þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware
(State or other jurisdiction of incorporation or organization) |
31-1757086
(I.R.S. Employer Identification No.) |
|
313 Congress Street, 6
th
Floor
Boston, Massachusetts 02210 (Address of principal executive offices, including zip code) |
(617) 790-4800
(Registrants telephone number, including area code) |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer þ | Smaller reporting company o | |||
(Do not check if a smaller reporting company) |
PART I
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PART II
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PART III
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PART IV
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Exhibit 10.10 | ||||||||
Exhibit 10.11 | ||||||||
Exhibit 10.12 | ||||||||
Exhibit 10.13 | ||||||||
Exhibit 10.16 | ||||||||
Exhibit 10.17 | ||||||||
Exhibit 10.19 | ||||||||
Exhibit 10.21 | ||||||||
Exhibit 21 | ||||||||
Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 32 |
2
| changes in Medicaid funding or changes in budgetary priorities by state and local governments; |
| our significant amount of debt, our ability to meet our debt service obligations and our ability to incur additional debt; |
| current credit and financial market conditions; |
| legal proceedings; |
| the size of our self-insurance accruals and changes in the insurance market that affect our ability to obtain coverage at reasonable rates; |
| our ability to control operating costs and collect accounts receivable; |
| our ability to maintain, expand and renew existing services contracts and to obtain additional contracts; |
| our ability to attract and retain experienced personnel, including members of our senior management team; |
| our ability to acquire new licenses or to maintain our status as a licensed service provider in certain jurisdictions; |
| government regulations and our ability to comply with such regulations or the interpretations thereof; |
| our ability to establish and maintain relationships with government agencies and advocacy groups; |
| increased or more effective competition; |
| changes in reimbursement rates, policies or payment practices by our payors; |
| changes in interest rates; |
| successful integration of acquired businesses; and |
| possible conflict between the interests of our majority equity holder and those of the holders of our notes. |
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
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Increasing life expectancy of the I/DD populationThe life expectancy of
individuals with I/DD increased from 59 years in the 1970s to 66 years in the 1990s and
we expect this trend to continue.
Approximately 2.8 million individuals with I/DD are cared for by a family member,
and 25% of their caregivers are age 60 or older. As the caregivers grow older and are
not able to provide continuous care, we expect the demand for I/DD services to expand.
Active Litigation and AdvocacyIndividuals with I/DD are supported by active
and well-organized advocacy groups. Using legislation prompted by the Olmstead
decision, as well as lawsuits filed on behalf of those on waiting lists for services,
policy makers, civil rights lawyers, social workers and advocacy groups are forcing
states to provide to individuals with I/DD the option to live and receive services in
home and community-based settings. In 2007, 66,000 individuals were on formal state
waiting lists to receive residential services funded through the HCBS
Waiver program,
and there are at least 20 active lawsuits advocating for community integration and the
reduction of HCBS waiting lists.
Continued Closure of State InstitutionsAlthough most of the shift from
institutions to home and community-based settings has already occurred, the closure of
additional state institutions is expected. There were approximately 36,000 individuals
in large state institutions in 2007. State governments are still actively working to
close many state institutions that remain open, with several institutions identified
for downsizing or closure in the coming years. We currently provide services to
individuals with I/DD in many of the states that are downsizing, including California,
Georgia and Illinois.
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it may limit our ability to obtain additional debt or equity financing for
working capital, capital expenditures, debt service requirements, acquisitions, and
general corporate or other purposes;
a substantial portion of our cash flows from operations will be dedicated to
the payment of principal and interest on our indebtedness and will not be available for
other purposes, including our operations, future business opportunities and capital
expenditures;
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the debt service requirements of our indebtedness could make it more difficult
for us to satisfy our financial obligations;
a portion of our variable interest rate borrowings under the senior secured
credit facilities has not been hedged, exposing us to the risk of increased interest
rates;
it may limit our ability to adjust to changing market conditions and place us
at a competitive disadvantage compared to our competitors that have less debt and a
lower degree of leverage; and
we may be vulnerable if the current downturn in general economic conditions
continues or if there is a downturn in our business, or we may be unable to carry out
activities that are important to our growth.
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incur additional debt or issue certain preferred shares;
pay dividends on or make distributions in respect of capital stock or make
other restricted payments;
make certain investments;
sell certain assets;
create liens on certain assets to secure debt;
enter into agreements that restrict dividends from subsidiaries;
consolidate, merge, sell or otherwise dispose of all or substantially all of
our assets; and
enter into certain transactions with our affiliates.
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require us to refund amounts we have previously been paid;
terminate or modify our existing contracts;
suspend or prevent us from receiving new contracts or extending existing
contracts;
impose referral holds on us;
impose fines, penalties or other sanctions on us; and
reduce the amount we are paid under our existing contracts.
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we may be unable to maintain and renew the contracts of the acquired business;
unforeseen difficulties may arise in integrating the acquired operations,
including information systems and accounting controls;
we may not achieve operating efficiencies, synergies, economies of scale and
cost reductions as expected;
the business we acquire may not continue to generate income at the same
historical levels on which we based our acquisition decision;
management may be distracted from overseeing existing operations by the need to
integrate the acquired business;
we may acquire or assume unexpected liabilities or there may be other
unanticipated costs;
we may encounter unanticipated regulatory risk;
we may experience problems entering new markets or service lines in which we
have limited or no experience;
we may fail to retain and assimilate key employees of the acquired business;
we may finance the acquisition by incurring additional debt and further
increase our leverage ratios; and
the culture of the acquired business may not match well with our culture.
the failure by our employees or Mentors to properly care for clients;
the failure to submit proper documentation to the applicable government agency,
including documentation supporting reimbursements for costs;
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the failure by our programs to abide by the applicable regulations relating to
the provision of human services; or
the failure of our facilities to comply with the applicable building, health
and safety codes and ordinances.
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the failure to maintain and renew our licenses;
the failure to maintain important relationships with officials of government
agencies; and
any negative publicity regarding our operations.
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20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
F-1
F-2
F-3
F-4
F-5
F-6
F-7
F-8
F-9
F-10
F-11
F-12
F-13
F-14
F-15
F-16
F-17
F-18
F-19
F-20
F-21
F-22
F-23
F-24
F-25
F-26
F-27
F-28
Number of Securities Remaining
Available for Future Issuance
Number of Securities to be
Weighted-Average
under Equity Compensation
Issued Upon Exercise of
Exercise Price of
Plans (excluding Securities
Outstanding Options
Outstanding Options
Reflected in Column (a))
Plan Category
(a)
(b)
(c)
Preferred Units: 8,427.66
A Units: 92,126.61
B Units: 12,201.44
C Units: 12,800.58
D Units: 23,176.43
N/A
N/A
E Units: 3,187.00
N/A
N/A
N/A
Preferred Units: 8,427.66
A Units: 92,126.61
B Units: 12,201.44
C Units: 12,800.58
D Units: 23,176.43
E Units: 3,187.00
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Dates
Title of Securities
Amount
Purchasers
Consideration
Class A Common Units
6,200.00
One director and one executive officer
$
62,000.00
Class B Common Units
4,990.33
$
249.52
Class C Common Units
5,236.60
$
157.10
Class D Common Units
5,547.68
$
55.48
Class E Common Units
3,188.00
$
159.40
Class B Common Units
1,732.50
Certain employees
$
86.63
Class C Common Units
1,818.00
$
54.54
Class D Common Units
1,926.00
$
19.26
Class A Common Units
12,500.00
One employee
$
125,000.00
Class B Common Units
5,513.56
$
275.68
Class C Common Units
5,788.72
$
173.66
Class D Common Units
6,136.19
$
61.36
(d) Maximum Number (or
(c) Total Number of
Approximate Dollar Value)
Units Purchased as
of Shares (or Units) that
(a) Class and
Part of Publicly
May Yet be Purchased
Total Number of
(b) Average Price
Announced Plans
Under the Plans or
Units Purchased
Paid per Unit
or Programs
Programs
1,443.75 B Units
$
0.05
N/A
1,515.00 C Units
$
0.03
N/A
1,605.00 D Units
$
0.01
N/A
500.00 A Units
$
10.00
N/A
2,983.75 B Units
$
0.05
N/A
3,131.00 C Units
$
0.03
N/A
3,317.00 D Units
$
0.01
N/A
3,000.00 A Units
$
10.00
N/A
4,427.50 B Units
$
0.05
N/A
4,646.00 C Units
$
0.03
N/A
4,922.00 D Units
$
0.01
N/A
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Predecessor(1)(4)
Successor(4)
Period From
Period From
October 1
June 30
Year Ended
Through
Through
Year Ended
September 30,
June 29,
September 30,
September 30,
(dollars in thousands)
2005
2006
2006
2007
2008
2009
$
674,881
$
564,840
$
203,367
$
887,668
$
941,371
$
979,397
509,550
427,530
155,633
670,983
714,980
745,576
165,331
137,310
47,734
216,685
226,391
233,821
90,665
76,230
29,031
118,264
130,941
133,585
26,880
21,405
17,274
11,621
51,481
51,244
57,770
9,136
53,261
7,790
7,082
46,940
44,206
42,466
(270
)
(198
)
(227
)
(892
)
(1,349
)
(1,146
)
(186
)
808
(60
)
(404
)
(873
)
(788
)
661
646
256
1,060
684
193
1,202
(30,636
)
(52,311
)
(13,269
)
(50,687
)
(48,947
)
(48,254
)
22,830
(43,265
)
(6,218
)
(3,983
)
(6,279
)
(6,327
)
9,734
(11,396
)
(2,346
)
(859
)
(250
)
(2,051
)
13,096
(31,869
)
(3,872
)
(3,124
)
(6,029
)
(4,276
)
902
83
208
632
(1,206
)
(1,180
)
$
13,998
$
(31,786
)
$
(3,664
)
$
(2,492
)
$
(7,235
)
$
(5,456
)
$
24,707
$
26,511
$
29,373
$
38,908
$
23,650
49,190
55,423
57,297
55,878
47,836
449,438
1,000,665
1,012,628
1,016,433
995,610
319,430
517,001
512,300
509,984
502,443
36,310
248,868
246,031
237,128
223,728
(1)
On June 29, 2006, the Company changed ownership. The previous ownership periods are deemed to
be predecessor periods pursuant to Rule 3-05 of Regulation S-X.
(2)
Working capital is calculated by subtracting current liabilities from current assets.
(3)
Long-term debt includes obligations under capital leases.
(4)
All fiscal years presented reflect the classification of REM Health as discontinued operations.
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Post Acute Specialty
For the Year Ended September 30,
Human Services
Rehabilitation Services
Corporate
Consolidated
(in thousands)
$
888,901
$
90,496
$
$
979,397
74,239
10,768
(42,541
)
42,466
8.4
%
11.9
%
4.3
%
861,431
79,940
941,371
76,669
10,526
(42,989
)
44,206
8.9
%
13.2
%
4.7
%
813,185
74,483
887,668
71,299
12,546
(36,905
)
46,940
8.8
%
16.8
%
5.3
%
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Less than
More than
(in thousands)
Total
1 year
1-3 years
3-5 years
5 years
$
508,178
$
7,415
$
6,700
$
494,063
$
140,755
34,553
49,760
27,920
28,522
1,798
118
129
141
1,410
26,049
26,049
$
676,780
68,135
56,589
522,124
29,932
(1)
Does not include interest on long-term debt or the $202.9 million of senior floating rate
toggle notes due 2014, net of discount, issued by NMH Holdings. Approximately $12.3 million of
the outstanding senior floating rate toggle notes are held by us.
(2)
Includes the fixed rent payable under the leases and does not include additional amounts,
such as taxes, that may be payable under the leases.
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September 30,
2009
September 30,
2010
(in thousands)
Swap
Swap
Interest Swap effective date
Value
Rate
Value
Rate
$
88,988
5.32
%
$
220,117
4.89
%
15,008
320,763
$
324,113
$
320,763
(1)
Interest rates do not include 2.00% spread on LIBOR loans.
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We have insufficient segregation of duties within our new billing and accounts
receivable system and insufficient controls to ensure appropriate access to our new
billing and accounts receivable system and data. This material weakness increases the
risk that erroneous or unauthorized revenue transactions could occur and the risk that
they would not be detected on a timely basis if they do occur. Management is currently
designing processes and controls to limit system access to appropriate personnel and
segregate incompatible duties.
We have insufficient controls over the accuracy and validity of the billing rates
used to calculate revenues recorded in our consolidated financial statements. We
previously addressed this material weakness within our legacy accounts receivable
system. However, our new billing and accounts receivable system is not yet able to
generate timely reports to identify changes to billing rates for periodic review.
Therefore, as of September 30, 2009, we had no control to verify that changes to
billing rates entered into the new system were valid and accurate. This control
deficiency increases the risk of errors in the invoicing and recording of billings to
payors.
During the fourth quarter, we completed implementation of our new billing and
accounts receivable system, introducing the system and related controls in multiple
locations relating to a substantial portion of our revenue. As of September 30, 2009,
these controls had not been in place for an adequate period of time for us to determine
whether they were operating effectively. Because we were unable to conduct our review
and testing of revenue controls for the revenue associated with these new locations, we
are unable to conclude that these controls are operating effectively, and there can be
no assurance that there are not additional material weaknesses relating to revenue.
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We have insufficient controls over revenue recognition and revenue reserves for
unauthorized sales. We maintain a revenue recognition policy in accordance with U.S.
generally accepted accounting principles. However, we lacked controls to ensure
definitive, consistent and documented application of the revenue recognition criteria
regarding varying local payor contract requirements, specifically with respect to payor
service authorization requirements. During the quarter ended September 30, 2009,
management undertook a process to remediate the control design by documenting,
reviewing and approving local application of revenue recognition requirements and
developing a process to assess contract terms in each state to ensure that revenue
recognition criteria are being consistently and appropriately interpreted and applied.
However, we continue to have insufficient controls to ensure that all unauthorized
sales are identified and reserved appropriately in the consolidated financial
statements. Generally, if we provide services without a current, valid authorization
from the payor agency to provide those services, revenue associated with the
unauthorized services may need to be either reserved until such authorization is
received, or ultimately written off if authorization is not granted. Management
expects our new billing and accounts receivable system, when remediated, to capture
more complete and accurate data related to authorizations, which will improve our
controls over identifying and reserving for unauthorized sales.
In order to remediate this material weakness, we conducted a physical count of a
majority of our fixed asset balances and reviewed their net book value during the
period ended September 30, 2009. We identified errors arising from unrecorded
disposals in furniture and fixtures and client home furnishings, which resulted in an
adjustment to reduce our property and equipment balance by $1.8 million as of June 30,
2009 and to incur related depreciation expense of $1.8 million during the quarter ended
June 30, 2009. We also reduced the useful lives of furniture and fixtures and client
home furnishings to better reflect their respective usage periods, depreciating the net
book value of our fixed assets over a lesser number of years. As a result of this
change we incurred additional depreciation expense of $1.6 million during the quarter
ended June 30, 2009.
We plan to conduct periodic review and counts of a sample of our fixed assets, as
determined by management, to support the existence of our fixed asset balances
reflected on our consolidated balance sheets.
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Name
Age
Position
60
Chairman and Director
62
Chief Executive Officer and Director
52
President and Chief Operating Officer
57
Executive Vice President and Chief Development Officer
55
Executive Vice President, Chief Financial Officer and Treasurer
44
Executive Vice President, Chief Administrative Officer and
Assistant Secretary
50
Senior Vice President, General Counsel and Secretary
50
Senior Vice President, Human Resources
50
Senior Vice President of Finance Operations and Assistant Treasurer
47
Senior Vice President and Cambridge Operating Group President
61
Senior Vice President and Redwood Operating Group President
55
Director
57
Director
55
Director
55
Director
45
Director
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attract and retain top executive talent;
achieve accountability for performance by linking annual cash and long-term
equity incentive awards to achievement of measurable performance objectives; and
align executives incentives with equity value creation.
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base salary;
annual cash bonus incentives;
long-term incentive compensation in the form of equity-based units;
deferred compensation;
severance and change-in-control benefits; and
other benefits.
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Targeted
Actual
Organic
Organic
Targeted
Actual
Was each
Targeted
Actual
Adjusted
Adjusted
Adjusted
Adjusted
of the
Adjusted
Adjusted
EBITDA
EBITDA
Net Debt
Net Debt
financial
EBITDA
EBITDA
Growth
Growth
(Maximum)
(Maximum)
targets
Vesting
(in millions)
(in millions)
Rate
Rate
(in millions)
(in millions)
met?
result
$
92.2
$
106.1
3.0
%
8.9
%
$
495.9
$
491.8
Yes
1/3 C units
105.0
106.1
5.0
8.9
515.2
491.8
Yes
1/3 D units
98.4
108.8
3.0
3.4
488.7
474.9
Yes
1/3 C units
110.9
108.8
5.0
3.4
490.0
474.9
No
106.4
111.8
N/A
0.0
483.7
455.6
Yes
1/3 C units
114.4
111.8
5.0
0.0
482.0
455.6
No
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B units
B units
C and D units
C and D units
All units
Termination without
cause, or
resignation for
good reason
Resignation without
good reason
Termination without
cause, or
resignation for
good reason
Resignation without
good reason
Termination for
cause
Cost
Cost
Fair market value
Cost
Cost
Portion at fair
market value
increases ratably
each month, from
20.00% to 59.10%
Cost
Fair market value
Cost
Cost
Portion at fair
market value
increases ratably
each month, from
60.80% to 99.90%
Portion at fair
market value
increases ratably
each month, from
40.00% to 99.94%
Fair market value
Fair market value
Cost
Fair market value
Fair market value
Fair market value
Fair market value
Cost
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Non-Equity
Nonqualified
Incentive
Deferred
Equity
Plan
Compensation
All Other
Name and Principal
Fiscal
Salary
Awards
Compensation
Earnings
Compensation
Total
Position
Year
($)(b)
($)(c)
($)(d)
($)(e)
($)(f)
($)
2009
350,000
70,329
213,755
1,511
19,523
654,758
2008
350,000
123,624
205,719
466
53,615
733,424
2007
350,000
60,918
155,275
1,865
53,459
621,517
2009
275,000
65,810
83,975
784
14,376
439,944
2008
275,000
111,602
84,352
323
36,610
507,887
2007
239,039
57,742
122,002
32,948
29,754
481,485
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Non-Equity
Nonqualified
Incentive
Deferred
Equity
Plan
Compensation
All Other
Name and Principal
Fiscal
Salary
Awards
Compensation
Earnings
Compensation
Total
Position
Year
($)(b)
($)(c)
($)(d)
($)(e)
($)(f)
($)
2009
275,000
62,587
83,9758
2,248
14,496
438,306
2008
275,000
108,404
84,352
400
37,150
505,306
2007
275,000
56,566
122,002
6,967
37,060
497,595
2009
275,000
66,286
83,975
788
13,956
440,005
2008
275,000
111,413
84,352
325
36,610
507,700
2007
242,308
54,566
130,244
8,026
30,037
465,181
2009
275,000
65,220
83,975
774
13,130
438,099
and
Chief Administrative Officer
(a)
Effective December 4, 2009, Mr. Murphys title is Chief Executive Officer, and Mr. Nardella
is President and Chief Operating Officer.
(b)
Includes individuals pre-tax contributions to health plans and contributions to retirement
plans.
(c)
Figures represent compensation expense of equity awards under the NMH Investment, LLC Amended
and Restated 2006 Unit Plan as reflected in the Companys financial statements, except that no
estimate of forfeitures is made for the individuals listed in this table. Please refer to
Note 19 in the Notes to Consolidated Financial Statements for the relevant assumptions used to
determine the compensation expense of our equity awards.
(d)
Represents cash bonuses under our annual incentive compensation plan.
(e)
Represents earnings in excess of the applicable federal long-term rate under the Executive
Deferred Compensation Plan and the Executive Deferral Plan.
(f)
All other compensation represents Company contributions credited to the Executive Deferred
Compensation Plan and the Company match on executive contributions to the 401(k) plan and
Executive Deferral Plan, which has been estimated for fiscal 2009 in advance of the actual
determination. The fiscal 2008 and 2007 amounts in this column were estimated at the time and
have not been restated, as any differences were immaterial. Also included are Company paid
parking, tax gross-ups for Company paid parking, and imputed income on group term life
insurance premiums. For fiscal 2009, the components of All Other Compensation were as follows:
Company
Contributions
match on
to Executive
contributions
Deferred
to 401(k) and
Group
Compensation
Executive
Company
term life
Plan
Deferral Plan
paid parking
Gross-ups
insurance
11,375
3,675
1,470
683
2,376
7,563
3,675
1,470
683
1,040
7,563
3,675
1,470
683
1,161
7,563
3,675
1,470
683
621
7,563
3,675
876
407
665
Table of Contents
Name
Threshold (a)($)
Target (a)($)
Maximum (a)($)
175,000
350,000
525,000
68,750
137,500
206,250
68,750
137,500
206,250
68,750
137,500
206,250
68,750
137,500
206,250
(a)
Amounts represent potential payouts relating to fiscal 2009 under the Executive Leadership
Incentive Plan, based on base salary as in effect at September 30, 2009. For a description of
the plan, see Compensation Discussion and Analysis Annual Incentive Compensation.
Equity Incentive Plan Awards
Payout Value
Number and Class
Payout Value
Number and Class
of Unearned
of Earned Units
of Earned Units
of Unearned Units
Units Not
Name
Not Vested (#)
Not Vested ($)(e)
Not Vested (#)(f)
Vested ($)(e)
664.13 Class B Units
(a)
33.21
696.90 Class C Units
(a)
20.91
8,698.65 Class D Units
(a)
86.99
17,397.31 Class D Units
(a)
173.97
6,737.50 Class B Units
(b)
336.88
7,070.00 Class C Units
(b)
212.10
2,496.67 Class D Units
(b)
24.97
4,993.33 Class D Units
(b)
49.93
664.13 Class B Units
(a)
33.21
696.90 Class C Units
(a)
20.91
7,241.32 Class D Units
(a)
72.41
14,482.63 Class D Units
(a)
144.83
481.25 Class B Units
(c)
24.06
505.00 Class C Units
(c)
15.15
178.33 Class D Units
(c)
1.78
356.67 Class D Units
(c)
3.57
6,256.25 Class B Units
(b)
312.81
6,565.00 Class C Units
(b)
196.95
2,318.33 Class D Units
(b)
23.18
4,636.67 Class D Units
(b)
46.37
664.13 Class B Units
(a)
33.21
696.90 Class C Units
(a)
20.91
7,241.32 Class D Units
(a)
72.41
14,482.63 Class D Units
(a)
144.83
6,256.25 Class B Units
(b)
312.81
6,565.00 Class C Units
(b)
196.95
2,318.33 Class D Units
(b)
23.18
4,636.67 Class D Units
(b)
46.37
Table of Contents
Equity Incentive Plan Awards
Payout Value
Number and Class
Payout Value
Number and Class
of Unearned
of Earned Units
of Earned Units
of Unearned Units
Units Not
Name
Not Vested(#)
Not Vested($)(e)
Not Vested(#)(f)
Vested($)(e)
664.13 Class B Units
(a)
33.21
696.90 Class C Units
(a)
20.91
7,241.32 Class D Units
(a)
72.41
14,482.63 Class D Units
(a)
144.83
962.50 Class B Units
(c)
48.13
1,010.00 Class C Units
(c)
30.30
356.67 Class D Units
(c)
3.57
713.33 Class D Units
(c)
7.13
5,775.00 Class B Units
(b)
288.75
6,060.00 Class C Units
(b)
181.80
2,140.00 Class D Units
(b)
21.40
4,280.00 Class D Units
(b)
42.80
664.13 Class B Units
(a)
33.21
696.90 Class C Units
(a)
20.91
4,618.11 Class D Units
(a)
46.18
9,236.22 Class D Units
(a)
92.36
5,775.00 Class B Units
(b)
288.75
6,060.00 Class C Units
(b)
181.80
2,140.00 Class D Units
(b)
21.40
4,280.00 Class D Units
(b)
42.80
481.25 Class B Units
(d)
24.06
505.00 Class C Units
(d)
15.15
2,801.54 Class D Units
(d)
28.02
5,603.08 Class D Units
(d)
56.03
(a)
Granted on August 22, 2008 in connection with compensatory grants under the NMH Investment,
LLC 2006 Unit Plan, as amended. The vesting measurement date, as set forth in the relevant
subscription agreement, for these units is June 29, 2006. Assuming continued employment of the
employee with the Company, 40 percent vest at the end of 37 months from the measurement date,
and the remaining 60 percent vest monthly through the end of 61 months from the measurement
date. The C and D Units vested three years after the measurement date, on June 29, 2009.
Vesting is explained in more detail above, under Compensation Discussion and
AnalysisEquity-Based Compensation.
(b)
Granted on January 12, 2007 in connection with the initial compensatory grants under the NMH
Investment, LLC 2006 Unit Plan. The vesting measurement date, as set forth in the relevant
subscription agreement, for these units is June 29, 2006. The B Units vest over 61 months and
the C and D Units vested after three years, on June 29, 2009, as explained in more detail
above, under Compensation Discussion and AnalysisEquity-Based Compensation.
(c)
Granted on August 14, 2007 in recognition of the named executive officers promotion. The
vesting measurement date, as set forth in the relevant subscription agreement, for these units
is May 22, 2007, the date of the promotions. The B Units vest over 61 months and the C and D
Units vest after three years, as explained in more detail above, under Compensation
Discussion and AnalysisEquity-Based Compensation.
(d)
Granted on September 24, 2008 in recognition of the named executive officers promotion. The
vesting measurement date, as set forth in the relevant subscription agreement, for these units
is August 1, 2008, the date of the promotion. The B Units vest over 61 months and the C and D
Units vest after three years, as explained in more detail above, under Compensation
Discussion and AnalysisEquity-Based Compensation.
(e)
Payout value represents fair market value determined as of fiscal year-end, which is $0.05
per B unit, $0.03 per C unit and $0.01 per D unit. For purposes of calculating fair market
value, we assumed hypothetical transaction costs in a change in control of the Company. In
the event of a change in control, the unearned C and D units could increase in value if
certain investment return conditions are achieved that relate to Vestar receiving a specified
multiple of its investment.
Table of Contents
Number of B
Value of B
Number of C
Value of C
Number of D
Value of D
Total
Units
Units
Units
Units
Units
Units
Value
Acquired on
Realized on
Acquired on
Realized on
Acquired on
Realized on
Realized on
Name
Vesting (#)(b)
Vesting ($)(a)
Vesting (#)(b)
Vesting ($)(a)
Vesting (#)(b)
Vesting ($)(a)
Vesting ($)(a)
3,666.77
183.34
7,766.90
233.01
33,585.96
335.86
752.21
3,428.36
171.42
7,261.90
217.86
28,678.95
286.79
676.07
3,428.36
171.42
7,261.90
217.86
28,678.95
286.79
676.07
3,189.95
159.50
6,756.90
202.71
28,143.95
281.44
643.65
3,189.95
159.50
6,756.90
202.71
20,274.33
202.74
564.95
(a)
The value realized on vesting represents fair market value determined as of fiscal year end.
The named executive officers have not received any payments of the amounts shown in the
columns representing value realized on vesting, and the named executive officers are not
permitted to transfer the units for value. Payment of the amounts realized on vesting is
deferred until such time as NMH Investment repurchases the units following termination of a
named executive officers employment, or upon a sale of the Company or other liquidity event.
The amounts realized on vesting, if any, are subject to forfeiture in the event a named
executive officer is terminated for cause, at which time NMH Investment may repurchase the
units at the lesser of fair market value and cost.
(b)
In the event of a change in control, the unvested B units automatically vest, and the
unearned C and D units could increase in value if certain investment return conditions are
achieved that relate to Vestar receiving a specified multiple of its investment
Executive
Company
Aggregate
Aggregate
Contributions
Contributions
Earnings
Aggregate
Balance at
in Last
in Last
in Last
Withdrawals/
Last Fiscal
Fiscal Year
Fiscal Year
Fiscal Year
Distributions
Year End
Name
($)(a)(b)
($)(b)(c)
($)(b)(d)
($)(e)
($)(f)
10,500
13,070
9,506
5,689
228,162
17,968
9,258
14,398
512,132
35,933
9,258
13,648
248,655
20,625
9,258
9,683
3,844
246,188
4,200
9,258
5,346
4,556
190,831
(a)
Represents amounts contributed to the Executive Deferral Plan during fiscal 2009. The
Executive Deferral Plan is available to highly compensated employees to supplement the 401(k)
plan. For details about the plan, see Compensation Discussion and Analysis Deferred
Compensation, above.
(b)
All of the amounts reported under Executive Contributions in Last Fiscal Year and Company
Contributions in Last Fiscal Year are reported as compensation for fiscal 2009 in the Summary
Compensation Table. Under Aggregate Earnings in Last Fiscal Year, the following amounts are
reported as compensation in the Summary Compensation Table that were in excess of the
applicable federal long-term rate are as follows:
$
1,151
784
2,248
788
774
Table of Contents
(c)
Represents Company match (up to 1.5% of base salary) on executive contributions to the
Executive Deferral Plan, plus Company contributions to the Executive Deferred Compensation
Plan. The Executive Deferred Compensation Plan is an unfunded, nonqualified deferred
compensation arrangement to provide deferred compensation to senior management. For details
about both these plans, see Deferred Compensation above.
(d)
Represents the 6% return credited to the participants account in the Executive Deferred
Compensation Plan for balances in fiscal 2009, plus the executives respective returns for
amounts invested in the Executive Deferral Plan.
(e)
Represents amounts withdrawn from the Executive Deferral Plan and deposited into the
executives respective 401(k) account in accordance with IRS rules.
(f)
Represents aggregate balances in Executive Deferral Plan and Executive Deferred Compensation
Plan for each executive as of fiscal year-end. Of the amounts in this column, the following
amounts have been reported as compensation in the Summary Compensation Table for fiscal 2009,
fiscal 2008 and fiscal 2007.
Fiscal
Fiscal
Fiscal
2009
2008
2007
$
14,994
$
48,931
$
48,856
11,181
33,681
26,866
11,181
33,681
33,606
11,181
33,681
27,154
11,181
N/A
N/A
Table of Contents
Repurchase of
Value of
Restricted B,
Continued
Salary
Bonus
C and D Units
Benefits
Total
Name
($)(a)
($)(b)
($)(c)
($)(d)
($)
700,000
700,000
939
34,776
1,435,715
275,000
84,352
895
20,332
380,579
275,000
84,352
851
3,232
363,435
275,000
84,352
895
26,128
386,375
275,000
84,352
851
21,158
381,361
(a)
Under Mr. Murphys employment agreement, salary continues for two years. For each of the
other named executive officers, salary continues for one year. These amounts would be payable
over time in accordance with the Companys regular payroll practices.
(b)
Mr. Murphy would receive an amount equal to his target annual bonus of 100 percent of base
salary under the incentive compensation plan for two years after termination. Each of the
other named executive officers would receive an amount equal to the actual annual bonus for
the prior fiscal year. These amounts would be payable over time in accordance with the
Companys regular payroll practices.
(c)
Represents the amount the executive officer would receive for the B, C and D units, including
the original purchase price. The units may be called upon the executive officers termination.
Assuming a termination without cause on September 30, 2009, the named executive officers would
receive fair market value and cost, respectively, for the following numbers of B units:
Number of
Number of
B units
B units
purchased at
purchased at
fair market value
cost
4,877.67
2,523.96
4,787.68
2,613.95
4,560.53
2,359.85
4,697.69
2,703.94
4,347.82
2,572.56
All of the C and D units would be purchased at fair market value. For purposes of
calculating fair market value, we assumed hypothetical transaction costs assuming a change
in control of the Company. The purchase price may be paid in the form of a promissory note
at the discretion of NMH Investment.
(d)
Mr. Murphy would continue to participate in health and welfare benefit plans at the Companys
expense for two years. All other named executive officers would participate in the health and
welfare benefit plans for one year. Amounts are estimated based on the respective named
executive officers current benefit elections.
Table of Contents
Name
B Units ($)
C Units ($)
D Units ($)
Total ($)
370.08
233.01
335.86
938.95
370.08
233.01
292.14
895.23
346.02
217.86
286.79
850.67
370.08
233.01
292.14
895.23
346.02
217.86
286.79
850.67
(a)
Mr. Torres is paid a salary of $100,000 per year in accordance with his amended and restated
employment agreement.
(b)
Represents earnings in excess of the applicable federal long-term rate. Mr. Torres continues
to accrue interest on amounts credited to him in the Executive Deferred Compensation Plan
during his service as the Companys President and Chief Executive Officer.
(c)
Represents imputed income on group term life insurance.
(d)
Ms. Lenehan received a fee of $5,000 for each meeting of the Board of Directors that she
attended in person and a fee of $1,000 for each meeting that she attended by phone and each
committee meeting that she attended.
(e)
Ms. Lenehan purchased 3,188.00 E Units for $159.40 on January 8, 2009. Please refer to Note
19 in the Notes to Consolidated Financial Statements for the relevant assumptions used to
determine the compensation expense of our equity awards.
Table of Contents
Number of
Percent of
Name and address of Beneficial Owner
Class A Units(1)(2)
Class A Units
6,918,627
92.5
%
25,000
*
130,000
1.7
%
40,169
*
41,750
*
30,000
*
40,000
*
2,750
*
421,837
5.6
%
*
Less than 1.0%.
(1)
In addition, certain members of management own non-voting Preferred Units, Class B Units,
Class C Units and Class D Units and Ms. Lenehan owns non-voting Preferred Units and Class E
Units, which are not reflected in the table above. See Certain Relationships and Related
Party TransactionsManagement Unit Subscription Agreements and Director Unit Subscription
Agreement for additional information.
(2)
The Preferred Units and 30% of Class A Units held by the management investors were vested
with respect to appreciation immediately upon issuance, assuming continued employment with the
Company, and the remaining 70% of Class A Units vest over time. See Certain Relationships and
Related Party TransactionsManagement Unit Subscription Agreements for additional
information.
(3)
In addition, Vestar Capital Partners V, L.P. (the Fund) owns 1,728,137 Preferred Units,
representing approximately 96.8% of the Preferred Units, of NMH Investment. Vestar Associates
V, L.P. is the general partner of the Fund, having voting and investment power over membership
interests held or controlled by the Fund. Vestar
Managers V, Ltd. (VMV) is the general partner of Vestar Associates V, L.P. Each of Vestar
Associates V, L.P. and VMV disclaims beneficial ownership of any membership interests in NMH
Investment beneficially owned by the Fund. The address of Vestar Capital Partners V, L.P. is
245 Park Avenue, 41st Floor, New York, NY 10167.
(4)
Mr. OConnell is the Chief Executive Officer of Vestar and Messrs. Elrod and Mundt are
Managing Directors of Vestar. Each of Messrs. OConnell, Elrod and Mundt disclaims beneficial
ownership of any membership interests in NMH Investment beneficially owned by the Fund, except
to the extent of his indirect pecuniary interest therein.
Table of Contents
Table of Contents
(a)
up to six designees of Vestar, initially not more than three of whom shall be
employees of Vestar; and
(b)
the Companys chief executive officer.
Table of Contents
Table of Contents
2009
2008
(in thousands)
$
1,047
$
979
213
124
231
219
$
1,491
$
1,322
(1)
Audit fees primarily include professional services rendered for the audits of our
consolidated financial statements and for our quarterly reviews, as well as, services related
to other statutory and regulatory filings.
(2)
Audit related fees primarily include due diligence services and services related to financial
reporting that are not required by regulation.
(3)
Tax fees primarily include professional services rendered for tax services during the fiscal
year indicated.
Table of Contents
(a)(1)
Financial Statements
Consolidated Balance Sheets as of September 30, 2009 and 2008;
Consolidated Statements of Operations for the years ended September 30, 2009,
2008 and 2007;
Consolidated Statements of Shareholders Equity
for the years ended September 30, 2009, 2008 and 2007; and
Consolidated Statements of Cash Flows for the years ended September 30, 2009,
2008 and 2007.
(2)
Financial Statement Schedules:
Financial statement schedules have been omitted because they
are not applicable or not required, or because the required information is provided in our
consolidated financial statements or notes thereto.
(3)
Exhibits
: The Exhibit Index is incorporated by reference herein.
Table of Contents
NATIONAL MENTOR HOLDINGS, INC.
By:
/s/ Edward M. Murphy
Edward M. Murphy
Its: Chief Executive Officer
Signature
Title
Chief Executive Officer (principal executive officer) and Director
President and Chief Operating Officer (principal executive officer)
Executive Vice President, Chief Financial Officer and Treasurer
(principal financial officer and principal accounting officer)
Chairman and Director
Director
Director
Director
Director
Table of Contents
Exhibit No.
Description
2.1
Incorporated by reference to Exhibit 2.1 of
National Mentor Holdings, Inc. Form S-4
Registration Statement (Registration No.
333-138362) filed on November 1, 2006 (the S-4)
3.1
Incorporated by reference to Exhibit 3.1 of
National Mentor Holdings, Inc. Form 10-Q for the
quarterly period ended March 31, 2007 (the March
2007
10-Q)
3.2
Incorporated by reference to Exhibit 3.2 of the
March 2007 10-Q
4.1
Incorporated by reference to Exhibit 4.1 of the S-4
4.2
Incorporated by reference to Exhibit 4.2 to
National Mentor Holdings, Inc. Amendment No. 1 to
Form S-4 Registration Statement (Registration No.
333-138362) filed on January 12, 2007 (the
S-4/A)
4.3
Incorporated by reference to Exhibit 4.1 to
National Mentor Holdings, Inc. Form 10-Q for the
quarterly period ended June 30, 2008 (the June
2008 10-Q)
4.4
Incorporated by reference to Exhibit 4.1 to
National Mentor Holdings, Inc. Form 10-K for the
fiscal year ended September 30, 2008 (the 2008
10-K)
4.5
Incorporated by reference to Exhibit 4.1 to
National Mentor Holdings, Inc. Form 10-Q for the
quarterly period ended June 30, 2009 (the June
2009 10-Q)
4.6
Incorporated by reference to Exhibit 4.2 to the
June 2009 10-Q
4.7
Incorporated by reference to Exhibit 4.3 to the
June 2009 10-Q
4.8
Incorporated by reference to Exhibit 4.4 to the
June 2009 10-Q
4.9
Incorporated by reference to Exhibit 4.5 to the
June 2009 10-Q
4.10
Incorporated by reference to Exhibit 4.6 to the
June 2009 10-Q
4.11
Incorporated by reference to Exhibit 4.1 of the S-4
Table of Contents
Exhibit No.
Description
10.1.1
Incorporated by reference to Exhibit 10.1 of the
S-4
10.1.2
Incorporated by reference to Exhibit 10.1.2 of the
March 2007 10-Q
10.2
Incorporated by reference to Exhibit 10.2 of the
S-4
10.3
Incorporated by reference to Exhibit 10.3 of the
S-4
10.4
*
Incorporated by reference to Exhibit 10.3 of the
National Mentor Holdings, Inc. Form 10-Q for the
quarterly period ended December 31, 2008 (the
December 2008 10-Q)
10.5
*
Incorporated by reference to Exhibit 10.5 of the
S-4
10.6
*
Incorporated by reference to Exhibit 10.2 to
December 2008 Form 10-Q
10.7
*
Incorporated by reference to Exhibit 10.1 of the
December 2008 10-Q
10.8
Incorporated by reference to Exhibit 10.11 of the
S-4
10.9
*
Filed herewith
10.10
*
Filed herewith
10.11
*
Filed herewith
10.12
*
Filed herewith
10.13
*
Filed herewith
Table of Contents
Exhibit No.
Description
10.14
*
Incorporated by reference to Exhibit 10.14 of the
S-4
10.15
*
Incorporated by reference to Exhibit 10.1 of
National Mentor Holdings, Inc. Form 10-Q for the
quarterly period ended December 31, 2007
10.16
*
Filed herewith
10.17
*
Filed herewith
10.18
*
Incorporated by reference to Exhibit 10.15 of the
S-4/A
10.19
*
Filed herewith
10.20
*
Incorporated by reference to Exhibit 10.13 of the
2008 10-K
10.21
*
Filed herewith
10.22
*
Incorporated by reference to Exhibit 10.17 of the
S-4/A
10.23
*
Incorporated by reference to Exhibit 10.1 of the
June 2008 Form 10-Q
10.24
*
Incorporated by reference to Exhibit 10.1 of
National Mentor Holdings, Inc. Form 8-K filed on
December 10, 2008
21
Filed herewith
31.1
Filed herewith
31.2
Filed herewith
32
Filed herewith
*
Management contract or compensatory plan or arrangement.
Table of Contents
F-2
F-3
F-4
F-5
F-6
F-7
Table of Contents
December 22, 2009
Table of Contents
September 30,
2009
2008
$
23,650
$
38,908
5,192
5,773
118,969
113,933
13,897
10,355
16,868
23,268
178,576
192,237
145,876
144,233
440,202
462,987
206,699
199,392
16,047
17,584
8,210
$
995,610
$
1,016,433
$
19,819
$
20,840
58,388
59,146
45,000
52,437
118
201
7,415
3,735
130,740
136,359
13,462
10,859
125,237
122,103
1,680
1,806
500,763
508,178
250,038
256,648
(7,115
)
(5,781
)
(19,195
)
(13,739
)
223,728
237,128
$
995,610
$
1,016,433
Table of Contents
Year Ended September 30,
2009
2008
2007
$
979,397
$
941,371
$
887,668
745,576
714,980
670,983
233,821
226,391
216,685
133,585
130,941
118,264
57,770
51,244
51,481
191,355
182,185
169,745
42,466
44,206
46,940
(1,146
)
(1,349
)
(892
)
(788
)
(873
)
(404
)
193
684
1,060
1,202
(48,254
)
(48,947
)
(50,687
)
(6,327
)
(6,279
)
(3,983
)
(2,051
)
(250
)
(859
)
(4,276
)
(6,029
)
(3,124
)
(1,180
)
(1,206
)
632
$
(5,456
)
$
(7,235
)
$
(2,492
)
Table of Contents
Common Stock
Additional Paid-in
Accumulated Other
Accumulated
Total Shareholders
Shares
Amount
Capital
Comprehensive Loss
Deficit
Equity
Comprehensive Loss
100
$
$
253,627
$
(1,095
)
$
(3,664
)
$
248,868
142
142
849
849
(1,336
)
(1,336
)
(1,336
)
(2,492
)
(2,492
)
(2,492
)
$
(3,829
)
100
254,618
(2,431
)
(6,156
)
246,031
2,215
2,215
3
3
(188
)
(188
)
(348
)
(348
)
(3,350
)
(3,350
)
(3,350
)
(7,235
)
(7,235
)
(7,235
)
$
(10,585
)
100
256,648
(5,781
)
(13,739
)
237,128
(1,334
)
(1,334
)
(1,334
)
1,306
1,306
452
452
(8,368
)
(8,368
)
(5,456
)
(5,456
)
(5,456
)
$
(6,790
)
100
$
$
250,038
$
(7,115
)
$
(19,195
)
$
223,728
Table of Contents
Year Ended September 30,
2009
2008
2007
$
(5,456
)
$
(7,235
)
$
(2,492
)
11,712
9,526
8,435
24,233
19,311
18,524
33,667
32,315
33,348
3,266
3,388
3,185
(601
)
1,306
2,215
849
381
(52
)
905
874
859
2,671
2,119
(603
)
(14,318
)
(6,406
)
(20,916
)
5,724
(5,508
)
5,512
(1,257
)
(1,934
)
1,296
(2,040
)
3,661
5,151
(4,196
)
5,549
2,571
415
(4,673
)
(6,171
)
542
(1,462
)
(1,807
)
2,603
1,905
4,410
58,954
53,593
52,754
(33,638
)
(14,895
)
(25,074
)
(27,398
)
(26,105
)
(19,662
)
(6,555
)
121
148
4,055
340
1,105
1,488
1,520
(62,310
)
(39,024
)
(43,216
)
(3,736
)
(3,957
)
(4,498
)
(208
)
(273
)
(432
)
(8,368
)
(188
)
452
3
142
(42
)
(619
)
(1,888
)
(11,902
)
(5,034
)
(6,676
)
(15,258
)
9,535
2,862
38,908
29,373
26,511
$
23,650
$
38,908
$
29,373
$
44,386
$
45,073
$
47,716
$
832
$
153
$
(7,431
)
$
$
1,805
$
54
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Year Ended September 30,
(in thousands)
2009
2008
2007
$
(5,456
)
$
(7,235
)
$
(2,492
)
(2,733
)
(5,623
)
(2,244
)
494
905
2,273
907
$
(6,790
)
$
(10,585
)
$
(3,829
)
Table of Contents
(in thousands)
IFCS
Lakeview
$
2,513
$
515
168
65
810
237
8,187
7,543
942
2,215
(1,140
)
(438
)
$
11,480
$
10,137
Table of Contents
(in thousands)
$
940
21
62
6,902
1,963
(635
)
$
9,253
Years Ended September 30,
2009
2008
$
1,014,075
$
986,825
(2,316
)
(2,680
)
(2,586
)
(6,012
)
Table of Contents
Year Ended
September 30,
(in thousands)
2009
$
15,833
$
(905
)
Post Acute
Specialty
Human
Rehabilitation
(in thousands)
Services
Services
Corporate
Total
$
162,443
$
25,812
$
$
188,255
1,696
1,696
(592
)
(592
)
(1,772
)
11,805
10,033
161,775
37,617
199,392
1,295
2,251
3,546
(1,251
)
(1,251
)
4,454
558
5,012
$
166,273
$
40,426
$
206,699
Table of Contents
Weighted
Gross
(in thousands)
Average
Carrying
Accumulated
Intangible
Description
Remaining Life
Value
Amortization
Assets, Net
13 years
$
439,793
$
86,067
$
353,726
3 years
618
227
391
6 years
12,886
4,611
8,275
7 years
3,637
1,058
2,579
Indefinite life
47,700
47,700
7 years
38,994
12,324
26,670
7 years
904
43
861
$
544,532
$
104,330
$
440,202
Weighted
Gross
(in thousands)
Average
Carrying
Accumulated
Intangible
Description
Remaining Life
Value
Amortization
Assets, Net
14 years
$
431,989
$
59,108
$
372,881
3 years
336
150
186
7 years
12,887
3,168
9,719
8 years
3,351
726
2,625
Indefinite life
47,700
47,700
8 years
38,471
8,595
29,876
$
534,734
$
71,747
$
462,987
(in thousands)
Year ending September 30,
$
33,843
33,823
33,497
33,412
32,721
225,206
$
392,502
Table of Contents
(in thousands)
2009
2008
$
112,871
$
107,133
28,364
25,803
9,195
14,521
18,930
19,069
11,665
8,405
5,597
6,507
22
987
186,644
182,425
(40,768
)
(38,192
)
$
145,876
$
144,233
(in thousands)
2009
2008
$
7,839
$
11,320
9,029
11,948
$
16,868
$
23,268
(in thousands)
2009
2008
$
$
12,000
12,438
9,705
6,563
5,693
6,522
4,716
19,477
20,323
$
45,000
$
52,437
(1)
The earnout payment in fiscal 2008 related to the Companys CareMeridan acquisition. This
amount was calculated in accordance with the related Asset Purchase Agreement and the earnout
was paid in the first quarter of fiscal 2009.
Table of Contents
September 30,
September 30,
(in thousands)
2009
2008
$
88,988
$
137,844
220,117
183,930
15,008
5,689
180,000
180,000
4,065
4,450
508,178
511,913
7,415
3,735
$
500,763
$
508,178
Table of Contents
September 30,
2009
September 30,
2010
(in thousands)
Swap
Swap
Interest Swap effective date
Value
Rate
Value
Rate
$
88,988
5.32
%
$
220,117
4.89
%
15,008
320,763
$
324,113
$
320,763
(1)
Interest rates do not include 2.00% spread on LIBOR loans.
(in thousands)
$
7,415
3,350
3,350
314,063
180,000
$
508,178
Table of Contents
Table of Contents
Table of Contents
Unadjusted quoted market prices in active markets for identical assets or liabilities.
Unadjusted quoted prices in active markets for similar assets or liabilities,
unadjusted quoted prices for identical or similar assets or liabilities in markets
that are not active, or inputs other than quoted prices that are observable for the
asset or liability.
Unobservable inputs for the asset or liability. These values are generally
determined using pricing models which utilize management estimates of market
participant assumptions.
Table of Contents
Unadjusted Quoted
Significant Other
Significant
Market Prices
Observable Inputs
Unobservable Inputs
(in thousands):
Total
(Level 1)
(Level 2)
(Level 3)
$
23,650
$
23,650
$
$
$
(12,439
)
$
$
(12,439
)
$
$
8,210
$
$
8,210
$
(in thousands)
$
34,553
27,926
21,834
15,597
12,323
28,522
$
140,755
Table of Contents
(in thousands)
$
118
68
61
67
74
1,410
$
1,798
Table of Contents
Year Ended September 30,
(in thousands)
2009
2008
2007
$
1,591
$
754
$
1,632
1,261
1,397
1,699
2,852
2,151
3,331
(4,903
)
(2,401
)
(4,190
)
$
(2,051
)
$
(250
)
$
(859
)
September 30,
(in thousands)
2009
2008
$
711
$
1,119
4,830
3,924
7,833
6,106
5,314
5,592
2,228
1,816
96
463
2,387
1,695
23,303
20,811
(5,160
)
(5,192
)
18,143
15,619
(14,559
)
(13,331
)
(111,231
)
(110,567
)
(3,693
)
(3,469
)
$
(111,340
)
$
(111,748
)
Table of Contents
Year Ended September 30,
(in thousands)
2009
2008
2007
35.0
%
35.0
%
35.0
%
(5.0
)
(7.2
)
(7.6
)
(15.0
)
(13.1
)
(7.4
)
(1.1
)
(6.1
)
1.6
22.1
2.1
(2.8
)
(4.6
)
(2.6
)
(0.8
)
(2.1
)
2.6
32.4
%
4.0
%
21.6
%
(in thousands)
$
5,364
(400
)
$
4,964
Table of Contents
Post Acute
Specialty
Human
Rehabilitation
For the Year Ended September 30,
Services
Services
Corporate
Consolidated
(in thousands)
$
888,901
$
90,496
$
$
979,397
74,239
10,768
(42,541
)
42,466
831,723
104,745
59,142
995,610
46,824
6,645
4,301
57,770
12,819
8,652
5,927
27,398
$
861,431
$
79,940
$
$
941,371
76,669
10,526
(42,989
)
44,206
849,725
88,533
78,175
1,016,433
42,818
5,870
2,556
51,244
17,409
3,965
4,731
26,105
$
813,185
$
74,483
$
$
887,668
71,299
12,546
(36,905
)
46,940
44,260
5,601
1,620
51,481
14,439
1,702
3,521
19,662
Table of Contents
Weighted Average
Units
Grant-Date
(in thousands)
Outstanding
Fair Value
$
566,195
7.75
(1,521
)
7.73
564,674
7.75
223,404
4.14
(30,107
)
8.29
757,971
6.94
41,878
4.11
(51,219
)
7.45
(570,516
)
6.76
178,114
$
6.70
Balance at
Balance at
Beginning
End
(in thousands)
of Period
Provision
Write-Offs
of Period
$
5,057
$
11,712
$
(10,873
)
$
5,896
5,091
9,526
(9,560
)
5,057
1,208
8,435
(4,552
)
5,091
Table of Contents
For the quarters ended
December 31,
March 31,
June 30,
September 30,
December 31,
March 31,
June 30,
September 30,
2007
2008
2008
2008
2008
2009
2009
2009
(in thousands)
$
232,105
$
234,953
$
237,287
$
237,026
$
241,233
$
240,737
$
247,133
$
250,294
55,668
57,236
58,029
55,458
58,144
56,351
62,075
57,251
(435
)
(1,307
)
(1,191
)
(3,096
)
(2,383
)
(1,256
)
1,050
(1,687
)
116
(32
)
(803
)
(487
)
42
74
(1,540
)
244
$
(319
)
$
(1,339
)
$
(1,994
)
$
(3,583
)
$
(2,341
)
$
(1,182
)
$
(490
)
$
(1,443
)
ARTICLE I Introduction
|
1 | |||
|
||||
1.1
Name
|
1 | |||
1.2
Purpose
|
1 | |||
|
||||
ARTICLE II Plan Participation
|
2 | |||
|
||||
ARTICLE III Contributions
|
2 | |||
|
||||
3.1
Contributions
|
2 | |||
3.2
Account
|
2 | |||
|
||||
ARTICLE IV Earnings on Account Balances
|
2 | |||
|
||||
4.1
Investments
|
2 | |||
4.2
Actual Investment Not Required
|
2 | |||
4.3
Crediting of Contributions
|
3 | |||
|
||||
ARTICLE V Distribution of Account Balances
|
3 | |||
|
||||
5.1
Vesting
|
3 | |||
5.2
Timing Distribution
|
3 | |||
5.3
Form of Distribution of Account Balances
|
3 | |||
5.4
Involuntary Distributions
|
4 | |||
5.5
Designation of Beneficiaries
|
4 | |||
|
||||
ARTICLE VI Establishment of Trust
|
4 | |||
|
||||
6.1
Establishment of Trust
|
4 | |||
6.2
Status of Trust
|
5 | |||
|
||||
ARTICLE VII Amendment and Termination
|
5 | |||
|
||||
7.1
Amendment
|
5 | |||
7.2
Plan Termination
|
5 |
ARTICLE VIII Administration
|
5 | |||
|
||||
8.1
Administration of the Plan
|
5 | |||
8.2
Decisions of the Committee
|
6 | |||
8.3
Review of Benefit Determinations
|
6 | |||
|
||||
ARTICLE IX Definitions
|
6 | |||
|
||||
9.1
Account
|
6 | |||
9.2
Account Balance
|
6 | |||
9.3
Affiliate
|
6 | |||
9.4
Beneficiary
|
7 | |||
9.5
Code
|
7 | |||
9.6
Committee
|
7 | |||
9.7
Company
|
7 | |||
9.8
Contributions
|
7 | |||
9.9
Disability
|
7 | |||
9.10 ERISA
|
7 | |||
9.11
Participant
|
7 | |||
9.12
Permitted Investment
|
7 | |||
9.13
Plan
|
8 | |||
9.14
Plan Year
|
8 | |||
9.15
Subsidiary
|
8 | |||
|
||||
ARTICLE X General Provisions
|
8 | |||
|
||||
10.1
Non-Alienation of Benefits
|
8 | |||
10.2
Withholding for Taxes
|
8 | |||
10.3
Immunity of Committee Members
|
9 | |||
10.4
Plan Not to Affect Employment Relationship
|
9 | |||
10.5
Assumption of Company Liability
|
9 | |||
10.6
Subordination Rights
|
9 | |||
10.7
Notices
|
9 | |||
10.8
Gender and Number; Headings
|
10 | |||
10.9
Controlling Law
|
10 | |||
10.10
Successors
|
10 | |||
10.11
Severability
|
10 | |||
10.12
Action by Company
|
10 | |||
10.13
No Guarantee of Tax Consequences
|
10 |
1
2
3
4
5
6
7
8
9
National Mentor Holdings, LLC
|
||||
By: | /s/ Denis Holler |
10
ARTICLE I Introduction
|
1 | |||
|
||||
1.1
Name
|
1 | |||
1.2
Purpose
|
1 | |||
|
||||
ARTICLE II Plan Participation
|
2 | |||
|
||||
ARTICLE III Contributions
|
2 | |||
|
||||
3.1
Contributions
|
2 | |||
3.2
Account
|
2 | |||
|
||||
ARTICLE IV Earnings on Account Balances
|
2 | |||
|
||||
4.1
Investments
|
2 | |||
4.2
Actual Investment Not Required
|
2 | |||
4.3
Crediting of Contributions
|
3 | |||
|
||||
ARTICLE V Distribution of Account Balances
|
3 | |||
|
||||
5.1
Vesting
|
3 | |||
5.2
Timing Distribution
|
3 | |||
5.3
Form of Distribution of Account Balances
|
3 | |||
5.4
Involuntary Distributions
|
3 | |||
5.5
Designation of Beneficiaries
|
4 | |||
|
||||
ARTICLE VI Establishment of Trust
|
4 | |||
|
||||
6.1
Establishment of Trust
|
4 | |||
6.2
Status of Trust
|
4 | |||
|
||||
ARTICLE VII Amendment and Termination
|
5 | |||
|
||||
7.1
Amendment
|
5 | |||
7.2
Plan Termination
|
5 |
ARTICLE VIII Administration
|
5 | |||
|
||||
8.1
Administration of the Plan
|
5 | |||
8.2
Decisions of the Committee
|
6 | |||
8.3
Review of Benefit Determinations
|
6 | |||
|
||||
ARTICLE IX Definitions
|
6 | |||
|
||||
9.1
Account
|
6 | |||
9.2
Account Balance
|
6 | |||
9.3
Affiliate
|
6 | |||
9.4
Beneficiary
|
7 | |||
9.5
Code
|
7 | |||
9.6
Committee
|
7 | |||
9.7
Company
|
7 | |||
9.8
Contributions
|
7 | |||
9.9
Disability
|
7 | |||
9.10 ERISA
|
7 | |||
9.11
Participant
|
7 | |||
9.12
Permitted Investment
|
7 | |||
9.13
Plan
|
8 | |||
9.14
Plan Year
|
8 | |||
9.15
Subsidiary
|
8 | |||
|
||||
ARTICLE X General Provisions
|
8 | |||
|
||||
10.1
Non-Alienation of Benefits
|
8 | |||
10.2
Withholding for Taxes
|
8 | |||
10.3
Immunity of Committee Members
|
9 | |||
10.4
Plan Not to Affect Employment Relationship
|
9 | |||
10.5
Assumption of Company Liability
|
9 | |||
10.6
Subordination Rights
|
9 | |||
10.7
Notices
|
9 | |||
10.8
Gender and Number; Headings
|
10 | |||
10.9
Controlling Law
|
10 | |||
10.10
Successors
|
10 | |||
10.11
Severability
|
10 | |||
10.12
Action by Company
|
10 | |||
10.13
No Guarantee of Tax Consequences
|
10 |
1
2
3
4
5
6
7
8
9
National Mentor Holdings, LLC
|
||||
By: | /s/ Denis Holler | |||
10
Contribution rate, | ||||||
as percentage of | ||||||
annual base | ||||||
compensation | ||||||
(not including | ||||||
Level | bonus) | Name | ||||
President
and Chief Executive Officer
|
13 | % | Edward M. Murphy | |||
Executive Vice President
|
11 | % |
Juliette E. Fay
|
|||
|
Denis M. Holler
|
|||||
|
Hugh R. Jones, III
|
|||||
|
Bruce F. Nardella | |||||
Senior Vice President / Managing
|
9 | % |
Linda DeRenzo
|
|||
Director of NMHI / NMHI Business
|
Kathleen P. Federico
|
|||||
Unit President
|
John J. Green
|
|||||
|
Robert A. Longo
|
|||||
|
Robert M. Melia
|
|||||
|
David M. Petersen | |||||
Chairman of the Board of Directors
|
* | Gregory T. Torres |
* |
Mr. Torres does not receive contributions under the Plan but his previous allocations may earn a
return under the Plan.
|
ARTICLE I Introduction
|
1 | |||
|
||||
1.1
Name
|
1 | |||
1.2
Purpose
|
1 | |||
|
||||
ARTICLE II Plan Participation
|
2 | |||
|
||||
ARTICLE III Contributions
|
2 | |||
|
||||
3.1
Contributions
|
2 | |||
3.2
Account
|
2 | |||
|
||||
ARTICLE IV Earnings on Account Balances
|
2 | |||
|
||||
4.1
Investments
|
2 | |||
4.2
Actual Investment Not Required
|
2 | |||
4.3
Crediting of Contributions
|
3 | |||
|
||||
ARTICLE V Distribution of Account Balances
|
3 | |||
|
||||
5.1
Vesting
|
3 | |||
5.2
Timing Distribution
|
3 | |||
5.3
Form of Distribution of Account Balances
|
3 | |||
5.4
Involuntary Distributions
|
3 | |||
5.5
Designation of Beneficiaries
|
4 | |||
|
||||
ARTICLE VI Establishment of Trust
|
4 | |||
|
||||
6.1
Establishment of Trust
|
4 | |||
6.2
Status of Trust
|
4 | |||
|
||||
ARTICLE VII Amendment and Termination
|
5 | |||
|
||||
7.1
Amendment
|
5 | |||
7.2
Plan Termination
|
5 |
ARTICLE VIII Administration
|
5 | |||
|
||||
8.1
Administration of the Plan
|
5 | |||
8.2
Decisions of the Committee
|
6 | |||
8.3
Review of Benefit Determinations
|
6 | |||
|
||||
ARTICLE IX Definitions
|
6 | |||
|
||||
9.1
Account
|
6 | |||
9.2
Account Balance
|
6 | |||
9.3
Affiliate
|
6 | |||
9.4
Beneficiary
|
7 | |||
9.5
Code
|
7 | |||
9.6
Committee
|
7 | |||
9.7
Company
|
7 | |||
9.8
Contributions
|
7 | |||
9.9
Disability
|
7 | |||
9.10 ERISA
|
7 | |||
9.11
Participant
|
7 | |||
9.12
Permitted Investment
|
7 | |||
9.13
Plan
|
8 | |||
9.14
Plan Year
|
8 | |||
9.15
Subsidiary
|
8 | |||
|
||||
ARTICLE X General Provisions
|
8 | |||
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10.1
Non-Alienation of Benefits
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10.2
Withholding for Taxes
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10.3
Immunity of Committee Members
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10.4
Plan Not to Affect Employment Relationship
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10.5
Assumption of Company Liability
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10.6
Subordination Rights
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10.7
Notices
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10.8
Gender and Number; Headings
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10.9
Controlling Law
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10.10
Successors
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10 | |||
10.11
Severability
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10 | |||
10.12
Action by Company
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10 | |||
10.13
No Guarantee of Tax Consequences
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10 |
1
(i) |
Appointed as a Participant by vote of the Board; and
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(ii) |
Designated as such in, or by written amendment to, the attached
Exhibit A (Schedule of Participants)
.
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3
4
5
6
7
8
9
National Mentor Holdings, LLC
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By: | /s/ Denis M. Holler |
10
Contribution rate, | ||||||
as percentage of | ||||||
annual base | ||||||
compensation | ||||||
(not including | ||||||
Level | bonus) | Name | ||||
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||||||
Chief Executive Officer
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13 | % | Edward M. Murphy | |||
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||||||
President
|
12 | % | Bruce F. Nardella | |||
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||||||
Executive Vice President
|
11 | % |
Juliette E. Fay
Denis M. Holler Hugh R. Jones, III |
|||
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Senior Vice President
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9 | % |
Linda DeRenzo
Kathleen P. Federico John J. Green Robert A. Longo Robert M. Melia David M. Petersen |
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||||||
Chairman of the Board of Directors
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* | Gregory T. Torres |
* |
Mr. Torres does not receive contributions under the Plan but his invested amounts are earning a
return under the Plan.
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2
3
4
5
6
7
8
9
10
11
National Mentor Holdings, LLC
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By: | /s/ Denis Holler |
12
2
3
4
5
6
7
8
9
10
11
National Mentor Holdings, LLC
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By: | /s/ Denis Holler |
12
Purpose of Plan
|
1 | |||
Incentive Compensation Philosophy
|
1 | |||
Incentive Plan Guiding Principles
|
1 | |||
Eligibility
|
2 | |||
Incentive Compensation Payout Opportunity
|
2 | |||
Performance Measurements
|
3 | |||
Calculation of Incentive Payouts
|
3 | |||
Making the Initial Calculation
|
4 | |||
Using DSO Performance to Confirm or Modify the Initial Calculation
|
5 | |||
Using Quality of Services or Work to Confirm or Modify the Initial Calculation (as adjusted
for DSO performance)
|
5 | |||
Redistribution of Unallocated Incentive Compensation
|
5 | |||
In the Event that Calculated Payouts Exceed Funds Available to Pay Incentive Compensation
|
5 | |||
Discretionary Incentive Pool
|
6 | |||
Administration
|
6 | |||
Plan Changes
|
6 | |||
Management of Financial and Other Goals
|
6 | |||
Incentive Compensation Payouts
|
6 | |||
Approval of New Plan Entrants
|
7 | |||
Ongoing Eligibility Management
|
7 | |||
Participant Termination Provisions
|
7 | |||
Voluntary Terminations
|
7 | |||
Involuntary Terminations for Cause
|
7 | |||
Retirement and Death
|
8 | |||
Special Provisions Relating to Position and Status Changes
|
8 | |||
Promotions and Job Transfers
|
8 | |||
Interruptions in Work
|
8 | |||
Plan Year and Effective Date
|
9 | |||
Plan Amendments
|
9 | |||
Exhibit A: Eligibility, Weighting, and Target IC Opportunity for Management Positions
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10 | |||
Exhibit B: Eligibility, Weighting, and Target IC Opportunity for Executive Positions
|
11 | |||
Annex 1: Examples of Incentive Compensation Payout Calculations
|
12 |
ii
| Incentives that closely align pay with the attainment of high-quality services and work and the attainment of financial goals affecting equity value, including: (1) adjusted EBITDA for The Network as reported to The Networks private equity investor (Adjusted EBITDA); (2) contribution to overhead (CTO) for organizational units within The Network; (3) revenue; (4) adjusted free cash flow for The Network, as defined by the Compensation Committee at the beginning of each fiscal year (Free Cash Flow); and (5) days sales outstanding (DSO); and |
| Meaningful and competitive incentive compensation opportunities that attract and retain high performers at the executive and management levels. |
| Variable pay. Variable pay is an important component of total compensation for executives, management, and other key employees. This Incentive Plan provides the opportunity for participants to receive annual incentive compensation payouts based on performance. The opportunity available is related to a participants level of responsibility for and impact on The Networks and/or organizational units performance, expressed as a percentage of annualized base salary. (Throughout this document, organizational unit means operating subgroup, state, or, in the case of Minnesota, region, whichever applies to the individual participant. For example, for an Executive Director, the organizational unit is the group of states for which the Executive Director is responsible, which is a subgroup of the larger Operating Group.) |
1
| Alignment. Incentive payouts are directly linked to The Networks business goals. The initial calculation of incentive payouts is based on actual Adjusted EBITDA and/or CTO and actual revenue compared against budgeted goals for The Network and/or organizational unit. In addition, the calculation factors in Free Cash Flow or the applicable level of DSO and the participants performance with regard to quality of services or work. |
| Clear line of sight . As much as possible, incentives are linked to goals that participants can see, understand, and impact. |
| Simplicity. The method for calculating incentive payouts and the goals on which incentive payouts are based are easily understood. |
2
| Adjusted EBITDA and/or CTO and revenue. An initial calculation of a participants incentive compensation (the Initial Calculation) is based on The Networks and/or organizational units Adjusted EBITDA and/or CTO and revenue measured against budget goals. Allocation between Network (Adjusted EBITDA) and organizational unit (CTO) performance is determined according to a participants position, as set out on Exhibits A and B. Adjusted EBITDA/CTO performance is weighted 75 percent and revenue performance is weighted 25 percent. |
| Free Cash Flow or DSO. The Free Cash Flow target applicable to the executive positions listed on Exhibit B is established and approved at the beginning of the fiscal year by the Compensation Committee. When the target is met, the Initial Calculation is unaffected. When the target is not met, the Initial Calculation is modified. For all other employees, DSO targets are established and approved for The Network and organizational units at the beginning of the fiscal year by the CFO and COO. When the target is met, the Initial Calculation is unaffected. When the target is not met, the Initial Calculation is modified. |
| Quality of Services or Work. When goals relating to quality of services or work are met or exceeded, the Initial Calculation (after any Free Cash Flow or DSO adjustment) is unaffected. When these goals are not met, the Initial Calculation is modified. Operating Group positions (as set out on Exhibit A) are rated based on quality of services of the participants applicable organizational unit, including factors such as licensure issues and restrictions. Network positions (as set out on Exhibits A and B) are rated based on an individual participants quality of work, including factors such as quality of management, achievement of assigned goals, completion of assigned projects, and contributions to the achievement of departmental or company goals. Supervisors will be asked to certify their ratings with respect to individual performance pertaining to quality of work. The applicable Operating Group President must certify a participants organizational units rating for quality of service. |
1. | Make the Initial Calculation; i.e., calculate the incentive compensation payout attributable to Adjusted EBITDA/CTO and revenue performance based on management reporting conventions. This calculation excludes new start investments under immunity and acquisitions other than tuck-ins (i.e., purchase price of $3 million or less and easy to integrate, as determined by the Chief Executive Officer (CEO)). |
3
2. | Factor in Free Cash Flow or Network/organizational unit DSO performance, as applicable, confirming or modifying the Initial Calculation, depending on outcome. |
3. | Factor in the participants performance pertaining to quality of services or work, confirming or modifying the Initial Calculation, depending on outcome, and as adjusted for Free Cash Flow or DSO performance. |
4. | Redistribute unallocated incentive dollars resulting from modifying payouts for Free Cash Flow, DSO, and quality performance. |
| First, determine the participants target incentive compensation by multiplying the participants annualized base salary as of the last day of the fiscal year by the percentage applicable to his or her position (the Target IC Payout Opportunity set out on Exhibits A and B). |
| Second, determine the portion of the participants target incentive compensation attributable to actual Adjusted EBITDA/CTO performance by multiplying the participants target incentive compensation by 75 percent (i.e., Adjusted EBITDA/CTO weighting) and then by the adjusted percentage (the IC Payout Levels set out on Annex 1) associated with the Networks and/or organizational units actual Adjusted EBITDA/CTO results. |
| Third, determine the portion attributable to actual revenue performance by multiplying the participants target incentive compensation by 25 percent (i.e., revenue weighting) and then by the adjusted percentage (the IC Payout Levels set out on Annex 1) associated with the Networks and/or organizational units actual revenue results. |
| Last, sum the portions calculated for actual Adjusted EBITDA/CTO and revenue performance. |
4
5
| The Networks Adjusted EBITDA, revenue and DSO performance goals that will be used for measuring Network performance |
| The Networks Free Cash Flow performance goal that will be used in calculating incentive compensation payouts for executive positions listed on Exhibit B |
| The Networks actual performance results that will be used as the basis for calculating incentive compensation payouts |
6
7
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9
Network and Organizational | ||||||||||||
Target IC | Unit Performance Weighting | |||||||||||
Payout | Organizational | |||||||||||
Position | Opportunity | Network | Unit | |||||||||
Operating Group Positions (Measured by Quality
of Services)
|
||||||||||||
Vice Presidents, Operations
|
25 | % | 25 | % | 75 | % | ||||||
Executive Directors
|
20 | % | 25 | % | 75 | % | ||||||
State Directors
|
15 | % | 0 | % | 100 | % | ||||||
Deputy State Directors
|
10 | % | 0 | % | 100 | % | ||||||
Program Directors/Managers (Must meet minimum of
$250k CTO floor or have CFO and COO approval)
|
10 | % | 0 | % | 100 | % | ||||||
Sr. Business Directors
|
20 | % | 25 | % | 75 | % | ||||||
Business Directors
|
15 | % | 25 | % | 75 | % | ||||||
Business Managers
|
10 | % | 25 | % | 75 | % | ||||||
State Accounting Managers
|
10 | % | 0 | % | 100 | % | ||||||
Operating Group level IT, QA, and HR Directors
|
15 | % | 100 | % | 0 | % | ||||||
Network Positions (Measured by Quality of Work)
|
||||||||||||
Vice Presidents
|
25 | % | 100 | % | 0 | % | ||||||
Sr. Directors
|
20 | % | 100 | % | 0 | % | ||||||
Directors
|
15 | % | 100 | % | 0 | % | ||||||
Managers
|
10 | % | 100 | % | 0 | % | ||||||
Designated Executive Group Business Analyst positions
|
10 | % | 100 | % | 0 | % |
10
Target IC Payout | ||||
Position | Opportunity | |||
CEO
|
50 | % | ||
Executive Vice Presidents
|
50 | % | ||
Operating Group Presidents
|
50 | % | ||
Senior Vice Presidents
|
50 | % | ||
Managing Directors
|
50 | % |
11
Name
|
Johan Doe | |
Title
|
Program Manager | |
Salary
|
$50,000 | |
Target IC
Opportunity
|
10% |
DSO Performance Modifier | ||||||
YES
|
Meets/Exceeds DSO Target | 100 | % | |||
NO
|
Does not meet DSO Target | 90 | % |
Quality/Performance Modifier | ||||||
4
|
Meets/Exceeds Expectations | 100 | % | |||
3
|
Meets Most Expectations | 75 | % | |||
2
|
Needs Improvement | 50 | % | |||
1
|
Failed To Meet Expectations | 0 | % |
Weighting | Target Goals | Actual Performance | Achieved | Adjustors | ||||||||||||||||||||||||||||||||||||||||
Performance | State | Network | Total | State | Network | State | Network | State | Network | State | Network | |||||||||||||||||||||||||||||||||
Measures | 100 | % | 0 | % | 100 | % | ||||||||||||||||||||||||||||||||||||||
CTO
|
75 | % | 0.0 | % | 75 | % | 5,570 | 5,836 | 104.8 | % | 0.0 | % | 131.8 | % | 0.0 | % | ||||||||||||||||||||||||||||
Revenue
|
25 | % | 0.0 | % | 25 | % | 37,707 | 37,753 | 100.1 | % | 0.0 | % | 100.8 | % | 0.0 | % | ||||||||||||||||||||||||||||
DSO
|
45 | 47 | NO | 90.0 | % | |||||||||||||||||||||||||||||||||||||||
Quality
|
4 | 3 | NO | 75.0 | % |
Initial Calculation | ||||||||||||||||||||||||||||||||||||||||
Salary | $ | 50,000 | CTO | Revenue | Total | DSO | Adjusted | Quality | Adjusted | |||||||||||||||||||||||||||||||
Target IC % | 10 | % | State | Network | State | Network | Combined | Modifier | Payout | Modifier | Payout | |||||||||||||||||||||||||||||
Target IC $
|
$ | 5,000 | $ | 3,750 | $ | | $ | 1,250 | $ | | $ | 5,000 | | $ | 5,000 | | $ | 5,000 | ||||||||||||||||||||||
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Adjustors
|
131.8 | % | 100.8 | % | 90 | % | 75 | % | ||||||||||||||||||||||||||||||||
|
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IC Payout $
|
$ | 4,944 | $ | | $ | 1,260 | $ | | $ | 6,204 | $ | (620 | ) | $ | 5,584 | $ | (1,396 | ) | $ | 4,188 | ||||||||||||||||||||
IC Payout Level
|
124.1 | % | 111.7 | % | 83.8 | % | ||||||||||||||||||||||||||||||||||
IC Payout as
% of Salary
|
12.4 | % | 11.2 | % | 8.4 | % |
12
Name
|
Jayne Doe | |
Title
|
Business Director | |
Salary
|
$75,000 | |
Target IC
Opportunity
|
15% |
DSO Performance Modifier | ||||||
YES | Meets/Exceeds DSO Target | 100 | % | |||
NO | Does not meet DSO Target | 90 | % |
Quality/Performance Modifier | ||||||
4
|
Meets/Exceeds Expectations | 100 | % | |||
3
|
Meets Most Expectations | 75 | % | |||
2
|
Needs Improvement | 50 | % | |||
1
|
Failed To Meet Expectations | 0 | % |
Weighting | Target Goals | Actual Performance | Achieved | Adjustors | |||||||||||||||||||||||||||||||||||||||||
Performance | State | Network | Total | State | Network | State | Network | State | Network | State | Network | ||||||||||||||||||||||||||||||||||
Measure | 75 | % | 25 | % | 100 | % | |||||||||||||||||||||||||||||||||||||||
CTO
|
56 | % | 19 | % | 75 | % | 7,820 | 104,461 | 8,104 | 101,260 | 103.6 | % | 96.9 | % | 124.2 | % | 79.6 | % | |||||||||||||||||||||||||||
Revenue
|
19 | % | 6 | % | 25 | % | 57,143 | 919,547 | 58,243 | 911,748 | 101.9 | % | 99.2 | % | 112.8 | % | 94.3 | % | |||||||||||||||||||||||||||
DSO
|
48 | 52 | NO | 90.0 | % | ||||||||||||||||||||||||||||||||||||||||
Quality
|
4 | 4 | YES | 100.0 | % |
Initial Calculation | ||||||||||||||||||||||||||||||||||||||||
Salary | $ | 75,000 | CTO | Revenue | Total | DSO | Adjusted | Quality | Adjusted | |||||||||||||||||||||||||||||||
Target IC % | 15 | % | State | Network | State | Network | Combined | Modifier | Payout | Modifier | Payout | |||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Target IC $
|
11,250 | $ | 6,328 | $ | 2,109 | $ | 2,109 | $ | 703 | $ | 11,250 | | $ | 11,250 | | $ | 11,250 | |||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Adjustors
|
124.2 | % | 79.6 | % | 112.8 | % | 94.3 | % | 90 | % | 100 | % | ||||||||||||||||||||||||||||
|
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IC Payout $
|
$ | 7,860 | $ | 1,678 | $ | 2,380 | $ | 663 | $ | 12,582 | $ | (1,258 | ) | $ | 11,324 | | $ | 11,324 | ||||||||||||||||||||||
IC Payout Level
|
111.8 | % | 100.7 | % | 100.7 | % | ||||||||||||||||||||||||||||||||||
IC Payout as
% of Salary
|
16.8 | % | 15.1 | % | 15.1 | % |
13
Purpose of Plan
|
1 | |||
Incentive Compensation Philosophy
|
1 | |||
Incentive Plan Guiding Principles
|
2 | |||
Eligibility
|
2 | |||
Incentive Compensation Payout Opportunity
|
2 | |||
Performance Measurements
|
3 | |||
Calculation of Incentive Payouts
|
4 | |||
Making the Initial Calculation
|
4 | |||
Using Free Cash Flow or DSO Performance to Confirm or Modify the Initial Calculation
|
5 | |||
Using Quality of Services or Work to Confirm or Modify the Initial Calculation (as adjusted for Free Cash Flow or DSO performance)
|
5 | |||
Redistribution of Unallocated Incentive Compensation
|
6 | |||
In the Event that Calculated Payouts Exceed Funds Available to Pay Incentive Compensation
|
6 | |||
Discretionary Incentive Pool
|
6 | |||
Administration
|
6 | |||
Plan Changes
|
6 | |||
Management of Financial and Other Goals
|
7 | |||
Incentive Compensation Payouts
|
7 | |||
Approval of New Plan Entrants
|
7 | |||
Ongoing Eligibility Management
|
7 | |||
Participant Termination Provisions
|
8 | |||
Voluntary Terminations
|
8 | |||
Involuntary Terminations for Cause
|
8 | |||
Retirement and Death
|
8 | |||
Special Provisions Relating to Position and Status Changes
|
8 | |||
Promotions and Job Transfers
|
8 | |||
Interruptions in Work
|
9 | |||
Plan Year and Effective Date
|
9 | |||
Plan Amendments
|
9 | |||
Exhibit A: Eligibility, Weighting, and Target IC Opportunity for Management Positions
|
10 | |||
Exhibit B: Eligibility, Weighting, and Target IC Opportunity for Executive Positions
|
11 | |||
Annex 1: Examples of Incentive Compensation Payout Calculations
|
12 |
ii
| Incentives that closely align pay with the attainment of high-quality services and work and the attainment of financial goals affecting equity value, including: (1) adjusted EBITDA for The Network as reported to The Networks private equity investor (Adjusted EBITDA); (2) contribution to overhead (CTO) for organizational units within The Network; (3) revenue; (4) adjusted free cash flow for The Network, as defined by the Compensation Committee at the beginning of each fiscal year (Free Cash Flow); and (5) days sales outstanding (DSO); and |
| Meaningful and competitive incentive compensation opportunities that attract and retain high performers at the executive and management levels. |
1
| Variable pay. Variable pay is an important component of total compensation for executives, management, and other key employees. This Incentive Plan provides the opportunity for participants to receive annual incentive compensation payouts based on performance. The opportunity available is related to a participants level of responsibility for and impact on The Networks and/or organizational units performance, expressed as a percentage of annualized base salary. (Throughout this document, organizational unit means operating subgroup, state, or, in the case of Minnesota, region, whichever applies to the individual participant. For example, for an Executive Director, the organizational unit is the group of states for which the Executive Director is responsible, which is a subgroup of the larger Operating Group.) | |
| Alignment. Incentive payouts are directly linked to The Networks business goals. The initial calculation of incentive payouts is based on actual Adjusted EBITDA and/or CTO and actual revenue compared against budgeted goals for The Network and/or organizational unit. In addition, the calculation factors in Free Cash Flow or the applicable level of DSO and the participants performance with regard to quality of services or work. | |
| Clear line of sight . As much as possible, incentives are linked to goals that participants can see, understand, and impact. | |
| Simplicity. The method for calculating incentive payouts and the goals on which incentive payouts are based are easily understood. |
2
| Adjusted EBITDA and/or CTO and revenue. An initial calculation of a participants incentive compensation (the Initial Calculation) is based on The Networks and/or organizational units Adjusted EBITDA and/or CTO and revenue measured against budget goals. Allocation between Network (Adjusted EBITDA) and organizational unit (CTO) performance is determined according to a participants position, as set out on Exhibits A and B. Adjusted EBITDA/CTO performance is weighted 75 percent and revenue performance is weighted 25 percent. |
| Free Cash Flow or DSO. The Free Cash Flow target applicable to the executive positions listed on Exhibit B is established and approved at the beginning of the fiscal year by the Compensation Committee. When the target is met, the Initial Calculation is unaffected. When the target is not met, the Initial Calculation is modified. For all other employees, DSO targets are established and approved for The Network and organizational units at the beginning of the fiscal year by the CFO and COO. When the target is met, the Initial Calculation is unaffected. When the target is not met, the Initial Calculation is modified. |
| Quality of Services or Work. When goals relating to quality of services or work are met or exceeded, the Initial Calculation (after any Free Cash Flow or DSO adjustment) is unaffected. When these goals are not met, the Initial Calculation is modified. Operating Group positions (as set out on Exhibit A) are rated based on quality of services of the participants applicable organizational unit, including factors such as licensure issues and restrictions. Network positions (as set out on Exhibits A and B) are rated based on an individual participants quality of work, including factors such as quality of management, achievement of assigned goals, completion of assigned projects, and contributions to the achievement of departmental or company goals. Supervisors will be asked to certify their ratings with respect to individual performance pertaining to quality of work. The applicable Operating Group President must certify a participants organizational units rating for quality of service. Notwithstanding the foregoing, Operating Group Presidents will have discretion to reduce any individuals Initial Calculation, as modified for quality of services, if the individuals quality of work was unsatisfactory and therefore merits such a reduction. Any unallocated incentive compensation as a result of such reduction may be awarded by the applicable Operating Group President to one or more other participants in the Plan whose performance with respect to quality of work was exceptional in the judgment of the Operating Group President. |
3
1. | Make the Initial Calculation; i.e., calculate the incentive compensation payout attributable to Adjusted EBITDA/CTO and revenue performance based on management reporting conventions. This calculation excludes new start investments under immunity and acquisitions other than tuck-ins (i.e., purchase price of $3 million or less and easy to integrate, as determined by the Chief Executive Officer (CEO)). |
2. | Factor in Free Cash Flow or Network/organizational unit DSO performance, as applicable, confirming or modifying the Initial Calculation, depending on outcome. |
3. | Factor in the participants performance pertaining to quality of services or work, confirming or modifying the Initial Calculation, depending on outcome, and as adjusted for Free Cash Flow or DSO performance. |
4. | Redistribute unallocated incentive dollars resulting from modifying payouts for Free Cash Flow, DSO, and quality performance. |
5. | Redistribute unallocated incentive dollars resulting from Operating Group Presidents discretion to reduce individual awards for less than satisfactory quality of work. |
| First, determine the participants target incentive compensation by multiplying the participants annualized base salary as of the last day of the fiscal year by the percentage applicable to his or her position (the Target IC Payout Opportunity set out on Exhibits A and B). |
| Second, determine the portion of the participants target incentive compensation attributable to actual Adjusted EBITDA/CTO performance by multiplying the participants target incentive compensation by 75 percent (i.e., Adjusted EBITDA/CTO weighting) and then by the adjusted percentage (the IC Payout Levels set out on Annex 1) associated with the Networks and/or organizational units actual Adjusted EBITDA/CTO results. |
| Third, determine the portion attributable to actual revenue performance by multiplying the participants target incentive compensation by 25 percent (i.e., revenue weighting) and then by the adjusted percentage (the IC Payout Levels set out on Annex 1) associated with the Networks and/or organizational units actual revenue results. |
| Last, sum the portions calculated for actual Adjusted EBITDA/CTO and revenue performance. |
4
5
6
| The Networks Adjusted EBITDA, revenue and DSO performance goals that will be used for measuring Network performance |
| The Networks Free Cash Flow performance goal that will be used in calculating incentive compensation payouts for executive positions listed on Exhibit B |
| The Networks actual performance results that will be used as the basis for calculating incentive compensation payouts |
7
8
9
Network and Organizational | ||||||||||||
Target IC | Unit Performance Weighting | |||||||||||
Payout | Organizational | |||||||||||
Position | Opportunity | Network | Unit | |||||||||
Operating Group Positions (Measured by Quality of Services) | ||||||||||||
Vice Presidents, Operations
|
25 | % | 25 | % | 75 | % | ||||||
Executive Directors
|
20 | % | 25 | % | 75 | % | ||||||
State Directors
|
15 | % | 0 | % | 100 | % | ||||||
Deputy State Directors
|
10 | % | 0 | % | 100 | % | ||||||
Program Directors/Managers (Must meet minimum of
$250k CTO floor or have CFO and COO approval)
|
10 | % | 0 | % | 100 | % | ||||||
Sr. Business Directors
|
20 | % | 25 | % | 75 | % | ||||||
Business Directors
|
15 | % | 25 | % | 75 | % | ||||||
Business Managers
|
10 | % | 25 | % | 75 | % | ||||||
State Accounting Managers
|
10 | % | 0 | % | 100 | % | ||||||
Operating Group level IT, QA, and HR Directors
|
15 | % | 100 | % | 0 | % | ||||||
Network Positions (Measured by Quality of Work)
|
||||||||||||
Vice Presidents
|
25 | % | 100 | % | 0 | % | ||||||
Sr. Directors
|
20 | % | 100 | % | 0 | % | ||||||
Directors
|
15 | % | 100 | % | 0 | % | ||||||
Managers
|
10 | % | 100 | % | 0 | % | ||||||
Designated Executive Group Business Analyst positions
|
10 | % | 100 | % | 0 | % |
10
Target IC Payout | ||||
Position | Opportunity | |||
CEO
|
50 | % | ||
President
|
75 | % | ||
Executive Vice Presidents
|
50 | % | ||
Operating Group Presidents
|
50 | % | ||
Senior Vice Presidents
|
50 | % |
11
Name
|
Johan Doe | |
Title
|
Program Manager | |
Salary
|
$50,000 | |
Target IC Opportunity
|
10% |
DSO Performance Modifier | ||||||
|
||||||
YES
|
Meets/Exceeds DSO Target | 100 | % | |||
NO
|
Does not meet DSO Target | 90 | % |
Quality/Performance Modifier | ||||||
|
||||||
4
|
Meets/Exceeds Expectations | 100 | % | |||
3
|
Meets Most Expectations | 75 | % | |||
2
|
Needs Improvement | 50 | % | |||
1
|
Failed To Meet Expectations | 0 | % |
Weighting | Target Goals | Actual Performance | Achieved | Adjustors | ||||||||||||||||||||||||||||||||||||||||
Performance | State | Network | Total | State | Network | State | Network | State | Network | State | Network | |||||||||||||||||||||||||||||||||
Measures | 100 | % | 0 | % | 100 | % | ||||||||||||||||||||||||||||||||||||||
CTO
|
75 | % | 0.0 | % | 75 | % | 5,570 | 5,836 | 104.8 | % | 0.0 | % | 131.8 | % | 0.0 | % | ||||||||||||||||||||||||||||
Revenue
|
25 | % | 0.0 | % | 25 | % | 37,707 | 37,753 | 100.1 | % | 0.0 | % | 100.8 | % | 0.0 | % | ||||||||||||||||||||||||||||
DSO
|
45 | 47 | NO | 90.0 | % | |||||||||||||||||||||||||||||||||||||||
Quality
|
4 | 3 | NO | 75.0 | % |
Initial Calculation | ||||||||||||||||||||||||||||||||||||||||
Salary | $ | 50,000 | CTO | Revenue | Total | DSO | Adjusted | Quality | Adjusted | |||||||||||||||||||||||||||||||
Target IC % | 10 | % | State | Network | State | Network | Combined | Modifier | Payout | Modifier | Payout | |||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Target IC $
|
$ | 5,000 | $ | 3,750 | $ | | $ | 1,250 | $ | | $ | 5,000 | | $ | 5,000 | | $ | 5,000 | ||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Adjustors
|
131.8 | % | 100.8 | % | 90 | % | 75 | % | ||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
IC Payout $
|
$ | 4,944 | $ | | $ | 1,260 | $ | | $ | 6,204 | $ | (620 | ) | $ | 5,584 | $ | (1,396 | ) | $ | 4,188 | ||||||||||||||||||||
IC Payout Level
|
124.1 | % | 111.7 | % | 83.8 | % | ||||||||||||||||||||||||||||||||||
IC Payout as
% of Salary
|
12.4 | % | 11.2 | % | 8.4 | % |
12
Name
|
Jayne Doe | |
Title
|
Business Director | |
Salary
|
$75,000 | |
Target IC Opportunity
|
15% |
DSO Performance Modifier | ||||||
YES
|
Meets/Exceeds DSO Target | 100 | % | |||
NO
|
Does not meet DSO Target | 90 | % |
Quality/Performance Modifier | ||||||
4
|
Meets/Exceeds Expectations | 100 | % | |||
3
|
Meets Most Expectations | 75 | % | |||
2
|
Needs Improvement | 50 | % | |||
1
|
Failed To Meet Expectations | 0 | % |
Weighting | Target Goals | Actual Performance | Achieved | Adjustors | ||||||||||||||||||||||||||||||||||||||||
Performance | State | Network | Total | State | Network | State | Network | State | Network | State | Network | |||||||||||||||||||||||||||||||||
Measure | 75 | % | 25 | % | 100 | % | ||||||||||||||||||||||||||||||||||||||
CTO
|
56 | % | 19 | % | 75 | % | 7,820 | 104,461 | 8,104 | 101,260 | 103.6 | % | 96.9 | % | 124.2 | % | 79.6 | % | ||||||||||||||||||||||||||
Revenue
|
19 | % | 6 | % | 25 | % | 57,143 | 919,547 | 58,243 | 911,748 | 101.9 | % | 99.2 | % | 112.8 | % | 94.3 | % | ||||||||||||||||||||||||||
DSO
|
48 | 52 | NO | 90.0 | % | |||||||||||||||||||||||||||||||||||||||
Quality
|
4 | 4 | YES | 100.0 | % |
Initial Calculation | ||||||||||||||||||||||||||||||||||||||||
Salary | $ | 75,000 | CTO | Revenue | Total | DSO | Adjusted | Quality | Adjusted | |||||||||||||||||||||||||||||||
Target IC % | 15 | % | State | Network | State | Network | Combined | Modifier | Payout | Modifier | Payout | |||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Target IC $
|
11,250 | $ | 6,328 | $ | 2,109 | $ | 2,109 | $ | 703 | $ | 11,250 | | $ | 11,250 | | $ | 11,250 | |||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Adjustors
|
124.2 | % | 79.6 | % | 112.8 | % | 94.3 | % | 90 | % | 100 | % | ||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
IC Payout $
|
$ | 7,860 | $ | 1,678 | $ | 2,380 | $ | 663 | $ | 12,582 | $ | (1,258 | ) | $ | 11,324 | | $ | 11,324 | ||||||||||||||||||||||
IC Payout Level
|
111.8 | % | 100.7 | % | 100.7 | % | ||||||||||||||||||||||||||||||||||
IC Payout as %
of Salary
|
16.8 | % | 15.1 | % | 15.1 | % |
13
1 |
Three years after the applicable Vesting Measurement Date.
|
2
2 |
Three years after the applicable Vesting Measurement Date.
|
3
NMH INVESTMENT, LLC,
a Delaware limited liability company |
||||||
|
||||||
|
By: | |||||
|
|
|||||
|
Title: President | |||||
|
||||||
[Name of Executive] |
2
NMH INVESTMENT, LLC,
a Delaware limited liability company |
||||||
|
||||||
|
By: | |||||
|
|
|||||
|
Title: President | |||||
|
||||||
Pamela F. Lenehan |
State of | ||||
Incorporation/ | ||||
Subsidiary | Organization | Name(s) under which doing business | ||
CareMeridian, LLC
|
Delaware | |||
Center for Comprehensive Services, Inc.
|
Illinois | |||
Community Care Indemnity Company
|
Vermont | |||
Cornerstone Living Skills, Inc.
|
California | |||
Family Advocacy Services, LLC
|
Delaware | |||
First Step Independent Living
Program, Inc.
|
California | |||
Horrigan Cole Enterprises, Inc.
|
California | Cole Vocational Services | ||
Institute for Family Centered
Services, Inc.
|
Virginia | |||
Illinois Mentor, Inc.
|
Illinois | |||
Lakeview Blue Ridge, Inc.
|
Delaware | |||
Lakeview Healthcare Systems, Inc.
|
New Hampshire | |||
Lakeview Ocean State, Inc.
|
Delaware | |||
LakeviewWaterford, Inc.
|
Delaware | |||
Loyds Liberty Homes, Inc.
|
California | |||
Massachusetts Mentor, Inc.
|
Massachusetts | |||
Mentor ABI, LLC
|
Delaware | |||
Mentor Management, Inc.
|
Delaware | |||
Mentor Maryland, Inc.
|
Maryland | |||
National Mentor Healthcare, LLC
|
Delaware | Alabama Mentor | ||
|
Arizona Mentor | |||
|
California Mentor | |||
|
Creative Home Programs | |||
|
DC Mentor | |||
|
Delaware Mentor | |||
|
Florida Mentor | |||
|
Georgia Mentor | |||
|
Home Care Options | |||
|
Idaho Mentor | |||
|
Independent Development for the Disabled | |||
|
Indiana Mentor | |||
|
Kentucky Mentor | |||
|
Kingsbury Academy | |||
|
Louisiana Mentor | |||
|
New Hampshire Mentor | |||
|
New Jersey Mentor | |||
|
North Carolina Mentor | |||
|
Pennsylvania Mentor | |||
|
Rhode Island Mentor | |||
|
Texas Mentor | |||
|
Washington Mentor | |||
National Mentor Holdings, LLC
|
Delaware | |||
National Mentor Services Holdings, LLC
|
Delaware | |||
National Mentor Services, LLC
|
Delaware | Family Advocacy Services | ||
|
Mentor Habilitation Services | |||
|
MENTOR Oregon | |||
|
Missouri Mentor | |||
|
Nebraska Mentor | |||
National Mentor, LLC
|
Delaware | |||
Ohio Mentor, Inc.
|
Ohio | |||
REM Arizona Rehabilitation, Inc.
|
Arizona |
State of | ||||
Incorporation/ | ||||
Subsidiary | Organization | Name(s) under which doing business | ||
REM Arrowhead, Inc.
|
Minnesota | |||
REM Central Lakes, Inc.
|
Minnesota | |||
REM Colorado, Inc.
|
Colorado | |||
REM Community Options, LLC
|
West Virginia | |||
REM Community Payroll Services, LLC
|
Minnesota | |||
REM Connecticut Community Services, Inc.
|
Connecticut | |||
REM Consulting of Ohio, Inc.
|
Ohio | |||
REM Developmental Services, Inc.
|
Iowa | |||
REM Health of Wisconsin II, Inc.
|
Wisconsin | |||
REM Heartland, Inc.
|
Minnesota | |||
REM Hennepin, Inc.
|
Minnesota | |||
REM Home Health, Inc.
|
Minnesota | |||
REM, Inc.
|
Minnesota | |||
REM Indiana Community Services, Inc.
|
Indiana | |||
REM Indiana Community Services II, Inc.
|
Indiana | |||
REM Indiana, Inc.
|
Indiana | |||
REM Iowa Community Services, Inc.
|
Iowa | |||
REM Iowa, Inc.
|
Iowa | |||
REM Management, Inc.
|
Minnesota | |||
REM Maryland, Inc.
|
Maryland | |||
REM Minnesota Community Services, Inc.
|
Minnesota | |||
REM Minnesota, Inc.
|
Minnesota | |||
REM Nevada, Inc.
|
Nevada | Creative Home Services | ||
REM New Jersey, Inc.
|
New Jersey | |||
REM New Jersey Properties, Inc.
|
New Jersey | |||
REM North Dakota, Inc.
|
North Dakota | |||
REM North Star, Inc.
|
Minnesota | |||
REM Ohio, Inc.
|
Ohio | |||
REM Ohio Waivered Services, Inc.
|
Ohio | |||
REM Pennsylvania Community Services, Inc.
|
Pennsylvania | |||
REM Ramsey, Inc.
|
Minnesota | |||
REM River Bluffs, Inc.
|
Minnesota | |||
REM South Central Services, Inc.
|
Minnesota | |||
REM Southwest Services, Inc.
|
Minnesota | |||
REM Utah, Inc.
|
Utah | Mentor Utah | ||
REM West Virginia, LLC
|
West Virginia | |||
REM Wisconsin, Inc.
|
Wisconsin | CCS-Wisconsin | ||
REM Wisconsin II, Inc.
|
Wisconsin | |||
REM Wisconsin III, Inc.
|
Wisconsin | |||
REM Woodvale, Inc.
|
Minnesota | |||
Rockland Child Development Services, Inc.
|
New York | |||
South Carolina Mentor, Inc.
|
South Carolina | |||
Transitional Services, LLC
|
Indiana | |||
Unlimited Quest, Inc.
|
California |
2
1. | I have reviewed this Annual Report on Form 10-K of National Mentor Holdings, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and |
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
December 22, 2009 | /s/ Edward M. Murphy | |||
Edward M. Murphy | ||||
Chief Executive Officer |
1. | I have reviewed this Annual Report on Form 10-K of National Mentor Holdings, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and |
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
December 22, 2009 | /s/ Bruce F. Nardella | |||
Bruce F. Nardella | ||||
President and Chief Operating Officer |
1. | I have reviewed this Annual Report on Form 10-K of National Mentor Holdings, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15(d)-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and |
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
December 22, 2009 | /s/ Denis M. Holler | |||
Denis M. Holler | ||||
Executive Vice President, Chief Financial Officer and Treasurer |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: December 22, 2009 | By: | /s/ Edward M. Murphy | ||
Edward M. Murphy | ||||
Chief Executive Officer | ||||
Date: December 22, 2009 | By: | /s/ Bruce F. Nardella | ||
Bruce F. Nardella | ||||
President and Chief Operating Officer | ||||
Date: December 22, 2009 | By: | /s/ Denis M. Holler | ||
Denis M. Holler | ||||
Executive Vice President,
Chief Financial Officer and Treasurer |
||||