Exhibit 10.3


 


AMENDED AND RESTATED


EMPLOYMENT AGREEMENT


(Edward Murphy)


 


THIS EMPLOYMENT AGREEMENT
(“Agreement”), originally made as of June 29, 2006, is hereby
amended and restated dated December 30, 2008 and effective January 1,
2009 by and between Edward Murphy (“Officer”), and National Mentor
Holdings, Inc., a Delaware corporation (“Employer”).


 


WHEREAS, an
Agreement and Plan of Merger dated March 22, 2006 (the “Merger
Agreement”) was entered into by and among NMH Holdings, LLC, a Delaware
limited liability company (“Parent”), NMH Mergersub, Inc. a
Delaware Corporation wholly owned by Parent, and National Mentor Holdings Inc.,
a Delaware corporation, pursuant to which the Employer became a wholly owned
subsidiary of Parent (the “Transaction”);


 


WHEREAS, Officer
continued to be employed by the Employer following the Closing (as defined in
the Merger Agreement) and Officer and Employer entered into this Agreement
embodying the terms of Officer’s employment;


 


WHEREAS, the parties
hereto have agreed that it is mutually beneficial to amend and restate the
Agreement effective January 1, 2009 to comply with the requirements of Section 409A
of the Internal Revenue Code of 1986, as amended (the “Code”);


 


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 Closing and, unless terminated earlier in accordance
with the terms of this Agreement, ending on the third anniversary of the
Closing.  After the initial term has
expired, this Agreement will renew automatically on the anniversary date of
each year for a one year 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.


 


2.             Position and Duties of Officer.  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 reasonable best efforts and abilities
to promote Employer’s interests.  Officer
agrees that he will diligently 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
materially interfere or conflict with the performance of Officer’s duties under
this Agreement.  Notwithstanding the foregoing,
nothing contained herein shall prohibit Officer from continuing as trustee of
the Massachusetts Health and Welfare Trust.


 


4.                                       Compensation.


 


(a)           Base Salary.  Employer will pay Officer a base salary in
the amount of $350,000 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.  Employer shall establish a bonus plan for
each fiscal year (the “Plan”) pursuant to which Officer will be eligible to
receive an annual bonus (the “Bonus”). 
The Board or the Compensation Committee of the Board will administer the
Plan and establish performance objectives for each year in consultation with
Officer.  In the event that Employer
achieves target based on actual performance, Officer shall be entitled to
receive a Bonus in an amount equal to no less than Officer’s Base Salary.  The Bonus shall be paid to the Officer in a
single lump sum on or before the 15th day of the third month following the end
of the applicable fiscal year of the Employer in which the Bonus is earned.


 


(c)           Benefits.  Officer will be eligible to participate in
all benefit plans to the same extent as they are made available to other senior
Officers 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 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 


 


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supporting documentation as required by
Employer’s policies applicable to its officers and employees generally.  For all purposes of this Agreement,
(including without limitation under this Section 5, Section 6(b)(iii) or
Section 6(c)(iii)), any expense reimbursements made (or any in-kind
benefits provided) to Officer in any one calendar year shall not
affect the amount that may be reimbursed in any other calendar year and a
reimbursement or in-kind benefit (or right thereto) may not be exchanged
or liquidated for another benefit or payment.  Any reimbursement subject
to Section 409A of the Code and the rules and regulations thereunder,
shall be made no later than the end of the calendar year following the calendar
year in which Officer incurs such expense.


 


6.                                       Termination.


 


(a)           Termination Due to Resignation
Without Good Reason, Termination with Cause, or Non-Renewal of Agreement by
Officer.  Except as otherwise set
forth in this Agreement, this Agreement, Officer’s employment, 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” (as defined in Section 6(c) below);
(ii) termination for “cause” at the discretion of Employer under any of
the following circumstances: (A) the commission by the Officer of an act
of fraud or embezzlement, (B) the indictment or conviction of the Officer
for (x) a felony or (y) a crime involving moral turpitude or a plea
by Officer of guilty or nolo contendere involving such a crime (to the extent
such crime results in an adverse effect on the business or reputation of
Employer), (C) the willful misconduct by the Officer in the performance of
Officer’s duties, including any willful misrepresentation or willful
concealment by Officer on any report submitted to Employer (or any of its
securityholders or subsidiaries) that is other than de minimis, (D) the
violation by Officer of a written Employer policy regarding substance abuse,
sexual harassment, discrimination or any other material written policy of
Employer regarding employment, (E) the willful failure of the Officer to
render services to Employer or any of its subsidiaries in accordance with
Officer’s employment which failure amounts to a material neglect of the Officer’s
duties to Employer or any of its subsidiaries, (F) the failure of the
Officer to comply with reasonable directives of the Board consistent with the
Officer’s duties or (G) the material breach by Officer of any of the
provisions of any agreement between Officer, on the one hand, and Employer or a
securityholder or an affiliate of Employer, on the other hand. Notwithstanding
the foregoing, with respect to clauses (C), (D), (E), (F) and (G) above,
Officer’s termination of employment with Employer shall not be deemed to have
been terminated for Cause unless and until (X) Officer has been provided
written notice of Employer’s intention to terminate his employment for Cause
and the specific facts relied on, (Y) Officer has been provided ten (10) business
days from the receipt of such notice to cure any such conduct or omission
giving rise to a termination for Cause, and (Z) Officer does not cure any
such conduct or omission within such ten-day period; or (iii) the
expiration of the term of the Agreement, if Officer notifies Employer of his
non-renewal of the term of the Agreement (or an extension thereof) pursuant to
the procedures set forth in Section 1 hereof.


 


Officer may resign his employment without “good reason” at any time by
giving thirty (30) days written notice of resignation to Employer.


 


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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, any earned but unpaid bonus for any
completed full year prior to the year of such termination and accrued but
unpaid vacation and reimbursable travel and entertainment expenses through the
date of Officer’s termination (collectively, “Accrued Obligations”).  Any Accrued Obligations attributable to
earned but unpaid bonus shall be paid to the Officer in a single lump sum no
later than the 15th day of the third month following the end of
the fiscal year in which the bonus is earned, and any other Accrued Obligations
under this Section 6(a) shall be paid to the Officer no later than 90
days following his Separation from Service from the Employer.


 


(b)           Termination Without Cause or
Non-Renewal of Agreement by Employer. 
Employer may terminate this Agreement without “cause” (as defined in Section 6(a)(ii) above)
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.  In addition, Employer may
notify Officer of Employer’s non-renewal of the term of the Agreement (or an
extension thereof) pursuant to the procedures set forth in Section 1
hereof, in which case the Agreement and Officer’s employment hereunder will
cease as of the expiration of the term of the Agreement.  If Employer terminates this Agreement without
“cause”, or notifies Officer of non-renewal pursuant to Section 1 hereof,
Employer shall:


 


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(i)            With respect to the Accrued Obligations, pay any earned
but unpaid bonus to the Officer in a single lump sum no later than the 15th day of the third month following
the end of the fiscal year in which such bonus is earned, and pay all other
Accrued Obligations to the Officer no later than  90 days following his Separation from Service
from the Employer;


 


(ii)           Continue to pay Officer the Base Salary in effect at the
time of his Separation from Service, in accordance with the Employer’s
customary payroll practices, for a period of two years.  Such payments shall begin on the payroll date
next following the Officer’s Separation from Service;


 


(iii)          For the two-year period immediately following Officer’s
Separation from Service, permit the Officer to elect to participate, subject to
Officer’s continued payment to the Employer of the “active employee” portion of
the plan premiums during such period, in any employee benefit plans(s) (other
than any incentive or bonus plans) maintained by the Employer from time to time
for the Employer’s similarly situated active employees, provided that (A) Officer
was participating in such plans at the time of his Separation from Service, (B) such
plan(s) permit continued participation by terminated employees and (C) with
respect to any such plan subject to the Consolidated Omnibus Budget
Reconciliation Act of 1986 (“COBRA”), such coverage is co-extensive with COBRA
and Officer makes a valid election of continuation coverage under COBRA.


 


(iv)          On or before the last day of each of the two full calendar
years following the date of the Officer’s Separation from Service, pay Officer
an amount equal to Officer’s target annual bonus for the year in which such
termination occurs; and


 


(v)           Pay Officer a pro rata bonus for the year in which such
termination occurs based on Employer’s actual performance as of the date of
termination, such bonus to be paid in a single lump sum no later than the 15th day of the third month following
the end of the fiscal year in which the Officer’s Separation from Service
occurs, provided, however that no such pro rata bonus will be paid if the
Officer’s termination occurs in the first six months of such fiscal year.


 


No other benefits or compensation
will be paid or provided to Officer if he is terminated pursuant to this Section 6(b) unless
otherwise provided for in the terms of the applicable plan or agreement.


 


(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 change by
Employer in Officer’s title, duties and responsibilities which is materially
inconsistent with Officer’s position in Employer, (ii) a material
reduction in Officer’s annual base salary or annual bonus opportunity, provided
that any reduction of up to ten percent (10%) of Officer’s salary or bonus
opportunity (in effect on June 29, 2006) that is part of a plan to reduce
compensation of comparably situated employees of Employer generally shall not
be considered a “material reduction in Officer’s annual base salary or annual
bonus opportunity” hereunder, (iii) a material breach by Employer of this
Agreement, or (iv) the relocation of the 


 


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Officer’s principal place of work from its
current location to a location that is beyond a 50-mile radius of such current
location.  Notwithstanding anything to
the contrary in the foregoing, Officer shall only have “Good Reason” to
terminate employment if Officer gives notice, in writing, to the Employer of
the act or omission which is alleged to constitute “Good Reason” within 90 days
of the initial occurrence thereof, and Employer fails to remedy such act or
omission within thirty (30) days following Employer’s receipt of written notice
from Officer specifying such act or omission.


 


If Officer terminates this Agreement for “good
reason”, Employer shall


 


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(i)            With respect to the Accrued Obligations, pay any earned
but unpaid bonus to the Officer in a single lump sum no later than the 15th day of the third month following
the end of the fiscal year in which such bonus is earned, and pay all other
Accrued Obligations to the Officer no later than  90 days following his Separation from Service
from the Employer;


 


(ii)           Continue to pay Officer the Base Salary in effect at the
time of his Separation from Service, in accordance with the Employer’s
customary payroll practices, for a period of two years.  Such payments shall begin on the payroll date
next following the Officer’s Separation from Service;


 


(iii)          For the two-year period immediately following Officer’s
Separation from Service, permit the Officer to elect to participate, subject to
Officer’s continued payment to the Employer of the “active employee” portion of
the plan premiums during such period, in any employee benefit plans(s) (other
than any incentive or bonus plans) maintained by the Employer from time to time
for the Employer’s similarly situated active employees, provided that (A) Officer
was participating in such plans at the time of his Separation from Service, (B) such
plan(s) permit continued participation by terminated employees and (C) with
respect to any such plan subject to the Consolidated Omnibus Budget
Reconciliation Act of 1986 (“COBRA”), such coverage is co-extensive with COBRA
and Officer makes a valid election of continuation coverage under COBRA.


 


(iv)          On or before the last day of each of the two full calendar
years following the date of the Officer’s Separation from Service, pay Officer
an amount equal to Officer’s target annual bonus for the year in which such
termination occurs; and


 


(v)           Pay Officer a pro rata bonus for the year in which such
termination occurs based on Employer’s actual performance as of the date of
termination, such bonus to be paid in a single lump sum no later than the 15th day of the third month following
the end of the fiscal year in which the Officer’s Separation from Service
occurs, provided, however that no such pro rata bonus will be paid if the
Officer’s termination occurs in the first six months of such fiscal year.


 


No other benefits or compensation
will be paid or provided to Officer if he is terminated pursuant to this Section 6(c) unless
otherwise provided for in the terms of the applicable plan or agreement.


 


(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 (i) the Officer is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
that can be expected to result in death or can be expected to last for a
continuous period of not less than 12 months, 
(ii) the Officer is, by reason of any medically determinable physical or
mental impairment that can be expected to result in death or can be expected to
last for a continuous period of not less than 12 months, receiving income
replacement benefits for a period of not less than three months under an
accident and health plan 


 


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covering employees of the Employer, or (iii) the
Officer is determined to be totally disabled by the Social Security
Administration. Subject to continuing coverage under applicable benefit plans,
and except as otherwise provided in this Agreement or as may be required by
law, 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 Officer (or his beneficiary, as the case may be) (x) the
Accrued Obligations and (y) a pro rata bonus for the year in which such
termination occurs based on Employer’s actual performance, such bonus to be paid in a single lump sum no
later than the 15th day of
the third month following the end of the fiscal year in which his Separation
from Service from the Employer by reason of Disability or death
occurs.   With respect to the Accrued Obligations, Employer shall pay any earned
but unpaid bonus to the Officer (or his beneficiary, as the case may be) in a
single lump sum no later than the 15th day of the third month following the end of
the fiscal year in which such bonus is earned, and pay all other Accrued
Obligations to the Officer no later than 
90 days following his Separation from Service from the Employer by
reason of death or Disability;


 


(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.


 


(f)            Separation from Service.  Any termination of employment triggering
payment of benefits under this Section 6 must constitute a Separation from
Service within the meaning of Treas. Reg. § 1.409A-1(h) (a “Separation
from Service”) before distribution of such benefits can commence.  For purposes of clarification, this paragraph
shall not cause any forfeiture of benefits on the part of the Officer, but
shall only act as a delay until such time as a Separation from Service occurs.


 


(g)           Certain Delayed Payments.  If any amount to be paid to Officer pursuant
to this Section 6 as a result of Officer’s termination of employment is “deferred
compensation” subject to Section 409A of the Code and the rules and
regulations thereunder and if the Officer is a “Specified Employee” (as defined
under Section 409A) as of the date of Officer’s termination of employment
hereunder, then, to the extent necessary to avoid the imposition of excise
taxes or other penalties under Section 409A of the Code, the payment of
benefits, if any, scheduled to be paid by the Employer to Officer hereunder
during the first six (6) month period following the date of a termination
of employment hereunder shall not be paid until the date which is the first
business day following the six-month anniversary of Officer’s termination of
employment for any reason other than death. 
Any deferred compensation payments delayed in accordance with the terms
of this paragraph shall be paid in a lump sum when paid.


 


7.                                       Notwithstanding
anything contained herein or in any other agreement, plan, program or policy to
which Officer and the Employer are parties or by which they are bound, to the
extent that any payments hereunder (when aggregated with any other payments,
benefits or 


 


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other consideration to be received by Officer
in connection with the change in control occurring as a result of the
transaction contemplated in the Merger Agreement) could reasonably be expected
to result in any amount or payment which would be non-deductible under Section 280G
of the Code, any payments that would otherwise be payable hereunder shall be
reduced (to the extent possible, the specific payment to be so reduced will be
made at the election of Officer), but not below zero, such that the total
amount considered to have been received by Officer will be one dollar less than
the amount which would result in the loss of any deduction under such Section 280G
with respect to the amounts.  The parties
intend for the payments under Sections 4 and 6 of this Agreement to reasonably
compensate Officer for his services to be performed after the Closing, or in
the event of his termination of employment, to compensate him for the
restrictive covenants by which he is bound, the release of his claims, and, in
certain circumstances, the interruption of his employment.  The provisions of this Section 7 shall
not be applied to reduce amounts payable to the Officer to the extent such
amounts are treated as a “parachute payment” in connection with any transaction
other than the transactions contemplated in the Merger Agreement.


 


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


 


Officer covenants and agrees as follows:


 


(a)           Officer will not at any time (whether
during or after Officer’s employment with Employer), other than in the ordinary
course of performing services for Employer, (x) retain or use for the
benefit, purposes or account of Officer or any other person, firm, partnership,
joint venture, association, corporation or other business organization, entity
or enterprise whatsoever (“Person”); or (y) disclose, divulge, reveal,
communicate, share, transfer or provide access to any Person outside Employer
(other than its professional advisers who are bound by confidentiality
obligations), any non-public, proprietary or confidential information obtained
by Officer in connection with the commencement of Officer’s employment with
Employer or at any time thereafter during the course of Officer’s employment
with Employer — including without limitation trade secrets, know-how, research
and development, software, databases, inventions, processes, formulae,
technology, designs and other intellectual property, information concerning
finances, investments, profits, pricing, costs, products, services, vendors,
customers, clients, partners, investors, personnel, compensation, recruiting,
training, advertising, sales, marketing, promotions, government and regulatory
activities and approvals — concerning the past, current or future business,
activities and operations of Employer and/or any third party that has disclosed
or provided any of the same to Employer on a confidential basis (provided that with
respect to such third party Officer knows or reasonably should have known that
the third party provided it to Employer on a confidential basis) (“Confidential
Information”) without the prior written authorization of the Board of Directors
of Employer; provided, however, that in any event Officer shall be permitted to
disclose any Confidential Information reasonably necessary (i) to perform
Officer’s duties while employed with Employer or (ii) in connection with
any litigation or arbitration involving this or any other agreement entered
into between Officer and Employer before, on or after the date of this
Agreement in connection with any action or proceeding in respect thereof.


 


(b)           “Confidential Information” shall not
include any information that is (A) generally known to the industry or the
public other than as a result of Officer’s breach of this 


 


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covenant or any breach of other
confidentiality obligations by third parties to the extent the Officer knows or
reasonably should have known of such breach by such third parties; (B) made
legitimately available to Officer by a third party (unless Officer knows or
reasonably should have known that such third party has breached any
confidentiality obligation); or (C) required by law or by any court,
arbitrator, mediator or administrative or legislative body (including any
committee thereof) with actual or apparent jurisdiction to order Officer to
disclose or make accessible any information; provided that, with respect to
clause (C) Officer, except as otherwise prohibited by law or regulation,
shall give prompt written notice to Employer of such requirement, disclose no
more information than is so required, and shall reasonably cooperate with any
attempts by Employer, at its sole cost, to obtain a protective order or similar
treatment prior to making such disclosure.


 


(c)           Except as required by law or
otherwise set forth in Section 8(b) above, or unless or until
publicly disclosed by Employer, Officer will not disclose to anyone, other than
Officer’s immediate family and legal, tax or financial advisors, the material
provisions of this Agreement; provided that Officer may disclose the provisions
of this Agreement (A) to any prospective future employer provided they agree
to maintain the confidentiality of such terms or (B) in connection with
any litigation or arbitration involving this Agreement.


 


(d)           Upon termination of Officer’s
employment with Employer for any reason, Officer shall (A) cease and not
thereafter commence use of any Confidential Information or intellectual
property (including without limitation, any patent, invention, copyright, trade
secret, trademark, trade name, logo, domain name or other source indicator) if
such property is owned or used by Employer; (B) immediately destroy,
delete, or return to Employer, at Employer’s option, all originals and copies
in any form or ‘medium (including memoranda, books, papers, plans, computer
files, letters and other data) in Officer’s possession or control (including
any of the foregoing stored or located in Officer’s office, home, laptop or
other computer, whether or not Employer property) that contain Confidential
Information or otherwise relate to the business of Employer, except that
Officer may retain only those portions of any personal notes, notebooks and
diaries that do not contain Confidential Information; and (C) notify and
fully cooperate with Employer regarding the delivery or destruction of any
other Confidential Information of which Officer is or becomes aware to the
extent such information is in Officer’s possession or control. Notwithstanding
anything elsewhere to the contrary, Officer shall be entitled to retain (and
not destroy) information showing Officer’s compensation or relating to
reimbursement of expenses that Officer reasonably believes is necessary for tax
purposes and copies of plans, programs, policies and arrangements of, or other
agreements with, Employer addressing Officer’s compensation or employment or
termination thereof.


 


(e)           During the term of Officer’s
employment and during the two (2) years immediately following (x) the
date of any termination of Officer’s employment with Employer by Employer with
or without Cause and (y) if earlier than the date referenced in clause (x) hereof,
the date that notice is given by Officer to Employer of Officer’s resignation
from Employer for any reason (other than due to Officer’s death) (such period,
the “Restricted Period”), Officer will not, directly or indirectly:


 


(A)          engage
in any business that competes, wholly or in part, as of the Relevant Date (as
defined below), in the provision or sale of acquired brain injury services,


 


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therapeutic foster care, other foster care or other home or
community-based healthcare, therapy, counseling or other educational or human
services to people with special needs, or any other business that Employer is
actively conducting or is actively considering conducting at the time of
Officer’s termination of employment (so long as Officer knows or reasonably
should have known about such plan(s)), in each case anywhere in the United
States (a “Competitive Business”);


 


(B)           enter
the employ of, or render any services to, any Person (or any division or
controlled or controlling affiliate of any Person) who or which is a
Competitive Business as of the date Officer enters such employment or renders
such services; or


 


(C)           acquire
a financial interest in, or otherwise become actively involved with, any
Competitive Business which is a Competitive Business as of the date of such
acquisition or involvement, directly or indirectly, as an individual, partner,
shareholder, officer, director, principal, agent, trustee or officer.


 


(f)            Notwithstanding the provisions of Section 8(e)(A),
(B) or (C) above, nothing contained in Section 8(e) shall
prohibit Officer from (A) investing, as a passive investor, in any
publicly held company provided that Officer’s beneficial ownership of any class
of such publicly held company’s securities does not exceed one percent (1%) of
the outstanding securities of such class, (B) entering the employ of any
academic institution or governmental or regulatory instrumentality of any
country or any domestic or foreign state, county, city or political
subdivision, or (C) providing services to a subsidiary or affiliate of an
entity that controls a separate subsidiary or affiliate that is a Competitive
Business, so long as the subsidiary or affiliate for which Officer may be
providing services is not itself a Competitive Business and Officer is not, as
an Officer of such subsidiary or affiliate, engaging in activities that would
otherwise cause such subsidiary or affiliate to be deemed a Competitive Business.


 


(g)           During the Restricted Period, Officer
will not, whether on Officer’s own behalf or on behalf of or in conjunction
with any Person, directly or indirectly solicit or assist in soliciting the
business of, in all such cases determined as of the Relevant Date
(collectively, the “Clients”):


 


(A)          with
whom Officer had personal contact or dealings on behalf of Employer during the
one-year period immediately preceding Officer’s termination of employment;


 


(B)           with
whom employees of Employer reporting to Officer have had personal contact on
behalf of Employer and about such contacts the Officer was aware during the
one-year period immediately preceding the Officer’s termination of employment;
or


 


(C)           with
whom Officer had direct or indirect responsibility during the one-year period
immediately preceding Officer’s termination of employment.


 


For purposes of this Section 8, the term “Relevant Date”
shall mean, during the term of Officer’s employment, any date falling during
such time, and, for the period of time during the Restricted Period that falls
after the date of any termination of Officer’s employment with Employer, the
effective date of termination of Officer’s employment with Employer.


 


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(h)           Non-Interference with Business
Relationships.  During the Restricted
Period, Officer will not interfere with, or attempt to interfere with, business
relationships (whether formed before, on or after the date of this Agreement)
between Employer, on the one hand, and any Client, customers, suppliers,
partners, of Employer, on the other hand, in any such case determined as of the
Relevant Date.


 


(i)            During the term of Officer’s
employment and during the Restricted Period, Officer will not, whether on
Officer’s own behalf or on behalf of or in conjunction with any Person,
directly or indirectly (other than in the ordinary course of Officer’s
employment with Employer on Employer’s behalf):


 


(A)          solicit
or encourage any employee of Employer to leave the employment of Employer; or


 


(B)           hire
any such employee who was employed by Employer as of the date of Officer’s
termination of employment with Employer or who left the employment of Employer
coincident with, or within one year prior to or after, the termination of Officer’s
employment with Employer; or


 


(C)           solicit
or encourage to cease to work with Employer any Officer that Officer knows, or
reasonably should have known, is then under contract with Employer.


 


(j)            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.


 


It is expressly understood and agreed that although Officer and
Employer consider the restrictions contained in this Section 8 to be
reasonable, if a final judicial determination is made by a court of competent
jurisdiction that the time or territory or any other restriction contained in
this Agreement is an unenforceable restriction against Officer, the provisions
of this Agreement shall not be rendered void but shall be deemed amended to
apply as to such maximum time and territory and to such maximum extent as such
court may judicially determine or indicate to be enforceable (provided that in
no event shall any such amendment broaden the time period or scope of any
restriction herein).  Alternatively, if
any court of competent jurisdiction finds that any restriction contained in
this Agreement is unenforceable, and such restriction cannot be amended so as
to make it enforceable, such finding shall not affect the enforceability of any
of the other restrictions contained herein.


 


9.                                       Intellectual
Property.


 


(a)           If Officer has created, invented,
designed, developed, contributed to or improved any inventions, intellectual property,
discoveries, copyrightable subject matters or other similar work of
intellectual property (including without limitation, research, reports,
software, databases, systems or applications, presentations, textual works,
content, or audiovisual materials) (“Works”), either alone or with third
parties, prior to or during Officer’s prior and current employment with
Employer, that are in connection with such employment (“Prior


 


12

















 


Works”),
to the extent Officer has retained or does retain any right in such Prior Work,
Officer hereby grants Employer a perpetual, non-exclusive, royalty-free,
worldwide, assignable, sublicensable license under all rights and intellectual
property rights (including rights under patent, industrial property, copyright,
trademark, trade secret, unfair competition and related laws) therein to the
extent of Officer’s rights in such Prior Work for all purposes in connection
with Employer’s current and future business.


 


(b)           If Officer creates, invents, designs,
develops, contributes to or improves any Works, either alone or with third
parties, at any time during Officer’s employment by Employer and within the
scope of such employment and/or with the use of any Employer resources (“Company
Works”), Officer shall promptly and fully disclose same to Employer and
hereby irrevocably assigns, transfers and conveys, to the maximum extent
permitted by applicable law, and at Employer’s sole expense, all rights and
intellectual property rights therein (including rights under patent, industrial
property, copyright, trademark, trade secret, unfair competition and related
laws) to Employer to the extent ownership of any such rights does not vest
originally in Employer.


 


(c)           Officer agrees to keep and maintain
adequate and current written records (in the form of notes, sketches, drawings,
and any other form or media requested by Employer) of all Company Works. The
records will be available to and remain the sole property and intellectual
property of Employer at all times.


 


(d)           Officer shall take all requested
actions and execute all requested documents (including any licenses or
assignments required by a government contract) at Employer’s expense (but
without further remuneration) to assist Employer in validating, maintaining,
protecting, enforcing, perfecting, recording, patenting or registering any of
Employer’s rights in the Prior Works and Company Works as set forth in this Section 9.  If Employer is unable for any other reason to
secure Officer’s signature on any document for this purpose, then Officer
hereby irrevocably designates and appoints Employer and its duly authorized
officers and agents as Officer’s agent and attorney in fact, to act for and in
Officer’s behalf and stead to execute any documents and to do all other
lawfully permitted acts in connection with the foregoing.


 


(e)           Except as may otherwise be required
under Section 4(a) above, Officer shall not improperly use for the
benefit of, bring to any premises of, divulge, disclose, communicate, reveal,
transfer or provide access to, or share with Employer any confidential,
proprietary or non-public information or intellectual property relating to a
former employer or other third party which Officer knows or reasonably should
have known is confidential, proprietary or non-public information or
intellectual property of such third party without the prior written permission
of such third party.  Officer hereby
indemnifies, holds harmless and agrees to defend Employer and its officers,
directors, partners, Officers, agents and representatives from any breach of
the foregoing covenant. Officer shall comply with all relevant policies and
guidelines of Employer, including regarding the protection of confidential
information and intellectual property and potential conflicts of interest.  Officer acknowledges that Employer may amend
any such policies and guidelines from time to time, and that Officer remains at
all times bound by their most current version.


 


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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
Commonwealth of Massachusetts.


 


12.           Remedies. 
Officer acknowledges and agrees that in the course of Officer’s
employment with Employer, Officer will be provided with access to Confidential
Information, and will be provided with the opportunity to develop relationships
with clients, prospective clients, employees and other agents of Employer, and
Officer further acknowledges that such confidential information and
relationships are extremely valuable assets of Employer in which Employer has
invested and will continue to invest substantial time, effort and expense.
Accordingly, Officer acknowledges and agrees that Employer’s remedies at law
for a breach or threatened breach of any of the provisions of Section 8, 9
or 10 would be inadequate and, in recognition of this fact, Officer agrees
that, in the event of such a breach or threatened breach, in addition to any
remedies at law, Employer, without posting any bond, shall be entitled to cease
making any payments or providing any benefit otherwise required to be paid or
provided by Employer (other than any vested benefits under any retirement plan
or as may otherwise be required by applicable law to be provided) and seek
equitable relief in the form of specific performance, temporary restraining
order, temporary or permanent injunction or any other equitable remedy which
may then be available; provided, however, that if it is subsequently determined
in a final and binding arbitration or litigation that Officer did not breach
any such provision, Employer will promptly pay any payments or provide any
benefits, which Employer may have ceased to pay when originally due and
payable, plus an additional amount equal to interest (calculated based on the
applicable federal rate for the month in which such final determination is
made) accrued on the applicable payment or the amount of the benefit, as
applicable, beginning from the date such payment or benefit was originally due
and payable through the day preceding the date on which such payment or benefit
is ultimately paid hereunder.


 


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.           Indemnification. 
Employer agrees to maintain a Directors and Officers Liability Policy
covering Officer to the fullest extent permitted by Delaware Law unless such
policy increases in cost to an amount that is more than three times the amount
that Employer pays as of the date of this Agreement.


 


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


 


If to Employer:


 


National Mentor Holdings, Inc.


Vestar Capital Partners


245 Park Avenue, 41st Floor


New York, NY 10167


Attn: General Counsel


Telecopy: (212) 808-4922


 


with a copy to:


 


National Mentor
Holdings, Inc.


313 Congress
Street


Boston, MA 02210


Attn:  General Counsel


Telecopy:  (617) 790-4271


 


If to the Officer:


 


To the most
recent address on file with Employer for the Officer.


 


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.


 


16.           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.


 


17.           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.


 


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18.           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
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.


 


19.           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.


 


20.           Entire Agreement. 
This Agreement, embodies the entire agreement and understanding between
the parties with respect to the subject matter contained herein and supersedes
all prior agreements and understandings, whether written or oral, relating to
their subject matter, unless expressly provided otherwise within such
agreements, including but not limited to (a) that certain employment
agreement entered into between Officer and National Mentor, Inc. dated September 7,
2004, and (b) the original version of this Agreement, dated June 29,
2006 by and among the Officer and the Employer. 
No amendment or modification of this Agreement will be valid unless made
in writing and signed by each of the parties and countersigned by Vestar
Capital Partners V, L.P. 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.


 


21.           Interpretation. 
The Employer will interpret, construe, and administer the Agreement in a
manner that satisfies the requirements of (a) Code § 409A(a)(2), (3) and
(4), (b) Treas. Reg. § 1.409A-1 et seq., and (c)  other
applicable authority issued by the Internal Revenue Service and the U.S.
Department of the Treasury.  In addition,
the parties shall cooperate fully with one another to ensure compliance with Section 409A
of the Code, including, without limitation, adopting amendments to arrangements
subject to Section 409A.


 


22.           No Guarantee of Tax Consequences.  No person connected
with this Agreement, including but not limited to the Employer, or its
officers, directors, agents or employees, makes any representation, commitment
or guarantee with respect to the Federal, state or local income, estate and/or
gift tax treatment of any benefit paid hereunder including, without limitation, under Section 409A
of the Code.


 


23.           Counterparts.  This Agreement may be executed (including by
facsimile transmission) in several counterparts, each of which shall be deemed
to be an original but all of which together will constitute one and the same
instrument.


 


[Signatures on next page.]


 


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IN WITNESS WHEREOF,
the parties hereto have executed this Agreement on this 31st day of December,
2008.


 


	
  EDWARD MURPHY

  	
   

  	
  NATIONAL MENTOR HOLDINGS, INC.

  
	
   

  	
   

  	
   

  
	
  “Officer”

  	
   

  	
  “Employer”

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Edward Murphy

  	
   

  	
  By:

  	
  /s/ Denis M. Holler

  
	
   

  	
   

  	
  Name:

  	
  Denis M. Holler

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President,

  
	
   

  	
   

  	
   

  	
  Chief Financial Officer and Treasurer

  



 


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