PERSONAL RESPONSIBILITY AGREEMENT
XXXXXXXX X. XXXXXX, M.D.
THIS PERSONAL RESPONSIBILITY AGREEMENT ("Agreement"), dated
January 9, 1998, is made and entered into by and among IntegraMed America, Inc.,
a Delaware corporation, with its principal place of business at Xxx
Xxxxxxxxxxxxxx Xxxx, Xxxxxxxx, Xxx Xxxx 00000 ("INMD"), Fertility Centers of
Illinois, S.C., an Illinois medical corporation ("FCI"), whose principal place
of business is 0000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxx 00000,
and Xxxxxxxx X. Xxxxxx, an Illinois resident, residing at 0000 Xxxxxxxx Xxxxx,
Xxxxxxxxxx, Xxxxxxxx 00000 ("Xxxxxx").
RECITALS:
This Agreement is made with reference to a Management Agreement dated
February 28, 1997 (the "Management Agreement") between INMD and FCI, which has
been amended by agreements dated May 2, 1997, June 18, 1997, August 19, 1997 and
January 9, 1998.
A. Xxxxx Xxxxxx, M.D., Xxxxx X. Xxxxxxx, M.D., Xxxxx Xxxxx, M.D., and
Xxxxx Xxxxx, M.D. (collectively, "Physicians") are the sole shareholders of FCI,
the entity through which Physicians exclusively conduct their practice of
medicine. By agreement dated January 9, 1998, Xxxxxx has become affiliated with
FCI (the "Employment Agreement").
B. Pursuant to the Management Agreement, INMD has transferred to the
Physicians through FCI cash in amount of $6,000,000 and stock in INMD valued at
$2,000,000. Pursuant to the January 9, 1998 amendment to the Management
Agreement ("January 1998 Amendment"),INMD has transferred to Xxxxxx through FCI
cash in the amount of $587,499.75 and INMD Common Stock valued at $195,833.25.
C. The services Xxxxxx intends to offer through FCI are unique in terms
of how these services are rendered and the relative unavailability of similar
services from other physicians, and in terms of Xxxxxx'x reputation, and involve
medical, professional and technical services. Through INMD's resources, the
parties intend to maintain and enhance the technology which Physicians and
Xxxxxx offer through FCI.
X. Xxxxxx intends that FCI be the entity through which Xxxxxx conducts
his practice of medicine, and has entered into the Employment Agreement. This
Agreement is also made with reference to the Employment Agreement, which defines
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Xxxxxx'x rights and responsibilities with respect to FCI and his practice of
medicine, including, but not limited to, compensation terms and a covenant not
to compete.
E. While it is the objective of the parties to this Agreement and the
Management Agreement that the FCI expand its presence, hire additional and
replacement physicians, and otherwise seek to maintain and establish good will
apart from the continued full-time commitment of each of Xxxxxx and the other
Physicians, the parties also acknowledge that at present the identity of FCI is
not institutional, but rather is co-extensive with the individual practices of
its current physicians.
X. Xxxxxx recognizes that the success of FCI and of INMD's investment
in administrative and technologic resources depends on his commitment and the
commitment of each of the other Physicians to continue to practice medicine
exclusively through FCI. INMD has made substantial payments to Xxxxxx and the
other Physicians to assure their availability and dedication to FCI and has made
and plans to make a substantial investment in equipment and other resources for
FCI in reliance on the ability to amortize such investments based on such
assurances from Xxxxxx and each of the other Physicians.
G. The purpose of this Agreement is to assure INMD that its payments
and commitment of resources is supported by the commitment of Xxxxxx to exerting
his best efforts to support the operation of FCI under its Management Agreement
with INMD. Xxxxxx acknowledges that each of the Physicians has executed a
similar agreement with INMD.
Therefore, INMD, FCI, and Xxxxxx agree as follow:
1. Term and Termination. This Agreement shall commence on the date
first above written and expire five (5) years thereafter (the "Term").
2. FCI as Representative of Xxxxxx'x Interests. Xxxxxx acknowledges
that INMD is entering into the January 1998 Amendment with FCI upon Xxxxxx'x
stipulation that FCI will represent his entire medical practice. It is agreed,
therefore, that for purposes of assuring continuity of the commitments under the
Management Agreement, as amended, that FCI is deemed the alter ego of Xxxxxx,
with specific rights and responsibilities existing between Xxxxxx and INMD, as
set forth herein.
3. Repayment of Rateable Portion of Right to Manage Fee.
3.1 Pursuant to the January 1998 Amendment, INMD has paid FCI, for the
benefit of Xxxxxx, a Right to Manage Fee in the sum of $1.0 million. If, during
the Term of this Agreement, Xxxxxx should cease to practice medicine through
FCI, except as a result of death or "permanent disability", as defined in the
Employment Agreement, Xxxxxx shall be obligated to forthwith pay to INMD a
prorata portion of $1.0 million, determined by multiplying the number of
quarters this Agreement has been in effect rounded off to the nearest quarter by
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$50,000 ("Vested Amount"). The Vested Amount is then deducted from the $1.0
million resulting in the amount Xxxxxx is obligated to pay INMD. Xxxxxx may pay
up to 25% of the sum due INMD under this paragraph in the form of INMD Common
Stock, at the same price per share Xxxxxx received the INMD Common Stock from
INMD. Payments to INMD under this paragraph shall not entitle Xxxxxx to any
interest in the assets of FCI or INMD.
3.2 The parties acknowledge that through an effective
transition plan, FCI may add another physician to its practice so that Xxxxxx'x
retirement or other reduction in his availability to FCI does not adversely
affect INMD revenues under the Management Agreement, but that there are no
assurances of such a transition's success. Xxxxxx may request INMD to waive or
reduce his repayment obligation by submitting a written transition plan to INMD
for its consideration. Xxxxxx shall submit such a transition plan as soon as
possible if he plans to reduce his availability to FCI, but in no event less
than six months before the reduction in his availability. It is expected that
such a plan shall be modified as the result of discussions among Xxxxxx, FCI,
and INMD, that INMD's acceptance of the plan shall be in accordance with the
Management Agreement, and that its agreement to waive or reduce Xxxxxx'x
repayment obligation shall be mostly, if not wholly, contingent upon the
economic results of the implementation of the plan and shall be secured by sums
owed Xxxxxx by FCI and FCI's shareholders. Approval of the request shall be
discretionary for INMD, but shall not be unreasonably withheld.
3.3 Xxxxxx may assign all or a portion of his payment
obligations under this Section to a new or an existing employee-physician of FCI
who has executed the agreements with FCI and INMD contemplated by this
Agreement, subject to INMD's written consent, which shall not be unreasonably
withheld. Such assignment shall be reflected in the Personal Responsibility
Agreement signed by the new employee-physician of FCI and in an amendment to
this Agreement.
4. FCI's Compliance with the Management Agreement. Xxxxxx agrees to
exert his best efforts to cause FCI to fulfill each of its obligations under the
Management Agreement.
5. Physician-Shareholder Employment Agreement.
5.1 FCI agrees to exert its best efforts to: (i) comply with
the terms of the Employment Agreement which, if FCI does not comply, would
excuse Xxxxxx or any of the other Physicians or other physician employees or
shareholders of FCI from complying with his covenant not to compete with FCI,
his assignment of all Professional Revenues to FCI and other terms confirming
that physician's commitment to practicing medicine solely through FCI for a
period of not less than five (5) years and thereafter not to terminate his
employment without cause on less than 180 days written notice (the "Exclusive
Practice Covenants") and (ii) enforce with respect to each of the Physicians and
other physician employees and shareholders of FCI the Exclusive Practice
Covenants and Xxxxxx agrees to exert his best efforts to cause FCI to comply
with each of the aforementioned obligations.
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5.2 FCI and Xxxxxx further agree that INMD is a third-party
beneficiary of the Exclusive Practice Covenants with respect to Xxxxxx and the
other Physicians and that the Exclusive Practice Covenants, in the form that is
then most recently approved by INMD, are hereby incorporated in this Agreement
by reference and may be enforced by INMD as well as by FCI FCI and Xxxxxx
further agree that the Exclusive Practice Covenants and any other terms of the
Employment Agreement may not be amended or modified in a way which may adversely
affect the interests of INMD, including without limitations its rights under the
Management Agreement, without thirty (30) days prior written notice to INMD and
the written consent of INMD, which consent shall not be unreasonably withheld.
6. Scope of Covenant Not to Compete. Xxxxxx and FCI agree that the
scope and term of Xxxxxx'x covenant not to compete, insofar as it is for the
benefit of INMD, shall be as follows:
6.1 The term of the covenant not to compete (the
Non-Competition Period") shall be for a period of one (1) year after the
termination of the Employment Agreement in the event such termination occurs
during the initial term of the Employment Agreement. After the Employment
Agreement has been in effect for six (6) years, Xxxxxx shall not be subject to
any non-compete restrictions.
6.2 The geographic scope of the covenant not to compete (the
"Service Area") is ten (10) miles from any offices maintained by FCI for the
rendition of professional or other medical services to patients during the last
12 months of Xxxxxx'x employment by FCI (the "Current Medical Offices").
6.3 During the Non-Competition Period, Xxxxxx agrees that he
shall not advertise or market Infertility Services, engage in the practice of
medicine in which he provides Infertility Services, be an agent of, act as a
consultant for, allow his name to be used by, or have a proprietary interest in,
any Medical Practice providing Infertility Services within ten (10) miles of a
Current Medical Office.
6.4 For purposes of this Section, the following definitions
shall apply:
6.4.1 The term "Medical Practice" shall include any
form of organization in which Infertility Services are provided to
patients of the Medical Practice or of other physicians, including but
not limited to a sole proprietorship, a partnership, an association, a
professional corporation, a business corporation, or a limited
liability partnership or corporation, a laboratory, an outpatient
clinic, a practice management company or medical services organization
(or MSO). However, ownership of less than 5% of the outstanding
securities of any class of a medical management or managed care
organization traded on a national securities exchange or the NASDAQ
National Market System will not be deemed to be engaging, solely by
reason thereof, in the same business.
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6.4.2 The term "Medical Office" includes any location at which
the professional or technical component of Infertility Services are
provided and any other location which a Medical Practice maintains for
patient visits.
6.4.3 The term "Infertility Services" shall have the
same meaning as set forth in the Management Agreement, except that
Xxxxxx shall not be prohibited from providing obstetrics and general
gynecological services.
6.5 Separability. If the final judgment of a court of
competent jurisdiction declares that any term or provision of this Section is
invalid or unenforceable, each Party agrees that the court making the
determination of invalidity or unenforceability will have the power to reduce
the scope, duration or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
will be enforceable as so modified after the expiration of time within which the
judgment may be appealed.
6.6 Clarification of Scope of Non-Competition Covenant. This
Agreement is not intended to prohibit the personal performance of medical care
by Physician on behalf of FCI, provided those services are for patients of FCI,
nor prohibit Physician from fulfilling his contract with FCI, nor prohibit the
Physician from holding any position on the medical staff of any acute care
hospital or the teaching staff of any university.
6.7 Acknowledgments. FCI, INMD and Xxxxxx each acknowledges
that: (i) the terms set forth in this Section are necessary for the reasonable
and proper protection of the interests of FCI and INMD; (ii) each and every
covenant and restriction is reasonable with respect to such matter, length of
time and geographical area; (iii) this Agreement, and this Section in
particular, shall be enforceable notwithstanding any dispute as to the sums and
timing of payments to Xxxxxx or other disputes under this Agreement or the
Employment Agreement; and (iv) the FCI and INMD have been induced to enter into
this Agreement and their other respective agreements with Xxxxxx, in part, due
to the representation by Xxxxxx that he will abide by and be bound by the
aforesaid covenants and restraints.
7. Commitment to Pay Management Fees. Xxxxxx has agreed in the
Employment Agreement not to compete with FCI during the initial term of his
employment by FCI and for at least one (1) year thereafter, and recognizes that
in the event that he should compete with FCI, INMD would suffer damages in
addition to the loss of Xxxxxx'x unique services. Xxxxxx therefore agrees that
during the initial term of his Employment Agreement with FCI, and during the
Non-Competition Period after the initial term of his employment, he shall be
obligated, with respect to each month in which he renders services which earn
Physician and other Professional Revenues, as defined in the Management
Agreement, that are not assigned to and collected by FCI, or offers services or
assists other persons in offering services in the Service Area which are similar
to any of those offered by FCI while he was still a director, officer, or
shareholder of FCI or active in providing services on behalf of FCI, he shall
owe INMD management fees equal to one-twelfth of:
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7.1 One-seventh of the Cost of Services as defined in the
Management Agreement, which are incurred in the twelve months preceding
the first month in which INMD, in the reasonable exercise of its
discretion, concludes that Xxxxxx was engaging in such competitive acts
so as to materially adversely affect FCI's operations (the "Pre-
Competition Period").
7.2 One-seventh of the Base Management Fee which INMD earned
during the Pre-Competition Period.
7.3 One-seventh of any other fees earned by INMD under the
Management Agreement during the Pre-Competition Period.
7.4 One-seventh of any advances or other payments owed by FCI
to INMD at the end of the Pre-Competition Period.
It is understood and agreed that the payment of the foregoing fees would be made
as an alternative to the restrictions against Xxxxxx during the Non-Competion
Period. These fees shall be payable notwithstanding the dissolution, insolvency,
receivership or bankruptcy of FCI and any breach of FCI's contracts with Xxxxxx
occasioned by such dissolution, insolvency, receivership or bankruptcy.
8. Force Majeure. No party shall be liable to the other party for
failure to perform any of the services required under this Agreement in the
event of a strike, lockout, calamity, act of God, unavailability of supplies, or
other event over which such party has no control, for so long as such event
continues and for a reasonable period of time thereafter, and in no event shall
such party be liable for consequential, indirect, incidental or like damages
caused thereby.
9. Equitable Relief. Without limiting other possible remedies available
to a non- breaching party for the breach of the covenants contained herein,
injunctive or other equitable relief shall be available to enforce those
covenants, such relief to be without the necessity of posting bond, cash or
otherwise. If any restriction contained in said covenants is held by any court
to be unenforceable or unreasonable, a lesser restriction shall be enforced in
its place and remaining restrictions therein shall be enforced independently of
each other.
10. Confidential Information. Xxxxxx acknowledges and agrees to
maintain the confidentiality of INMD and FCI Confidential Information as defined
in the Management Agreement and in any agreements he may have with FCI, and that
any notice to INMD that documents or other information, however maintained, is
Confidential Information, shall be deemed, for purposes of this Agreement, to be
notice to him that it is Confidential Information.
11. Prior Agreements; Amendments. This Agreement, together with the
Management Agreement and the other agreements referenced herein, supersedes all
prior agreements and understandings between the parties as to the subject matter
covered hereunder, and this Agreement may not be amended, altered, changed or
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terminated orally. No amendment, alteration, change orattempted waiver of any of
the provisions hereof shall be binding without the written consent of the
parties, and such amendment, alteration, change, termination or waiver shall in
no way affect the other terms and conditions of this Agreement, which in all
other respects shall remain in full force.
12. Assignment; Binding Effect. This Agreement and the rights and
obligations hereunder may not be assigned without the prior written consent of
the parties, and any attempted assignment without such consent shall be void and
of no force and effect, except that INMD may assign this Agreement to any
subsidiary or affiliate of INMD without the consent of Xxxxxx. The provisions of
this Agreement shall be binding upon and shall inure to the benefit of the
parties' respective heirs, legal representatives, successors and permitted
assigns.
13. Waiver of Breach. The failure to insist upon strict compliance with
any of the terms, covenants or conditions herein shall not be deemed a waiver of
such terms, covenants or conditions, nor shall any waiver or relinquishment of
any right at any one or more times be deemed a waiver or relinquishment of such
right at any other time or times.
14. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois to the fullest extent
permitted by law, without regard to the application of conflict of law rules.
Any and all claims, disputes, or controversies arising under, out of, or in
connection with this Agreement or any breach thereof, shall be determined by
binding arbitration in the State of Illinois, County of Xxxx (hereinafter
"Arbitration"). The party seeking determination shall subject any such dispute,
claim or controversy to either (I) JAMS/Endispute or (ii) the American
Arbitration Association, and the rules of commercial arbitration of the selected
entity shall govern, except with regard to actions for injunctive relief. The
Arbitration shall be conducted and decided by three (3) arbitrators, unless the
parties mutually agree in writing at the time of the Arbitration, to fewer
arbitrators. In reaching a decision, the arbitrators shall have no authority to
change or modify any provision of this Agreement, including without limitation,
any liquidated damages provision. Each party shall bear its own expenses and
one-half the expenses and costs of the arbitrators. Any application to compel
Arbitration, confirm or vacate an arbitral award or otherwise enforce this
paragraph shall be brought either in the Courts of the State of Illinois or the
United States District Court for the Northern District of Illinois, to whose
jurisdiction for such purposes the parties hereby irrevocably consent and
submit.
15. Separability. If any portion of the provisions hereof shall to any
extent be invalid or unenforceable, the remainder of this Agreement, or the
application of such portion or provisions in circumstances other than those in
which it is held invalid or unenforceable, shall not be affected thereby, and
each portion or provision of this Agreement shall be valid and enforced to the
fullest extent permitted by law, but only to the extent the same continues to
reflect fairly the intent and understanding of the parties expressed by this
Agreement taken as a whole.
16. Headings; Capitalized Terms. Section and paragraph headings are not
part of this Agreement and are included solely for convenience and are not
intended to be full or accurate descriptions of the contents thereof. The term
"Infertility Services" and any other capitalized term which is not defined in
this Agreement shall have the same definition it has in the Management
Agreement.
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17. Notices. Any notice or other communication required by or which may
be given pursuant to this Agreement shall be in writing and mailed, certified or
registered mail, postage prepaid, return receipt requested, or overnight
delivery service such as Fedex or Airborne Express, prepaid, and shall be deemed
given when received. Any such notice or communication shall be sent to the
address set forth below:
If for INMD at:
IntegraMed America, Inc.
Xxx Xxxxxxxxxxxxxx Xxxx
Xxxxxxxx, XX 00000-0000
Attention: Xxxxxxx Xxxxx, President
With a copy to:
IntegraMed America, Inc.
Xxx Xxxxxxxxxxxxxx Xxxx
Xxxxxxxx, XX 000000-0000
Attention: Xxxxxx Xxxxx, General Counsel
If for Xxxxxx at:
Xxxxxxxx X. Xxxxxx, M.D.
0000 Xxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
If for FCI at:
Fertility Centers of Illinois, S.C.
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Attention: President
With a copy to:
Xxxxxx Xxxxxxx, Esq.
Xxxxxxx & Xxxxxxx, P.C.
0000 Xxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxx 00000-0000
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Any party hereto, by like notice to the other party, may designate such
other address or addresses to which notice must be sent.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the day and year first above written.
Xxxxxxxx X. Xxxxxx:
/s/Xxxxxxxx X. Xxxxxx, M.D.
---------------------------------------
Xxxxxxxx X. Xxxxxx, M.D.
INTEGRAMED AMERICA, INC.,
By: /s/Xxxxxx X. Xxxx
-----------------------------------
Xxxxxx X. Xxxx, Vice President
FERTILITY CENTERS OF ILLINOIS, S.C.
By:/s/Xxxxx Xxxxxxx, M.D.
------------------------------------
Xxxxx Xxxxxxx, M.D., President
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