PERSONAL RESPONSIBILITY AGREEMENT
XXXXX XXXXX, M.D.
THIS PERSONAL RESPONSIBILITY AGREEMENT ("Agreement"), dated February 28,
1997, 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 Xxxxx Xxxxx, M.D.,
residing at 0000 Xxxxxxxx Xxxxx, Xxxxxxxx Xxxx, Xxxxxxxx 00000 ("Xxxxx").
RECITALS:
This Agreement is made with reference to a Management Agreement of even
date herewith (the "Management Agreement") between INMD and FCI
X. Xxxxx, Xxxxx Xxxxxx, M.D., Xxxxx Xxxxxxx, 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.
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.
C. The services Physicians have offered and intend to continue offering
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 Physicians' reputation, and involve medical, professional and technical
services. Through INMD's resources, the parties intend to maintain and enhance
the technology which Physicians offer through FCI
D. Physicians intend that FCI be the entity through which they henceforth
conduct their practice of medicine, and have each entered into a
Physician-Shareholder Employment Agreement effective of even date with FCI (the
"Employment Agreement"). This Agreement is also made with reference to the
Employment Agreement, which defines Xxxxx'x and the other Physicians' respective
rights and responsibilities with respect to FCI and their medical practices,
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
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of each of Xxxxx 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 shareholders.
X. Xxxxx 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 Xxxxx 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 Xxxxx 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 Xxxxx to exerting his
best efforts to support the operation of FCI under its Management Agreement with
INMD. Xxxxx acknowledges that each of the Physicians has executed a similar
agreement with INMD.
Therefore, INMD, FCI, and Xxxxx agree as follow:
1. Term and Termination. This Agreement shall commence on the effective
date of the Management Agreement and expire five (5) years thereafter (the
"Term").
2. FCI as Representative of Xxxxx'x Interests. Xxxxx acknowledges that INMD
is entering into the Management Agreement with FCI upon Xxxxx'x stipulation that
FCI represents his entire medical practice. It is agreed, therefore, that for
purposes of assuring continuity of the commitments under the Management
Agreement, that FCI is deemed the alter ego of Xxxxx, with specific rights and
responsibilities existing between Xxxxx and INMD, as set forth herein.
3. Repayment of Rateable Portion of Right to Manage Fee.
3.1 Pursuant to Article 7 of the Management Agreement, INMD has paid
FCI, for the benefit of Physicians, a Right to Manage Fee in the sum of
$6,000,000 cash and $2,000,000 in INMD stock. If, during the Term of this
Agreement, Xxxxx should cease to practice medicine through FCI, except as a
result of death or "permanent disability", as defined in the Employment
Agreement, Xxxxx shall be obligated to forthwith pay to INMD a prorata portion
of $1.2 million, determined by multiplying the number of years this Agreement
has been in effect rounded off to the nearest quarter of the year by $240,000
("Vested Amount"). The Vested Amount is then deducted from the $1.2 million
resulting in the amount Xxxxx is obligated to pay INMD. Xxxxx may pay up to 25%
of the sums due INMD under this paragraph in the form of INMD Sock, at the same
price per share FCI received the INMD Stock from INMD. Payments to INMD under
this paragraph shall not entitle Xxxxx 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 Xxxxx'x retirement or
other reduction in his availability
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to FCI does not adversely affect INMD revenues under the Management Agreement,
but that there are no assurances of such a transition's success. Xxxxx may
request INMD to waive or reduce his repayment obligation by submitting a written
transition plan to INMD for its consideration. Xxxxx 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 Xxxxx, 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 Xxxxx'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 Xxxxx by FCI and FCI's shareholders. Approval of the
request shall be discretionary for INMD, but shall not be unreasonably withheld.
3.3 Xxxxx may assign all or a portion of his payment obligations under
this Section to a new or an existing shareholder 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
shareholder of FCI and in an amendment to this Agreement.
4. FCI's Compliance with the Management Agreement. Xxxxx 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 Xxxxx 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 Xxxxx
agrees to exert his best efforts to cause FCI to comply with each of the
aforementioned obligations.
5.2 FCI and Xxxxx further agree that INMD is a third-party beneficiary
of the Exclusive Practice Covenants with respect to Xxxxx 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 Xxxxx 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.
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6. Scope of Covenant Not to Compete. Xxxxx and FCI agree that the scope and
term of Xxxxx'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, Xxxxx 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
Xxxxx'x employment by FCI (the "Current Medical Offices").
6.3 During the Non-Competition Period, Xxxxx 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.
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 Xxxxx 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
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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 Xxxxx 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 Xxxxx 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 Xxxxx, in part, due to the representation by
Xxxxx that he will abide by and be bound by the aforesaid covenants and
restraints.
7. Commitment to Pay Management Fees. Xxxxx has agreed in the Employment
Agreement not to compete with FCI during the 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
Xxxxx'x unique services. Xxxxx therefore agrees that during the term of his
Employment Agreement with FCI, 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 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:
7.1 One-fourth 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 Xxxxx was engaging in such competitive acts so as to
materially adversely affect FCI's operations (the "Pre-Competition
Period").
7.2 One-fourth of the Base Management Fee which INMD earned during the
Pre-Competition Period.
7.3 One-fourth of any other fees earned by INMD under the Management
Agreement during the Pre-Competition Period.
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7.4 One-fourth of any advances or other payments owed by FCI to INMD
at the end of the Pre-Competition Period.
These fees shall be payable notwithstanding the dissolution, insolvency,
receivership or bankruptcy of FCI and any breach of FCI's contracts with Xxxxx
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. Xxxxx 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
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 Xxxxx. 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
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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 Illnois 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.
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 communciation 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
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With a copy to:
IntegraMed America, Inc.
Xxx Xxxxxxxxxxxxxx Xxxx
Xxxxxxxx, XX 000000-0000
Attention: Xxxxxx Xxxxx, General Counsel
If for Xxxxx at:
Xxxxx Xxxxx, M.D.
0000 Xxxxxxxx Xxxxx
Xxxxxxxx Xxxx, 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
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.
XXXXX XXXXX:
_____________________________________
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Xxxxx Xxxxx, M.D.
INTEGRAMED AMERICA, INC.,
By: _________________________________
Xxxxxxx Xxxxx, President
FERTILITY CENTERS OF ILLINOIS, S.C.
By:__________________________________
Xxxxx Xxxxxxx, M.D., President
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