PERSONAL RESPONSIBILITY AGREEMENT
XXXXXX X. XXXXXXXX, M.D.
THIS PERSONAL RESPONSIBILITY AGREEMENT ("Agreement"), dated
March 12, 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 ("IntegraMed"), Levy, Sagoskin and
Xxxxxxxx, M.D., P.C., a Maryland professional services corporation ("PC"), with
a place of business at 0000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxx
00000 and Xxxxxx X. Xxxxxxxx, M.D. residing at 00000 Xxxxxxxx Xxxxx Xxxxx,
Xxxxxxxxxx, Xxxxxxxx 00000 ("Sagoskin").
RECITALS:
This Agreement is made with reference to a Stock Purchase and Sale
Agreement dated March 12, 1998 ("Stock Agreement") between IntegraMed and
Sagoskin, Xxxxxxx X. Xxxx, M.D. and Xxxxxx X.Xxxxxxxx, M.D. (collectively,
"Physicians") who owned all the issued and outstanding capital stock (the "Shady
Grove Stock") of Shady Grove Fertility Centers, Inc., a Maryland corporation
("Shady Grove"), prior to the First Closing (as such term is defined in the
Stock Agreement) under the Stock Agreement, and a Management Agreement dated
March 11, 1998 (the "Management Agreement") between Shady Grove and PC.
Physicians are the sole shareholders of PC, the entity through which
Physicians exclusively conduct their practice of medicine.
Pursuant to the Stock Agreement, IntegraMed has paid Sagoskin and
Xxxxxxx X. Xxxx, M.D., in the aggregate, $1,848,200 in cash, IntegraMed Common
Stock valued at $1,224,100 and given Levy and Sagoskin promissory notes totaling
$1,097,250 (the "Notes") for the Shady Grove Stock owned by Levy and Sagoskin.
Pursuant to the Stock Agreement, IntegraMed will pay Xxxxxx X. Xxxxxxxx, M.D.
("Xxxxxxxx") $951,800 in cash, IntegraMed Common Stock valued at $175,900 and
will give Xxxxxxxx a promissory note for $402,750 on or about November 1, 1998
for the Shady Grove Stock owned by Xxxxxxxx.
The services Physicians previously offered through Shady Grove and
intend to continue offering through PC are unique in terms of how these services
are rendered and the relative unavailability of similar services from other
physicians, and in terms of Physicians' reputation, and involve medical,
professional and technical services. Through IntegraMed's resources, the parties
intend to maintain and enhance the technology which Physicians offer through PC.
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Physicians intend that PC, as successor to Shady Grove's medical
practice, be the entity through which they henceforth conduct their practice of
medicine, and have each entered into a Physician-Stockholder Employment
Agreement with PC on March 11, 1998 (the "Employment Agreement"). This Agreement
is also made with reference to the Employment Agreement, which defines Sagoskin
's and the other Physicians' respective rights and responsibilities with respect
to PC and their medical practices, including but not limited to compensation
terms and a covenant not to compete.
Sagoskin recognizes that the success of PC and of IntegraMed'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 PC. IntegraMed has made substantial payments to
Sagoskin and the other Physicians for the Shady Grove Stock and in reliance on
Sagoskin's and the other Physicians' commitment of their availability and
dedication to PC. Moreover, IntegraMed has made and plans to make a substantial
investment in equipment and other resources for PC in reliance on the ability to
amortize such investments based on such assurances from Sagoskin and each of the
other Physicians.
The purpose of this Agreement is to assure IntegraMed that its payment
for the Shady Grove Stock and other payments and commitment of resources, is
supported by the commitment of Sagoskin to exert his best efforts to support the
operation of PC under its Management Agreement with Shady Grove, a subsidiary of
IntegraMed. Sagoskin acknowledges that each of the Physicians has executed or
will execute a similar agreement with IntegraMed.
Therefore, IntegraMed, PC, and Sagoskin 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. PC as Representative of Sagoskin's Interests. Sagoskin acknowledges
that IntegraMed has acquired the Shady Grove Stock, and as such has valued the
Shady Grove Stock based upon Sagoskin's stipulation that PC represents his
entire medical practice and that Sagoskin will devote substantially all of his
professional time, effort and ability to PC.
3. Payment to IntegraMed.
3.1 Pursuant to the Stock Agreement, IntegraMed has paid
Sagoskin aggregate consideration of $1,909,500 comprised of $838,000 in cash,
$569,000 in IntegraMed Common Stock and a promissory note for $502,500
(collectively referred to as "Aggregate Consideration"). If, during the Term of
this Agreement, Sagoskin should cease to practice medicine through PC, except as
a result of death or "permanent disability", as defined in the Employment
Agreement, Sagoskin shall be obligated to forthwith pay to IntegraMed a prorata
portion of the Aggregate Consideration determined by deducting the Vested Amount
(as hereinafter described) from the Aggregate Consideration. The Vested Amount
shall be determined by multiplying the number of quarters this Agreement has
been in effect, rounded to the nearest quarter based on the number of days in
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the quarter, times $95,475 (the product of which is the "Vested Amount").
Sagoskin may pay up to 29.8% of the sums due IntegraMed under this paragraph in
the form of IntegraMed Common Stock, at the same price per share Sagoskin
received the IntegraMed Common Stock from IntegraMed which payment will be
further reduced by the balance due under the Note which Note shall be canceled
in the event Sagoskin's payment obligations are triggered under this Section
3.1. Payments to IntegraMed under this paragraph shall not entitle Sagoskin to
any interest in the assets of PC, Shady Grove or IntegraMed. The parties agree
that it is impractical and not in the best interest of IntegraMed for Sagoskin
to repurchase the Shady Grove Stock and this provision requires a repayment of
consideration as a penalty for breach of the representation that Physician would
remain employed by PC for a specified time, which induced IntegraMed to enter
into the Stock Agreement.
3.2 The parties acknowledge that through an effective
transition plan, PC may add another physician to its practice so that Sagoskin's
retirement or other reduction in his availability to PC does not adversely
affect IntegraMed revenues under the Management Agreement, but that there are no
assurances of such a transition's success. Sagoskin may request IntegraMed to
waive or reduce his repayment obligation by submitting a written transition plan
to IntegraMed for its consideration. Sagoskin shall submit such a transition
plan as soon as possible if he plans to reduce his availability to PC, 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
Sagoskin, PC, and IntegraMed, that IntegraMed's acceptance of the plan shall be
in accordance with the Management Agreement, and that its agreement to waive or
reduce Sagoskin's 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 Sagoskin by PC. Approval of the request shall be
discretionary for IntegraMed, but shall not be unreasonably withheld.
3.3 Sagoskin may assign all or a portion of his payment
obligations under this Section to a new or an existing shareholder of PC who has
executed the agreements with PC and IntegraMed contemplated by this Agreement,
subject to IntegraMed's written consent, which shall not be unreasonably
withheld. Such assignment shall be reflected in the Personal Responsibility
Agreement signed by the new shareholder of PC and in an amendment to this
Agreement.
4. PC's Compliance with the Management Agreement. Sagoskin agrees to
exert his best efforts to cause PC to fulfill each of its obligations under the
Management Agreement.
5. Physician-Shareholder Employment Agreement.
5.1 PC agrees to exert its best efforts to: (i) comply with
the terms of the Employment Agreement which, if PC does not comply, would excuse
Sagoskin or any of the other Physicians or other physician employees or
shareholders of PC from complying with his covenant not to compete with PC, his
assignment of all Professional Revenues to PC and other terms confirming that
physician's commitment to practicing medicine solely through PC for a period of
not less than five (5) years ( the "Exclusive Practice Covenants")and thereafter
not to terminate his employment without cause on less than 180 days written
notice and (ii) enforce with respect to each of the Physicians and other
physician employees and shareholders of PC the Exclusive Practice Covenants
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and Sagoskin agrees to exert his best efforts to cause PC to comply with each of
the aforementioned obligations.
5.2 PC and Sagoskin further agree that IntegraMed and Shady
Grove are third-party beneficiaries of the Exclusive Practice Covenants with
respect to Sagoskin and the other Physicians and that the Exclusive Practice
Covenants set forth in the Employment Agreement, in the form that is then most
recently approved by IntegraMed, are hereby incorporated in this Agreement by
reference and may be enforced by IntegraMed or Shady Grove as well as by PC. PC
and Sagoskin 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 IntegraMed or Shady Grove, including
without limitation, rights under the Management Agreement, without thirty (30)
days prior written notice to IntegraMed or Shady Grove and the written consent
of IntegraMed or Shady Grove, which consent shall not be unreasonably withheld.
Moreover, Sagoskin acknowledges that Shady Grove and/or IntegraMed are entitled
to damages in the event Sagoskin breaches the Exclusive Practice Covenants.
5.3 Any payments received by IntegraMed under Section 4.6.3 of
the Management Agreement will be used by IntegraMed to offset any payments due
IntegraMed under Section 7 of this Agreement.
6. Scope of Covenant Not to Compete. Sagoskin and PC agree that the
scope and term of Sagoskin's covenant not to compete, insofar as it is for the
benefit of IntegraMed, shall be as follows:
6.1 The term of the covenant not to compete shall be for a
period of one (1) year after the termination of Physician's employment provided
such termination occurs during the initial term of the Employment Agreement (the
"Non-Competition Period"). The Non-Competition Period shall not apply to any
termination that occurs after the first five years of employment.
6.2 The geographic scope of the covenant not to compete is ten
(10) miles from any offices ("Non-Compete Area") maintained by PC for the
rendition of professional or other medical services to patients during the last
12 months of Sagoskin's employment by PC.
6.3 During the Non-Competition Period, Sagoskin 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 the Non-Compete Area.
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,
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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.
6.4.2 The term "Infertility Services" shall have the
same meaning as set forth in the Management Agreement, except that
Sagoskin 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 PC, provided those services are for patients of PC,
nor prohibit Physician from fulfilling his contract with PC, 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. PC, IntegraMed and Sagoskin each
acknowledges that: (i) the terms set forth in this Section are necessary for the
reasonable and proper protection of the interests of PC and IntegraMed; (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 Sagoskin or other disputes under this
Agreement or the Employment Agreement; and (iv) the PC and IntegraMed have been
induced to enter into this Agreement and their other respective agreements with
Sagoskin, in part, due to the representation by Sagoskin that he will abide by
and be bound by the aforesaid covenants and restraints.
7. Commitment to Pay Management Fees. Sagoskin has agreed in the
Employment Agreement not to compete with PC during the initial term of his
employment by PC and for at least one (1) year thereafter should employment
terminate at or before the fifth anniversary of employment, and recognizes that
in the event that he should compete with PC, IntegraMed would suffer damages in
addition to the loss of Sagoskin's unique services. Sagoskin therefore agrees
that during the initial term of his Employment Agreement with PC, and during the
Non-Competition Period thereafter, 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
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collected by PC, or offers services or assists other persons in offering
services in the Service Area which are similar to any of those offered by PC
while he was still a director, officer or shareholder of PC or active in
providing services on behalf of PC, he shall owe IntegraMed management fees
equal to one-twelfth of:
7.1 33.5% of the Cost of Services as defined in the Management
Agreement, which are incurred in the twelve months preceding the first
month in which IntegraMed, in the reasonable exercise of its
discretion, concludes that Sagoskin was engaging in such competitive
acts so as to materially adversely affect PC's operations (the
"Pre-Competition Period").
7.2 33.5% of the Base Management Fee which IntegraMed earned
during the Pre- Competition Period.
7.3 33.5% of any other fees earned by IntegraMed under the
Management Agreement during the Pre-Competition Period.
7.4 33.5% of any Advances or other payments owed by PC to
IntegraMed at the end of the Pre-Competition Period.
These fees shall be payable notwithstanding the dissolution,
insolvency, receivership or bankruptcy of PC and any breach of PC's contracts
with Sagoskin 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. Sagoskin acknowledges and agrees to
maintain the confidentiality of IntegraMed and PC Confidential Information as
defined in the Management Agreement and in any agreements he may have with PC,
and that any notice to IntegraMed 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.
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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
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 IntegraMed may assign this Agreement to any
subsidiary or affiliate of IntegraMed without the consent of Sagoskin. 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 Maryland 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 Maryland, County of Baltimore (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 Maryland or the
United States District Court for the District of Maryland, to whose jurisdiction
for such purposes the parties hereby irrevocably consent and submit.
15. Severability. 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.
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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 Stock 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 IntegraMed at:
Xxxxxxx Xxxxx, President
IntegraMed America, Inc.
Xxx Xxxxxxxxxxxxxx Xxxx
Xxxxxxxx, XX 00000-0000
With a copy to:
Xxxxxx X. Xxxxx, General Counsel
IntegraMed America, Inc.
Xxx Xxxxxxxxxxxxxx Xxxx
Xxxxxxxx, XX 000000-0000
If for Sagoskin at:
Xxxxxx X. Xxxxxxxx, M.D.
00000 Xxxxxxxx Xxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
If for PC at:
President
Levy, Sagoskin and Xxxxxxxx, M.D., P.C.
0000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
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With a copy to:
Xxx Xxxxxxx Xxxxxx, Esq.
Xxxxxxx, Xxxxxx & Green, P.C.
0000 00xx Xxxxxx, X.X.
Xxxxxxxxxx, XX 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.
XXXXXX X. XXXXXXXX
/s/Xxxxxx X. Xxxxxxxx
--------------------------------------
Xxxxxx X. Xxxxxxxx, M.D.
INTEGRAMED AMERICA, INC.
By: /s/Xxxxxxx Xxxxx
----------------------------------
Xxxxxxx Xxxxx, President & CEO
LEVY, SAGOSKIN AND XXXXXXXX, M.D., P.C.
By:/s/Xxxxxxx X. Xxxx
--------------------------------------
Xxxxxxx X. Xxxx, M.D., President
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