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EXHIBIT 10.9
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement") is made and entered into as of
the 1st day of September, 1996, by and among BIRMAN MANAGED CARE, INC., a
Tennessee corporation (the "Company"); RRCG, L.L.C., an Arizona limited
liability company, ("Consultant") and RICHARD M. ROSS, an Arizona resident
("Principal").
W I T N E S S E T H:
WHEREAS, Principal is as of the date hereof the legal and beneficial
owner of the majority of the outstanding membership units of Consultant
(including its economic interests); and is Consultant's sole employee devoted
to the engagement described herein; and
WHEREAS, the Company, Consultant and Principal mutually desire that
Consultant be engaged in accordance with the terms and conditions hereof;
NOW, THEREFORE, in consideration of the foregoing, the payment of $1.00
and other good and valuable consideration and the mutual covenants and
agreements contained herein, the receipt and sufficiency whereof the parties
hereby acknowledge, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Engagement. The Company hereby engages Consultant and
Consultant hereby accepts engagement from the Company as a consultant.
Consultant shall perform services for the Company for the period and upon the
terms and conditions set forth in this Agreement. The term "Company" as used
herein shall mean the Company and its Affiliates. "Affiliate" means an entity
or person that, directly, or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with, the person
specified, including the holder of five percent (5%) or more of the beneficial
ownership of the Company.
2. Term. The term of this Agreement shall commence as of the date
hereof and, unless terminated sooner as provided in Article 7 herein, shall
continue up to and including August 31, 1997 (the "Initial Term"). Following
the expiration of the Initial Term, this Agreement shall automatically be
renewed for one or more (but not more than five (5)) successive one (1) years
terms, unless this Agreement has been sooner terminated in accordance with
Section 7.
3. Scope of Engagement.
3.01 Services. During the term of this Agreement, Consultant shall
consult with and advise the Company as to business development; corporate
strategies; opportunities for mergers and acquisitions and other ventures
related to the Company's business, all as reasonably requested by the Board of
Directors or the Chief Executive Officer from time to time.
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3.02 Performance of Services. (A) Consultant and Principal shall
serve the Company faithfully and to the best of its and his ability and devote
such time, attention, skill and effort as is required to effectively discharge
its and his duties hereunder, consistent with the standards of conduct and
professionalism applicable to the health care industry. Principal shall make
himself available to the Company during business hours on business days, and
may be required to expend up to, but not in excess of, seventy-five (75) hours
per month (non-cumulative) on Company matters. The manner, means and methods
of conducting the Services are under the sole control of Consultant so long as
they are lawful and consistent with the terms of this Agreement.
(B) Neither Consultant nor Principal shall provide services on behalf
of or with respect to any business which is competitive with any of the
Company's plans, programs or products ("Competing Business"). Subject to the
foregoing, and subject further to the provisions of Articles 5 and 6 hereof,
Consultant may, with the consent of the Company (which shall not unreasonably
be withheld), provide services to entities which engage in a Competing
Business. Consultant shall receive reimbursement for travel and other business
expenses of Principal in accordance with Section 4.02. The consent referred to
above shall be deemed to have been given by the Company if the Company fails to
respond in writing to a Notice of Proposed Services given by Ross within ten
(10) days after receipt of such Notice by the Company. The term "Notice of
Proposed Service" shall mean a writing signed by Ross and sent by certified
mail, return receipt requested, to (i) the Company's Chief Executive Officer
and (ii) the Company's Chief Financial Officer, describing in reasonable detail
the entity for whom services will be performed, the nature of the services
proposed, and the amount of time which Ross expects to expend.
3.03 Independent Contractor. The parties intend that an independent
contractor relationship be created by this Agreement. None of the benefits
provided by the Company to its employees will be provided to Consultant or
Principal, except as specifically set forth in this Agreement. Neither
Consultant nor Principal shall be deemed to be the employee of the Company, or
as an agent of the Company except as otherwise specifically agreed upon by the
parties. Consultant shall have no authority to bind the Company unless
specifically authorized by an executive officer of the Company.
4. Compensation.
4.01 Fee. During the Initial Term and any Renewal Terms, the
Company shall pay to Consultant as compensation for all services to be rendered
by Consultant and Principal under this Agreement a consulting fee ("Fee") as
follows:
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One Hundred Eighty Six Thousand Dollars ($186,000), to be paid in
monthly installments of $15,500.00, mid-month, with the first installment due
on September 15, 1996 and with each subsequent installment due on the
fifiteenth (15th) day of the month next following.
4.02 Expenses. The Company will pay or reimburse Consultant for all
reasonable and necessary travel and other out-of-pocket expenses incurred by
Principal in the performance of duties under this Agreement (except as provided
in Section 4.03 below), subject to the presentment of appropriate vouchers in
accordance with the Company's policies and procedures as adopted from time to
time. Notwithstanding the foregoing, the Company must pre-approve any single
expense which exceed $500.00 and any expenses in excess of an aggregate of
$1500.00 per month. Payments will be made to Consultant within twenty (20)
days after presentment of invoice.
The Company will make all travel arrangements for Consultant for
airline travel outside Maricopa County, Arizona on Company business.
4.03 Office Facilities. Consultant shall be responsible for its
office facilities as well as such staff, equipment and materials as may
Consultant may deem necessary for Consultant to fulfill its duties under this
Agreement.
5. Confidentiality; Return of Materials.
5.01 Consequences of Entrustment. Consultant and Principal hereby
acknowledge that (i) the services to the Company will be of a special, unique,
extraordinary and intellectual character, (ii) Consultant's engagement by the
Company will place Consultant and Principal in a position of confidence,
responsibility and trust with respect to the operations of the Company, and
(iii) in reliance on Consultant's and Principal's ethical responsibility and
loyalty, the Company have entrusted and expect to entrust Consultant and
Principal with highly sensitive, confidential, restricted and proprietary
information involving Trade Secret Information (as hereinafter defined).
Consultant and Principal acknowledge that Consultant and Principal are legally
and ethically responsible for protecting and preserving the proprietary rights
of the Company for use only for the benefit of the Company, and these
responsibilities may impose limitations on Consultant's and Principal's ability
to pursue some kinds of business opportunities that might interest Consultant
after the termination of Consultant's and Principal's employment.
5.02 Definition of "Trade Secret Information". For purposes of this
Agreement, "Trade Secret Information" means information, whether or not in
written or tangible form, in the possession of the Company and considered by
the Company to be proprietary, valuable and confidential, from which the
Company derives economic value, actual or potential, by such information not
being generally known to, and not being readily ascertainable by proper means
by, other persons who can obtain economic value from its disclosure or use, and
is the subject of efforts that are reasonable under the circumstances to
maintain its secrecy. Trade Secret Information includes, without limitation,
(a) any data or information acquired by Consultant and Principal during their
engagement by the Company relating to the products, services, business methods,
customer accounts or operations of the Company or any customer or business
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partner of the Company, and (b) the techniques and business methods for (i)
applying scientific literature to merge resources and clinical language used in
defining medical payments for purposes of quality management and utilization
review, (ii) developing and managing health care provide organizations and
providing services thereto, (iii) developing reimbursement and at-risk systems
under capitation, prepayment, indemnity and other forms of compensatory
arrangements, and (iv) managing the delivery, reporting and financing of health
care services in managed care and managed cost settings, including the systems,
techniques, strategies and methods used to compete successfully in these lines
of business and the managed care business of the Company generally.
5.03 Restrictions on Use and Disclosure of Trade Secret Information.
Except as authorized by the Company, neither Principal or Consultant shall
during the term of this Agreement and for so long after the termination of this
Agreement as the information or data remains Trade Secret Information, directly
or indirectly divulge, furnish or make accessible to anyone or use in any way
(other than in the ordinary course of business of the Company) the Trade Secret
Information.
5.04 Return of Materials. Upon the request of the Company and, in
any event, upon the termination of Consultant's engagement, Consultant and
Principal shall return to the Company and leave at the disposal of the Company
all copies of memoranda, notes, records, drawings, manuals, computer programs,
documentation, diskettes and other documents or media, in Consultant's or
Principal's possession or control, pertaining in any way to the business,
practices or techniques of the Company.
6. Restrictions on Competition.
6.01 Premises. The Company has invested prior to the date hereof
and expects to continue to invest considerable time, effort and capital in
developing the business of the Company and enhancing the value and desirability
of the skills of its executives, technical personnel and consultants. This
investment, together with the Fee, reflect the Company's expectation of
receiving a considerable return from the exclusive use of Consultant's services
and know-how in the future, free from any risk that the Company's competitors
may attempt to induce Consultant or Principal to leave the Company and
wrongfully gain the benefit of the Company's investment. The partial restraint
set forth in Section 6.02 hereof does not, and cannot, provide complete
protection for the Company's investment, but the Company, on the one hand, and
Consultant and Principal, on the other hand, believe that, in combination with
the other provisions of this Agreement, it is a fair and reasonable measure
permitted under applicable law to protect the Company's interests, giving due
regard to both the interests of Consultant and Principal and the interests of
the Company. Consultant and Principal hereby (i) agree that the restrictions
contained within Section 6 are reasonable and necessary for the protection of
the goodwill of the business of the Company during the term of this Agreement
and thereafter and that the limitations as to period of time and geographic
area contained in Section 6.02 are reasonable and necessary for the protection
of the Company's business; and (ii) acknowledge that the Company would not have
entered into this Agreement but for these restrictions.
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6.02 Covenant Not to Compete; Solicit. In consideration of
Consultant's engagement hereunder, together with the Fee payable to Consultant,
during the term of this Agreement and for a period equal to the two (2) years
from the termination of this Agreement for any reason, neither Consultant nor
Principal shall:
(a) directly or indirectly, for itself, himself, as an owner,
partner, principal, shareholder, officer, director, employee, or independent
contractor engage in the development, management or operation of any Managed
Care Plan within fifty (50) miles from any city or town where the Company has
engaged in the development, management or operation of a Managed Care Plan; or
(b) attempt, directly or indirectly, to solicit or entice (i) any
employee or consultant of the Company to terminate his or her employment or
consultancy with the Company or to become employed by or associated with any
person, firm or corporation other than the Company, or approach any such
employee or associate of any of the foregoing purposes or authorize or assist
in the taking of any such action by any third party; (ii) any existing
customer, business partner or client of the Company to terminate or reduce its
relationship with the Company; or (iii) any prospective customer, business
partner or client of the Company to refrain from doing business with the
Company.
(c) a "Managed Care Plan" shall be defined as independent practice
associations ("IPAs"), physician-hospital organizations ("PHOs"), management
services organizations ("MSOs"), preferred provide organizations ("PPOs"),
integrated delivery systems ("IDS"), health maintenance organizations ("HMOs"),
point of service ("POS") plans, long-term plans, third-party administrators
("TPAs") or other types of managed care organizations ("MCOs") that contract
with commercial third-party payors, self-insured employers, health care
purchasing cooperatives or Medicare fiscal intermediaries for the delivery of
health care services, engage in the development, management or operation of any
such IPAs, PHOs, MSOs, PPOs, IDS, HMOs, POS plans, long-term plans, TPAs or
other MCOs;
6.03 Interpretation. If Consultant or Principal violates the
restrictive covenant in Section 6.02 and the Company brings legal action for
injunctive or other relief, the Company shall not, as a result of the time
involved in obtaining the relief, be deprived of the benefit of the full period
of the restrictive covenant. Accordingly, unless Consultant or Principal
contests the alleged violation in a court of law and is the prevailing party in
a nonappealable decision to the applicable court, the restrictive covenant
shall be deemed to have the three-year post-employment duration specified in
Section 6.02 hereof computed from the date the relief is granted but reduced by
the period when the restriction began to run and the date of the first
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violation by Consultant or Principal. Notwithstanding the foregoing, however,
to the extent this provision is invalid or unenforceable under the laws of any
applicable jurisdiction, the remainder of Section 6 shall be interpreted,
status quo ante, as if Section 6.03 had never been included herein and was an
absolute nullity.
6.04 No Adequate Remedy at Law. Consultant and Principal hereby
acknowledge and agree that a violation of any of the provisions contained in
Section 6.02 will cause irreparable damage to the Company, the exact amount of
which may be impossible to ascertain and that, for such reason, among others,
the Company shall be entitled to seek injunctive relief, both pendente lite and
permanently, against Consultant and Principal to restrain any further violation
of such provisions, and Consultant and Principal hereby consents to any
initiation by the Company in a court of competent jurisdiction of any action to
enjoin immediately any breach of this Agreement. This provision with respect
to injunctive relief shall not, however, diminish the right of the Company to
pursue any other rights and remedies the Company may have against Consultant,
including, but not limited to, the recovery of damages.
6.05 Duration. The restrictions contained in this Section 6 shall
insure to the benefit of the Company and shall survive the termination of this
Agreement.
7. Termination of Engagement. This Agreement shall terminate
prior to the expiration of its term upon the occurrence of any of the following
events:
(A) (i) A breach of Articles 5 or 6 of this Agreement which is not
cured (to the extent curable) within three (3) business days after notice by
the Company of such breach is received by Consultant or Principal; or (ii) a
material breach of any other provision contained in this Agreement which is not
cured within thirty (30) days after written notice by the Company of such
breach is received by Consultant, provided that the Company shall not be
required to give Consultant an opportunity to cure in the event Consultant or
Principal breaches this Agreement in a material manner twice in any six (6)
month period;
(B) Principal's death;
(C) by mutual agreement of the parties; or
(D) upon ten (10) day's notice to the Company given by Consultant.
In the event of a termination of this Agreement hereunder, unless
otherwise agreed in writing, the Company will have no further obligation to
Consultant or Principal, except the obligation to pay the prorated Fee due
Consultant through the period ending as of the effective date of termination.
Notwithstanding the foregoing, if Consultant's engagement is terminated as a
result of Principal's death, the Company shall pay to Consultant the prorated
Fee through the sixtieth (60th) day following the date on which Consultant's
death occurs.
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8 Miscellaneous.
8.01 Governing Law. This Agreement shall be deemed to have been
executed in the State of Arizona and shall be governed and construed as to both
substantive and procedural matters in accordance with the laws of the State of
Arizona, but excepting (i) any State of Arizona rule which would result in the
application of the law of a jurisdiction other than the State of Arizona.
8.02 Prior Agreements. This Agreement contains the entire agreement
of the parties relating to the subject matter hereof and supersedes all prior
agreements and understandings with respect to such subject matter, and the
parties hereto have made no agreements, representations or warranties relating
to the subject matter of this Agreement which are not set forth herein.
8.03 Amendment. This Agreement may not be amended, modified,
superseded, canceled or terminated, and any of the matters, covenants,
representations, warranties or conditions hereof may not be waived, except by
written instrument executed by the parties hereto or, in the case of a waiver,
by the party to be charged with such waiver.
8.04 Severability. To the extent any provision of this Agreement
shall be invalid or unenforceable, it shall be considered deleted herefrom and
the remainder of such provision and of this Agreement shall be unaffected and
not in limitation of business activities covered by, any provision of this
Agreement be in excess of that which is valid and enforceable under applicable
law, then such provision shall be construed to cover only that duration, extent
or activities which may validly and enforceably be covered. Consultant
acknowledges the uncertainty of the law in this respect and expressly
stipulates that this Agreement be given the construction which renders its
provisions valid and enforceable to the maximum extent possible under
applicable law.
8.05 Attorney's Fees. If either party hereto shall be required to
retain the services of an attorney to enforce any of his or its rights
hereunder, the prevailing party shall be entitled to receive from the other
party all costs and expenses including, but not limited to, court costs and
attorneys' or experts' fees (whether in a court of original jurisdiction or one
or more courts of appellate jurisdiction) incurred by him or it in connection
therewith.
8.06 Assignment. This Agreement shall not be assignable, in whole
or in part, by either party without the written consent of the other party,
except that the Company may, without the consent of Consultant or Principal,
assign its rights and obligations under this Agreement to any corporation, firm
or other business entity with or into which the Company may merge or
consolidate, or to which the Company may sell or transfer all or substantially
all of its assets, or of which fifty (50%) percent or more of the equity
investment and of the voting control is owned, directly or indirectly, by, or
is under common ownership with the Company; provided, however, that such
corporation, firm or business entity has a financial net worth comparable to or
greater than the Company as of the date of such transaction, and provided
further, that the Company remains liable to Consultant for its obligations
hereunder.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
The Company
BIRMAN MANAGED CARE, INC.,
a Tennessee corporation
By:/s/ David Birman, M.D.
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David N. Birman, M.D.
Chairman and Chief Executive
Officer
[signatures continued on following page]
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PRINCIPAL
---------------------- (SEAL)
Richard M. Ross
CONSULTANT
RRCG, L.L.C.
By:
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Manager
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