Document:

exv10w4

Exhibit 10.4

ATLAS AIR WORLDWIDE HOLDINGS, INC.

BENEFITS PROGRAM

EXECUTIVE VICE PRESIDENTS

AND

SENIOR VICE PRESIDENTS

Amended and Restated as of July 1, 2011

 

 

          This document describes the benefits program for individuals employed as Executive Vice
Presidents or Senior Vice Presidents of Atlas Air, Inc. (“Atlas”), Polar Air Cargo Worldwide, Inc.
(“Polar”) and Titan Aviation Leasing, Ltd. (“Titan”) (such individuals are hereinafter referred to
as “Executives”), as in effect on July 1, 2011 and amends and restates the document dated December
31, 2008. Individuals employed as Executive Vice Presidents or Senior Vice Presidents by other
subsidiaries of Atlas Air Worldwide Holdings, Inc. (“Holdings,” and collectively with Atlas, Polar
and Titan, the “Company”) may participate in this program only if expressly approved for such
participation by the Compensation Committee of the Board of Directors of Holdings. All references
in this document to the Compensation Committee or the Board of Directors refers to those bodies of
Holdings. All references to the Employer are to the company employing the Executive.

I. Annual Salary.

          The Executive will receive a base annual salary (“Base Annual Salary”) reviewed annually for
possible increases by the Compensation Committee. Included among other considerations in the annual
review will be the Executive’s individual job performance. Increases, if any, shall be at the
discretion of the Compensation Committee.

II. Bonus Plan.

          The Executive shall be eligible to participate in Holdings’ Annual Incentive Plan or successor
plan at the Executive Vice President or Senior Vice President level, as appropriate. The level of
the bonus available to the Executive will be set forth in the Annual Incentive Plan and will be
awarded in consideration of individual and corporate performance based on performance goals and
objectives determined by the Compensation Committee. A fuller description of how corporate and
individual performance operate in tandem to determine the calculation of bonuses is described in
the Annual Incentive Plan. The Annual Incentive Plan document is developed by the Compensation
Committee and is subject to amendment from time to time with changes as adopted by the Compensation
Committee or full Board of Directors of Holdings. As further described in the Annual Incentive
Plan, corporate and individual performance in combination may permit the Executive to earn a target
bonus equal to at least 75% of Base Annual Salary for Senior Vice Presidents and at least 85% for
Executive Vice Presidents, as may be adjusted upward by the Compensation Committee. Lesser
corporate or individual performance may cause bonus payments to be in an amount less than 75% or
85%, as applicable, of such Base Annual Salary or result in no bonus being payable. Greater
corporate and individual performances may result in the bonus being more than 75% or 85%, as
applicable, of such Base Annual Salary. When the bonus payment reaches more than 75% or 85%, as
applicable, of such Base Annual Salary, the Employer reserves the right to pay some or all of the
portion of the bonus that is above 50% of Base Annual Salary in Holdings unrestricted company stock
payable under the Atlas Air Worldwide Holdings, Inc. 2007 Incentive Plan, as may be amended or
superseded. Any bonus paid to Executive under the Annual Incentive Plan will be paid no later than
two weeks following the completion of the year-end audit for the applicable year, but in no event
later than March 15 of the year following the applicable year.

 

 

III. Health Benefits.

          The Executive and Executive’s dependents shall be entitled to participate in the health
insurance plan offered by Executive’s Employer, provided that the Executive and the Employer will
each contribute to the Executive’s monthly premium as provided by such plan. The Employer reserves
the right to discontinue any health insurance plan at any time with the understanding that the
Employer will comply in full measure with all state and federal laws regarding continuation of
coverage, including the Consolidated Omnibus Budget Reconciliation Act of 1985, as may be amended
or superseded (“COBRA”).

IV. Severance.

          A. If the Executive’s employment is terminated by the Employer for reasons other than Cause
(as defined below) or if the Executive resigns for Good Reason (as defined below), and subject to
the Executive’s execution of a release upon terms and conditions reasonably acceptable to the
Employer and Executive (such acceptance not to be unreasonably withheld), which release must be
presented to Executive, executed, no longer be subject to revocation, and become effective no later
than the sixtieth (60th) day following the date of termination, then the Executive shall be
entitled to:

          (i) receive a severance payment equal to eighteen (18) months of the Executive’s monthly Base
Annual Salary for Senior Vice Presidents and twenty four (24) months of the Executive’s Base Annual
Salary for Executive Vice Presidents, and except as otherwise required by Section XI below, all
severance pay to which the Executive is entitled shall be in the form of salary continuation,
payable in accordance with the normal payroll practices of the Employer for its executives (each
such payment to be treated as a separate payment under Section 409A of the Internal Revenue Code),
with the first payment, which shall be retroactive to the day immediately following the date the
Executive’s employment terminated, being due and payable on the later of the sixty-first (61st) day
following the date of termination or the date specified in Section XI below (if applicable) (the
“Lump-Sum Payment Date);

          (ii) continued coverage at Executive’s expense under the Employer’s health (medical,
dental and vision) benefit plan in accordance with Section III for a period of twelve (12) months
from the date of termination (with COBRA coverage to follow thereafter, if timely elected);
provided, however, that any such continued coverage shall cease in the event the Executive
obtains comparable coverage in connection with subsequent employment; and

          (iii) assuming the Executive’s employment is terminated without Cause (as defined
below) or is for Good Reason (as defined below), the Executive shall be entitled to receive a
payment with respect to an annual bonus award under the Annual Incentive Plan for the year in which
such termination occurred, as if Executive had been employed by Employer
on the last day of such year in an amount equal to the lesser of (1) the amount Executive
would have received if Executive was employed by Employer on the last day of the such year, based
upon actual company performance measured pursuant to the Annual Incentive Plan (and assuming for
such purpose that 50% of any individual business objectives have been achieved), or (2) Executive’s
target bonus percentage, such payment shall be subject to all terms and conditions of the Annual
Incentive Plan under which the

 

 

award was granted, including without limitation any provisions related to whether all required
performance measures for the payment of an award have been satisfied and the provisions of the
Annual Incentive Plan regarding time of payment of such award.

          The above benefits are in addition to the Executive’s right to receive accrued but unused
vacation pay through the date the employment period terminates, and all other benefits in which the
Executive is vested pursuant to other plans and programs of the Company at the time of the
Executive’s date of termination.

          Upon the death of Executive while severance payments are due to Executive, the Executive’s
personal representative shall be entitled to the unpaid severance payments described in this
Section IV.A and Executive’s spouse and covered dependents, if any, shall be entitled to the
health benefit coverage described in this Section IV.A, except that the remaining severance
payments under this Section IV.A shall be made in a lump sum within (10) days immediately following
the Executive’s date of death.

          An Executive will be treated as having resigned for Good Reason only if he or she provides
Employer with a Notice of Termination within 90 days of the initial existence of one of the
conditions described in the definition of Good Reason below, following which the Employer shall
have 30 days from the receipt of the Notice of Termination to cure the event specified in the
Notice of Termination and, if Employer fails to so cure the event, the Executive terminates his or
her employment not later than thirty (30) days following the end of such cure period.

          B. If the Executive’s employment is terminated by the Employer for Cause or if the
Executive resigns but not for Good Reason, the Executive shall be entitled to receive only the
Executive’s accrued but unpaid Base Annual Salary as of the date of termination.

          C. If the Executive’s employment is terminated as a result of Permanent Disability
(as defined below), the Executive shall be entitled to receive the Executive’s accrued but unpaid
Base Annual Salary as of the date of termination, the benefits described in Section IV.A above
(payable in accordance with the payment rules of Section IV.A. above), plus any benefits to which
he is then entitled under the Employer’s disability program, if any.

          D. “Good Reason” as used herein shall mean for any Executive subject to this
Benefits Program, any of (i) a reduction in the Executive’s Base Annual Salary from the Base Annual
Salary the previous year, except where such reduction is part of a general salary reduction for the
Employer, or Executive ceasing to be eligible for an annual bonus under the Annual Incentive Plan,
(ii) the Executive ceasing to hold the title of Executive Vice President or Senior Vice President,
as the case may be, other than through promotion or through reassignment to another job title of
comparable responsibility, and (iii) any reduction in job responsibilities which diminishes the
opportunity for the Executive to earn the same bonus under the Annual Incentive Plan for which the
Executive was previously eligible.

          E. “Cause” as used herein shall mean (i) any act or acts of material dishonesty by
the Executive, (ii) the failure of the Executive to comply with any of the Executive’s material
obligations to the Employer within ten (10) days of written notice from the Employer, (iii) any
material violations by the Executive of the Employer’s corporate

 

 

policies as set forth in the Employer’s compliance manual or program, employee handbook or related
corporate policies, provided that, if such violation is subject to cure, the Executive shall have
ten (10) days within which to cure such violation, or (iv) the conviction of or “no contest” plea
by the Executive to any misdemeanor of moral turpitude or any felony.

          F. “Permanent Disability” as used herein shall be deemed to have been sustained by the
Executive if the Executive shall have been continuously disabled from performing the duties
assigned to the Executive for a period of six (6) consecutive calendar months, and such Permanent
Disability shall be deemed to have commenced on the day following the end of such six (6)
consecutive calendar months. Notwithstanding the foregoing, in the event that, as a result of an
absence because of mental or physical incapacity or other impairment, the Executive incurs an
earlier “separation from service” within the meaning of Section 409A of the Internal Revenue Code,
as may be amended (“Section 409A”), the Executive shall on such date automatically be terminated
from employment as a result of Permanent Disability.

V. Change of Control.

	 	A.	 	If, within the twelve-month period immediately following a Change of Control
(defined below), the Executive’s employment is terminated by the Employer for reasons
other than Cause or if the Executive resigns for Good Reason, and subject to the
Executive’s execution of a general release upon terms and conditions consistent with this
Agreement and acceptable to the Employer and Executive (such acceptance not to be
unreasonably withheld), which release must be presented to Executive upon or promptly
after termination of the Executive’s employment, fully executed, no longer subject to
revocation, and become effective no later than the sixtieth (60th) day
following the date on which the Executive’s employment terminates, then the Executive
shall be entitled to the compensation and benefit coverage set forth in Section IV.A
above, except that the severance payments in Section IV.A shall be in the form of a
single lump-sum payment payable on the Lump-Sum
Payment Date in an amount equal to thirty six (36) months of the Executive Vice President’s
Base Annual Salary or twenty four (24) months of the Senior Vice President’s Base Annual
Salary, as applicable.
	 
	 	B.	 	If, within the six-month period immediately following a termination of the
Executive’s employment by Employer for reasons other than Cause or by the Executive for
Good Reason, a Change of Control occurs, then, in addition to the payment set forth in
Section IV.A above (which shall be paid in the manner specified in Section IV.A above),
and subject to satisfaction by the Executive of the release requirements of Section IV.A
above, the Executive shall receive a lump-sum payment on the Lump-Sum Payment Date equal
to twelve (12) months (in the case of an Executive Vice President) or six (6) months (in
the case of a Senior Vice President) of the Executive’s Annual Base Salary, as
applicable.
	 
	 	C.	 	For purposes of this Benefits Program, “Change in Control of the Company” means a
“change in control event” (as that term is defined at Section 1.409A- 3(i)(5) of the
Treasury Regulations) with respect to the Company, which generally will include the
following events, subject to such additional rules

 

 

	 	 	 	and requirements as may be set forth in the Treasury Regulations and related guidance:

          (1) a transfer or issuance of stock of the Company, where stock in the Company
remains outstanding after the transaction, and one person, or more than one person acting as a
group (as determined under the Treasury Regulations), acquires ownership of stock in the Company
that, together with stock held by such person or group, constitutes more than 50% of the total fair
market value or total voting power of the stock of the Company (however, if a person or group is
considered to own more than 50% of the total fair market value or 30% of the total voting power of
the stock of the Company, the acquisition of additional stock by the same person or group will not
be considered a change in control for purposes of this Section 2(f));

          (2) the acquisition by a person or group, during the 12-month period ending on the date of the
most recent acquisition by such person or group, of ownership of stock possessing 30% or more of
the total voting power of the Company (however, if a person or group is considered to control the
Company within the meaning of this sentence (i.e., owns stock of the Company possessing 30% of the
total voting power of the Company), then the acquisition of additional control will not be
considered a change in control for purposes of this Section 2(1));

          (3) the replacement of a majority of members of the Company’s Board of Directors during any
12-month period by directors whose appointment or election is not endorsed by a majority of the
members of the Company’s Board of Directors before the appointment or election; or

          (4) the acquisition by a person or group, during the 12-month period ending on the date of the
most recent acquisition by such person or group, of assets from the Company that have a total gross
fair market value equal to or more than 40% of the total gross fair market value of all the assets
of the Company, as determined under the Treasury Regulations (however, a transfer of assets to
certain related persons, as provided under the Treasury Regulations, or to an entity that is
controlled by the shareholders of the Company immediately after the transfer, will not be
considered a change in control for purposes of this Section 2(f)).

VI. Vacation.

	 	 	The Executive shall be entitled to four weeks of paid vacation per year, prorated for partial
years of employment.

VII. 401(k) Plan and other benefits.

          The Executive shall be eligible to participate in the Employer’s 401(k) plan and any other
pension or welfare plan generally available from time to time to Executives or other employees of
the Employer, as determined by the Compensation Committee, as well as an annual executive physical.

VIII. Non-Competition

          As a condition of employment and participation in this Benefits Program, the Executive shall
execute a Non-Competition Agreement in a form approved by Holdings.

 

 

IX. Principal Residence

          The Executive shall be required to maintain his or her principal residence in the Purchase,
New York area, except as may be otherwise expressly agreed in Section X, below, based upon
Employer’s specific business need.

X. Variations from Benefits Program

          Any variation from the provisions of this Benefits Program (whether by separate employment
agreement otherwise) shall be effective only if such variation is contained in a writing provided
to the affected Executive and signed by the CEO, President or Chief Human Resources Officer of
Holdings or of the Employer; provided, however, that no such modification or amendment after the
date on which the Executive’s employment has been terminated for reasons other than Cause, for Good
Reason or after the occurrence of a Change in Control shall adversely affect an Executive’s
entitlement to severance benefits under Sections IV or V above.

XI. Section 409A.

          Notwithstanding anything to the contrary in this Benefits Program, if at the time of an
Executive’s termination of employment, the Executive is a “specified employee,” as defined below,
any and all amounts payable under this Benefits Program on account of such separation from service
that constitute deferred compensation and would (but for this provision) be payable within six (6)
months following the date of termination, shall instead be paid on the next business day following
the expiration of such six (6) month period or, if earlier, upon the Executive’s death; except (A)
to the extent of amounts that do not constitute a deferral of compensation within the meaning of
Treasury regulation Section 1.409A-1 (b) (including without limitation by reason of the safe harbor
set forth in Section 1.409A-1 (b)(9)(iii), as determined by the Company in its reasonable good
faith discretion); (B) benefits that qualify as excepted welfare benefits pursuant to Treasury
regulation Section 1.409A-1(a)(5); or (C) other amounts or benefits that are not subject to the
requirements of Section 409A.

          For purposes of this Benefits Program, all references to “termination of employment” and
correlative phrases shall be construed to require a “separation from service” (as defined in
Section 1.409A-1 (h) of the Treasury regulations after giving effect to the presumptions contained
therein), and the term “specified employee” means an individual determined by the Company to be a
specified employee under Treasury regulation Section 1.409A-l(i).

          Each payment made under this Benefits Program shall be treated as a separate payment and the
right to a series of installment payments under this Benefits Program is to be treated as a right
to a series of separate payments.

          In no event shall the Company have any liability relating to the failure or alleged failure of
any payment or benefit under this Benefits Program to comply with, or be exempt from, the
requirements of Section 409A.Exhibit 10.1

Exhibit 10.1

The MENTOR Network

Human Services and Corporate Management

Incentive Compensation Plan

Amended and Restated

Effective October 1, 2011

 

 

 

Table of Contents

	 	 	 	 	 
	Purpose of Plan
	 	 	1	 
	Eligibility
	 	 	1	 
	Definitions
	 	 	1	 
	Minimum Threshold Requirement
	 	 	3	 
	Weighting of Performance Criteria
	 	 	3	 
	Calculation of Incentive Payouts
	 	 	3	 
	Calculating the Potential Payout
	 	 	4	 
	Applying Personal Scorecard Results to the Potential Payout
	 	 	4	 
	Discretionary Incentive Compensation
	 	 	5	 
	Distribution of 3% Discretionary Pool
	 	 	5	 
	Discretionary Divestitures
	 	 	5	 
	In the Event that Calculated Payouts Exceed Funds Available to Pay Incentive Compensation
	 	 	5	 
	Administration
	 	 	6	 
	Plan Changes
	 	 	6	 
	Management of Financial Goals
	 	 	6	 
	Establishment of Personal Scorecards
	 	 	6	 
	Incentive Compensation Payouts
	 	 	6	 
	Approval of New Plan Entrants
	 	 	6	 
	Participant Termination Provisions
	 	 	7	 
	Terminations Without Cause and Voluntary Terminations
	 	 	7	 
	Involuntary Terminations for Cause
	 	 	7	 
	Retirement and Death
	 	 	7	 
	Special Provisions Relating to Position and Status Changes
	 	 	7	 
	Promotions and Job Transfers
	 	 	7	 
	Interruptions in Work
	 	 	8	 
	Plan Year and Effective Date
	 	 	8	 
	Plan Amendments
	 	 	8	 
	Exhibit A: Eligibility, Target IC Opportunity, and Weighting for Management Positions
	 	 	9	 
	Exhibit B: Target IC Opportunity and Weighting for Executive Officer Positions
	 	 	10	 
	Annex 1: Performance Scale
	 	 	11	 
	Annex 2: Sample Incentive Compensation Calculation and Scorecard Results
	 	 	12	 

 

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Purpose of Plan

The purpose of The MENTOR Network Human Services and Corporate Management Incentive Compensation
Plan (the “MIC Plan” or the “Plan”) is to provide executives, management, and other employees in
designated key positions with the opportunity to receive an annual cash incentive award for
achieving performance goals that align with the business goals of The MENTOR Network (“The
Network”).

Eligibility

Eligibility for participation in the MIC Plan is limited to employees in the Human Services
operating groups and certain other management positions, specifically: (i) Executive Officers (as
such term is defined under the Securities Exchange Act of 1934, as amended) and other employees
whose positions are listed on Exhibit B and (ii) employees whose positions are listed on Exhibit A.
However, the President and Chief Operating Officer (“President/COO”), the Chief Financial Officer
(“CFO”) and the Chief Human Resources Officer (“CHRO”), acting together, may amend Exhibit A and
Exhibit B with respect to positions which are not Executive Officers. Employees are not eligible
to participate in the MIC Plan if they are eligible for participation under any other cash
incentive plan of The Network, with the exception of discretionary bonuses available to
participants in the Mergers and Acquisitions Bonus Plan and additional plans as may be specifically
approved by the President/COO, CFO and CHRO from time to time.

Definitions

3% Discretionary Pool. The “3% Discretionary Pool” is a discretionary pool budgeted each fiscal
year that is equal to three percent of total budgeted incentive compensation. The discretionary
pool may be used to increase incentive compensation payouts for participants whose calculated
Potential Payout adjusted for Personal Scorecard results may not adequately reflect their
performance; for example, to a high performer within a state or other organizational unit that does
not perform well.

Adjusted EBITDA. Earnings before interest, taxes, depreciation and amortization, with adjustments,
as reported to The Network’s equity sponsor.

Adjusted EBITDA/CTO. Adjusted EBITDA, CTO or both, as applicable to a particular participant.
Adjusted EBITDA/CTO excludes new start investments under immunity and acquisitions other than
tuck-ins (as determined by the CEO).

Adjusted EBITDA/CTO Performance Level. Actual Adjusted EBITDA/CTO divided by planned (or budgeted)
Adjusted EBITDA/CTO as applicable to a given participant, expressed as a percentage.

 

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CTO. “CTO” means contribution to overhead for a given organizational unit within The Network.

IC Payout Level. The percentage incentive compensation payout that is associated with actual
Adjusted EBITDA/CTO and Revenue performance achieved against plan as shown on the Performance Scale
in Annex 1. The IC Payout Level factored into the Potential Payout calculation ranges from 50
percent, for 92.5 percent performance against plan (or budget), to 150 percent, for 107.5 percent
performance against plan, with planned or target incentive compensation at 100 percent. In cases
where actual Adjusted EBITDA/CTO and/or revenue performance falls between two performance points in
the Performance Scale table, the IC Payout Level used for the Potential Payout calculation will
fall proportionately between the two IC Payout Level percentages in the table.

Personal Scorecard. The scorecard established for an individual participant for a fiscal year that
contains up to five specific measurable objectives for the individual to achieve over the course of
the fiscal year, at least two of which relate to quality in the case of Operations management
positions. Each objective on the Personal Scorecard has a corresponding percentage weighting
value, and the total of all the percentages on a Personal Scorecard will total 100 percent.

Potential Payout. A participant’s “Potential Payout” is the amount of incentive compensation
potentially payable to a participant based on Network and/or organizational unit performance,
before reduction of up to 50 percent based on Personal Scorecard results.

Reallocation Pool. Unallocated (or forfeited) incentive compensation as a result of less than 100
percent performance on participants’ Personal Scorecards which forms a pool of residual dollars for
potential reallocation by the applicable Operating Group President or Functional Head.

Revenue. As measured in The Network’s financial statements, excluding new start investments under
immunity and acquisitions other than tuck-ins (as determined by the CEO).

Revenue Performance Level. Actual Revenue achieved for the fiscal year divided by planned (or
budgeted) Revenue for that year, expressed as a percentage.

Target IC Opportunity. The amount a given participant may earn under the Plan if the applicable
planned (or budgeted) financial targets are achieved and the Personal Scorecard result is 100
percent. This amount is calculated by multiplying the participant’s annual salary by the
applicable Target IC% shown in Exhibit A or Exhibit B. A participant’s “Target IC Opportunity” is
based on the participant’s level of responsibility for and impact on The Network’s business goals.
Refer to Exhibit A for management and other key positions, and to Exhibit B for Executive Officers
and others.

 

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Minimum Threshold Requirement

The minimum actual performance level required for a participant to receive incentive compensation
is 92.5 percent of the planned Adjusted EBITDA/CTO target goal for The Network or an organizational
unit, whichever is applicable to the participant. If the minimum threshold requirement is not met,
the participant will not receive any incentive compensation unless the participant is awarded
discretionary incentive compensation.

In the case of participants whose incentive compensation is based on both The Network’s and an
organizational unit’s performance, the minimum threshold requirement applies separately to each.
That is, if The Network does not achieve the minimum threshold, then the participant will not
receive the portion of the incentive compensation based on The Network’s performance. Similarly,
if the organizational unit does not achieve the minimum threshold, then the participant will not
receive the portion of incentive compensation based on the organizational unit’s performance.

Weighting of Performance Criteria

For purposes of calculating a participant’s incentive compensation, weighting between The Network’s
and organizational unit’s Adjusted EBITDA/CTO and revenue performance is determined according to a
participant’s position, as set out on Exhibits A and B.

For purposes of calculating a participant’s incentive compensation, the weighting between revenue
and Adjusted EBITDA and/or CTO is determined each year by the Compensation Committee.

Calculation of Incentive Payouts

Plan participants are eligible to receive incentive compensation based on The Network’s and/or
their organizational unit’s performance and their own individual Personal Scorecard results. The
principle steps for calculating a participant’s incentive compensation payout are as follows:

	1.	 	Calculate the participant’s Potential Payout.

	2.	 	Determine the participant’s Personal Scorecard results, then calculate the portion of the
Potential Payout that will be paid to the participant based on the results. If the
participant achieved a score of 100 percent on his or her Personal Scorecard, then the
participant’s payout will equal the Potential Payout calculated in Step 1. However, if the
participant’s score is less than 100 percent, the Potential Payout calculated in Step 1 will
be reduced by as much as 50 percent.

	3.	 	If applicable, add discretionary incentive compensation to the amount calculated in Step 2.
Discretionary incentive compensation may be added from the Reallocation Pool and/or the 3%
Discretionary Pool.

 

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For an example of an incentive compensation payout calculation, refer to Annex 2.

Calculating the Potential Payout

To calculate a participant’s Potential Payout described in Step 1 above, the following steps apply:

	1.	 	Determine if the Adjusted EBITDA/CTO Performance Level meets the minimum threshold
requirement (i.e., 92.5 percent of planned performance).

	 	 	If the Adjusted EBITDA/CTO Performance Level does not meet the minimum threshold requirement,
then the participant’s Potential Payout is zero. If the minimum threshold requirement is met,
then proceed to the next step.

	2.	 	Determine the IC Payout Level associated with the EBITDA/CTO Performance Level determined in
Step 1 using the Performance Scale set out on Annex 1.

	3.	 	Calculate the portion of the participant’s Potential Payout attributable to Adjusted
EBITDA/CTO performance by multiplying the participant’s Target Incentive Compensation by the
applicable weighting, as determined by the Compensation Committee for that fiscal year, and
then by the IC Payout Level determined in Step 2.

	4.	 	Determine the Revenue Performance Level for The Network and/or the organizational unit,
whichever is applicable to the participant, and then determine the IC Payout Level associated
with the Revenue Performance Level using the Performance Scale set out on Annex 1.

	5.	 	Calculate the portion of the participant’s Potential Payout attributable to Revenue
performance by multiplying the participant’s Target Incentive Compensation by the applicable
weighting, as determined by the Compensation Committee for that fiscal year, and then by the
IC Payout Level determined in Step 4.

	6.	 	Sum the amounts calculated in Steps 3 and 5 to obtain the Potential Payout.

Applying Personal Scorecard Results to the Potential Payout

	1.	 	A participant’s Personal Scorecard results must be certified by the participant’s supervisor
and: (i) the Operating Group President for a Vice President of Operations; (ii) the Vice
President of Operations, for all other Operations positions; (iii) the functional head, or
chief, of a corporate function (the “Functional Head”), for corporate positions. The CEO and
the President will certify Personal Scorecard results for the Executive Officers reporting to
each of them, respectively, and the Compensation Committee will approve and certify the
Personal Scorecard results for the CEO.

 

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	2.	 	The Personal Scorecard result (which will range from 0 percent to 100 percent) is divided by
two and that number is added to 50 percent, resulting in a modifier of the Potential Payout
(the “Modifier”) ranging from 50 percent to 100 percent.

	3.	 	The Potential Payout is multiplied by the Modifier to yield an initial calculation of an
individual’s incentive compensation ranging from 50 percent to 100 percent of the Potential
Payout as initially calculated.

Discretionary Incentive Compensation

In cases where a participant’s performance may not be adequately rewarded by the calculations
above, additional compensation may be awarded from the the 3% Discretionary Pool, as detailed
below, and/or the Reallocation Pool (established when Personal Scorecards are less than 100
percent). Awards from the Reallocation Pool will be made in the discretion of the applicable
Operating Group President or Functional Head, except for additions to payouts for Executive
Officers, whose additions must be recommended by the CEO and approved by the Compensation
Committee.

Distribution of 3% Discretionary Pool

Based on actual Network Adjusted EBITDA and Revenue performance, the planned (or budgeted) 3%
Discretionary Pool will be adjusted so that it is 3 percent of the total potential pool. Once the
size of the 3% Discretionary Pool has been calculated for the fiscal year, one-half of such pool
will be allocated by the CEO to the operating groups, and the Operating Group Presidents must
approve all additions to incentive compensation payouts from their allocation of the 3%
Discretionary Pool. The other half of such pool shall be available for increases to incentive
compensation payouts to any participant, which payouts shall be approved by the CEO, except for
additions to payouts for Executive Officers, whose additions must be recommended by the CEO and
approved by the Compensation Committee.

Discretionary Divestitures

Notwithstanding the foregoing, if a participant engages in or bears responsibility for
exceptionally poor conduct or poor performance during the fiscal year, he or she may not be
entitled to receive any incentive compensation whatsoever, regardless of the Potential Payout
calculation and Personal Scorecard results. The decision to divest a participant will be made by:
(i) the President/COO and the Operating Group President, for Operations positions; (ii) the CEO and
Functional Head, for Corporate positions; or (iii) the Compensation Committee, for Executive
Officers.

In the Event that Calculated Payouts Exceed

Funds Available to Pay Incentive Compensation

In the event that the total calculated incentive payouts, after taking into account any
discretionary redistributions of unallocated incentive compensation, exceed the funds that are
available to pay incentive compensation, all payouts will be reduced proportionately based on the
funds available.

 

5

 

Administration

Plan Changes

The Compensation Committee must approve the MIC Plan and any changes to the Plan, except that the
President, CFO and CHRO, acting together, may amend Exhibit A and/or Exhibit B to the extent such
amendments do not relate to Executive Officers.

Management of Financial Goals

For each fiscal year, the Compensation Committee must approve:

	 	•	 	The Network’s Adjusted EBITDA and revenue performance goals that will be used for
measuring Network performance;

	 	•	 	The weighting between Adjusted EBITDA and revenue that will be used to calculate
performance under the Plan; and

	 	•	 	The Network’s actual performance results that will be used as the basis for calculating
incentive compensation payouts.

The CEO, President/COO and CFO must approve actual performance results for organizational units as
compared to the budgeted (i.e., planned) goals approved by management.

Establishment of Personal Scorecards

At the beginning of each fiscal year, a participant will work with his or her supervisor to create
a Personal Scorecard that sets out up to five measurable objectives to achieve over the course of
the fiscal year that align with the organization’s overall business goals. In the case of
operations positions, at least two objectives will relate to quality of services. The
President/COO, the CFO and the CHRO, acting together, may waive or change the number of goals for
any participant who is not an Executive Officer. The supervisor will also set the weighting among
a participant’s goals, which in total must equal 100 percent.

Incentive Compensation Payouts

Each fiscal year, the Compensation Committee must approve all incentive compensation payouts for
Executive Officers. The CEO must approve all other incentive compensation payouts.

Approval of New Plan Entrants

The Compensation Committee must approve any new Executive Officer entering the plan and the
applicable performance weightings and incentive compensation payout opportunities.

Approval of new entrants other than Executive Officers is based on whether an employee’s position
has been approved for plan participation (as set forth on Exhibit A or Exhibit B). New
participants (other than Executive Officers and other than those set forth on Exhibit A or Exhibit
B) must be approved for entry into the Plan by the President/COO, CFO and CHRO.

 

6

 

Participant Termination Provisions

Terminations Without Cause and Voluntary Terminations

Plan participants whose employment is terminated without cause or who terminate employment
voluntarily before the actual payment date of incentive compensation, other than by retirement,
will not be eligible for any incentive payout under the Plan, with the exception of specific
situations that are approved by the CEO or, in the case of payouts for Executive Officers, approved
by the Compensation Committee.

Involuntary Terminations for Cause

Plan participants whose employment is involuntarily terminated for cause will not be eligible for
incentive payouts under the Plan under any circumstances. “Cause” shall mean any of the following:
(i) theft or embezzlement, or attempted theft or embezzlement, of money or property of the Company
or any subsidiary, perpetration or attempted perpetration of fraud, or participation in a fraud or
attempted fraud, on the Company or any subsidiary, or any third party, or unauthorized
appropriation of, or attempt to misappropriate, any tangible or intangible assets or property of
the Company or any subsidiary; (ii) any act or acts of disloyalty, misconduct, or moral turpitude
injurious to the interest, property, operations, or business reputation of the Company or any
subsidiary; (iii) material violation of any agreement with the Company or any serious violation of
the Company’s policies, including its Code of Conduct; or (iv) failure or inability (other than by
reason of disability) to carry out effectively a participant’s duties and obligations to the
Company and its subsidiaries or to participate effectively and actively in the management of the
Company and its subsidiaries, as determined in the reasonable judgment of the CEO or, with respect
to the CEO, the Compensation Committee.

Retirement and Death

Plan participants whose employment terminates because of retirement or death are eligible to
receive an incentive compensation payout. The payout will be calculated based upon actual Network
and/or organizational unit performance for the full fiscal year and the Personal Scorecard for the
portion of the year that the individual was employed, and the resulting amount prorated for the
portion of the year that was worked. Any incentive compensation payout that is earned will be paid
at the normal payout date for all Plan participants.

Special Provisions Relating to Position and Status Changes

Promotions and Job Transfers

Personal Scorecard criteria and MIC Plan goals and payout weightings may be reestablished for an
individual participant upon transfer or promotion to a new position. Unless otherwise determined
by the CEO, incentive payouts will be calculated based upon the participant’s position and base
salary as of the last day of the fiscal year.

 

7

 

Interruptions in Work

A long-term illness or disability will not affect the eligibility of an employee to participate in
the Plan. Personal Scorecard objectives will not be adjusted based on the work interruption,
although actual performance achieved will be evaluated and the corresponding incentive payout will
be prorated based upon the amount of time worked during the performance period.

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

Special assignments generally will not affect either the target goals or incentive payout, except
as may be reflected in a participant’s performance review rating. However, if the special
assignment is of a significant nature or duration, Personal Scorecard and MIC Plan goals may be
reestablished and incentive payouts prorated based on the time spent in each position during the
performance period.

Plan Year and Effective Date

The Plan year is the fiscal year, which starts on October 1st and ends on September
30th. The effective date of this amended and restated plan is October 1, 2011.

Plan Amendments

The MENTOR Network reserves the right to amend this Plan at any time, including termination of the
Plan, without prior notice to participants.

 

8

 

Exhibit A: Eligibility, Target IC Opportunity, and Weighting for Management Positions

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Target IC %	 	 	Network	 	 	Organizational	 
	Eligible Positions	 	Opportunity	 	 	Weighting	 	 	Unit Weighting	 
	Operations and Field Management Positions
	 	 	 	 	 	 	 	 	 	 	 	 
	Vice President, Operations
	 	 	30	%	 	 	25	%	 	 	75	%
	Vice President, CFO
	 	 	30	%	 	 	25	%	 	 	75	%
	Vice President, Field HR
	 	 	30	%	 	 	25	%	 	 	75	%
	Senior Executive Director
	 	 	25	%	 	 	25	%	 	 	75	%
	Executive Director
	 	 	20	%	 	 	0	%	 	 	100	%
	State Director
	 	 	20	%	 	 	0	%	 	 	100	%
	Regional Director
	 	 	15	%	 	 	0	%	 	 	100	%
	Operations Director
	 	 	15	%	 	 	0	%	 	 	100	%
	Area Director
	 	 	10	%	 	 	0	%	 	 	100	%
	Program Manager II
	 	 	10	%	 	 	0	%	 	 	100	%
	Senior Business Director
	 	 	20	%	 	 	25	%	 	 	75	%
	Business Director
	 	 	15	%	 	 	25	%	 	 	75	%
	Business Manager
	 	 	10	%	 	 	0	%	 	 	100	%
	State Accounting Manager
	 	 	10	%	 	 	0	%	 	 	100	%
	Operating Group Director, QA
	 	 	15	%	 	 	25	%	 	 	75	%
	Director (Regional level HR & QA)
	 	 	10	%	 	 	25	%	 	 	75	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Corporate (All positions at levels indicated below)
	 	 	 	 	 	 	 	 	 	 	 	 
	Vice President
	 	 	30	%	 	 	100	%	 	 	0	%
	Senior Director
	 	 	20	%	 	 	100	%	 	 	0	%
	Director
	 	 	15	%	 	 	100	%	 	 	0	%
	Manager
	 	 	10	%	 	 	100	%	 	 	0	%
	Manager (Designated Field)
	 	 	10	%	 	 	100	%	 	 	0	%

 

9

 

Exhibit B: Target IC Opportunity and Weighting for Executive Officer Positions

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Target IC Payout	 	 	 	 	 	 	 
	Position	 	Opportunity	 	 	Network	 	 	Operating Group	 
	Chief Executive Officer
	 	 	100	%	 	 	100	%	 	 	0	%
	President and Chief Operating Officer
	 	 	75	%	 	 	100	%	 	 	0	%
	Operating Group Presidents
	 	 	50	%	 	 	25	%	 	 	75	%
	All Other Executive Officers
	 	 	50	%	 	 	100	%	 	 	0	%

 

10

 

Annex 1: Performance Scale

	 	 	 	 	 	 	 	 	 
	 	 	Performance Scale	 
	 	 	CTO/Rev Perf	 	 	 	 
	 	 	Level	 	 	IC Payout Level	 
	 
	 	 	107.5	%	 	 	150.0	%
	 
	 	 	106.0	%	 	 	140.0	%
	 
	 	 	104.5	%	 	 	130.0	%
	 
	 	 	103.0	%	 	 	120.0	%
	 
	 	 	101.5	%	 	 	110.0	%
	Target
	 	 	100.0	%	 	 	100.0	%
	 
	 	 	98.5	%	 	 	90.0	%
	 
	 	 	97.0	%	 	 	80.0	%
	 
	 	 	95.5	%	 	 	70.0	%
	 
	 	 	94.0	%	 	 	60.0	%
	 
	 	 	92.5	%	 	 	50.0	%

 

11

 

Annex 2: Sample Incentive Compensation Calculation and Scorecard Results

TMN
Human Services and Corporate Management Incentive Compensation Plan —  Sample Calculation and
Scorecard

	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Employee	 	Position Title	 	Salary	 	 	Target IC %	 		Target IC $	 
	Doe, John
	 	Regional Director	 	$	100,000	 	 	 	15	%	 	$	15,000	 

Your Potential Payout Based on Organization Performance (Note: Before applying your Scorecard
results)

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Target	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Potential	 
	Objective	 	Weight	 	 	Payout	 	 	Target	 	 	Result	 	 	% of Target	 	 	Payout %	 	 	Payout	 
	Revenue
	 	 	50	%	 	$	7,500	 	 	$	15,000,000	 	 	$	15,123,456	 	 	 	100.8	%	 	 	105.5	%	 	$	7,912	 
	CTO
	 	 	50	%	 	$	7,500	 	 	$	2,250,000	 	 	$	2,200,000	 	 	 	97.8	%	 	 	85.2	%	 	$	6,389	 
	Total Potential Payout
	 	 	100	%	 	$	15,000	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	95.3	%	 	$	14,300	 
	Amount at Risk Based on Your Scorecard Results (50%)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	7,150	 

Your Scorecard Results (S.M.A.R.T. Objectives — Specific. Measureable. Attainable. Relevant. Time-
bound.)

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Scorecard	 	 	Target	 	 	 	 	 	 	 	 	 	 	Payout for	 
	Objectives (EXAMPLES ONLY)	 	Weight	 	 	Payout	 	 	Achieved	 	 	Payout %	 	 	Scorecard	 
	Quality: Reduce major incidents by 25%, from 16 in FY11
to 12 or less in FY12.
	 	 	20	%	 	$	1,430	 	 	Yes	 	 	100	%	 	$	1,430	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Quality: Design and implement initiatives to improve
consumer statisfaction and conduct quarterly surveys to
measure satisfaction and achieve 85% of consumers rating
service provided as Very Good or better by Q4 FY12 survey.
	 	 	20	%	 	$	1,430	 	 	Yes	 	 	100	%	 	$	1,430	 
	Growth: Work with VPOs and SEDs to ensure approval by
9/30/12 of 8 new start proposals with projected revenue
totaling at least $8.8 million
	 	 	25	%	 	$	1,788	 	 	No	 	 	0	%	 	$	—	 
	Safety/Cost Reduction: Identify opportunities and begin
execution to achieve net spending impact held to budget
levels with business case(s) developed and initiated for next
phase
	 	 	15	%	 	$	1,073	 	 	No	 	 	0	%	 	$	—	 
	People: Maximize revenue in Periodic services by
increasing the retention of Therapists by 15%
	 	 	20	%	 	$	1,430	 	 	Yes	 	 	100	%	 	$	1,430	 
	Portion of Potential Payout Achieved Based on Your
Scorecard Results
	 	 	100	%	 	$	7,150	 	 	 	 	 	 	 	60	%	 	$	4,290	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total Payout After Applying Your Scorecard Results
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	11,440	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Discretionary Award from Reallocation Pool
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	—	 
	Discretionary Award from 3% Pool
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	1,500	 
	Total Payout Including Discretionary Awards
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	12,940	 

 

12

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