AMENDED AND RESTATED EMPLOYMENT
AGREEMENT
AMENDED
AND RESTATED EMPLOYMENT AGREEMENT (this “Employment
Agreement”), dated as of December 22, 2008 (the
“Effective Date”), by and between Chindex
International, Inc., a Delaware corporation (the
“Company” or “Chindex”), and Lawrence
Pemble (“Employee”).
WHEREAS,
the Company and Employee entered into an Employment Agreement (the
“Original Employment Agreement”) dated as of
March 1, 2006 (the “Commencement Date”);
and
WHEREAS,
the Company and Employee desire to amend and restate the Original
Employment Agreement in accordance with the terms set forth herein;
and
WHEREAS,
the Company desires that Employee enter into this Employment
Agreement, and Employee desires to enter into this Employment
Agreement, on the terms and conditions set forth herein;
NOW
THEREFORE, the parties hereto agree as follows:
(a) The
Company agrees to employ Employee, and Employee agrees to be so
employed, in the position of Executive Vice President
(EVP) and Chief Financial Officer (CFO) of the Company,
reporting to the Chief Executive Officer (CEO) of the Company.
Employee agrees to perform such duties, functions and
responsibilities as are generally incident to such position, for a
period commencing on the Effective Date and ending on
December 31, 2013, unless sooner terminated in accordance with
Section 4 hereof (the “Term”). Employee agrees to
faithfully perform the lawful duties assigned to Employee pursuant
to this Employment Agreement to the best of Employee’s
abilities. Employee shall be subject to all laws, rules,
regulations and policies as are from time to time applicable to
employees of the Company and, in the case of rules or policies
adopted by the Company, communicated to Employee in writing.
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(b) Notwithstanding
the foregoing, Employee may (i) serve on civic or charitable
boards or not-for-profit industry related organizations,
(ii) engage in charitable, civic, educational, professional,
community and/or industry activities without remuneration therefor
and (iii) manage personal and family investments, so long as
such activities do not interfere with performance of
Employee’s duties under the Employment Agreement. Employee
also may serve on the board of directors or advisory committee of
other for-profit enterprises subject to the consent of the
Company’s Board of Directors (the “Board”), which
shall not unreasonably be withheld; provided ,
however , that Employee shall not serve on more than two
such boards at the same time.
(c) Employee
shall devote substantially all Employee’s working time,
attention, best efforts and ability during regular business hours
exclusively to the service of the Company, its affiliates and its
subsidiaries during the term of this Agreement.
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Section 2.
Compensation .
(a)
Annual Salary . As compensation for Employee’s
services hereunder, the Company shall pay to Employee an initial
annual salary at the rate of Two Hundred Seventy Thousand Dollars
($270,000) per annum, payable in accordance with the
Company’s standard payroll policies (the “Annual
Salary”). The Annual Salary shall be reviewed by the Company
each December during the Term, and shall be subject to such
increases (but not decreases) as the Company may determine, taking
into consideration the Company’s and Employee’s
performance during the preceding year as well as increases in the
cost of living and other factors.
(b)
Bonus . The Company shall also pay Employee annual bonus
compensation (“Bonus Compensation”) based on the
success of business operations and the pre-tax profits of the
Company and upon the performance of the Employee in accordance with
the Company’s Executive Management Incentive Program or other
then-existing bonus program. Any annual Bonus Compensation earned
shall be paid in cash as soon as reasonably practicable after the
end of the fiscal year for which such bonus was earned, and in any
event not later than six months after the end of such fiscal year,
unless the Compensation Committee of the Board determines (at a
time and in a manner that complies with Section 409A of the U.
S. Internal Revenue Code (“Section 409A”)) that
payment shall be made at a later date and/or in a different
form.
(c)
Long-term Equity Incentive Compensation . In addition to
stock options and other equity awards previously granted pursuant
to the terms of the Chindex International, Inc. 1994 Stock Option
Plan, the Chindex International, Inc. 2004 Stock Incentive Plan,
and the Chindex International, Inc. 2007 Stock Incentive Plan and
award agreements thereunder, the Company may also grant to Employee
unrestricted or restricted stock, stock options, and/or other
equity incentive compensation under equity compensation plans of
the Company in such form and having such terms as the Compensation
Committee of the Board may determine.
Section 3.
Benefits; Expense Reimbursement .
(a) During
the Term, Employee shall participate in any group life, accident,
sickness and hospitalization insurance, and any other employee
benefit plans of the Company in effect during the Term and
generally available to the Company’s senior executive
officers. Without limiting the generality of the foregoing, during
the Term, the Company will provide Employee at its expense with a
life insurance policy with a death benefit equal to three
(3) times Employee’s Annual Salary, the beneficiary to
be named by Employee. Employee shall have the right to
reimbursement, upon proper accounting, of reasonable expenses and
disbursements incurred by Employee in the course of
Employee’s duties hereunder. In addition, during each
calendar year of the Term, Employee shall be entitled to no less
than five (5) weeks of paid vacation. If Employee is requested
by the Company to move to China and agrees to do so, the Company
shall thenceforth reimburse Employee for round-trip economy-class
air fare for each of Employee, Employee’s spouse and
Employee’s dependent children from Beijing to
Employee’s home in the United States in connection with such
vacation. In addition, for each calendar year of the Term, Employee
shall be reimbursed for the tuition costs paid by Employee for
Employee’s dependent children, if any, attending primary or
secondary schools, provided , however , that such
reimbursement shall not exceed ninety thousand dollars ($90,000)
per
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calendar year.
During the Term, Employee shall be entitled to the use of a
Company-owned automobile or an allowance to reimburse Employee for
Employee’s costs associated with the use of a personal
automobile. During the Term, Employee shall also be provided an
allowance of five thousand dollars ($5,000) per month in connection
with Employee’s maintenance of a remote office facility in
the United States. Payment or reimbursement of each of the business
expenses, air fare (if applicable), tuition, automobile, and remote
office facility benefits provided for in this paragraph with
respect to any calendar year shall not affect the amount of
benefits payable or expenses eligible for reimbursement in any
other calendar year, and such benefits and reimbursements may not
be exchanged for cash or another benefit. Payment of the remote
office facility allowance and reimbursement for any of the expenses
referred to in this paragraph shall be made no later than the
March 15 of the calendar year following the calendar year in
which such expense is incurred.
(b) Employee
acknowledges that some or all of these benefits may be deemed
compensation to Employee and that the Company may withhold from any
amounts payable to Employee all federal, state, local and/or other
taxes and amounts as shall be required pursuant to law, rule or
regulation.
Section 4.
Employment Termination .
(a)
(1) At any time during the Term, and except as otherwise
provided in Section 4(b) hereof, the Company shall only have the
right to terminate this Employment Agreement and Employee’s
employment with the Company hereunder, upon written notice to
Employee, in the event Employee engages in conduct which
constitutes “Cause.” For purposes of this Employment
Agreement, Cause shall mean: (i) Employee’s willful
misconduct in the performance of Employee’s obligations under
this Employment Agreement or gross negligence in the performance of
Employee’s obligations under this Employment Agreement;
(ii) dishonesty or misappropriation by Employee relating to
the Company or any of its funds, properties, or other assets;
(iii) inexcusable repeated or prolonged absence from work by
Employee (other than as a result of, or in connection with, a
disability); (iv) any unauthorized disclosure by Employee of
confidential or proprietary information of the Company which is
reasonably likely to result in material harm to the Company;
(v) a conviction of Employee (including entry of a guilty or
nolo contendere plea) involving fraud, dishonesty, or moral
turpitude, or involving a violation of federal or state securities
laws; or (vi) the failure by Employee to attempt to perform
faithfully Employee’s duties hereunder, or other material
breach by Employee of this Employment Agreement, and such failure
or breach is not cured, to the extent cure is possible, by Employee
within thirty (30) days after written notice thereof from the
Company to Employee; provided , however , that no
event or condition described in clauses (i), (ii), (iii),
(iv) and (vi) shall constitute Cause unless (x) the
Company first gives Employee written notice of its intention to
terminate Employee’s employment for Cause and the grounds for
such termination no fewer than twenty (20) days prior to the
date of termination; and (y) Employee is provided the
opportunity to appear before the Board, with or without legal
representation at Employee’s election to present arguments on
Employee’s own behalf; provided further , however,
that notwithstanding anything to the contrary in this Agreement and
subject to the other terms of this proviso, the Company may take
any and all actions, including without limitation suspension (but
not without pay), it deems appropriate with respect to Employee and
Employee’s duties at the Company pending such appearance. No
act or failure to act on Employee’s part will be considered
“willful” unless
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done, or
omitted to be done, by Employee not in good faith and without
reasonable belief that Employee’s action or omission was in
the best interests of the Company.
(2) If
this Employment Agreement and Employee’s employment with the
Company hereunder is terminated for Cause, or if Employee
voluntarily resigns (which Employee may do at any time) from the
Company without Good Reason during the Term, the Company shall pay
Employee: (i) a lump sum amount within thirty (30) days
after such termination (or such later date as may be required by
Section 4(i) hereof) equal to the sum of (A) all earned but
unpaid portions of the Annual Salary, (B) payment of or
reimbursement for any unpaid remote office facility allowance or
unreimbursed business expenses, air fare, tuition, and automobile
expenses incurred by Employee prior to the date of termination or
resignation (the “Termination Date”) to which Employee
is entitled pursuant to Section 3, and (C) payment for
any unused vacation days through the Termination Date;
(ii) any earned but unpaid cash Bonus Compensation for a
previously completed fiscal year of the Company, which shall be
paid at the time paid to active employees, but no later than six
months after the end of the fiscal year for which the bonus was
earned (or such later date as may be required by Section 4(i)
hereof); and (iii) any other amounts or benefits (other than
severance, termination or similar pay) required to be paid or
provided by law or under any plan, program or policy of the
Company, which shall be paid or provided in accordance with the
terms of such law, plan, program or policy (or such later date as
may be required by Section 4(i) hereof) (the items in clauses
(i)(A)-(C), (ii), and (iii) collectively, the “Accrued
Amounts”); and following any such termination, Employee shall
not be entitled to receive any other compensation or benefits from
the Company hereunder, including, without limitation, any portion
of the annual Bonus Compensation for the fiscal year in which the
Termination Date occurs.
(b)
(1) This Employment Agreement and Employee’s
employment with the Company hereunder may also be terminated by the
Company without Cause, or by Employee upon the occurrence of an
event constituting Good Reason. For purposes of this Employment
Agreement, “Good Reason” shall mean: (i) any
reduction in Employee’s authority, functions, duties, or
responsibilities; (ii) any adverse change in Employee’s
positions, titles or reporting responsibility (such that Employee
reports to a person other than the CEO); (iii) the assignment
of duties to Employee that are inconsistent with Employee’s
position and status as EVP and CFO of the Company; provided
, however , that the provisions in clauses (i),
(ii) and (iii) of this paragraph shall not include a
change in Employee’s authority, functions, duties,
responsibilities, positions, titles or reporting responsibility
following a Change in Control (as defined in the Company’s
2007 Stock Incentive Plan) solely by virtue of the Company being
acquired and made part of a larger entity (as, for example, if
Employee is not appointed as Executive Vice President
(EVP) and Chief Financial Officer (CFO) of the acquiring
corporation, but continues to have a substantially similar level of
responsibility over the affairs of the Company following such
Change in Control); (iv) a reduction in the Annual Salary
during the Term or a material reduction in Employee’s bonus
opportunity during the Term; (v) any other material breach of
this Employment Agreement by the Company; or
(vi) Employee’s relocation by the Company or a successor
thereto without Employee’s written consent to a location
other than Bethesda, Maryland; provided that in the
case of (i) through (v) above, the Company has failed to
cure the event constituting Good Reason within thirty
(30) days following written notice thereof from
Employee.
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(2) In
the event that Employee’s employment with the Company shall
terminate during the Term on account of termination by the Company
without Cause, or by Employee with Good Reason, then the Company
shall pay or provide to Employee, as Employee’s sole and
exclusive remedy hereunder: (A) the Accrued Amounts, which shall be
paid or provided at the times set forth in Section 4(a)(2);
(B) a pro-rated (based on the number of days employed in the
year of termination or resignation) bonus for the fiscal year in
which such termination or resignation occurs based on the amount of
Bonus Compensation actually earned for such fiscal year by virtue
of the achievement of the performance goals established for such
fiscal year (a “Pro-Rated Bonus”), which shall be paid
(and any equity award component of which shall be granted) at the
same time the bonus for that fiscal year is paid to active
employees, but not later than six months after the end of such
fiscal year (provided, however, that in the event the termination
of Employee’s employment with the Company occurs within
twelve (12) months following a Change in Control (as defined
in the Company’s 2007 Stock Incentive Plan) which is also a
change in control event as defined for purposes of Section 409A,
the pro-rated bonus provided under this clause (B) shall
instead be based on the greater of (i) the average of the
Bonus Compensation paid to Employee for the two completed fiscal
years immediately preceding the Termination Date and
(ii) thirty percent (30%) of the Annual Salary of Employee as
of the last day of the most recently completed fiscal year, and
such amount shall be paid on the sixtieth (60th) day following the
Termination Date (or such later date as may be required by
Section 4(i))); (C) (1) group or individual health,
sickness and hospital insurance substantially similar to that which
Employee was receiving immediately prior to the notice of
termination, which obligation to provide insurance shall commence
upon such termination of employment and continue until Employee
qualifies for Medicare, reaches age 65, dies, notifies the Company
that such benefit should cease, or becomes eligible for
corresponding benefits in connection with new employment, whichever
occurs earliest, and (2) an annuity policy which will provide
Employee with payments of five hundred dollars ($500) per month
from the date Employee attains age 65 until his death that Employee
can use to purchase supplemental health insurance, which annuity
policy shall be delivered to Employee on the sixtieth (60th) day
following the Termination Date (or such later date as may be
required by Section 4(i)); (D) Three hundred percent
(300%) of the sum of (1) the Annual Salary to which Employee
would have been entitled if Employee had continued working for the
Company for an additional twelve (12) month period following
the Termination Date, (2) the amount of annual Bonus
Compensation that was paid to Employee for the Company’s
fiscal year immediately prior to the fiscal year in which the
Termination Date occurs, and (3) the annual remote office
facility allowance under Section 3, with the cash amounts
payable under this clause (D) being paid to Employee in a lump
sum payment on the sixtieth (60th) day following the Termination
Date (or such later date as may be required by Section 4(i));
(E) all unvested equity awards, including without limitation
all unvested stock options and all unvested stock grants, granted
to Employee prior to the Termination Date or pursuant to clause
(B) or (D) of this paragraph, shall become vested and
exercisable as follows: (1) Unvested equity awards granted
prior to the Termination Date shall vest and become exercisable on
the Termination Date (or, to the extent provided in the respective
grant letter, upon Employee’s execution of the Release
referred to in Section 24 hereof and expiration of any
applicable revocation period, provided such Release has not been
revoked); (2) equity awards granted pursuant to clause
(D) of this paragraph shall be granted and shall vest and
become exercisable upon Employee’s execution of the Release
referred to in Section 24 hereof and expiration of any
applicable revocation period, provided such Release has
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not been
revoked; (3) equity awards granted pursuant to clause
(B) of this paragraph shall vest and become exercisable upon
the date of grant of such awards, provided that Employee has
executed the Release referred to in Section 24 hereof and such
Release has not been revoked within any applicable revocation
period; (4) Employee shall have a period of ninety
(90) days following the Termination Date, or in the case of
stock options granted under clause (B), 90 days following the
date of grant (or, in each case, such longer exercise period as may
be provided in the respective option grant, but in no event past
the respective expiration term of the option grant) to exercise all
stock options granted under any of the Company’s plans then
exercisable or which become exercisable pursuant to this clause
(E); and (5) to the extent clause (B) or (D) of this
paragraph would call for the grant of restricted stock or
restricted stock units, the Company shall instead deliver fully
vested shares of common stock of the Company on the day after the
expiration of any applicable revocation period after
Employee’s execution of the Release referred to in
Section 24 provided such Release has not been revoked within
such period, or such later date as may be required by
Section 4(i); and (F) tuition reimbursements as provided
in Section 3 shall be continued for the remainder of the
calendar year in which the Termination Date occurs and for an
additional three calendar years thereafter, payable at the times
provided in Section 3 to the extent that Employee continues to
be eligible for such reimbursement as provided in Section 3.
Each tuition reimbursement payable under clause (F) shall be
paid no later than the March 15 of the calendar year following
the calendar year in which such tuition expense is incurred (or
such later date as may be required by Section 4(i)).
Notwithstanding the foregoing provisions of this paragraph:
(1) the payments and equity grants provided for in clause
(D) shall be contingent upon Employee’s continued
compliance with Sections 5 and 6 hereof (except that Employee
shall not be deemed for purposes of this Section 4(b) not to have
been in compliance with Section 6 solely as a result of an
unintentional disclosure of confidential information) and Employee
shall be obligated to repay all such payments (and value realized
from such equity grants) upon determination by the Board that
Employee has failed to comply as such with Sections 5 or 6
hereof; (2) all of the payments and benefits provided for in
this Section 4(b)(2) other than those provided for in clauses
(A) and (C)(1) shall be subject to Employee’s execution
of the Release referred to in Section 24 within the time
period set forth therein and Employee’s failure to revoke
such Release within any applicable revocation period; and
(3) the benefits continuation provided for in clause (C)
(1) above shall terminate if the Release referred to in
Section 24 has not been executed within the time period
provided in Section 24 or has been revoked within any
applicable revocation period.
(c) In
the event that Employee becomes entitled to one or more payments
(with a “payment” including, without limitation, the
vesting of an option or other non-cash benefit or property, whether
pursuant to the terms of this Employment Agreement or any other
plan, arrangement or agreement with the Company or any affiliated
company) (the “Total Payments”), which are or become
subject to the tax imposed by Section 4999 of the Internal
Revenue Code of 1986 (the “Code”) (or any similar tax
that may hereafter be imposed) (the “Excise Tax”), the
Company shall pay to Employee at the time specified below an
additional amount (the “Gross-up Payment”) (which shall
include, without limitation, reimbursement for any penalties and
interest that may accrue in respect of such Excise Tax) such that
the net amount retained by Employee, after reduction for any Excise
Tax (including any penalties or interest thereon) on the Total
Payments and any federal, state and local income or employment tax
and Excise Tax on the Gross-up Payment provided for by this section
4(c), but before reduction for any federal, state or local income
or employment tax on the Total Payments, shall
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be equal to the
sum of (a) the Total Payments, and (b) an amount equal to
the product of any deductions disallowed for federal, state or
local income tax purposes because of the inclusion of the Gross-up
Payment in Employee’s adjusted gross income multiplied by the
highest applicable marginal rate of federal, state or local income
taxation, respectively, for the calendar year in which the Gross-up
Payment is to be made.
(d) For
purposes of determining whether any of the Total Payments will be
subject to the Excise Tax and the amount of such Excise Tax
pursuant to subsection (c) above,
(i)
the Total Payments shall be treated as “parachute
payments” within the meaning of Section 280G(b)(2) of
the Code, and all “excess parachute payments” within
the meaning of Section 280G(b)(1) of the Code shall be treated
as subject to the Excise Tax, unless, and except to the extent
that, in the written opinion of independent compensation
consultants or auditors of nationally recognized standing selected
by the Company and reasonably acceptable to Employee
(“Independent Auditors”), the Total Payments (in whole
or in part) do not constitute parachute payments, or such excess
parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered within the meaning of
Section 280G(b)(4) of the Code in excess of the base amount
within the meaning of Section 280G(b)(3) of the Code or are
otherwise not subject to the Excise Tax,
(ii)
the amount of the Total Payments which shall be treated as subject
to the Excise Tax shall be equal to the lesser of (A) the
total amount of the Total Payments or (B) the amount of excess
parachute payments within the meaning of Section 280G(b)(1) of
the Code (after applying clause (i) above), and
(iii)
the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Company’s Independent
Auditors appointed pursuant to clause (i) above in accordance
with the principles of Sections 280G(d)(3) and (4) of the
Code.
(e) For
purposes of determining the amount of the Gross-up Payment,
Employee shall be deemed (A) to pay federal income taxes at
the highest marginal rate of federal income taxation for the
calendar year in which the Gross-up Payment is to be made;
(B) to pay any applicable state and local income taxes at the
highest marginal rate of taxation for the calendar year in which
the Gross-up Payment is to be made, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such
state and local taxes if paid in such year (determined without
regard to limitations on deductions based upon the amount of
Employee’s adjusted gross income); and (C) to have
otherwise allowable deductions for federal, state and local income
tax purposes at least equal to those disallowed because of the
inclusion of the Gross-up Payment in Employee’s adjusted
gross income. In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder
at the time the Gross-up Payment is made, Employee shall repay to
the Company at the time that the amount of such reduction in Excise
Tax is finally determined (but, if previously paid to the taxing
authorities, not prior to the time the amount of such reduction is
refunded to Employee or otherwise realized as a benefit by
Employee) the portion of the Gross-up Payment that would not have
been paid if such Excise Tax had been applied in initially
calculating the Gross-up
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Payment, plus
interest on the amount of such repayment at the rate provided in
Section&nb
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