EX-10.11 161 a2173512zex-10_11.htm EXHIBIT 10.11

Exhibit 10.11

 

MANAGEMENT AGREEMENT

 

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

 

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

 

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

 

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

 

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

 

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

 



 

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

 

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

 

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

 

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

 



 

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

 

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

 

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

 

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

 

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

 



 

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

 

If to Vestar:

 

Vestar Capital Partners

 

 

245 Park Avenue, 41st Floor

 

 

New York, New York 10167

 

 

Attention: General Counsel

 

 

 

If to Investment,
Holdings, the

 

 

Company or NMI:

 

National Mentor Holdings, Inc.
313 Congress Street
Boston, MA 02210
Attention: Edward Murphy

 

 

 

In any case,
with copies to:

 


The other parties hereto
at their respective addresses
noted above.

 

 

 

 

 

and

 

 

 

 

 

Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
Attention: Peter J. Gordon, Esq.

 

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

 

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

 

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

 

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

 



 

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

 

 

VESTAR CAPITAL PARTNERS

 

 

 

 

 

By its General Partner:

 

 

 

 

 

 

 

 

By:

/s/ Brian Ratzan

 

 

 

Name: Brian Ratzan

 

 

Title: General Director

 

 

 

 

 

 

 

NATIONAL MENTOR HOLDINGS, INC.

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

 

 

 

 

 

 

NATIONAL MENTOR, INC.

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

 

 

 

 

 

 

NMH HOLDINGS, LLC

 

 

 

 

 

 

 

 

 

 

By:

/s/ Brian Ratzan

 

 

 

Name: Brian Ratzan

 

 

Title: President

 

 

 

 

 

 

 

NMH INVESTMENT, LLC

 

 

 

 

 

 

 

 

 

 

By:

/s/ Brian Ratzan

 

 

 

Name: Brian Ratzan

 

 

Title: President

 



 

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

 

 

VESTAR CAPITAL PARTNERS

 

 

 

 

 

By its General Partner:

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

 

 

 

 

 

 

NATIONAL MENTOR HOLDINGS, INC.

 

 

 

 

 

 

 

 

 

 

By:

/s/ Edward Murphy

 

 

 

Name: Edward Murphy

 

 

Title:   President and Chief Executive Officer

 

 

 

 

 

 

 

NATIONAL MENTOR, INC.

 

 

 

 

 

 

 

 

 

 

By:

/s/ Edward Murphy

 

 

 

Name: Edward Murphy

 

 

Title:   President and Chief Executive Officer

 

 

 

 

 

 

 

NMH HOLDINGS, LLC

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name: Brian Ratzan

 

 

Title: President

 

 

 

 

 

 

 

NMH INVESTMENT, LLC

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name: Brian Ratzan

 

 

Title: President