Exhibit 10.14


 


The MENTOR Executive Leadership Incentive Plan


 


“Mentor/the
Company” shall mean National Mentor Holdings, Inc., a Delaware corporation, and
(except to the extent the context requires otherwise) any subsidiary
corporation of National Mentor Holdings, Inc., a Delaware corporation, as such
term id defined in Section 425 of the Code.


 


Incentive Compensation Philosophy


 


MENTOR’s
primary objectives are to provide quality care and services to people with
special needs, continue as an attractive employer of choice and achieve strong
organizational and financial growth.


 


Competitive
base salary levels and merit increases are intended to reward executives for
performing the ongoing aspects of their jobs in a high quality manner.


 


MENTOR
has developed this Leadership Incentive Plan (the “Plan”) to align variable
compensation with organization goals and participant performance.


 


The
Plan has been designed to compliment the other elements of total pay and to
support achievement of Company growth and quality goals by providing:


 


•                  incentives that closely align pay with
quality care and leader, divisional, and organizational-wide performance goals
related to the financial growth of MENTOR; and


 


•                  meaningful and competitive variable
compensation opportunities that effectively attract and retain talented
executives.


 


Incentive Plan Guiding
Principles


 


The
Plan is based on a set of principles necessary for an effective incentive
system. They are as follows:


 


1.               Variable Compensation. MENTOR recognizes that
we attract, motivate and retain our high performing leaders and executives by
providing total compensation that is fair, competitive and reflective of their
performance and contribution to our success. Because of their greater
responsibilities for and impact upon our business results, a greater portion of
leaders’ and executives’ annual total cash compensation opportunities (base
salary plus incentive) will be comprised of incentive compensation award
opportunities than for other employees.


 

















 


2.               Corporate Growth & Quality. Incentives
are linked with MENTOR’s core values, critical success factors and strategic
intent. MENTOR intends to provide incentives to leaders and executives
commensurate with their levels of responsibility and results achieved. While financial
performance is the key component for funding incentive payouts, service quality
will not be overlooked. Individual and unit performance reviews will
specifically examine quality, service and operational excellence as key
criteria for determining incentive plan payouts. The Plan is designed to
closely link incentives to growth in EBITDA and potentially to other growth
metrics over time.


 


Administration


 


The
Plan is to be approved by the Board of Directors,  and will be interpreted and administered by a
designated Compensation Committee. The administrative duties shall include:


 


•                  Determining eligibility criteria and
approving which leaders & executives shall participate in the Plan.


 


•                  Approving any changes to the threshold,
target or maximum payout opportunities as a percentage of base salary.


 


•                  Approving each Plan Year, the performance
measures and goals to be used for measuring performance at the threshold,
target and maximum levels.


 


•                  Determining/approving actual performance
achieved vs. goals at the end of each Plan Year.


 


•                  Determining the size of the discretionary
pool for awarding high performing individuals or units in years where
consolidated, division or unit growth was insufficient to create an equitable
incentive pool.


 


•                  Approving, at the end of each Plan Year, the
percentage of base salary (or dollar) amount to be paid to each Plan
participant.


 


•                  Reviewing and approving the policies and
procedures to be used in administration of the Plan.


 


•                  Rendering any decisions necessary with regard
to the interpretation of the Plan’s policies and procedures.


 


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Eligibility & Award
Opportunity


 


Initial
eligibility for participation in the Plan shall be limited to those individuals
in the following positions, and the corresponding initial threshold, target and
maximum payout opportunities as a percentage of base salary are:


 


	
  Participants

  	
   

  	
  Payout Opportunity:Thresh/Target/Max

  
	
  •  Chief
  Executive Officer

  	
   

  	
  20%/40%/80%

  
	
  •  Executive
  Group/EVP’s

  	
   

  	
  20%/40%/80%

  
	
  •  Senior
  Vice Presidents and Division Presidents

  	
   

  	
  15%/30%/45%

  



 


The
payout opportunities indicated in the preceding table are subject to plan
funding, as explained in the next section of the plan document, and actual
payouts may be prorated or even zero if individual performance is below
expectations or if sufficient funding is not achieved to pay the awards.


 


Plan Structure & Funding


 


To
provide funding for the approved participants’ payout percentages of salary
(threshold-maximum) as covered in the previous section, consolidated growth
between pre-approved threshold, target and maximum goals must be achieved. In
the initial year, the total pool of funds allocated for incentive awards will
be based upon consolidated growth in EBITDA. Acquisitions, divestitures and
other extraordinary items will be excluded, or appropriate adjustments will be
made by the Committee. In subsequent years, a combination of revenue and EBITDA
growth or other key metrics may be used, as approved by the Committee. Based
upon the level of growth on a consolidated basis, an example of funding for a single-factor plan is illustrated
in the chart below:


 


Single Factor Funding
Chart


 




	
  EBITDA
  Growth

  	
   

  	
  5

  	
  %

  	
  10

  	
  %

  	
  15

  	
  %

  
	
  Pool
  Funding

  	
   

  	
  50

  	
  %

  	
  100

  	
  %

  	
  200

  	
  %

  






 


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Upon
creation of the overall funding pool, each reporting level will then receive
incentive compensation funding based upon the performance of the consolidated
organization and/or their division as follows:


 


Pool Allocation


 




	
  Job Level

  	
   

  	
  Corporate

  	
   

  	
  Division

  	
   

  
	
  Corporate

  	
   

  	
  100

  	
  %

  	
  0

  	
  %

  
	
  Division Pres.

  	
   

  	
  25

  	
  %

  	
  75

  	
  %

  






 


For
example, the funding for a Division President would be based upon both the
performance of the consolidated organization as well as the President’s
division.


 


The
“Consolidated Funding” portion would be obtained from the funding chart above.
The “Division Funding” portion would be based upon the proportion of
consolidated growth which was achieved by each division, and subsequently
allocated to division participants, states and subunits.


 


An
example of how funding, pool allocations, performance reviews and actual
payouts are calculated/determined is included in the appendix.


 


Discretionary Payout Pool


 


In
the event that there is not sufficient funding of the overall pool based upon
consolidated performance results or a division, state or unit pool based upon
division growth to adequately fund the division/state/unit pools, the Plan
administrators will have a contingency pool from which to approve discretionary
awards to high performing participants in those organizations.


 


Performance Focus Areas
and Weights


 


Participants
will have their performance evaluated by their supervisors and leadership based
upon the growth of their division and/or of the overall organization, as well
as their personal achievements in the quality, service and operational
excellence areas. Participants may be assigned a limited number of other key,
annual business goals, depending upon job roles and levels. Growth is defined
as increases in revenue, EBITDA and/or service volumes. EBITDA growth will be
used for the first year to facilitate implementation and clear communications.


 


Significant
client service or quality lapses can result in reduction or even total
forfeiture of incentive payouts, based upon individual performance reviews.


 


Goals
and performance weights will be finalized based upon business plan cycles, and
should be communicated to participants and in place prior to the start of each
Plan year.


 


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(Note:  To meet the IRC section 162m $ million dollar
cap performance plan safe harbor for top 5 named executive officers in public
companies, the goals must be measurable, approved by the Board and disclosed to
shareholders for their approval.)


 


Target,
minimum Threshold and Maximum performance levels will be established for each
Performance Focus Area measure (EBITDA, revenue growth, and other key business
goals or volume growth where applicable) and linked to payout percentage
opportunities, which are typically:


 


•                  50% of target payout for the threshold
compared to target performance level;


 


•                  100% of target payout for 100% of target
performance; and


 


•                  150% to 200% (depending upon organizational
level) of target payout for maximum performance.


 


Payouts
for performance levels between threshold and maximum will be calculated based
upon pro-ration/interpolation.


 


Performance Period, Award Calculation/Payment
Methodology and Timing


 


Performance
goals (and possibly weights) will be set and measured on a fiscal year basis
with incentive payments to be made based upon audited results following the end
of each year.


 


Prior
to the beginning of each Plan Year, the CEO and leadership team will:


 


•                  Determine and recommend to the Plan
Administrators for approval:


 


•                  Potential payout ranges;


 


•                  Measures, weights, percentages and goals for
each eligible employee; and


 


•                  Administration procedures changes, if any.


 


•                  Communicate to each participant the
applicable performance measures and levels, as well as potential payout range.


 


During
the year, situations may arise which warrant legitimate changes to the measures
and goals of a participant. Such changes would only be allowed if they are
consistent with the goals and objectives of MENTOR and occur within the first
half of the annual incentive period. In such cases, the Plan Administrators
and/or an official designee shall review and approve any changes to a
participant’s measures and goals.


 


(Note:
to meet IRC section 162m million dollar cap performance plan safe harbor
requirements for top 5 named executive officers, as determined for SEC
disclosure purposes, goals cannot be changed after approved by Board and
shareholders.)


 


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Within
two-and-one-half months after the end of the fiscal year, the Plan
Administrators and/or an official designee shall:


 


•                  Review, evaluate and determine each
participant’s performance against the general quality, service &
operational excellence expectations & any predetermined performance goals.


 


•                  Determine the amount of incentive
compensation payable to each participant.


 


•                  Communicate the performance and payouts
linkage/amounts, and ensure checks are delivered within the necessary
timeframe.


 


Award
payments will be calculated using the following methodology:


 


1.               Funding pools will be calculated based upon
consolidated growth vs. the pre-establishes targets, with further allocation to
divisions and units based upon their relative/proportional growth contributions
compared to other divisions/units. Growth results will be determined by the
Committee, and will reflect any necessary adjustments for acquisitions,
divestitures and other extraordinary items.


 


2.               Discretionary pool funding, if any, for
awards to high performing individuals in divisions/units without (sufficient)
funding will be determined by the committee.


 


3.               Based upon pool funding, schedules will be
prepared and shared with “supervisors” indicating the “mechanically-allocated”
payout opportunity allocated for each individual along with their threshold,
target and maximum percentages of base salary.


 


4.               Did the participant’s results vs. assigned
performance goals meet minimum threshold, target or maximum expectations and
demonstrate growth in each of the assigned EBITDA, revenue and/or service
volume categories?


 


5.               Were there any quality or service problems
within the participant’s control that should potentially reduce or nullify the
payouts?


 


6.               Supervisors will then document performance
results along with actual payout recommendations. Within the pool,  upwards or downwards adjustment to the
individual incentive allocation will be made.


 


7.               The performance reviews and recommended
payouts will be reviewed by the CEO and recommended to the Compensation
Committee for approval. The Committee will assess the CEO’s performance to
determine the actual incentive payout.


 


8.               A detailed example is included in the
appendix.


 


Sale of Company/Change
in Control Provisions


 


In
the event of a Sale of the Company/Change in Control, as defined below, the
Plan Year will terminate and all eligible employees will receive a pro-rated
portion of their earned incentive.


 


Sale
of the Company shall mean the sale to a third party or affiliated group of
third parties, as determined by the Board Compensation Committee in its
discretion, of (i) capital stock of the Company possessing the voting power to
elect a majority of the Company’s nBoard of Directors(whether by merger,
consolidation or sale or transfer of the Company’s capital stock) or (ii) more
than 50% of the Company’s assets determined on a consolidated basis; provided
that in any event, the term “Sale of the Company” shall not include an offering
of securities tom the public.


 


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Termination Provisions


 


a.               Voluntary termination – employees who terminated employment
voluntarily prior to the actual payment date, other than by retirement, will
not be paid any incentive under the plan for the performance year.


 


b.              Involuntary termination for
cause – employees whose
employment is involuntarily terminated for cause will not be eligible for any
incentive payments under the Plan.


 


“Cause”
shall mean any of the following: (i) theft or embezzlement, or attempted theft
or embezzlement, of money or property of the Company or any subsidiary, perpetration
or attempted perpetration of fraud, or participation in a fraud or attempted
fraud, on the Company or any subsidiary or unauthorized appropriation of, or
attempt to misappropriate, any tangible or intangible assets or property of the
Company or any subsidiary, (ii) any act or acts of disloyalty, misconduct or
moral turpitude injurious to the interest, property, operations, business
reputation of the Company or any subsidiary or (iii) failure or inability
(other than by reason of disability) to carry out effectively a participant’s
duties and obligations to the Company and its subsidiaries or to participate
effectively and actively in the management of the Company and its subsidiaries,
as determined in the reasonable judgment of the Compensation Committee of the
Board.


 


c.               Reduction in Force – based upon actual performance and service
achieved, any partial, pro-rated incentives earned will be paid at the normal
payout date to employees who have been terminated by reason of a reduction in
force.


 


d.              Retirement – based upon actual performance and service
achieved, any partial, pro-rated incentives earned will be paid at the normal
payout date to employees who terminate employment through retirement.


 


e.               Death – based upon actual performance and service
achieved, any partial, pro-rated incentives earned will be paid to
participants’ estates at the normal payout date for any who cease employment
during the year due to the death.


 


Exclusions


 


Not
withstanding the above, participants are eligible for an incentive payout only
if their reviewer certifies that their performance is acceptable, based on the
following:


 


•                  Fulfilling general responsibilities and
expectations, including a demonstrated commitment to the quality of
programming, service to customers, and the effectiveness of the work
environment for employees;


 


•                  Successfully meeting financial objectives;


 


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•                  Meeting their organizational/business
objectives; and


 


•                  Conducting themselves in alignment with the
values of the company.


 


Mentor
generally believes that executive supervision involves regular clarification of
expectations, straight forward feedback on performance, support for success,
and regular guidance on areas where performance requires improvement. In light
of this, supervisors will be asked to provide feedback on a quarterly basis as
to whether or not an incentive eligible leader is meeting these basic
performance expectations. These conversations should be documented for any
quarter where a participant is judged as not meeting requirements and fully for
the annual review. On an annual basis, supervisors of incentive eligible
leaders will be expected to fill out a form to document performance appraisal
and to activate any incentive eligibility of the leaders reporting to them.


 


Special Provisions


 


a.               Promotions, job transfers – incentive plan goals and payout
opportunities will be reestablished upon transfer or promotion to a new
position. At the end of the performance period, earned incentive pay will be
prorated for performance achieved prior to transfer and in the new position
based on the date of transfer.


 


b.              Interruptions in work


 


i)                             Long-term illness or disability:  generally, a long-term illness or disability
will not affect the eligibility of an employee in the incentive plan.
Performance objectives will not be adjusted based on the work interruption,
although actual performance achieved will be evaluated and corresponding
incentive pay out will be prorated based on the amount of time worked during
the performance period.


 


“Disability”
shall mean the inability, due to illness, accident, injury, physical or mental
incapacity or other disability, of any participant to carry out effectively
their duties and obligations to the Company or to participate effectively and
actively in the management of the Company for a period of at least 90
consecutive days or for shorter periods aggregating at least 90 days (whether
or not consecutive) during any 180-day period, as determined in the reasonable
judgment of the Compensation committee of the Board.


 


ii)                          Special assignments:  will
generally not impact either the target goals or incentive pay out. If the
special assignment is of a significant nature or duration, incentive plan goals
may be renegotiated and incentive earnings will be prorated based on the time
spent in each position during the performance period as in promotions or job
transfers.


 


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Section 162(m)
Provisions


 


In
the event the company partakes in an Initial Public Offering or otherwise
becomes a publicly held company without an Initial Public Offering and becomes
subject to Section 162(m) of the Internal Revenue Code, and applicable
regulations, the plan terms shall be disclosed in the prospectus accompanying
the initial public offering. Furthermore, prior to the beginning of the next
plan year following the Company becoming publicly held without an Initial
Public Offering or prior to the beginning of the third plan year following an
Initial Public Offering, the Plan, as currently stated or amended, shall be
presented for shareholder approval as required by Section 162(m) and applicable
regulations.


 


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APPENDEX-replace with new example


 


MENTOR INCENT PLAN FUNDING & ALLOCATION EXAMPLE


 


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