Pay him what it would cost you to advertise to that client. You can make it work and he could be a good thing for you. The thing is when you are dealing with employees that are kinda off on their own getting work it is important to guide them and support them. People usually flake off because of poor leadership from the owner. You should offer bonuses and incentives to incourage him to *be* and *feel* successful. You can do that by offering dinner gift cards, movie tickets, ect if he meets sales goals that you guys agree on.
That type of work kinda does suck, so if you make it postive and fun the more successful that employee will be. That goes the same with all employees. You can turn a bad one into a top tech but it take leadership. Leadership is defined by the ability to direct people, but more importantly have them so directed that they accept it. Kinda like raising kids, be firm but also be supportive and kind.
Also image is VERY important when getting new clients. Clean shaven, clean van, ect. You should sit down with him a teach him how to put on "the show" when dealing with clients.
Good luck I hope it works out for you.
No compete agreements are nothing more than a scare tactic and many companies have failed when it went to court. As long as he doesnt go for your clients he can do whatever he wants.