PERSONAL RESPONSIBILITY AGREEMENT
XXXX X. XXXXXXXXX, 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 Xxxx X. Xxxxxxxxx, an Illinois resident, residing at 0000 Xxxxxxxx Xxxx,
Xxxxxxxx, Xxxxxxxx 60201("Xxxxxxxxx").
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, Xxxxxxxxx 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 Xxxxxxxxx through
FCI cash in the amount of $293,750.25 and INMD Common Stock valued at
$97,916.75.
C. The services Xxxxxxxxx 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 Xxxxxxxxx'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 Xxxxxxxxx offer through FCI.
X. Xxxxxxxxx intends that FCI be the entity through which Xxxxxxxxx
conducts his practice of medicine, and has entered into the Employment
Agreement. This Agreement is also made with reference to the Employment
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Agreement, which defines Xxxxxxxxx'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 Xxxxxxxxx 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. Xxxxxxxxx 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
Xxxxxxxxx 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 Xxxxxxxxx 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 Xxxxxxxxx to
exerting his best efforts to support the operation of FCI under its Management
Agreement with INMD. Xxxxxxxxx acknowledges that each of the Physicians has
executed a similar agreement with INMD.
Therefore, INMD, FCI, and Xxxxxxxxx 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 Xxxxxxxxx'x Interests. Xxxxxxxxx
acknowledges that INMD is entering into the January 1998 Amendment with FCI upon
Xxxxxxxxx'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 Xxxxxxxxx, with specific rights and responsibilities existing
between Xxxxxxxxx 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 Xxxxxxxxx, a Right to Manage Fee in the sum of $500,000. If, during
the Term of this Agreement, Xxxxxxxxx should cease to practice medicine through
FCI, except as a result of death or "permanent disability", as defined in the
Employment Agreement, Xxxxxxxxx shall be obligated to forthwith pay to INMD a
prorata portion of $500,000, determined by multiplying the number of quarters
this Agreement has been in effect rounded off to the nearest quarter by $25,000
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("Vested Amount"). The Vested Amount is then deducted from the $500,000
resulting in the amount Xxxxxxxxx is obligated to pay INMD. Xxxxxxxxx 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 Xxxxxxxxx received the INMD Common Stock from
INMD. Payments to INMD under this paragraph shall not entitle Xxxxxxxxx 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
Xxxxxxxxx'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. Xxxxxxxxx may request INMD to
waive or reduce his repayment obligation by submitting a written transition plan
to INMD for its consideration. Xxxxxxxxx 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 Xxxxxxxxx,
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 Xxxxxxxxx'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 Xxxxxxxxx by FCI and FCI's shareholders. Approval of the request shall be
discretionary for INMD, but shall not be unreasonably withheld.
3.3 Xxxxxxxxx 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. Xxxxxxxxx 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 Xxxxxxxxx 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 Xxxxxxxxx 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 Xxxxxxxxx further agree that INMD is a third-party
beneficiary of theExclusive Practice Covenants with respect to Xxxxxxxxx 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 Xxxxxxxxx
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. Xxxxxxxxx and FCI agree that the
scope and term of Xxxxxxxxx'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, Xxxxxxxxx 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 Xxxxxxxxx'x employment by FCI (the "Current Medical Offices").
6.3 During the Non-Competition Period, Xxxxxxxxx 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
Xxxxxxxxx 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 Xxxxxxxxx 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 Xxxxxxxxx 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 Xxxxxxxxx, in part,
due to the representation by Xxxxxxxxx that he will abide by and be bound by the
aforesaid covenants and restraints.
7. Commitment to Pay Management Fees. Xxxxxxxxx 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 Xxxxxxxxx'x unique services. Xxxxxxxxx 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 Xxxxxxxxx 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 Xxxxxxxxx during the
Non-Competition Period. These fees shall be payable notwithstanding the
dissolution, insolvency, receivership or bankruptcy of FCI and any breach of
FCI's contracts with Xxxxxxxxx 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. Xxxxxxxxx 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
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covered hereunder, and this Agreement may not be amended, altered, changed or
terminated orally. No amendment, alteration, change or attempted 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 Xxxxxxxxx. 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
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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.
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 Xxxxxxxxx at:
Xxxx X. Xxxxxxxxx, M.D.
0000 Xxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000
If for FCI at:
Fertility Centers of Illinois, S.C.
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Attention: President
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With a copy to:
Xxxxxx Xxxxxxx, Esq.
Xxxxxxx & Xxxxxxx, P.C.
0000 Xxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxx 00000-0000
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.
Xxxx X. Xxxxxxxxx:
/s/ Xxxx X. Xxxxxxxxx, M.D.
---------------------------------------
Xxxx X. Xxxxxxxxx, 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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