Document:

Exhibit 10.3

 

EMPLOYMENT AGREEMENT

 

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

 

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

 

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

 

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

 

STATEMENT OF AGREEMENT

 

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

 

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

 

3.             Time Devoted and Location of Officer.

 

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

 

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

 

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

 

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

 

4.             Compensation.

 

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

 

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

 

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

 

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

 

6.             Termination.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

7.             (Intentionally Omitted).

 

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

 

Officer covenants and
agrees as follows:

 

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

 

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

 

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

 

The
following definitions shall apply to this Section:

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

	
  To Officer:

  	
  Edward Murphy

  
	
   

  	
  79 Wilsondale Street,

  
	
   

  	
  Dover, MA 02030

  
	
   

  	
   

  
	
  To Employer:

  	
  National
  Mentor, Inc.

  
	
   

  	
  313 Congress Street

  
	
   

  	
  Boston, Massachusetts
  02210

  
	
   

  	
  Attention: General
  Counsel

  
	
   

  	
  Facsimile: 617-790-4941

  
	
   

  	
   

  
	
  With a copy to:

  	
  National Mentor
  Holdings, Inc.

  
	
   

  	
  c/o Madison Dearborn
  Capital Partners, LLC

  
	
   

  	
  Three First
  National Plaza, Suite 3800

  
	
   

  	
  Chicago,
  Illinois 60602

  
	
   

  	
  Attention: Timothy
  Sullivan

  
	
   

  	
  Fax No. (312)
  895-1001

  

 

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

 

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

 

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

 

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

 

8

 

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

 

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

 

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

 

*              *              *              *              *

 

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

 

	
  EDWARD
  MURPHY

  	
  NATIONAL
  MENTOR, INC.

  
	
  “Officer”

  	
  “Employer”

  
	
   

  	
   

  
	
  /s/ Edward Murphy

  	
   

  	
  By:

  	
  /s/ Gregory Torres

  	
   

  
	
   

  	
  Name:

  	
  Gregory Torres

  	
   

  
	
   

  	
  Title:

  	
  CEO

  	
   

  
									

 

 

EXHIBIT A

 

Restricted
Territory

 

The Restricted Territory
is any location within a radius of fifty (50) miles of any existing operation
of Employer, or its affiliates or controlled subsidiaries, engaged in the
provision or sale of therapeutic foster care or other home or community-based
healthcare or human services.Exhibit 10.4

 

EMPLOYMENT AGREEMENT

 

THIS
EMPLOYMENT AGREEMENT (“Agreement”) is made as of September 29,
1999 by and between Greg Torres (“Officer”),
and National Mentor, Inc., a
Delaware corporation (“Employer”).

 

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

 

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

 

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

 

STATEMENT OF AGREEMENT

 

1.                                      Employment. Employer agrees to employ
Officer, and Officer accepts such employment in accordance with the terms of
this Agreement, for an initial term of three years commencing on October 1,
1999 and, unless terminated earlier in accordance with the terms of this
Agreement, ending on September 30, 2002. 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 days prior to the next
anniversary date. If Employer chooses not to renew this Agreement, Employer
shall continue to pay Officer the compensation provided for in Section 4(a) of
this Agreement for one year commencing on such anniversary date.

 

2.                                      Position and Duties of Officer. 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/her full business time and energy to the business affairs and
interests of Employer, and will use his/her best efforts and abilities to
promote Employer’s interests. Officer agrees that he/she will diligently endeavor
to perform services contemplated by this Agreement in a manner consistent with
his/her position and in accordance with the policies established by the
Employer and provided to Officer from time to time.

 

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(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 the
Board; provided, that Officer may serve in any capacity with any civic,
educational or charitable organization, or any governmental entity or trade
association, without seeking or obtaining such written approval of the Board,
if such activities and services do not interfere or conflict with the
performance of Officer’s duties under this Agreement.

 

4.                                      Compensation.

 

(a)                                  Base
Salary. Employer will pay Officer a base salary in the amount of $250,000
per year, 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)                                 Benefits.
Officer will be eligible to participate in all benefit plans to the same extent
as they are made available to other senior executives of Employer. Officer will
receive separate information detailing the terms of the benefit plans and the
terms of such plans will control. Officer also will be eligible to participate
in any annual incentive plan and stock option plan applicable to Officer by its
terms.

 

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

 

6.                                      Termination;
Rights upon a Change of Control.

 

(a)                                  Termination
Due to Resignation and Termination with Cause. 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, or (ii) termination for cause
at the discretion of Employer under the following circumstances: (a) Officer’s
commission of an act of fraud or dishonesty involving his/her duties on behalf
of Employer; (b) Officer’s willful failure or refusal to faithfully and
diligently perform material duties assigned to Officer consistent with Section 2
above, or other breach of any material term under this Agreement; (c) Officer’s
willful failure or refusal to abide by Employer’s material policies, rules,
procedures or directives; or (d) Officer’s conviction of a felony or a
misdemeanor involving moral turpitude. If Officer is terminated pursuant to
this Section 6(a),

 

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Employer’s only remaining
financial obligation to Officer under this Agreement will be to pay any earned
but unpaid base salary and accrued but unpaid vacation and reimbursable travel
and entertainment expenses through the date of Officer’s termination.

 

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

 

(b)                                 Termination Without Cause. Officer may terminate his/her
employment without cause at any time by giving thirty days written notice of
resignation to Employer. Employer may terminate this Agreement without cause at
any time by giving thirty days prior written notice to Officer. If Employer
terminates this Agreement without cause, Employer may direct Officer to cease
providing services immediately. Subject to the limitation set forth in Section 7(a) below,
if Employer terminates this Agreement without cause, Employer shall continue to
pay Officer the compensation provided for in Section 4(a) of this
Agreement for a period of time equal to the greater of (i) the remaining
term of this Agreement or (ii) two years. No other benefits or
compensation will be paid to Officer if he/she is terminated pursuant to this Section 6(b),
unless otherwise provided for in the terms of the applicable plan or benefit
(including without limitation Employer’s Executive Sale Equity Bonus Plan).

 

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

 

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

 

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

 

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

 

(iv)                              the assignment to Officer of duties
materially inconsistent with Officer’s status as President and Chief Executive
Officer of Employer.

 

Prior
to terminating this Agreement pursuant to this Section, Officer shall give to
Employer written notice of his/her “good reason” for terminating this Agreement
and provide Employer with a reasonable period in which to contest or correct
the “good reason”, but in no event less than thirty days. In the event of a
termination for “good reason” pursuant to this Section, Officer will be
entitled to receive all compensation and benefits provided for in this
Agreement for a termination by Employer without cause, subject to the
limitation set forth in Section 7(a) below.

 

(d)                                 Automatic
Termination. This Agreement will terminate automatically upon the death or
permanent disability of Officer. Officer will be deemed

 

3

 

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

 

(e)                                  Effect
of Termination. Except as otherwise provided for in this Agreement, upon
termination of this Agreement, all rights and obligations under this Agreement
will cease except for the rights and obligations under Sections 4 and 5 to the
extent Officer has not been compensated or reimbursed for services performed
prior to termination or has not been paid vacation and reimbursable travel and
entertainment expenses accrued through the termination date (the amount of
compensation to be prorated for the portion of the pay period prior to
termination); the rights and obligations under Section 7 that expressly
state that they will continue after termination of employment, the rights and
obligations under Sections 8, 9 and 10; and all procedural and remedial
provisions of this Agreement. A termination of this Agreement will constitute a
termination of Officer’s employment with Employer.

 

7.                                      Rights
upon a Change of Control; Retention Bonus.

 

(a)                                  Rights
Upon a Change of Control.

 

(i) For
purposes of this Agreement, a “change of control” of Employer will take place
upon the occurrence of any of the following events: (a) the acquisition
after the beginning of the term in one or more transactions of beneficial
ownership (within the meaning of Rule 13d-3(a)(1) under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)) by any person
or entity (other than a wholly owned subsidiary of Magellan Health Services, Inc.
(“Magellan”)), or any group of persons or entities who constitute a group
(within the meaning of Rule 13d-5 of the Exchange Act), of any securities
of Employer such that as a result of such acquisition such person or entity or
group beneficially owns (within the meaning of Rule 13d3(a)(1) under
the Exchange Act) more than 50% of Employer’s then outstanding voting
securities entitled to vote on a regular basis for a majority of the Board of
Directors of Employer; or (b) the sale of all or substantially all of the
assets of Employer (including, without limitation, by way of merger,
consolidation, lease or transfer) in a transaction where Employer or Magellan
do not receive (i) voting securities representing a majority of the voting
power entitled to vote on a regular basis for the Board of Directors of the
acquiring entity or of an affiliate which controls the acquiring entity, or (ii) securities
representing a majority of the equity interest in the acquiring entity or of an
affiliate that

 

4

 

controls the acquiring
entity, if other than a corporation. The foregoing notwithstanding, a spinoff
or other similar distribution of the shares or business of Mentor shall not
constitute a change of control for purposes of this Agreement.

 

(ii) In
the event of a change of control of Employer occurs during the term of Officer’s
employment hereunder, (or within six months after the term of Officer’s
employment hereunder ends due to non-renewal of this Agreement by Employer,
termination by Employer without cause, termination by Officer for good reason,
or termination due to death or disability as contemplated by Section 6(d))
Officer shall be entitled to receive a lump sum payment of (a) 150% of his
Base Salary paid on the date of the closing of the transaction constituting
such change in control, and (b) 150% of his Base Salary on the first
anniversary of such closing. Officer shall not be entitled to any such payment
provided in the preceding clause (b), if prior to the time for payment thereof,
(x) Employer shall have terminated Officer’s Employment with Cause, (y) Officer
shall have terminated his Employment without good reason (as defined above), or
(z) Officer shall have violated the covenants set forth in Section 8
hereof, unless prior to the occurrence of (x), (y) or (z) above, Officer shall
have entered into a new Employment Agreement with the party acquiring control
in such change of control transaction. Any amounts paid to Officer upon a
change of control as contemplated by this Section 7(a) shall be in
lieu of any amounts otherwise payable to Officer under the last sentence of Section 1,
or Section 6(b) or Section 6(c) hereof.

 

(iii) Alternatively,
if there is a change of control (as defined above mutatis mutandis) of Magellan
during the term of this Agreement, and Employer is still a subsidiary of
Magellan at the time of such change of control, Officer will be entitled to
terminate this Agreement within 90 days after such change of control, and upon
such termination will be entitled to all of the compensation provided in Section 4(a) of
this Agreement for a period of one year. Any amounts payable to Officer upon a
change of control of Magellan as contemplated by this paragraph shall be
applied towards any amounts otherwise payable to Officer under the last
sentence of Section 1, or Section 6(b) or Section 6(c) hereof.

 

(iv) If
Officer becomes entitled to any payments (whether hereunder or otherwise) by
reason of an event described in Internal Revenue Code Section 280G (a “Parachute
Event”) that would constitute “excess parachute, payments” (as defined in
Internal Revenue Code Section 280G) if paid, then Officer’s entitlement to
such payments will be reduced by such amount as will cause none of such
payments to constitute excess parachute payments; if, and only if, the net
amount received by Officer by reason of the Parachute Event, after imposition
of all applicable taxes (including taxes under Internal Revenue Code Section 4999),
would be greater after such reduction than if such reduction were not made.

 

(b)                                 Retention
Bonus. Employer shall pay to Officer a retention bonus of 150% of the base
salary figure stated in Section 4(a) above on the second anniversary
of the date of this Agreement, provided that prior to such time Officer has not
been terminated for cause, terminated his employment without good reason, or
terminated his

 

5

 

employment after a change
in control of Magellan as contemplated by Section 7(a)(iii) above,
and provided further, that no transaction involving a change of control of
Employer (as defined above) has occurred by that time. Alternatively, and in
lieu of the foregoing retention bonus, in the event of a spinoff or other
similar distribution of the shares or business of Mentor, Employer shall pay to
Officer a retention bonus of 150% of the base salary figure stated in Section 4(a) above
on each of the first and second anniversaries of the closing of such spinoff,
provided that Officer has not been terminated for cause or terminated his
employment without good reason prior to such time. In the event that Employer
adopts any “above target” bonus program, any amounts paid to Officer thereunder
shall be credited toward payment of the foregoing retention bonuses.

 

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

 

Officer covenants and
agrees as follows:

 

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

 

(b)                                 Officer covenants and agrees that during
the term of his/her employment with Employer and for a period of twelve months
immediately following the

 

6

 

termination of said
employment for any reason, he/she will not, directly or indirectly, seek,
obtain or accept a “Competitive Position” in the “Restricted Territory” with a “Competitor”
of Employer.

 

The following definitions
shall apply to this Section:

 

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

 

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

 

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

 

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

 

7

 

result of Officer’s
association with Employer or its controlled subsidiaries or affiliates.

 

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

 

(e)                                  Employer may, with the prior written
consent of Magellan, 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 Magellan, and shall be
effective only with respect to the acts specifically described therein.

 

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

 

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

 

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

 

8

 

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

 

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

 

	
  /s/ GT

  	
   

  
	
  Officer’s

  
	
  Initials

  

 

14.                               Notices.
Any notice or request required or permitted to be given to any party will be
given in writing and, excepting personal delivery, will be given at the address
set forth below or at such other address as such party may designate by written
notice to the other party to this Agreement:

 

	
  To Officer:

  	
   

  	
  Greg Torres

  
	
   

  	
   

  	
  25 Wildwood Street

  
	
   

  	
   

  	
  Winchester, MA 01890

  
	
   

  	
   

  	
   

  
	
  To Employer:

  	
   

  	
  National Mentor, Inc.

  
	
   

  	
   

  	
  313 Congress Street

  
	
   

  	
   

  	
  Boston, Massachusetts
  02210

  
	
   

  	
   

  	
  Attention: General
  Counsel

  
	
   

  	
   

  	
  Facsimile: 617-790-4941

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Magellan Health
  Services, Inc.

  
	
   

  	
   

  	
  6950 Columbia Gateway
  Drive

  
	
   

  	
   

  	
  Columbia, Maryland
  21046

  
	
   

  	
   

  	
  Attention: General
  Counsel

  
	
   

  	
   

  	
  Facsimile: 410-953-5207

  

 

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

 

9

 

registered mail, return
receipt requested, with postage prepaid, to the address last given in
accordance with this Section.

 

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

 

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

 

17.                               Binding
Effect. This Agreement will be binding upon and shall inure to the
benefit of each party and each party’s respective successors, heirs and legal
representatives. This Agreement may not be assigned by Officer to any other
person or entity but may be assigned by Employer to any wholly-owned subsidiary
or affiliate of Employer or to any successor to or transferee of all, or any
part, of the stock or assets of Employer.

 

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

 

19.                               Entire
Agreement. This Agreement embodies the entire agreement and
understanding between the parties with respect to its subject matter and
supersedes all prior agreements and understandings, whether written or oral,
relating to its subject matter, unless expressly provided otherwise within this
Agreement. No amendment or modification of this Agreement will be valid unless
made in writing and signed by each of the parties and countersigned by
Magellan. 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.

 

*                                         *                                         *

 

10

 

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

 

	
  GREG
  TORRES

  	
  NATIONAL
  MENTOR, INC.

  
	
  “Officer”

  	
  “Employer”

  
	
   

  
	
   

  
	
  /s/ Gregory Torres

  	
   

  	
  By:

  	
  /s/ Gregory Torres

  	
   

  
	
   

  	
  Name:

  	
  Gregory Torres

  	
   

  
	
   

  	
  Title:

  	
  President and CEO

  	
   

  
							

 

 

EXHIBIT A

Restricted Territory

 

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

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