described therein.


 


9.             Work Made for Hire. Officer agrees that any
written program materials, protocols, research papers and all other writings
(the “Work”), which Officer develops for


 


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Employer’s use, or for
use by Employer’s controlled subsidiaries or affiliates, during the term of
this Agreement, will be considered “work made for hire” within the
meaning of the United States Copyright Act, Title 17, United States Code, which
vests all copyright interest in and to the Work in the Employer. In the event,
however, that any court of competent jurisdiction finally declares that the
Work is not or was not a work made for hire as agreed, Officer agrees to
assign, convey, and transfer to the Employer all right, title and interest
Officer may presently have or may have or be deemed to have in and to any such
Work and in the copyright of such work, including but not limited to, all
rights of reproduction, distribution, publication, public performance, public
display and preparation of derivative works, and all rights of ownership and
possession of the original fixation of the Work and any and all copies.
Additionally, Officer agrees to execute any documents necessary for Employer to
record and/or perfect its ownership of the Work and the applicable copyright.
The foregoing will not apply to any writing Officer develops which are not for
Employer’s use or are in each instance specifically excluded in advance of
publication from the coverage of the foregoing by the Board.


 


10.           Property of Employer. Officer
agrees that, upon the termination of Officer’s employment with Employer,
Officer will immediately surrender to Employer all property, equipment, funds,
lists, books, records and other materials of Employer or its controlled
subsidiaries or affiliates in the possession of or provided to Officer,
provided, however, Officer shall be entitled to retain individualized bound
volumes of transaction documents in which Officer provided services.


 


11.           Governing Law. This Agreement
and all issues relating to the validity, interpretation and performance will be
governed by and interpreted under the laws of the State of Massachusetts.


 


12.           Remedies. Employer and Officer
agree that an actual or threatened violation by Officer of the covenants and
obligations set forth in Sections 8, 9 and 10 will cause irreparable
harm to Employer or its controlled subsidiaries or affiliates and that the
remedy at law for any such violation will be inadequate. Officer agrees,
therefore, that Employer or its controlled subsidiaries or affiliates will be
entitled to appropriate equitable relief, including, but not limited to, a
temporary restraining order and a preliminary injunction, without the necessity
of posting a bond. The provisions of Sections 8, 9 and 10 will survive
the termination of this Agreement in accordance with the terms set forth in
each Section.


 


13.           Arbitration. Except for an
action for injunctive relief as described in Section 12, any
disputes or controversies arising under this Agreement will be settled by
arbitration in Boston, Massachusetts in accordance with the rules of the
American Arbitration Association relating to the arbitration of employment
disputes. The determination and finding of such arbitrators will be final and
binding on all parties and may be enforced, if necessary, in any court of
competent jurisdiction.


 


14.           Notices. Any notice or request
required or permitted to be given to any party will be given in writing and,
excepting personal delivery, will be given at the


 


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address set forth below
or at such other address as such party may designate by written notice to the
other party to this Agreement:


 


	
  To Officer:

  	
  Edward Murphy

  
	
   

  	
  79 Wilsondale Street,

  
	
   

  	
  Dover, MA 02030

  
	
   

  	
   

  
	
  To Employer:

  	
  National
  Mentor, Inc.

  
	
   

  	
  313 Congress Street

  
	
   

  	
  Boston, Massachusetts
  02210

  
	
   

  	
  Attention: General
  Counsel

  
	
   

  	
  Facsimile: 617-790-4941

  
	
   

  	
   

  
	
  With a copy to:

  	
  National Mentor
  Holdings, Inc.

  
	
   

  	
  c/o Madison Dearborn
  Capital Partners, LLC

  
	
   

  	
  Three First
  National Plaza, Suite 3800

  
	
   

  	
  Chicago,
  Illinois 60602

  
	
   

  	
  Attention: Timothy
  Sullivan

  
	
   

  	
  Fax No. (312)
  895-1001

  



 


Each notice given in
accordance with this Section will be deemed to have been given, if
personally delivered, on the date personally delivered; if delivered by
facsimile transmission, when sent and confirmation of receipt is received; or,
if mailed, on the third day following the day on which it is deposited in the
United States mail, certified or registered mail, return receipt requested,
with postage prepaid, to the address last given in accordance with this
Section.


 


15.           Headings. The headings of the
sections of this Agreement have been inserted for convenience of reference only
and should not be construed or interpreted to restrict or modify any of the
terms or provisions of this Agreement.


 


16.           Severability. If any provision
of this Agreement is held to be illegal, invalid, or unenforceable under
present or future laws effective during the term of this Agreement, such
provision will be fully severable and this Agreement and each separate
provision will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part of this Agreement, and the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance from this Agreement. In addition, in lieu of such illegal,
invalid or unenforceable provision, there will be added automatically, as a
part of this Agreement, a provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible and legal, valid and
enforceable, if such reformation is allowable under applicable law.


 


17.           Binding Effect. This Agreement
will be binding upon and shall inure to the benefit of each party and each
party’s respective successors, heirs and legal


 


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representatives. This
Agreement may not be assigned by Officer to any other person or entity but may
be assigned by Employer to any wholly-owned subsidiary or affiliate of Employer
or to any successor to or transferee of all, or any part, of the stock or
assets of Employer.


 


18.           Employer Policies, Regulations and
Guidelines for Officers. Employer may issue policies, rules, regulations,
guidelines, procedures or other material, whether in the form of handbooks,
memoranda, or otherwise, relating to its officers. These materials are general
guidelines for Officer’s information and will not be construed to alter, modify
or amend this Agreement for any purpose whatsoever.


 


19.           Entire Agreement. This
Agreement, the Stock Option Agreement, dated as of the date hereof, by and
between National Mentor Holdings, Inc. (“Holdings”) and Officer,
the Management Stock Purchase Agreement, dated as of the date hereof, by and
between Holdings and Officer, the Amended and Restated Stockholders Agreement,
dated as of May 1, 2003, by and among Holdings, Officer and certain of its
other stockholders, as amended, modified and supplemented from time to time
(the “Stockholders Agreement”), and the Registration Agreement, dated as
of March 9, 2001, by and among Holdings, Officer and certain other
stockholders of Holdings, as amended, modified and supplemented from time to
time, embody the entire agreement and understanding between the parties with
respect to their subject matter and supersede all prior agreements and
understandings, whether written or oral, relating to their subject matter,
unless expressly provided otherwise within such agreements. No amendment or
modification of this Agreement will be valid unless made in writing and signed
by each of the parties and countersigned by Madison Dearborn Capital Partners,
LLC. No representations, inducements or agreements have been made to induce
either Officer or Employer to enter into this Agreement which are not expressly
set forth within this Agreement. Officer and Employer acknowledge and agree
that Employer’s wholly-owned subsidiaries and affiliates are express third
party beneficiaries of this Agreement.


 


*              *              *              *              *


 


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


 


	
  EDWARD
  MURPHY

  	
  NATIONAL
  MENTOR, INC.

  
	
  “Officer”

  	
  “Employer”

  
	
   

  	
   

  
	
  /s/ Edward Murphy

  	
   

  	
  By:

  	
  /s/ Gregory Torres

  	
   

  
	
   

  	
  Name:

  	
  Gregory Torres

  	
   

  
	
   

  	
  Title:

  	
  CEO

  	
   

  
									



 





















 


EXHIBIT A


 


Restricted
Territory


 


The Restricted Territory
is any location within a radius of fifty (50) miles of any existing operation
of Employer, or its affiliates or controlled subsidiaries, engaged in the
provision or sale of therapeutic foster care or other home or community-based
healthcare or human services.