Exhibit 10.3


 


AMENDMENT NO. 1 TO TERM LOAN AGREEMENT AND

JOINDER AGREEMENT


 


THIS AMENDMENT NO.
1 TO TERM LOAN AGREEMENT AND JOINDER AGREEMENT (this “Amendment”), dated
as of June 29, 2006, is among NMH HOLDINGS, LLC, a Delaware limited liability
company (“New Holdings”), NATIONAL MENTOR HOLDINGS, INC., a Delaware
corporation (“Holdings”), NATIONAL MENTOR, INC., a Delaware corporation
(“Mentor”), REM ARROWHEAD, INC. (“REM Arrowhead”), REM
CONNECTICUT COMMUNITY SERVICES, INC. (“REM Connecticut”), REM INDIANA,
INC. (“REM Indiana”), REM NORTH DAKOTA, INC. (“REM North Dakota”),
REM WISCONSIN, INC. (“REM Wisconsin 1”), REM WISCONSIN II, INC. (“REM
Wisconsin II”), REM WISCONSIN III, INC. (together with REM Arrowhead, REM
Connecticut, REM Indiana, REM North Dakota, REM Wisconsin I, and REM Wisconsin
II, collectively, the “Existing Borrowers” and, together with Holdings
and Mentor, collectively, the “Existing Loan Parties”) and BANK OF
AMERICA, N.A. (the “Lender”).


 


RECITALS:


 


A.                The Existing
Loan Parties and the Lender have entered into a Term Loan Agreement dated as of
May 20, 2005 (the “Loan Agreement”), Capitalized terms used and not
otherwise defined herein shall have the meanings ascribed to them in the Loan
Agreement.


 


B.                 The Existing
Loan Parties have advised the Lender that, on the Amendment Effective Date (as
defined in Section 4(e) of this Amendment), Holdings will merge with NMH
Mergersub, Inc., a Delaware corporation (such transaction, the “Merger”),
with Holdings being the survivor of the Merger.


 


C.                 As a result of
the Merger, the Existing Loan Parties will become wholly-owned Subsidiaries of
New Holdings.


 


D.                The
Merger will constitute a Change of Control and an Event of Default under the
Loan Agreement.


 


E.                 New Holdings
and the Existing Loan Parties have requested that the Lender amend the Loan
Agreement to, among other things, amend the definition of Change of Control and
thereby avoid such Event of Default, as more specifically set forth below.


 


F.                 The Lender is
willing to so amend the Loan Agreement provided New Holdings becomes a party to
the Loan Agreement.


 


NOW,
THEREFORE, in consideration of the premises and the
covenants, terms, conditions, representations and warranties herein contained,
the parties hereto agree hereby as follows:


 

















 


Section 1.            JOINDER
AND AMENDMENTS. Subject to the covenants, terms and
conditions set forth herein and in reliance upon the representations and
warranties set forth herein, New Holdings, the Existing Loan Parties and the
Lender agree as follows:


 


(a)                New Holdings irrevocably,
absolutely and unconditionally (i) becomes a party to the Loan Agreement as if
it had been an original party thereto, and (ii) ratifies and assumes all the
terms, conditions, obligations, liabilities and undertakings to which a Loan
Party is subject thereunder. All references to the “Group Members” and “Loan
Parties” in the Loan Agreement shall be deemed to include New Holdings. In
addition, all representation and warranties, covenants and other provisions
made by or binding on Holdings in Articles V, VI, VII, VIII and IX of the Loan
Agreement shall also be deemed to constitute representations and warranties
made by, and covenants or other provisions binding on, New Holdings, as the
case may be.


 


(b)               Section 1.01 of the Loan
Agreement is amended to insert the following new definitions in the appropriate
alphabetical positions therein:


 


“Amendment
Effective Date” means June 29, 2006.


 


“New Holdings”
means NMH Holdings, LLC, subject to Section 10.17.


 


(c)                Section 1.01 of the Loan
Agreement is amended to delete the existing definitions of “Eligible Assignee”,
“Material Adverse Effect”, “Maturity Date”, “Net Cash Proceeds”, “Permitted
Lien” and “Syndicated Credit Agreement” and insert the following definitions in
lieu thereof:


 


“Eligible
Assignee” means (a) an Affiliate of the Lender; (b) an Approved Fund; and
(c) any other Person (other than a natural Person) approved by the Borrowing
Agent (such approval not to be unreasonably withheld or delayed); provided
that no such approval shall be required if an Event of Default under Section
8.01 (a) or (f) has occurred and is continuing.


 


“Material
Adverse Effect” means a material adverse effect on (a) the business,
property, operations or financial condition of Holdings and its Subsidiaries,
taken as a whole, (b) the ability of any Loan Party to perform its material
obligations under the Loan Documents to which it is a party, or (c) the
validity or enforceability of this Agreement, any Note, or, taken as a whole,
any of the other Loan Documents, or the rights or remedies of the Lender under
this Agreement, any Note or, taken as a whole, the other Loan Documents.


 


“Maturity Date”
means the earliest to occur of (a) May 20, 2010, (b) the date that is six
months prior to the Revolving Termination Date (as defined in the Syndicated
Credit Agreement) or (c) the date (after the Amendment Effective Date) of
earlier refinancing, replacement or other termination of the revolving
commitments under the Syndicated Credit Agreement.


 


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“Net Cash Proceeds” means, (a) for the purposes of Section
2.03 and the definition of Prepayment Event, the proceeds from the
applicable occurrence in the form of cash and Cash Equivalents (including any
such proceeds received by way of deferred payment of principal pursuant to a
note or installment receivable or purchase price adjustment receivable or
otherwise, but only as and when received), net of attorneys’ fees,
accountants’ fees, investment banking fees and other related fees and expenses
actually incurred in connection therewith and net of taxes paid or reasonably
estimated to be payable as a result thereof (after taking into account any
available tax credits or deductions and any tax sharing arrangements) and net
of (i) any reasonable reserves established in connection therewith, (ii)
reasonable holdbacks and (iii) reasonable indemnity obligations relating
thereto, and (b) for the purposes of any covenants incorporated by reference
pursuant to Section 7.03, has the definition set forth in the Syndicated
Credit Agreement.


 


“Permitted Lien” means a Lien permitted to exist pursuant to Section
7.02 or, for the purposes of Section 5.10 and any covenants
incorporated by reference pursuant to Section 7.03, permitted to exist
pursuant to such covenants.


 


“Syndicated Credit Agreement” means that certain Credit
Agreement dated as of June 29, 2006, among New Holdings, Holdings, JPMorgan
Chase Bank, N.A., as Administrative Agent, and the lenders party thereto, as in
effect on the date hereof and as the same may be amended, restated,
supplemented or otherwise modified from time to time; provided, that (i)
to the extent a covenant or other provision is incorporated herein by reference
to the Syndicated Credit Agreement and the incorporated covenant or other provision
permits or requires an action or other matter to have the approval, consent or
be to the satisfaction of, the Administrative Agent, Lenders or Required
Lenders under the Syndicated Credit Agreement, or would require an amendment or waiver
therefrom, such action or other matter shall require the approval, consent or
satisfaction of, or an amendment or waiver from, the Lender under this
Agreement (except to the extent the Lender has affirmatively voted in favor
thereof as a “Lender” under the Syndicated Credit Agreement), (ii) in the event
the Syndicated Credit Agreement is amended, restated, supplemented or otherwise
modified without the affirmative vote of the Lender in favor of such amendment,
restatement, supplement or modification cither hereunder or as a “Lender” under
the Syndicated Credit Agreement, all definitions, covenants and other
provisions defined by reference to the Syndicated Credit Agreement or
incorporated herein by reference thereto (and any required definitions utilized
therein) shall remain as defined or incorporated herein immediately prior to
giving effect to such amendment, restatement, supplement or modification, as
the case may be, and (iii) in the event the Syndicated Credit Agreement is
refinanced, replaced or the revolving commitments are otherwise terminated, all
definitions, covenants and other provisions defined by reference to the
Syndicated Credit Agreement or incorporated herein by reference thereto (and
any required definitions utilized therein) shall remain as defined or
incorporated herein immediately prior to such refinancing, replacement or
termination, as the case may be.


 


3

















 


(d)               Section 1.01 of the Loan
Agreement is amended to delete the existing definitions of the following terms
and incorporate into the Loan Agreement by reference the corresponding
definitions from the Syndicated Credit Agreement (and any required definitions
utilized therein): “Cash Equivalent”, “Change of Control”; “Consolidated EBITDA”;
“Consolidated Interest Coverage Ratio”; “Consolidated Interest Expense”; “Consolidated
Leverage Ratio”; “Consolidated Net Income”; “Consolidated Total Debt”; “Environmental
Laws”; “Indebtedness”; “Senior Subordinated Note indenture”; and “Senior
Subordinated Notes”; provided that any reference to “this Agreement”,
the “Loans” and the “Loan Documents” therein shall be deemed to be a reference,
respectively, to the Syndicated Credit Agreement and the “Loans” and the “Loan
Documents” as defined in the Syndicated Credit Agreement, and any reference to “Holdings”
and the “Borrower” therein shall be deemed to be a reference, respectively, to
New Holdings and Holdings.


 


(e)                Section 1.01 of the Loan
Agreement is amended to delete the following definitions in their entirety: “Acquired
EBITDA”; “Acquisition”; “Asset Sale”; Capital Expenditures”; “Capital Lease
Obligations”; “Domestic Subsidiary”; “Earnout Obligation”; “Foreign Subsidiary”;
“Initial Public Offering”; “Investments”; “Management Fees”; “MDP Holder”; “Net
Payment Amount”; “Permitted Acquisition”; “Permitted Capital Stock”; “Permitted
Disposition”; “Permitted Foreign Subsidiaries”; “Pro Forma Cost Reductions”; “Projections”;
“Recovery Event”; “Reinvestment Deferred Amount”; Reinvestment Event”; “Reinvestment
Notice”; “Restricted Payments”; “Sale Leaseback Transaction”; “Subordinated PIK
Debt” and “Transaction Bonuses”.


 


(f)                Section 5.09
of the Loan Agreement is deleted in its entirety and the following is inserted
in lieu thereof:


 


Section 5.09 Licenses, Intellectual Property.
Except as in the aggregate would not reasonably be expected to have a Material
Adverse Effect or as set forth in Schedule 5.09 (all of which items set
forth in Schedule 5.09 in the aggregate would not reasonably be expected
to have a Material Adverse Effect), each Group Member has all necessary
licenses, permits, franchises, rights to participate in, or the benefit of
valid agreements to participate in material Third Party Pay or Programs and
other rights necessary for the conduct of its business and for the intended use
of its properties and assets to the extent necessary to ensure no material
interruption in cash flow. Each Group Member owns, or is licensed to use, all
Intellectual Property necessary for the conduct of its business as currently conducted
except to the extent that a failure would not reasonably be expected to have a
Material Adverse Effect. No material claim has been asserted and is pending by
any Person challenging or questioning the use of any Intellectual Property that
is material to the business of the Group Members or the validity or
effectiveness of any such Intellectual Property, nor docs Holdings, Mentor or
any Borrower have knowledge of any valid basis for any such claim. Except as
would not reasonably be expected to result in a Material Adverse Effect, the
use of Intellectual Property by each Group Member does not infringe on the
rights of any Person in any material respect.


 


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(g)               Section 5.18 of the Loan
Agreement is hereby amended to delete the last sentence thereof.


 


(h)               Section 5.20 of the Loan
Agreement is deleted in its entirety and the following is inserted in lieu
thereof;


 


Section 5.20 Solvency. On the Amendment
Effective Date, the Loan Parties on a consolidated basis are, and after giving
effect to the incurrence of all Indebtedness and obligations being incurred on
the Amendment Effective Date will be, Solvent.


 


(i)                 Section
5.21 of the Loan Agreement is deleted in its entirety and the following is
inserted in lieu thereof:


 


5.21 Senior Indebtedness. The Obligations
constitute “Senior Indebtedness” under and as defined in the Senior
Subordinated Note Indenture.


 


(j)                 Clauses (a)
and (b) of Section 6.02 of the Loan Agreement are deleted in their
entirety and the following is inserted in lieu thereof:


 


(a)           If reasonably requested by the
Lender, concurrently with the delivery of the financial statements referred to
in Section 6.01(a), a certificate of the independent certified public
accountants reporting on such financial statements stating that in making the
examination necessary therefor no knowledge was obtained of any Default or
Event of Default, except as specified in such certificate (provided that such
certificate shall not be required if, after exercising commercially reasonable
efforts to do so, New Holdings or Holdings are unable to obtain such
certificate);


 


(b)           concurrently with the delivery of any
financial statements pursuant to Section 6.01(a) and (b)., (i) a
Compliance Certificate containing all information and calculations required by
the form of such certificate attached as Exhibit F including those
necessary for determining compliance by each Group Member with the provisions
of Section 7.01 (including detail with respect to any calculation of
Consolidated EBITDA as of the last day of the fiscal quarter or fiscal year of
Holdings, as the case may be), and (ii) to the extent not previously disclosed
to the Lender, a description of any change in the jurisdiction of organization
of any Loan Party since the date of the most recent report delivered pursuant
to this clause (ii) (or, in the case of the first such report so delivered,
since the Closing Date);


 


(k)                Clause (c) of Section 6.02
of the Loan Agreement is deleted in its entirety and the following is inserted
in lieu thereof:


 


(c)           within the time frame specified
therein, the deliveries and information required to be delivered under clause
(c) of Section 6.2 of the Syndicated Credit Agreement (to the extent not
already delivered to the Lender thereunder);


 


5

















 


(l)                 Section
6.03 of the Loan Agreement is deleted in its entirety and the following is
inserted in lieu thereof:


 


6.03        Payment of
Taxes. Pay, discharge or otherwise satisfy at or before
maturity or before they become delinquent, as the case may be, all its material
tax obligations of whatever nature, except where (i) the amount or validity
thereof is being contested in good faith by appropriate proceedings and
reserves in conformity with GAAP with respect thereto have been provided on the
books of the relevant Group Member or (ii) the failure to pay would reasonably
be expected to result in a Material Adverse Effect.


 


(m)               Section 6.04 of the Loan
Agreement is deleted in its entirety and the following is inserted in lieu
thereof:


 


6.04        Maintenance
of Existence; Compliance. (a)(i) Preserve, renew and keep in
full force and effect its organizational existence and (ii) take all reasonable
action to maintain all rights, privileges and franchises necessary or desirable
in the normal conduct of its business, except, in each case, as otherwise
permitted by Section 7.4 of the Syndicated Credit Agreement and except,
in the case of clause (ii) above, to the extent that failure to do so would not
reasonably be expected to have a Material Adverse Effect; and (b) comply with
all Requirements of Law except to the extent that failure to comply therewith
would not, in the aggregate, reasonably be expected to have a Material Adverse
Effect.


 


(n)               Clauses (a) and (b) of Section
6.05 of the Loan Agreement are deleted in their entirety and the following
is inserted in lieu thereof:


 


(a)           Keep all material property useful and
necessary in its business in good working order and condition, ordinary wear
and tear and ordinary damage by casualty excepted and maintain with financially
sound and reputable insurance companies insurance (or pursuant to
self-insurance to the extent commercially reasonable) in at least such amounts
and against at least such risks (but including in any event public liability,
professional liability, workers’ compensation and business interruption) as are
required by the Mortgages and as are usually insured against in the same
general area by companies engaged in the same or a similar business and of
similar size; provided that the insurance amount for general liability
insurance of each of Mentor and the Borrowers shall in no event be less than
$4,000,000 (which shall be available after any reasonable self-insurance or
effective deductibles, which at the date hereof are $1,000,000 per occurrence
and $2,000,000 for all occurrences),


 


(b)           Provide that each insurance policy
maintained or required to be maintained by any Loan Party shall (i) name the
Lender as loss payee pursuant to a so-called “standard mortgagee clause” or “Lender’s
loss payable endorsement”, with respect to property coverage of such Loan Party
carried as to the Mortgaged Properties, and shall name the Lender as an
additional insured, with respect to general liability coverage carried by each


 


6

















 


of Holdings, Mentor and
the Borrowers, (ii) provide that no action of any Loan Party or any Subsidiary
or any other Person shall void any such policy as to the Lender, (iii) provide
that the insurer(s) shall endcavor to notify the Lender of any proposed
cancellation of such policy at least 30 days in advance thereof (unless such
proposed cancellation arises by reason of non-payment of insurance premiums in
which case such notice shall be given at least 10 days in advance thereof) and
that the Lender will have the opportunity to correct any deficiencies
justifying such proposed cancellation and (iv) cause any Insurance Subsidiary
to (A) conduct its insurance business in compliance with all applicable
insurance laws, rules, regulations and orders and using sound actuarial
principles and (B) maintain usual and customary stop-loss coverage and excess
coverage reinsurance for individual claims. The insurance premiums and other
expenses charged by any Insurance Subsidiary to Mentor or any Borrower and its
Subsidiaries shall be reasonable and customary. Mentor will provide the Lender
(A) copies of any outside actuarial reports prepared with respect to any
projection, valuation or appraisal of any Insurance Subsidiary promptly after
receipt thereof and (B) once each year promptly after receipt thereof, an
actuarial opinion with respect to any Insurance Subsidiary from a recognized
actuarial firm reasonably satisfactory to the Lender.


 


(o)               Section 6.07 of the Loan
Agreement is deleted in its entirely and the following is inserted in lieu
thereof:


 


6.07        Notices.
Promptly give notice to the Lender:


 


(a)           of the occurrence of any Default or
Event of Default;


 


(b)                                 if
all or any part of any Mortgaged Property is subject to a casualty or other
damage in excess of $25,000, any taking under power of eminent domain or by
condemnation or similar proceeding (including any conveyance made in settlement
of any such proceeding or threatened proceeding) or other event that in the
reasonable discretion of such Person materially reduces the fair market value
thereof; and


 


(c)                                  of
any event or occurrence of which notice is required to be delivered under Section
6.7 of the Syndicated Credit Agreement (to the extent not already delivered
to the Lender thereunder).


 


Each notice pursuant to
this Section 6.07 shall be accompanied by a statement of a Responsible
Officer setting forth details of the occurrence referred to therein and stating
what action the relevant Group Member proposes to take with respect thereto.


 


(p)               Section 7.01 of the Loan
Agreement is deleted in its entirety and the following is inserted in lieu
thereof:


 


7.01        Financial
Condition Covenants.


 


7

















 


(a)           Consolidated Leverage Ratio.
Permit the Consolidated Leverage Ratio as at the last day of any fiscal quarter
of Holdings ending during any period set forth below to exceed the ratio set
forth below opposite such fiscal period:


 


	
  Fiscal Quarter

  Ending During Period

  	
   

  	
  Consolidated

  Leverage Ratio

  	
   

  
	
  September 30, 2006 to September 30, 2007

  	
   

  	
  7.00 to 1.00

  	
   

  
	
  December 31, 2007 to September 30, 2008

  	
   

  	
  6.50 to l.00

  	
   

  
	
  December 31, 2008 to September 30, 2009

  	
   

  	
  6.00 to 1.00

  	
   

  
	
  December 31, 2009 to September 30, 2010

  	
   

  	
  5.00 to 1.00

  	
   

  
	
  Thereafter

  	
   

  	
  4.50 to 1.00

  	
   

  



 


(b)           Consolidated Interest Coverage
Ratio. Permit the Consolidated Interest Coverage Ratio for any period of
four consecutive fiscal quarters of Holdings ending during any period set forth
below to be less than the ratio set forth below opposite such fiscal period:


 


	
  Fiscal Quarter

  Ending During Period

  	
   

  	
  Consolidated Interest

  Coverage Ratio

  	
   

  
	
  September 30, 2006 to September 30, 2007

  	
   

  	
  1.50 to 1.00

  	
   

  
	
  December 31, 2007 to March 31, 2008

  	
   

  	
  1.60 to 1.00

  	
   

  
	
  June 30, 2008 to December 31, 2008

  	
   

  	
  1.70 to 1.00

  	
   

  
	
  March 31, 2009

  	
   

  	
  1.80 to 1.00

  	
   

  
	
  June 30, 2009 to September 30, 2009

  	
   

  	
  1.90 to 1.00

  	
   

  
	
  December 31, 2009 to September 30, 2010

  	
   

  	
  2.00 to 1.00

  	
   

  
	
  Thereafter

  	
   

  	
  2.25 to 1.00

  	
   

  



 


(q)               Section 7.02 of the Loan
Agreement is deleted in its entirety and the following is inserted in lieu
thereof:


 


8

















 


7.02        Liens on
Mortgaged Properties. Create, incur, assume or suffer to
exist any Lien upon any Mortgaged Property, whether now owned or hereafter
acquired, except:


 


(a)            Liens for taxes, assessments,
charges or other governmental levies not overdue for a period of more than 60
days or that are being contested in good faith by appropriate proceedings, provided
that adequate reserves with respect thereto are maintained on the books of New Holdings,
Holdings or the applicable Borrower in conformity with GAAP;


 


(b)            mechanics’, materialmen’s, repairmen’s
or other like Liens arising in the ordinary course of business that are not
overdue for a period of more than 60 days or that are bonded off and being
contested in good faith by appropriate proceedings;


 


(c)            easements, rights-of-way,
restrictions and other similar encumbrances that, in the aggregate, do not in
any case materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of New Holdings,
Holdings or the applicable Borrower;


 


(d)            title exceptions specified in
Schedule B to any loan policy of title insurance issued to and approved by the
Lender;


 


(e)            Liens created pursuant to the
Mortgages;


 


(f)             Liens of suppliers (including
sellers of goods), other Liens imposed by law or pursuant to customary
reservations or retentions of title arising in the ordinary course of business,
and Liens incurred in connection with the purchase or shipping of goods or
assets on the related goods or assets and proceeds thereof in favor of the
seller or shipper of such goods or assets, in each case until the property
encumbered thereby becomes a fixture or otherwise incorporated into the real property
encumbered by the applicable Mortgage;


 


(g)            Liens arising out of judgments or
awards not constituting an Event of Default under Section 8.01 (h); and


 


(h)            to the extent subordinated to the
Mortgages in a manner reasonably satisfactory to the Lender, licenses,
sublicenses, leases or subleases granted to third Persons in the ordinary
course of business not interfering in any material respect with the business of
the Borrower or any of its Subsidiaries, which licenses, sublicenses, leases
and subleases may be extinguished or otherwise terminated both upon foreclosure
of the applicable Mortgage and by transfer of the applicable Mortgaged Property
by deed-in-lieu thereof.


 


(r)    Section 7.03 of the
Loan Agreement is deleted in its entirety and the following is inserted in lieu
thereof:


 


9

















 


7.03        Negative Covenants Incorporated by Reference to Syndicated
Credit Agreement.
Fail to comply with the provisions of Section 7 of the Syndicated Credit
Agreement (other than Section 7.1 thereof) applicable to it, which
provisions (including all required definitions) are incorporated herein by
reference; provided that each reference to “this Agreement”, the “Loans”
and the “Loan Documents” therein shall be deemed to be a reference,
respectively, to the Syndicated Credit Agreement and the “Loans” and the “Loan
Documents” as defined in the Syndicated Credit Agreement, and each reference to
“Holdings” and the “Borrower” therein shall be deemed to be a reference,
respectively, to New Holdings and Holdings.


 


(s)                Sections
7.04 through 7.19 of the Loan Agreement are deleted in their
entirety.


 


(t)                Clauses
(e) and (h) of Section 8.01 of the Loan Agreement are amended to delete
the references to “$ 12,000,000” and “$7,500,000” therein and insert references
to “$15,000,000” in lieu thereof.


 


(u)               Clause (q) of Section
8.01 of the Loan Agreement is amended to add the words “, in each case,
after the Amendment Effective Date”.


 


(v)               A new Section
10.17 is inserted at the end of the Loan Agreement that reads as follows;


 


10.17      Replacement of New Holdings. Notwithstanding any contrary provisions of
this Agreement, New Holdings may, in order to achieve the effect of
substituting a corporation as the immediate parent company of Holdings, form a
corporation that is a wholly owned subsidiary of New Holdings (such corporation
being referred to herein as “New Holdings II”), and transfer all its
assets (including all outstanding Capital Stock of Holdings) to New Holdings
II; provided that (a) the arrangements for the formation of New Holdings
II and the transfer of assets from New Holdings to New Holdings II are
reasonably satisfactory to the Lender, (b) New Holdings II shall become a party
to this Agreement and each other Loan Document to which New Holdings is a party
and shall assume all obligations of New Holdings thereunder pursuant to
documentation reasonably satisfactory to the Lender and (c) the Lender shall
receive such documents, certificates and legal opinions as the Lender or its
counsel may reasonably request with respect to the foregoing, all in form and
substance reasonably satisfactory to the Lender. If all of the requirements of
the preceding sentence are satisfied, then New Holdings shall cease to be a
party to the Loan Documents and shall be released from its obligations
thereunder and thereupon the term “New Holdings” shall be deemed to refer to
New Holdings II.


 


(w)               The existing Schedule
5.09 of the Loan Agreement is deleted in its entirety and Schedule 4.9
to the Syndicated Credit Agreement is inserted in lieu thereof.


 


(x)                The Syndicated
Credit Agreement, dated as of the Amendment Effective Date, is attached hereto
as a new Exhibit G to the Loan Agreement.


 


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The amendments set forth
in this Section 1 are limited to the extent specifically set forth above
and no other terms, covenants or provisions of the Loan Agreement are intended
to be effected hereby.


 


Section 2.                  CONDITIONS
PRECEDENT. The parties hereto agree that the consents contained
herein shall not be effective until the satisfaction of each of the following
conditions precedent:


 


(a)                Execution and Delivery of this Amendment. The Lender shall
have received a copy of this Amendment, duly executed and delivered by the
Existing Loan Parties and New Holdings.


 


(b)               Representations
and Warranties. Each of the representations and warranties made in
this Amendment shall be true and correct in all material respects on and as of
the Amendment Effective Date as if made on and as of such date, both before and
after giving effect to this Amendment except where such representations and
warranties are made by reference to another date, in which case such
representations and warranties shall be true and correct in all material
reports as of such other date.


 


(c)                Additional Loan Documentation. The Lender shall have received
each of the items set forth in this Section 2(c) below, each in form and
substance reasonably satisfactory to the Lender:


 


(i)              Closing Certificate.
Secretary’s Certificate(s), dated as of the Amendment Effective Date,
certifying as to incumbency of the Responsible Officers of New Holdings and
Holdings executing this Amendment, and the organizational documents thereof,
duly executed by the appropriate Responsible Officers of New Holdings and
Holdings, together with all attachments thereto, including, without limitation,
copies of resolutions New Holdings approving this Amendment and the joinder of
New Holdings to the Loan Agreement, duly adopted at a meeting of, or by the
unanimous written consent of, the Board of Directors (or other applicable
governing body) of New Holdings.


 


(ii)             Borrowing Base Certificate.
A duly executed and completed Borrowing Base Certificate, dated as of the
Amendment Effective Date in the form of Exhibit E attached to the Loan
Agreement.


 


(iii)            Syndicated Credit Agreement.
A fully executed copy of the Syndicated Credit Agreement (as defined in Section
1 above), which agreement shall be in full force and effect.


 


(iv)            Other Documents. Such other
approvals, opinions or documents as the Lender may reasonably request.


 


11

















 


Section 3.                  REPRESENTATIONS
AND WARRANTIES. To induce the Lender to enter into this
Amendment, each of New Holdings and the Existing Loan Parties represents and
warrants to the Lender us follows:


 


(a)                Existence, Qualification and Power. Such Person (i) is validly
existing and in good standing under the laws of the state in which it is
organized, (ii) has all requisite power and authority to execute, deliver and
perform its obligations under this Amendment (including, with respect to New
Holdings, its performance under the Loan Agreement), and (iii) is duly
qualified and is licensed and in good standing under the laws of the state in
which it is organized.


 


(b)               Authorization;
No Contravention. The execution, delivery and performance by such
Person of this Amendment (including, with respect to New Holdings, its
performance under the Loan Agreement), have been duly authorized by all
necessary organizational action, and do not (i) contravene the terms of any of
such Person’s organizational documents; (ii) conflict with or result in any
breach or contravention of, or the creation of any Lien under, (x) any
Contractual Obligation to which such Person is a party or (y) any order,
injunction, writ or decree of any Governmental Authority or any arbitral award
to which such Person or any of its property is subject; or (iii) violate any
Law binding upon such Person.


 


(c)                Governmental Authorization; Other Consents. Except as shall
have been obtained and remains in effect, no approval, consent, exemption,
authorization, or other action by (other than in the case of enforcement, a
court order), or notice to, or filing with, any Governmental Authority or any
other Person is necessary or required in connection with the execution,
delivery or performance by, such Person of this Amendment (including, with
respect to New Holdings, its performance under and enforcement of the Loan
Agreement).


 


(d)               Binding
Effect. This Amendment has been duly executed and delivered by such
Person and the Loan Agreement, as amended hereby, constitutes, the legal, valid
and binding obligations of such Person, enforceable against it in accordance
with its terms, subject to any applicable bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors’ rights and secured parties
generally, and subject to general principles of equity.


 


Sections 4.                MISCELLANEOUS


 


(a)                Ratification and Confirmation of Loan Documents. Except for
amendments expressly set forth in this Amendment and the joinder of New
Holdings to the Loan Agreement, the terms, provisions, conditions and covenants
of the Loan Agreement and the other Loan Documents remain in full force and
effect and are hereby ratified and confirmed, and the execution, delivery and
performance of this Amendment shall not in any manner operate as a waiver of,
consent to or amendment of any other term, provision, condition or covenant of
the Loan Agreement or any other Loan Document.


 


(b)               Fees
and Expenses. New Holdings shall pay on demand all reasonable costs
and expenses of the Lender in connection with the preparation, reproduction,
execution, and delivery


 


12

















 


of this Amendment and any
other documents prepared in connection herewith, including, without limitation,
the reasonable fees and out-of-pocket expenses of counsel for the Lender.


 


(c)                Headings. Section and subsection headings in this Amendment
are included herein for convenience of reference only and shall not constitute
a part of this Amendment for any other purpose or be given any substantive
effect.


 


(d)               APPLICABLE
LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS,
WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.


 


(e)                Counterparts and Amendment Effective Date. This Amendment may
be executed in any number of counterparts (including via facsimile) and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document. This Amendment shall become effective when each of thy conditions
precedent set forth in Section 2 of this Amendment have been satisfied
(the “Amendment Effective Date”).


 


(f)                FINAL AGREEMENT. THIS AMENDMENT, TOGETHER WITH THE
LOAN AGREEMENT AND OTHER LOAN DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.


 


(g)               Consents.
The execution of this Amendment by the Lender constitutes its express consent
to (i) the refinancing and replacement of the Syndicated Credit Agreement (as
defined prior to the effectiveness of this Amendment) with the Syndicated
Credit Agreement (as defined after the effectiveness of this Amendment), and
(ii) the consummation of the Merger.


 


[Remainder of Page Intentionally Left Blank; Signature Pages Follow]


 


13

















 


IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly authorized officers
effective as of the Amendment Effective Date.


 


	
   

  	
  NMH HOLDINGS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  NMH Investment, LLC

  its Sole Member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Vestar Capital Partners
  V, L.P.,

  its Sole Member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Vestar Associates V,
  L.P.,

  its General Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Vestar Associates
  Corporation V,

  its General Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brian Ratzan

  	
   

  
	
   

  	
   

  	
  Name: Brian Ratzan 

  
	
   

  	
   

  	
  Title: President

  
					



 


 


[Bank of America Amendment]


 

















 


	
   

  	
   

  	
  NATIONAL MENTOR
  HOLDINGS, INC.

  NATIONAL MENTOR, INC.

  REM ARROWHEAD, INC.

  REM CONNECTICUT COMMUNITY

     SERVICES, INC.

  REM INDIANA, INC.

  REM NORTH DAKOTA, INC.

  REM WISCONSIN, INC.

  REM WISCONSIN II, INC.

  REM WISCONSIN III, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Denis Holler

  	
   

  
	
   

  	
   

  	
  Name: Denis Holler

  
	
   

  	
   

  	
  Title: Senior Vice
  President of Finance

  



 

















 


IN WITNESS
WHEREOF, the parties hereto have caused this Amendment to be duly executed and
delivered by their proper and duly authorized officers effective as of the
Amendment Effective Date.


 


 


	
   

  	
   

  	
  NMH HOLDINGS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  NATIONAL HOLDINGS, INC.

  NATIONAL MENTOR, INC.

  REM ARROWHEAD, INC.

  REM CONNECTICUT COMMUNITY

     SERVICES, INC.

  REM INDIANA, INC.

  REM NORTH DAKOTA, INC.

  REM WISCONSIN, INC.

  REM WISCONSIN II, INC.

  REM WISCONSIN III, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  BANK OF AMERICA, N.A.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James Ford

  	
   

  
	
   

  	
   

  	
  Name: James Ford

  
	
   

  	
   

  	
  Title: Senior Vice
  President