Exhibit 10.11


 


MANAGEMENT AGREEMENT


 


This Agreement is
made as of this 29th day of June, 2006, among National Mentor Holdings, Inc., a
Delaware corporation (the “Company”), National Mentor, Inc., a Delaware
corporation (“NMI”), NMH Investment, LLC, a Delaware limited liability
company (“Investment”), NMH
Holdings, LLC, a Delaware a limited liability company (“Holdings”) and
Vestar Capital Partners, a Delaware limited partnership (“Vestar”).


 


WHEREAS, Vestar,
by and through its, partners, officers, employees, agents, representatives and
affiliates, has expertise in the areas of corporate management, finance,
investment, acquisitions and other matters relating to the business of the
Company and its subsidiaries; and


 


WHEREAS, each of
Investment, Holdings, the Company and NMI desires to avail itself, for the term
of this Agreement, of the expertise of Vestar in the aforesaid areas, in which
it acknowledges the expertise of Vestar.


 


NOW, THEREFORE, in
consideration of the foregoing recitals and the covenants and conditions herein
set forth, the parties hereto agree as follows.


 


1.                  Appointment.
Each of Investment, Holdings, the Company and NMI hereby appoints Vestar to
render the advisory and consulting services described in Paragraph 2 hereof
commencing upon the Effective Time (as defined in Section 3(b) hereof).


 


2.                  Services.
Vestar hereby agrees that commencing upon the Effective Time it shall render to
each of Investment, Holdings, the Company and NMI (and their subsidiaries) by
and through such of Vestar’s officers, employees, agents, representatives and
affiliates as Vestar, in its sole discretion, shall designate from time to
time, advisory and consulting services in relation to the affairs of
Investment, Holdings, the Company and NMI (and their subsidiaries) in
connection with strategic financial planning, and other services not referred
to in the next sentence, including, without limitation, advisory and consulting
services in relation to the selection, supervision and retention of independent
auditors, the selection, retention and supervision of outside legal counsel,
and the selection, retention and supervision of investment bankers or other
financial advisors or consultants. It is expressly agreed that the services to
be performed hereunder shall not include (x) investment banking or other
financial advisory services rendered by any of Vestar and its affiliates to
Investment, Holdings, the Company and NMI (and their subsidiaries) after the
Effective Time in connection with acquisitions, divestitures, refinancings,
restructurings and similar transactions by Investment, Holdings, the Company
and NMI (and their subsidiaries) or (y) full or part-time employment by any of
the Company and its subsidiaries of any employee or partner of Vestar or any of
its affiliates for which Vestar and its affiliates shall be entitled to receive
additional compensation.


 

















 


3.                  Fees. (a)
In consideration of the services contemplated by Paragraph 2, subject to the
provisions of Paragraph 6, Investment, Holdings, the Company and NMI and their
respective successors hereby jointly and severally agree to pay to Vestar a per
annum management fee (the “Fee”) equal to the greater of (i) $850,000
and (ii) an amount per annum equal to 1% of Consolidated EBITDA (as defined in
the Credit Agreement entered into on the date hereof among NMH Mergersub, Inc.,
Holdings, the lenders party thereto and JPMorgan Chase Bank, N.A. and UBS
Securities LLC, as joint lead arrangers and book managers, and JPMorgan Chase
Bank, N.A., as sole administrative agent for such lenders), before deducting
the Fee payable pursuant to this Section 3 (“Adjusted EBITDA”),
commencing at the Effective Time. The Fee shall be payable semi-annually in
advance (based on clause (i) above in 2006 an thereafter based on the greater
of clause (i) above and 1% of the prior year’s Adjusted EBITDA), with an
adjustment of the Fee for any fiscal year payable promptly following the
determination of Adjusted EBITDA for such fiscal year or on termination of this
Agreement. All references to per annum or annual herein refer to the fiscal
year of the Company. The initial Fee shall be pro rated to reflect the portion
of the current fiscal year which elapses prior to the Effective Time an shall
be payable at Closing. The semi-annual Fee payments shall be non-refundable
(except for any downward adjustment as described above).


 


(b)            Investment, Holdings,
the Company and NMI and their respective successors also hereby jointly and
severally agree to pay Vestar at the effective time (the “Effective Time”)
of the merger provided for in the Agreement and Plan of Merger, dated as of
March 22, 2006, among the Company, Holdings and NMH Mergersub, Inc., a Delaware
corporation and a wholly owned subsidiary of Holdings (the “Merger Agreement”),
a transaction fee equal to $7.5 million plus all of Out-of-Pocket Expenses (as
defined in Section 4) incurred by Vestar prior to the Effective Time for
services rendered by Vestar in connection with the consummation of the merger
referred to in the Merger Agreement.


 


4.                  Reimbursements.
In addition to the Fee, Investment, Holdings, the Company and NMI hereby
jointly and severally agree, at the direction of Vestar, to pay directly or
reimburse Vestar for its reasonable Out-of-Pocket Expenses incurred after the
Effective Time in connection with the services provided for in Paragraph 2
hereof. For the purposes of this Agreement, the term “Out-of-Pocket Expenses”
shall mean the amounts paid by or on behalf of Vestar in connection with the
services contemplated hereby, including reasonable (i) fees and disbursements
of any independent professionals and organizations, including independent
auditors and outside legal counsel, investment bankers or other financial
advisors or consultants, (ii) costs of any outside services or independent contractors,
such as financial printers, couriers, business publications or similar
services, and (iii) transportation, per diem, telephone calls, word processing
expenses or any similar expense not associated with its ordinary operations.
All reimbursements for Out-of-Pocket Expenses shall be made promptly upon or as
soon as practicable after presentation by Vestar of the statement in connection
therewith.


 


5.                  Indemnification.
Investment, Holdings, the Company and NMI hereby jointly and severally agree to
indemnify and hold harmless Vestar and its affiliates and their respective
affiliates, partners, members, officers, directors, employees, agents,
representatives and stockholders (each being an “Indemnified Party”,
from and against any and all losses,


 

















 


claims, damages and
liabilities of whatever kind or nature, joint or several, absolute, contingent
or consequential, to which such Indemnified Party may become subject under any
applicable federal or state law, or any claim made by any third party, or otherwise,
to the extent they relate to or arise out of the services contemplated by this
Agreement or the engagement of Vestar pursuant to, and the performance by
Vestar of the services contemplated by, this Agreement Investment, Holdings,
the Company and NMI hereby jointly and severally agree to reimburse any
Indemnified Party for all reasonable costs and expenses (including reasonable
attorneys’ fees and expenses) as they are incurred in connection with the
investigation of, preparation for or defense of any pending or threatened claim
for which the Indemnified Party would be entitled to indemnification under the
terms of the previous sentence, or any action or proceeding arising therefrom,
whether or not such Indemnified Party is a party hereto. Investment, Holdings,
the Company and NMI will not be liable under the foregoing indemnification
provision to the extent that any loss, claim, damage, liability, cost or
expense is determined by a court, in a final judgment from which no further
appeal may be taken, to have resulted primarily from the gross negligence or
willful misconduct of Vestar. None of Investment, Holdings, the Company and NMI
shall be obligated to make any payment to Vestar hereunder unless and until the
Effective Time has occurred.


 


6.                  Term. This
Agreement shall become effective upon the Effective Time and shall terminate
upon the earlier to occur of (i) the termination of the Merger Agreement or
(ii) such time after the Effective Time as Vestar Capital Partners V, L.P., a
Delaware limited partnership (“VCP”) and the partners therein and the
affiliates thereof, in the aggregate, hold directly or indirectly through
Investment and Holdings, or otherwise, less than 20% of the voting power of the
Company’s outstanding voting stock. The provisions of Paragraphs 4, 5, 7 and 8
and the joint and several obligation of Investment, Holdings, the Company and
NMI to pay Fees accrued during the term of this Agreement pursuant to Section 2
shall survive the termination of this Agreement.


 


7.                  Permissible
Activities. Subject to all applicable provisions of New York law that
impose fiduciary duties upon Vestar or its partners, members or affiliates,
nothing herein shall in any way preclude Vestar or its partners, members,
officers, employees or affiliates from engaging in any business activities or
from performing services for its or their own account or for the account of
others, including for companies that may be in competition with the business
conducted by the Company.


 


8.                  General.
(a) No amendment or waiver of any provision of this Agreement, or consent to
any departure by either party from any such provision, shall in any event be
effective unless the same shall be in writing and signed by the parties to this
Agreement and then such amendment, waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.


 


(b)            Any and all notices
hereunder shall, in the absence of receipted hand delivery, be deemed duly
given when mailed, if the same shall be sent by registered or certified mail,
return receipt requested, and the mailing date shall be deemed the date from
which all time


 

















 


periods pertaining to a
date of notice shall run. Notices shall be addressed to the parties at the
following addresses:


 


	
  If to Vestar:

  	
   

  	
  Vestar Capital Partners

  
	
   

  	
   

  	
  245 Park Avenue, 41st
  Floor

  
	
   

  	
   

  	
  New York, New York
  10167

  
	
   

  	
   

  	
  Attention: General
  Counsel

  
	
   

  	
   

  	
   

  
	
  If to Investment, 

  Holdings, the

  	
   

  	
   

  
	
  Company or NMI:

  	
   

  	
  National Mentor
  Holdings, Inc.

  313 Congress Street

  Boston, MA 02210

  Attention: Edward Murphy



  
	
   

  	
   

  	
   

  
	
  In any case, 

  with copies to:

  	
   

  	
  

  The other parties hereto 

  at their respective addresses 

  noted above.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Simpson Thacher &
  Bartlett LLP

  425 Lexington Avenue

  New York, New York 10017

  Attention: Peter J. Gordon, Esq.

  



 


(c)             This Agreement shall
constitute the entire Agreement between the parties with respect to the subject
matter hereof, and shall supersede all previous oral and written (and all
contemporaneous oral) negotiations, commitments, agreements and understandings
relating hereto.


 


(d)            THIS AGREEMENT SHALL
BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED THEREIN, THE
PARTIES TO THIS AGREEMENT HEREBY AGREE TO SUBMIT TO THE EXCLUSIVE JURISDICTION
OF THE FEDERAL AND STATE COURTS LOCATED IN THE STATE OF NEW YORK IN ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. This Agreement
shall inure to the benefit of, and be binding upon, Vestar, the Indemnified
Parties, Holdings, the Company and their respective successors and assigns.


 


(e)             This Agreement may be
executed in two or more counterparts, and by different parties on separate
counterparts, each set of counterparts showing execution by all parties shall
be deemed an original, but all of which shall constitute one and the same
instrument.


 


(f)               The waiver by any
party of any breach of this Agreement Shall not operate as or be construed to
be a waiver by such party of any subsequent breach.


 

















 


IN WITNESS
WHEREOF, the parties have caused this Agreement to be executed and delivered by
their duly authorized officers or agents as set forth below.


 


	
   

  	
  VESTAR CAPITAL PARTNERS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By its General Partner:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brian Ratzan

  	
   

  
	
   

  	
   

  	
  Name: Brian Ratzan

  
	
   

  	
   

  	
  Title: General Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  NATIONAL MENTOR
  HOLDINGS, INC.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  NATIONAL MENTOR, INC.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  NMH HOLDINGS, LLC

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brian Ratzan

  	
   

  
	
   

  	
   

  	
  Name: Brian Ratzan

  
	
   

  	
   

  	
  Title: President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  NMH INVESTMENT, LLC

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brian Ratzan

  	
   

  
	
   

  	
   

  	
  Name: Brian Ratzan

  
	
   

  	
   

  	
  Title: President

  
					



 

















 


IN WITNESS
WHEREOF, the parties have caused this Agreement to he executed and delivered by
their duly authorized officers or agents as set forth below.


 


	
   

  	
  VESTAR CAPITAL PARTNERS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By its General Partner:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  NATIONAL MENTOR
  HOLDINGS, INC.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Edward Murphy

  	
   

  
	
   

  	
   

  	
  Name: Edward Murphy

  
	
   

  	
   

  	
  Title:   President and Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  NATIONAL MENTOR, INC.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Edward Murphy

  	
   

  
	
   

  	
   

  	
  Name: Edward Murphy

  
	
   

  	
   

  	
  Title:   President and Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  NMH HOLDINGS, LLC

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name: Brian Ratzan

  
	
   

  	
   

  	
  Title: President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  NMH INVESTMENT, LLC

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name: Brian Ratzan

  
	
   

  	
   

  	
  Title: President