RESTRICTED STOCK AGREEMENT
THIS RESTRICTED STOCK AGREEMENT (the "Agreement") is entered into as of
November 22, 1996, effective as of November 1, 1996, by and between BONE, MUSCLE
AND JOINT, INC., a Delaware corporation (the "Company"), and the individual
identified on the signature page hereof (the "Stockholder"), with reference to
the following facts. Certain capitalized terms used herein are defined in
paragraph 5 below.
A. This Agreement is entered into in connection with and concurrently with
that certain Management Services Agreement dated as of the date hereof (the
"Management Services Agreement") by and between the Company and Southern
California Orthopedic Institute Medical Group (the "Medical Group").
B. This Agreement also is entered into concurrently with substantially
identical Restricted Stock Agreements between the Company and the other partners
in or employees of the Medical Group identified in Schedule A attached hereto
(collectively, the "Stockholders").
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, and intending to be legally bound hereby, the parties
hereto agree as follows:
1. Purchase and Sale of Restricted Stock. (a) (i) Upon execution of this
Agreement, the Company shall issue to the Stockholder the number of shares
specified opposite the Stockholder's name in Schedule A attached hereto (the
"Restricted Stock") of the common stock of the Company, par value $0.001 per
share (the "Common Stock"), pursuant to Section 4 and Schedule III of the
Management Services Agreement.
(ii) The Company shall deliver, at the time of execution of this Agreement,
two (2) stock certificates, each dated the date hereof and issued in the name of
the Stockholder. One of the certificates shall represent seventy-five percent
(75%) of the Restricted Stock issued to the Stockholder on the date hereof, and
such certificate shall be delivered to the Stockholder. The other certificate
shall represent twenty-five percent (25%) of the Restricted Stock issued to the
Stockholder on the date hereof, and such certificate shall be delivered to the
Medical Group. Additionally, the Stockholder shall deliver to the Medical Group
an executed stock power relating to such certificate. The Medical Group shall
hold such share certificate and stock power until the recalculation required
under Schedule III of the Management Services Agreement has been completed, and
the Medical Group shall promptly thereafter deliver such certificate to the
Stockholder or to the Management Company, as applicable, in accordance with the
terms of such Schedule III. In the event of delivery of such certificate to the
Management Company, such certificate shall be accompanied by the stock power
previously executed by the Stockholder.
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(b) In connection with the issuance of the Restricted Stock hereunder, the
Stockholder represents and warrants to the Company that:
(i) the Restricted Stock to be issued to the Stockholder pursuant to
this Agreement shall be acquired for the Stockholder's own account, for
investment only and not with a view to, or intention of, distribution
thereof in violation of the 1933 Act, or any applicable state securities
laws, and the Restricted Stock will not be disposed of in contravention of
the 1933 Act or any applicable state securities laws;
(ii) the Stockholder has generally such knowledge and experience in
business and financial matters and with respect to investments in
securities of privately held companies so as to enable the Stockholder to
understand and evaluate the risks and benefits of his or her investment in
the Restricted Stock;
(iii) the Stockholder has no need for liquidity in his or her
investment in the Restricted Stock and is able to bear the economic risk of
his or her investment in the Restricted Stock for an indefinite period of
time and understands that the Restricted Stock has not been registered or
qualified under the 1933 Act or any applicable state securities laws, by
reason of the issuance of the Restricted Stock in a transaction exempt from
the registration and qualification requirements of the 1933 Act or such
state securities laws and, therefore, cannot be sold unless subsequently
registered or qualified under the 1933 Act or such state securities laws or
an exemption from such registration or qualification is available;
(iv) the Stockholder understands that the exemption from registration
afforded by Rule 144 (the provisions of which are known to the Stockholder)
promulgated under the 1933 Act, depends on satisfaction of various
conditions and that, if applicable, Rule 144 may only afford the basis for
sales under certain circumstances and only in limited amounts;
(v) the Stockholder is an individual (A) whose individual net worth,
or joint net worth with his or her spouse, presently exceeds $1,000,000 or
(B) who had an income in excess of $200,000 in each of the two most recent
years, or joint income with his or her spouse in excess of $300,000 in each
of those years (in each case including foreign income, tax exempt income
and the full amount of capital gains and losses but excluding any income of
other family members and any unrealized capital appreciation) and has a
reasonable expectation of reaching the same income level in the current
year; or the Stockholder otherwise meets the requirements to be considered
an accredited investor, as defined under the 1933 Act; and
(vi) the Stockholder has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of the
Restricted Stock and has had full access to or been provided with such
other information concerning the Company as he or she has requested.
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(c) This Agreement constitutes the legal, valid and binding obligation of
the Stockholder, enforceable in accordance with its terms, and the execution,
delivery and performance of this Agreement by the Stockholder does not and will
not conflict with, violate or cause a breach of any agreement, contract or
instrument to which the Stockholder is a party or any judgment, order or decree
to which the Stockholder is subject.
(d) As an inducement to the Company to issue the Restricted Stock to the
Stockholder and as a condition thereto, the Stockholder acknowledges and agrees
that:
(i) neither the issuance of the Restricted Stock to the Stockholder
nor any provision contained herein shall affect the right of the Company to
terminate the Management Services Agreement; and
(ii) the Company shall provide the Stockholder with substantially the
same information regarding the Company that the Company regularly discloses
to its other stockholders.
(e) Notwithstanding anything to the contrary set forth in this Agreement,
the total number of shares to be issued to the Stockholder hereunder is subject
to adjustment in connection with any adjustment made to the total number of
shares issued to all Stockholders pursuant to Schedule III of the Management
Services Agreement; provided, however, that the amount of such adjustment
allocated to the Stockholder shall be as provided in a written schedule
furnished to the Company by the Medical Group specifying the adjusted number of
shares for each of the Stockholders. In the event that the Stockholder is
entitled to receive additional shares pursuant to such adjustment, the Company
shall promptly deliver to the Stockholder without further consideration a stock
certificate representing such additional shares. If pursuant to such adjustment
the Stockholder is required to return any shares to the Company, the Medical
Group shall promptly return to the Company the share certificate representing
twenty-five percent (25%) of the Restricted Stock previously issued to the
Stockholder, accompanied by the stock power previously executed by the
Stockholder. If the Stockholder is required to return more shares than is
represented by such certificate, the Stockholder shall return to the Company the
share certificate representing seventy-five percent (75%) of the Restricted
Stock previously issued to the Stockholder, together with an executed stock
power, in lieu of or in addition to the above-referenced stock certificate
representing twenty-five percent (25%) of such stock, as necessary to comply
with the Stockholder's obligation to return to the Company the total number of
shares required to be returned to the Company in accordance with this paragraph
1(e). Thereafter the Company shall promptly deliver to the Stockholder a new
stock certificate or certificates representing the adjusted number of shares,
all without any further consideration.
2. Vesting of the Restricted Stock. (a) Except as otherwise provided in
paragraphs 2(b) and 2(c) hereof, the Restricted Stock shall become vested in
accordance with the following schedule, if, as of each such date, (i) the
Management Services Agreement has not been terminated, (ii) there has not been a
Cessation of Active Practice (as defined in paragraph 2(d) below) by the
Stockholder, or (iii) the Stockholder has not died or become permanently
disabled:
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Anniversary Date Cumulative Percentage of
of this Agreement Restricted Stock Vested
----------------- -----------------------
First 25%
Second 50%
Third 75%
Fourth 100%
For purposes of this Agreement, "Anniversary Date of this Agreement" means
November 1 of each year after 1996. Shares of the Restricted Stock which have
become vested are referred to herein as "Vested Shares" and all other shares of
the Restricted Stock are referred to herein as "Unvested Shares." The parties
acknowledge and agree that the number of shares issued to the Stockholder
hereunder may be increased or decreased in connection with the recalculation
described in Schedule III to the Management Services Agreement. Accordingly,
following such recalculation, the vesting schedule set forth above shall be
applicable retroactively and prospectively to the adjusted number of shares
issued to the Stockholder in connection with such recalculation.
(b) (i) The provisions of paragraph (ii) below shall be applicable only in
the event that the Company has not amended that certain Restricted Stock
Agreement entered into by and between the Company and Lehigh Valley Bone, Muscle
and Joint Group, L.L.C., a Pennsylvania limited liability company ("Lehigh
Valley"), in or about July, 1996, to delete that provision in such agreement
which is substantially similar to paragraph (ii) below. If such agreement is so
amended, paragraph (ii) below shall become null and void upon the Company's
provision of notice thereof to the Medical Group, and the Restricted Stock shall
become vested only in annual increments as provided in paragraph 2(a) above.
(ii) If the Management Services Agreement is terminated or there is a
Cessation of Active Practice by the Stockholder, or if the Stockholder dies or
becomes permanently disabled, on any date other than an anniversary date of the
issuance of the Restricted Stock, the cumulative percentage of the Restricted
Stock to become vested shall be determined on a pro rata basis according to the
number of days elapsed since the prior anniversary date or the date of this
Agreement (should such termination occur prior to the first anniversary date).
(c) Notwithstanding the foregoing, in the event of the death of the
Stockholder, in addition to any shares that have vested in accordance with
paragraphs 2(a) and 2(b) above, the number of Unvested Shares scheduled to
become Vested Shares pursuant to paragraph 2(a) above during the eighteen-month
period immediately following the date of death shall immediately become Vested
Shares.
(d) For purposes of this Agreement, "Cessation of Active Practice" means a
physician Stockholder's failure (other than by reason of death or permanent
disability),
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throughout any twelve-month period ending on the day before any of the vesting
dates described in paragraph 2(a) hereof, to engage in the practice of medicine
with the Medical Group on a regular basis, including the performance of
orthopedic surgical procedures on a regular basis (except in the case of any
Stockholder who did not practice surgery on a regular basis immediately prior to
the date hereof), such that (i) the Stockholder was engaged in patient care
activities for less than seventy-five percent (75%) of the time that the
Stockholder had been engaged in such activities during the twelve-month period
immediately preceding the date hereof, and (ii) the Stockholder generated
xxxxxxxx that were less than seventy-five percent (75%) of the amount of
xxxxxxxx generated by the Stockholder during the twelve-month period immediately
preceding the date hereof.
(e) If the Stockholder is insured under a disability insurance policy, the
determination under such policy as to whether the Stockholder's condition
constitutes a permanent disability shall be binding on the parties hereto for
purposes of this Agreement. If the Stockholder is not insured under a policy of
disability insurance, such determination shall be made by an independent
qualified physician proposed by the Medical Group, subject to the approval of
the Company, which approval shall not be unreasonably withheld.
(f) Notwithstanding anything to the contrary set forth in this Agreement,
including without limitation the provisions of paragraph 2(a) hereof relating to
vesting, if as of the date or dates on which any of the Restricted Stock is
scheduled to vest, Phase II under the Management Services Agreement has not yet
commenced and the Medical Group has not waived the Medical Group's right to
terminate the Management Services Agreement pursuant to Section 13.1(e) of the
Management Services Agreement (providing the Medical Group the right under
certain circumstances to terminate the Management Services Agreement prior to
the commencement of Phase II), such vesting shall be deferred until (i) the date
on which Phase II under the Management Services Agreement commences or (ii) the
date on which the Medical Group gives written notice to the Management Company
waiving its right to terminate the Management Services Agreement under Section
13.1(e), whichever first occurs. If the Management Services Agreement is
terminated by the Medical Group pursuant to Section 13.1(e) thereof, none of the
Restricted Stock shall be deemed to Vested Shares hereunder.
3. Repurchase of Restricted Stock. (a) Except as provided in paragraph
3(g), in the event of a Repurchase Event, as defined in paragraph 3(b) below,
the Company may elect to repurchase the Restricted Stock (whether vested or
unvested and whether held by the Stockholder or one or more of the Stockholder's
permitted transferees) pursuant to the terms and conditions set forth in this
paragraph 3 (the "Repurchase Option").
(b) Each of the following shall constitute a "Repurchase Event":
(i) Termination of the Management Services Agreement for any reason
whatsoever on or before the fourth anniversary of the date of this
Agreement;
(ii) Termination of the Management Services Agreement by the Medical
Group pursuant to Section 13.1(d) thereof (based on failure of the Company
to
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consummate an initial public offering of its Common Stock within
forty-eight (48) months after the Commencement Date under the Management
Services Agreement); or
(iii) The Stockholder's Cessation of Active Practice.
(c) The repurchase price for each Unvested Share shall be equal to the
Original Value of such share.
(d) The repurchase price for each Vested Share shall be the Fair Market
Value for such share.
(e) The Company may elect to repurchase all or a portion of the Restricted
Stock by delivering written notice (the "Repurchase Notice") to the Stockholder
within ninety (90) days after the Repurchase Event; provided, however, that if
the Company elects to repurchase less than all of the Restricted Stock, the
Company shall repurchase all of the Unvested Shares and may purchase that number
of Vested Shares as the Company may, in its discretion, determine. The
Repurchase Notice shall set forth the number of Unvested Shares and Vested
Shares to be acquired, the aggregate consideration to be paid for such shares,
and the time and place for the closing of the transaction. If the Repurchase
Event giving rise to the Company's election to repurchase consists of the
termination of the Management Services Agreement, and if the number of shares of
Restricted Stock that the Company has elected to repurchase is less than the
total number of shares of Restricted Stock held by all of the Stockholders, the
Company shall purchase the shares of Restricted Stock pro rata according to the
number of shares of Restricted Stock held by all of the Stockholders at the time
of delivery of such Repurchase Notice (determined as nearly as practicable to
the nearest share).
(f) The closing of the repurchase of Restricted Stock pursuant to the
Repurchase Option shall take place on the date designated by the Company in the
Repurchase Notice, which date shall not be more than sixty (60) days nor less
than five (5) days after the delivery of the Repurchase Notice. The Company
shall pay for Restricted Stock to be purchased pursuant to the Repurchase Option
by delivery of (i) the Company's check or wire transfer of funds, (ii) a
subordinated note or notes payable in up to five equal annual installments
beginning on the first anniversary of the closing of such purchase and bearing
interest (payable quarterly) at a rate per annum equal to the greater of either
the prime rate announced from time to time by The Chase Manhattan Bank (National
Association) plus 1/2% or the "applicable Federal rate" (as defined in Section
1274(d) of the Internal Revenue Code) in effect from time to time, or (iii) both
(i) and (ii), in the aggregate amount of the repurchase price for such shares;
provided, however, that in the event that the Medical Group is obligated to pay
to the Company any sums in connection with the repurchase of assets by the
Medical Group pursuant to the Management Services Agreement, the total of such
sums may be offset by the Company against any amounts owed by the Company to the
Stockholders pursuant to each of the Restricted Stock Agreements, such offset
amount to be allocated pro rata among all of the Stockholders. Any notes issued
by the Company pursuant to this paragraph 3(f) shall be subject to the
restrictive covenants, if any, to which the Company is subject at the time of
such repurchase. The Company shall be entitled to require the signature of the
Stockholder to be guaranteed and to receive representations and
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warranties from the Stockholder regarding (A) the Stockholder's power, authority
and legal capacity to enter into such sale and transfer valid right, title and
interest in such Restricted Stock, (B) the Stockholder's ownership of such
Restricted Stock and the absence of any liens, pledges, and other encumbrances
on such Restricted Stock and (C) the absence of any violation, default, or
acceleration of any agreement or instrument pursuant to which the Stockholder or
the Stockholder's assets are bound resulting from such sale.
(g) Notwithstanding anything to the contrary set forth in this paragraph 3,
in the event of a Repurchase Event consisting of the termination of the
Management Services Agreement by the Medical Group pursuant to Section 13.1 of
the Management Services Agreement, or in the event of termination of the
Management Services Agreement by either party in accordance with Section 27
thereof (pursuant to Section 13.3), the Company shall have the obligation
(rather than the option) to purchase all of the Restricted Stock acquired by the
Stockholder pursuant to this Agreement, and the repurchase price shall be paid
in full in cash not later than sixty (60) days after the date of termination of
the Management Services Agreement; provided, however, that in the event that the
Medical Group is obligated to pay to the Company any sums in connection with the
repurchase of assets by the Medical Group pursuant to the Management Services
Agreement, the total of such sums may be offset by the Company against any
amounts owed by the Company to the Stockholders pursuant to each of the
Restricted Stock Agreements, such offset amount to be allocated pro rata among
all of the Stockholders.
(h) In the event of the death or permanent disability of the Stockholder,
the Company shall repurchase all of the Unvested Shares (but not the Vested
Shares) of the Stockholder. The repurchase price for each Unvested Share shall
be equal to the Original Value of such share, and such repurchase price shall be
paid in full in cash not later than sixty (60) days after the date of death or
the date on which such disability is determined to be permanent.
(i) In the event that the Stockholder is required, prior to the
consummation of an initial public offering of the Company's Common Stock
pursuant to the 1933 Act or prior to the second anniversary of the date hereof,
whichever is later, to pay any state or federal taxes in connection with the
receipt of the Restricted Stock hereunder, the Stockholder shall have the right
to sell to the Company, and the Company shall be obligated to purchase from the
Stockholder, for the purchase price determined in accordance with this paragraph
3, such number of shares of Vested Stock as the Stockholder may tender to the
Company, provided that the purchase price therefor shall not exceed the total
amount of the Stockholder's tax liability incurred in connection with the
receipt of such stock. In the event that the Stockholder desires to exercise the
right conferred under this paragraph 3(i), the Stockholder shall give notice to
the Company not earlier than forty-five (45) days prior to, nor later than
forty-five (45) days after, the date on which such taxes are due and payable,
and the Stockholder shall furnish to the Company reasonable documentation
prepared by the Stockholder's certified public accountant establishing the
amount of such tax liability.
(j) Notwithstanding anything to the contrary contained in this Agreement,
all repurchases of Restricted Stock by the Company shall be subject to
applicable restrictions, if
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any, contained in Federal law or in the Delaware General Corporation Law.
Notwithstanding anything to the contrary contained in this Agreement, if any
such restrictions prohibit or otherwise delay the repurchase of Restricted Stock
hereunder which the Company is otherwise entitled or required to make, the
Company may make such repurchases as soon as it is permitted to do so under such
restrictions.
(k) In the event that Restricted Stock is repurchased pursuant to this
paragraph 3, the Stockholder and his or her successors and assigns shall take
all reasonable steps to obtain all required third-party, governmental and
regulatory consents and approvals and take all other reasonable actions
necessary to facilitate consummation of such repurchase in a timely manner.
4. Transfer Restriction; Legend. (a) Except as otherwise expressly provided
in paragraph 3, the Stockholder shall sell or transfer or agree to sell or
transfer ("Sale" or "Sell") Restricted Stock only in accordance with the
following procedures; provided, however, that with respect to this paragraph
4(a), Restricted Stock, at any point in time, shall be limited to Vested Shares
and at no time shall the Stockholder have the right to sell Unvested Shares;
provided, further, that the restrictions on transfers of Vested Shares set forth
in this paragraph 4 shall expire, and shall be of no further force or effect,
upon the consummation of initial public offering of the Company's Common Stock
pursuant to the 1933 Act:
(b) In the event that the Stockholder receives a bona fide offer from
a third party (the "Prospective Stockholder") to purchase all or any
portion of the Restricted Stock owned by the Stockholder, the Stockholder
shall deliver to the Company a written notice (the "Offer Notice"), which
shall be irrevocable for a period of fifteen (15) business days after
delivery thereof (the "Offer Period"), offering (the "Offer") all of the
Restricted Stock proposed to be Sold by the Stockholder to the Prospective
Stockholder at the purchase price and on the terms of the proposed Sale to
the Prospective Stockholder (such Offer Notice shall include the foregoing
information, a copy of the Prospective Stockholder's bona fide offer and
all other relevant terms of the proposed Sale, including the identification
of the Prospective Stockholder). The Company shall have the right and
option, for a period of fifteen (15) business days after delivery of the
Offer Notice, to repurchase all of the Restricted Stock so offered at the
purchase price and on the terms stated in the Offer Notice. Such acceptance
shall be made by delivering a written notice to the Stockholder within said
fifteen (15) business-day period.
(c) Sales of Restricted Stock under the terms of paragraph 4(b) above
shall be made on a mutually satisfactory business day within fifteen (15)
business days after the expiration of the Offer Period. Delivery of
certificates or other instruments evidencing such Restricted Stock duly
endorsed for transfer shall be made on such date against payment of the
purchase price therefor.
(d) If the Company fails to purchase the Restricted Stock offered for
Sale pursuant to the Offer Notice, then at any time within sixty (60)
business days after the expiration of the Offer Period the Stockholder may
Sell all or any part of the Restricted Stock so offered for Sale on terms
no more favorable than the terms stated in the Offer Notice; provided,
however, that the Stockholder shall not, under any circumstances, Sell any
Restricted Stock to
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the Prospective Stockholder if the Board of Directors of the Company, in
its sole discretion, determines in good faith that the Prospective
Stockholder is a competitor, or an Affiliate of a competitor, of the
Company or that such Prospective Stockholder's ownership of Restricted
Stock would be contrary to the best interests of the Company. In the event
that the Restricted Stock is not Sold by the Stockholder to the Prospective
Stockholder during such period, the right of the Stockholder to Sell such
remaining Restricted Stock to the Prospective Stockholder shall expire and
the obligations of the Stockholder pursuant to this paragraph 4 shall be
reinstated.
(e) Any transferee of Restricted Stock (other than the Company) shall,
as a condition to such transfer, agree to be bound by all of the provisions
of this Agreement applicable to the Stockholder.
(f) The certificates representing the Restricted Stock will bear the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN A
RESTRICTED STOCK AGREEMENT DATED AS OF NOVEMBER 1, 1996, BETWEEN THE
STOCKHOLDER AND BONE, MUSCLE AND JOINT, INC. A COPY OF SUCH AGREEMENT
MAY BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE
OF BUSINESS WITHOUT CHARGE."
(g) Xxxxxx Xxxxxx, M.D. and any venture capital firm providing funds
to the Company ("Selling Shareholders") shall give to the Stockholder the
right to participate on a pro rata basis (based on the number of shares
owned, whether preferred or common, held by the Stockholders and by any
other shareholders who hold the same rights that are conferred by this
paragraph 4(g), including members of other physician groups), in any
proposed sale of stock (whether preferred or common) in the Company from
any of the Selling Shareholders to any unaffiliated third party, and the
Company shall require the Selling Shareholders to comply with the
obligations set forth in this paragraph 4(g); provided, however, that the
obligation under this paragraph 4(g) shall become null and void upon the
consummation of an initial public offering of the Company's Common Stock
pursuant to the 0000 Xxx.
(h) The Stockholder hereby agrees to the provisions of Section 9.12 of
the Management Services Agreement (relating to the right of Xxxxxx Xxxxxx,
M.D. and any venture capital firm providing funds to the Company to
participate in certain sales of stock by the Stockholder).
5. Definitions.
(a) "Affiliate" means, with respect to any Person, any of (a) a director,
officer or partner of such Person and (b) any other Person that, directly or
indirectly, through one or more intermediaries, controls, or is controlled by,
or is under common control with, another Person. The term "control" includes,
without limitation, the possession, directly or indirectly,
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of the power to direct the management and policies of a Person, whether through
the ownership of voting securities, by contract or otherwise.
(b) "Fair Market Value" of each share of Restricted Stock means the average
of the closing prices of the sales of the Common Stock on all securities
exchanges on which the Common Stock may at the time be listed, or, if there have
been no sales on any such exchange on any given day, the average of the last bid
and asked prices on all such exchanges at the end of such day, or, if on any
given day the Common Stock is not so listed, the average of the representative
bid and asked prices quoted in the Nasdaq Stock Market National Market System
("Nasdaq") as of 4:00 P.M., New York time, or, if on any given day the Common
Stock is not quoted in Nasdaq, the average of the bid and asked prices on such
day in the domestic over-the-counter market as reported by the National
Quotation Bureau Incorporated, or any similar successor organization, in each
such case averaged over a period of 21 days consisting of the day as of which
the Fair Market Value is being determined and the 20 consecutive trading days
prior to such day. If at any time the Common Stock is not listed on any
securities exchange or quoted in Nasdaq or the over-the-counter market, the Fair
Market Value shall be that value jointly determined by the Stockholder and the
Company, provided that if they cannot so agree, such value shall be determined
by a mutually acceptable investment banking or other qualified firm of national
or regional reputation, retained jointly by the Company and the Medical Group,
and all fees, expenses and other charges of such firm incurred in connection
with such determination of Fair Market Value shall be borne and shared equally
by the Company and the Medical Group. In the event that the parties are unable
to agree upon such an investment banking or other qualified firm within ten (10)
days after the date on which either party may initially propose such a firm, a
qualified firm shall be selected in the following manner:
First, the Stockholder shall send a list of names of four such firms,
arranged in order of the Stockholder's preference, by written notice to the
Company within seven (7) days after the expiration of the above referenced
10-day period. If the Stockholder does not furnish such a list to the
Company within such time period, the Company may, within the next seven (7)
days following expiration of such earlier seven-day period, submit a list
of names of four such firms to the Stockholder.
Second, the Company (or the Stockholder, as applicable) shall select,
within seven (7) days after receipt of the above-referenced list, one of
the firms identified on such list and shall give written notice thereof to
the other party. If the recipient of such list does not make any such
selection, the firm identified as the first choice on such list shall be
deemed agreed to by the parties.
(c) "Internal Revenue Code" means the Internal Revenue of Code of 1986, as
the same may be amended or supplemented from time to time, or any successor
statute, and the rules and regulations thereunder, as the same are from time to
time in effect.
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(d) "Original Value" of each share of Restricted Stock purchased hereunder
will be equal to Ten Cents $0.10 (as proportionately adjusted for all subsequent
stock splits, stock dividends and other recapitalizations).
(e) "Person" shall be construed broadly and shall include, without
limitation, an individual, a partnership, an investment fund, a limited
liability corporation or partnership, a corporation, an association, a joint
stock company, a trust, a joint venture, an unincorporated organization and a
governmental entity or any department, agency or political subdivision thereof.
(f) "Public Sale" means any sale of Restricted Stock to the public pursuant
to an offering registered under the 1933 Act or to the public through a broker,
dealer or market maker pursuant to the provisions of Rule 144 adopted under the
1933 Act.
(g) "Restricted Stock" has the meaning set forth in paragraph 1(a). The
Restricted Stock will continue to be Restricted Stock in the hands of any holder
other than the Stockholder (except for the Company and except for transferees in
a Public Sale), and except as otherwise provided herein, each such other holder
of the Restricted Stock will succeed to all rights and obligations attributable
to the Stockholder as the holder of the Restricted Stock hereunder. The
Restricted Stock will also include shares of the Company's capital stock issued
with respect to the Restricted Stock by way of a stock split, stock dividend or
other recapitalization.
(h) "1933 Act" means the Securities Act of 1933, as the same may be amended
or supplemented from time to time, or any successor statute, and the rules and
regulations thereunder, as the same are from time to time in effect.
6. Indemnification. (a) The Company shall indemnify, defend and hold
harmless the Stockholder against all liability, loss or damage, together with
all reasonable costs and expenses related thereto (including reasonable legal
fees and expenses), relating to or arising from the untruth, inaccuracy or
breach of any of the representations, warranties or agreements of the Company
contained in this Agreement.
(b) The Stockholder shall indemnify and hold harmless the Company against
all liability, loss or damage, together with all reasonable costs and expenses
related thereto (including reasonable legal fees and expenses), relating to or
arising from the untruth, inaccuracy or breach of any of the representations,
warranties or agreements of the Stockholder contained in this Agreement.
7. General Provisions.
(a) Transfers in Violation of Agreement. Any sale, transfer, assignment or
other disposition (whether with or without consideration and whether voluntarily
or involuntarily or by operation of law) (a "Transfer") or attempted Transfer of
any Restricted Stock in violation of any provision of this Agreement shall be
void, and the Company shall not record such
-11-
Transfer on its books or treat any purported transferee of such Restricted Stock
as the owner of such stock for any purpose.
(b) Severability. It is the desire and intent of the parties hereto that
the provisions of this Agreement be enforced to the fullest extent permissible
under the laws and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, if any particular provision of this
Agreement shall be adjudicated by a court of competent jurisdiction to be
invalid, prohibited or unenforceable for any reason, such provision, as to such
jurisdiction, shall be ineffective, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of this
Agreement or affecting the validity or enforceability of such provision in any
other jurisdiction. Notwithstanding the foregoing, if such provision could be
more narrowly drawn so as not to be invalid, prohibited or unenforceable in such
jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
(c) Entire Agreement. This Agreement, those documents expressly referred to
herein and other documents of even date herewith embody the complete agreement
and understanding among the parties hereto with respect to the subject matter
hereof and supersede and preempt any prior understandings, agreements or
representations by or among the parties, written or oral, which may have related
to the subject matter hereof in any way.
(d) Counterparts. This Agreement may be executed in separate counterparts,
each of which is deemed to be an original and all of which taken together
constitute one and the same agreement.
(e) Successors and Assigns. Except as otherwise provided herein, this
Agreement shall bind and inure to the benefit of and be enforceable by the
Stockholder, the Company and their respective successors, assigns, heirs,
representatives and estate, as the case may be (including subsequent holders of
Restricted Stock); provided that the rights and obligations of the Stockholder
under this Agreement shall not be assignable except in connection with a
permitted transfer of Restricted Stock hereunder.
(f) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
any choice of law or conflicting provision or rule (whether of the State of
California, or any other jurisdiction), that would cause the laws of any
jurisdiction other than the State of California to be applied. In furtherance of
the foregoing, the internal law of the State of California will control the
interpretation and construction of this agreement, even if under such
jurisdiction's choice of law or conflict of law analysis, the substantive law of
some other jurisdiction would ordinarily apply.
(g) Jurisdiction. (i) Each of the parties hereto hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of any California state court or Federal court of the United States
of America sitting in the State of California, and any appellate court thereof,
in any action or proceeding arising out of or relating
-12-
to this Agreement or for recognition or enforcement of any judgment, and each of
the parties hereto hereby irrevocably and unconditionally agrees that all claims
in respect of any such action or proceeding may be heard and determined in any
such California state court or, to the extent permitted by law, in such Federal
court. Each of the parties hereto agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that any party may otherwise
have to bring any action or proceeding relating to this Agreement in the courts
of any other jurisdiction.
(ii) Each of the parties hereto irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection that it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement in any California state
or Federal court. Each of the parties hereto irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance
of such action or proceeding in any such court.
(h) Remedies. Each of the parties to this Agreement shall be entitled to
enforce its rights under this Agreement specifically to recover damages and
costs (including reasonable attorneys' fees) for any breach of any provision of
this Agreement and to exercise all other rights existing in its favor. The
parties hereto agree and acknowledge that money damages may not be an adequate
remedy for any breach of the provisions of this Agreement and that any party may
in its sole discretion apply to any court of law or equity of competent
jurisdiction for specific performance and/or other injunctive relief (without
posting any bond or deposit) in order to enforce or prevent any violations of
the provisions of this Agreement.
(i) Amendment and Waiver. The provisions of this Agreement may be amended
and waived only with the prior written consent of the Company and the
Stockholder and no course of conduct or failure or delay in enforcing the
provisions of this Agreement shall be construed as a waiver of such provisions
or affect the validity, binding effect or enforceability of this Agreement or
any provision hereof.
(j) Notices. Any notice provided for in this Agreement must be in writing
and must be either personally delivered, transmitted via telecopier, mailed by
first class mail (postage prepaid and return receipt requested) or sent by
reputable overnight courier service (charges prepaid) to the recipient at the
address below indicated or at such other address or to the attention of such
other person as the recipient party has specified by prior written notice to the
sending party. Notices will be deemed to have been given hereunder and received
when delivered personally, when received if transmitted via telecopier, five
days after deposit in the U.S. mail and one business day after deposit with a
reputable overnight courier service.
-13-
If to the Company, to:
Bone, Muscle and Joint, Inc.
0000 Xxxxx Xxxxxxx Xxxxxxx, Xxxxx 000X
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxxx Xxxxxx, M.D., President
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
X'Xxxxxxxx Graev & Karabell, LLP
00 Xxxxxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Held, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
If to the Stockholder, to:
[Name of Stockholder]
Southern California Orthopedic
Institute Medical Group
0000 Xxxxx Xxxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with copies to:
Southern California Orthopedic
Institute Medical Group
0000 Xxxxx Xxxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Attention: Managing Partner
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
and to:
Xxxxxxx and Xxxxxx Law Corporation
1900 Avenue of the Stars, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
-14-
(k) Business Days. If any time period for giving notice or taking action
hereunder expires on a day which is a Saturday, Sunday or holiday in the State
of California, the time period for giving notice or taking action shall be
automatically extended to the business day immediately following such Saturday,
Sunday or holiday.
(l) Attorneys' Fees. In the event of any dispute or controversy arising out
of or relating to this Agreement, the prevailing party shall be entitled to
recover from the other party all costs and expenses, including attorneys' fees
and accountants' fees, incurred in connection with such dispute or controversy.
(m) Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
(n) Construction. Where specific language is used to clarify by example a
general statement contained herein, such specific language shall not be deemed
to modify, limit or restrict in any manner the construction of the general
statement to which it relates. The language used in this Agreement shall be
deemed to be the language chosen by the parties to express their mutual intent,
and no rule of strict construction shall be applied against any party.
(o) Nouns and Pronouns. Whenever the context may require, any pronouns used
herein shall include the corresponding masculine, feminine or neuter forms, and
the singular form of nouns and pronouns shall include the plural and vice-versa.
* * *
-15-
AMENDMENT NO. 1 TO THE RESTRICTED
STOCK AGREEMENT dated September 11, 1997,
between BONE, MUSCLE AND JOINT, INC., a
Delaware corporation (the "Company"), and
each individual identified on the signature
page hereof (each a "Stockholder" and,
collectively, the "Stockholders").
Reference is made to the Restricted Stock Agreement entered into as of
November 22, 1996, effective as of November 1, 1996 (the "Restricted Stock
Agreement"), pursuant to which each Stockholder acquired shares (the "Restricted
Stock") of the common stock of the Company, par value $0.001 per share (the
"Common Stock"). The parties hereto desire to amend certain of the provisions of
the Restricted Stock Agreement relating to the vesting of the Restricted Stock
and the transferability thereof.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and intending to be legally bound hereby, the
Company and each Stockholder (for himself or herself only) agree as follows:
SECTION 1. All capitalized terms used but not defined herein have the
meanings ascribed in the Restricted Stock Agreement.
SECTION 2. Section 2 to the Restricted Stock Agreement is hereby
amended in its entirety, to read as follows:
"2. Vesting of the Restricted Stock.
(a) Except as otherwise provided in paragraph 2(b) below, the
Restricted Stock shall become vested in accordance with the following
schedule, if, as of each such date, (i) the Management Services
Agreement has not been terminated, (ii) there has not been a Cessation
of Active Practice (as defined in paragraph 2(c) below) by the
Stockholder, (iii) the Stockholder has not become permanently disabled
(as described in paragraph 3(d) below), and (iv) the Stockholder has
not died:
Anniversary Date Percentage of
of this Agreement Restricted Stock Vested
----------------- -----------------------
First 25%
Second 25%
Third 25%
Fourth 25%
For purposes of this Agreement, "Anniversary Date of this
Agreement" means November 1 of each year after 1996. Shares of
the Restricted Stock which have become vested are referred to
herein as "Vested Shares" and all other shares of the
Restricted Stock are referred to herein as "Unvested Shares."
The parties acknowledge and agree that the number of shares
issued to the Stockholder hereunder may be increased or
decreased in connection with the recalculation described in
Schedule III to the Management Services Agreement.
Accordingly, following such recalculation, the vesting
schedule set forth above shall be applicable retroactively and
prospectively to the adjusted number of shares issued to the
Stockholder in connection with such recalculation.
(b) Notwithstanding the foregoing, in the event of
the death of the Stockholder, in addition to any shares that
have vested in accordance with paragraph 2(a) above, the
number of Unvested Shares scheduled to become Vested Shares
pursuant to paragraph 2(a) above during the eighteen-month
period immediately following the date of death shall
immediately become Vested Shares.
(c) For purposes of this Agreement, "Cessation of
Active Practice" means the Stockholder's resignation from or
termination of employment with the Medical Group (other than
by reason of death or permanent disability).
(d) For purposes of this Agreement, if the
Stockholder is insured under a disability insurance policy,
the determination under such policy as to whether such
Stockholder's condition constitutes a permanent disability
shall be binding on the parties hereto. If the Stockholder is
not insured under a policy of disability insurance, such
determination shall be made by an independent qualified
physician proposed by the Medical Group, subject to the
approval of the
-2-
Company, which approval shall not be unreasonably withheld.
(e) Notwithstanding anything to the contrary set
forth in this Agreement, including without limitation the
provisions of paragraph 2(a) hereof relating to vesting, if as
of the date or dates on which any of the Restricted Stock is
scheduled to vest, Phase II under the Management Services
Agreement has not yet commenced and the Medical Group has not
waived the Medical Group's right to terminate the Management
Services Agreement pursuant to Section 13.1(e) of the
Management Services Agreement (providing the Medical Group the
right under certain circumstances to terminate the Management
Services Agreement prior to the commencement of Phase II),
such vesting shall be deferred until (i) the date on which
Phase II under the Management Services Agreement commences or
(ii) the date on which the Medical Group gives written notice
to the Management Company waiving its right to terminate the
Management Services Agreement under Section 13.1(e), whichever
first occurs. If the Management Services Agreement is
terminated by the Medical Group pursuant to Section 13.1(e)
thereof, none of the Restricted Stock shall be deemed to be
Vested Shares hereunder."
SECTION 3. Section 3 to the Restricted Stock Agreement is hereby
amended in its entirety, to read as follows:
"3. Forfeiture and Repurchase of Restricted Stock.
(a) In the event of the Cessation of Active Practice
by or the death or permanent disability of the Stockholder
(the "Forfeiture Event"), the following provisions shall
apply.
(i) The Stockholder or the estate (in the case of
death) of the Stockholder shall transfer to the Medical Group,
all of the Unvested Shares held by the Stockholder. Such
Unvested Shares shall be transferred for consideration equal
to an amount in cash (the "Forfeiture Payment") determined by
multiplying the number of such Unvested Shares by the Original
Value. The stock certificate(s) representing those shares
(duly endorsed for transfer in accordance with this Section
3(a)) shall be delivered to the Company, and the Forfeiture
Payment shall be paid by the Medical Group to the Stockholder
(or his or her
-3-
estate, if applicable), no later than sixty (60) days after
the Forfeiture Event.
(ii) A portion of the shares of Restricted Stock
received by the Medical Group pursuant to Section 3(a)(i)
above shall immediately vest upon the transfer to the Medical
Group, and a portion shall be held by the Medical Group as
Unvested Shares. The number of such shares that will
immediately become Vested Shares shall be determined by
dividing the Forfeiture Payment by the Fair Market Value per
share of Restricted Stock as of the date of such Forfeiture
Event. The remainder of such shares shall be Unvested Shares
and shall continue to vest according to the schedule set forth
in Section 2(a) hereof. The Company shall, within thirty (30)
days after its receipt of such stock certificate(s), issue and
deliver to the Medical Group a certificate representing the
Unvested Shares and a certificate representing the Vested
Shares. Any such Vested Shares may at the discretion of the
Medical Group be retained by the Medical Group or transferred
or Sold to any Person, in accordance with the terms of this
Agreement.
(iii) The Medical Group shall not Sell (as
hereinafter defined) any Unvested Shares to any Person, other
than to one or more physician employees or equity owners of
the Medical Group, who prior to the receipt of such shares
from the Medical Group had not acquired any shares of the
Company's Common Stock pursuant to the Management Services
Agreement between the Company and the Medical Group. As a
condition to any such Sale, the transferee shall execute and
deliver to the Company a Restricted Stock Agreement in
substantially the form of this Agreement, effective as of the
date of transfer of such shares. The Unvested Shares
distributed according to this Section 3(a) shall be subject to
a vesting schedule identical to the schedule set forth in
Section 2(a) hereof.
(b) In the event that the Management Services
Agreement is terminated for any reason prior to the fourth
anniversary of the Commencement Date (as defined therein) (the
"Repurchase Event"), the Company shall have the right (but not
the obligation) (the "Repurchase Option"), to be exercised in
its sole discretion, to repurchase all or any portion of the
Restricted
-4-
Stock (whether vested or unvested and whether held by the
Stockholder or one or more of the Stockholder's Permitted
Transferees) pursuant to the terms and conditions set forth in
this Section 3(b).
(i) The Company may elect to exercise the Repurchase
Option and repurchase all or any portion of the Restricted
Stock by delivering written notice (the "Repurchase Notice")
to the Stockholder within ninety (90) days after the
Repurchase Event; provided, however, that, if the Company
elects to repurchase less than all of the Restricted Stock,
the Company shall first repurchase all of the Unvested Shares
and then repurchase that number of Vested Shares, if any, as
the Company may, in its sole discretion, elect. The Repurchase
Notice shall set forth the number of Unvested Shares and
Vested Shares to be repurchased, the aggregate consideration
to be paid for such shares, and the time and place for the
closing of the transaction. The purchase price payable for
each Unvested Share shall equal the Original Value for such
share and the purchase price payable for each Vested Share
shall equal the Fair Market Value for such share. If the
number of shares of Restricted Stock that the Company has
elected to repurchase is less than the total number of shares
of Restricted Stock held by all of the Stockholders, the
Company shall purchase the shares of Restricted Stock pro rata
according to the number of shares of Restricted Stock held by
all of the Stockholders at the time of delivery of such
Repurchase Notice (determined as nearly as practicable to the
nearest whole share).
(ii) The closing of the repurchase of Restricted
Stock pursuant to the Repurchase Option shall take place on
the date designated by the Company in the Repurchase Notice,
which date shall not be more than sixty (60) days nor less
than five (5) days after the delivery of the Repurchase
Notice. The Company shall pay for Restricted Stock to be
purchased pursuant to the Repurchase Option by delivery of (A)
a check or wire transfer of funds, (B) subordinated note or
notes payable in up to five equal annual installments
beginning on the first anniversary of the closing of such
purchase and bearing interest (payable quarterly) at a rate
per annum equal to the greater of either the prime rate
announced from time to time by The Chase Manhattan Bank
(National Association) plus
-5-
1/2% or the "applicable Federal rate" (as defined in Section
1274(d) of the Internal Revenue Code) in effect from time to
time, or (C) a combination of both (A) and (B), in the
aggregate amount of the repurchase price for such shares;
provided, however, that in the event that the Medical Group is
obligated to pay to the Company any sums in connection with
the repurchase of assets by the Medical Group pursuant to the
Management Services Agreement, the total of such sums may be
offset by the Company against any amounts owed by the Company
to the Stockholders pursuant to each of the Restricted Stock
Agreements, such offset amount to be allocated pro rata among
all of the Stockholders. Any notes issued by the Company
pursuant to this paragraph 3(b)(ii) shall be subject to the
restrictive covenants, if any, to which the Company is subject
at the time of such repurchase. The Company shall be entitled
to require the signature of the Stockholder to be guaranteed
and to receive representations and warranties from such
Stockholder regarding (x) the Stockholder's power, authority
and legal capacity to enter into such sale and to transfer
valid right, title and interest in such Restricted Stock, (y)
the Stockholder's ownership of such Restricted Stock and the
absence of any liens, pledges, and other encumbrances on such
Restricted Stock and (z) the absence of any violation,
default, or acceleration of any agreement or instrument
pursuant to which the Stockholder or such Stockholder's assets
are bound resulting from such sale.
(c) Notwithstanding anything to the contrary set
forth in this paragraph 3, in the event of a Repurchase Event
consisting of the termination of the Management Services
Agreement by the Medical Group pursuant to Section 13.1 of the
Management Services Agreement, or in the event of termination
of the Management Services Agreement by either party in
accordance with Section 27 thereof (pursuant to Section 13.3),
the Company shall have the obligation (rather than the option)
to purchase all of the Restricted Stock acquired by the
Stockholder pursuant to this Agreement, and the repurchase
price shall be paid in full in cash not later than sixty (60)
days after the date of termination of the Management Services
Agreement; provided, however, that in the event that the
Medical Group is obligated to pay to the Company any sums in
connection with the repurchase of assets by the Medical Group
pursuant to the
-6-
Management Services Agreement, the total of such sums may be
offset by the Company against any amounts owed by the Company
to the Stockholders pursuant to each of the Restricted Stock
Agreements, such offset amount to be allocated pro rata among
all of the Stockholders.
(d) In the event that the Stockholder is required,
prior to the consummation of an initial public offering of the
Company's Common Stock pursuant to the 1933 Act or prior to
the second anniversary of the date hereof, whichever is later,
to pay any state or federal taxes in connection with the
receipt of the Restricted Stock hereunder, the Stockholder
shall have the right to Sell to the Company, and the Company
shall be obligated to purchase from the Stockholder, for the
purchase price determined in accordance with this paragraph 3,
such number of shares of Vested Stock, which shares shall have
been held (as Unvested Stock or Vested Stock) by the
Stockholder for at least six (6) months, as the Stockholder
may tender to the Company, provided that the purchase price
therefor shall not exceed the total amount of the
Stockholder's tax liability incurred in connection with the
receipt of such stock. In the event that the Stockholder
desires to exercise the right conferred under this paragraph
3(d), the Stockholder shall give notice to the Company not
earlier than forty-five (45) days prior to, nor later than
forty-five (45) days after, the date on which such taxes are
due and payable, and the Stockholder shall furnish to the
Company reasonable documentation prepared by the Stockholder's
certified public accountant establishing the amount of such
tax liability.
(e) Notwithstanding anything to the contrary
contained in this Agreement, all repurchases of Restricted
Stock by the Company shall be subject to applicable
restrictions, if any, under Federal law or the Delaware
General Corporation Law. Notwithstanding anything to the
contrary contained in this Agreement, if any such restrictions
prohibit or otherwise delay the repurchase of Restricted Stock
hereunder which the Company is otherwise entitled or required
to make, the Company may make such repurchases as soon as it
is permitted to do so under such restrictions.
(f) In the event that Restricted Stock is repurchased
pursuant to this paragraph 3, the
-7-
Stockholder and his or her successors and assigns shall take
all reasonable steps to obtain all required third-party,
governmental and regulatory consents and approvals and take
all other reasonable actions necessary to facilitate
consummation of such repurchase in a timely manner."
SECTION 4. Section 4(a) of the Restricted Stock Agreement is hereby
amended by (a) adding the words "and except for Permitted Transfers" after the
words "paragraph 3" in the second line thereof and (b) adding the phrase "(other
than pursuant to paragraph 3 above)" after the words "Unvested Shares" in the
fifth line thereof.
SECTION 5. Section 4(e) of the Restricted Stock Agreement is hereby
amended in its entirety, to read as follows:
"(e) Any Permitted Transferee (other than the
Company) shall, as a condition to the transfer, (i) agree to
be bound by all of the provisions of this Agreement applicable
to the Stockholder and shall evidence such agreement by
executing and delivering to the Company a joinder to this
Agreement in form and substance satisfactory to the Company,
and (ii) if such transferee is a partner in or an equity owner
or employee of the Medical Group, execute a noncompetition
agreement in form and substance satisfactory to the Company
(if such transferee is not, as of the date of such transfer, a
party to such an agreement with the Company)."
SECTION 6. Section 5 of the Restricted Stock Agreement is hereby
amended by adding the following new definitions:
"(f) "Permitted Transferee" means, as to the
Stockholder, any transferee who acquires the Restricted Stock
pursuant to a Permitted Transfer or any other transfer made in
accordance with the provisions of this Agreement.
(g) "Permitted Transfer" means, as to the
Stockholder, any sale or transfer of Vested Shares to (A) the
spouse or lineal descendants of the Stockholder or (B) a trust
for the benefit of any of the foregoing."
SECTION 7. Section 7(i) is hereby amended by adding the following at
the end thereof:
-8-
"; provided, however, that the Company may, without the
Stockholder's consent, amend Schedule A hereto upon
consummation of a Permitted Transfer of Restricted Stock by
any Stockholder or upon the issuance of additional shares of
Common Stock by the Company to the Stockholders pursuant to
Schedule III of the Management Services Agreement, in either
case to reflect the then current ownership of the Restricted
Stock."
SECTION 8. This Amendment No. 1 shall be deemed effective as of
November 1, 1996. Except as expressly provided in this Amendment No. 1, the
Restricted Stock Agreement remains in full force and effect in accordance with
its terms.
SECTION 9. No Stockholder shall have any responsibility for any breach
of this Amendment No. 1 by any other Stockholder or for any representations,
warranties, acts or omissions of any other Stockholder. Each Stockholder is
entering into this Amendment No. 1 for and on behalf of such Stockholder only,
and no partnership, joint venture, unincorporated association or any other legal
entity is intended to be formed by or among the Stockholders as a result of or
in connection with this Amendment No. 1. The parties have chosen to execute a
single instrument for convenience only, and this Agreement shall be construed as
separate and several agreements among the Medical Group, the Company and each of
the respective Stockholders for all purposes. This Amendment No. 1 may be
executed in separate counterparts and each such counterpart shall constitute an
original instrument.
SECTION 10. This Amendment No. 1 shall by governed by, construed and
interpreted in accordance with the laws of the State of California.
* * * *
-9-
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment No. 1 to the Restricted Stock Agreement as of the date first written
above.
COMPANY
BONE, MUSCLE AND JOINT, INC.
By:
-----------------------------
Name:
Title:
STOCKHOLDERS
--------------------------------
Xxxxx X. Xxx, M.D.
DEL XXXXX TRUST
By:
-----------------------------
Name:
Title:
XXXXXXXX FAMILY TRUST
By:
-----------------------------
Name:
Title:
XXXXXXX X. XXXXXX AND XXX XXX
XXXXXX FAMILY TRUST
By:
-----------------------------
Xxxxxxx X. Xxxxxx, M.D.,
co-trustee
By:
-----------------------------
Xxx Xxx Xxxxxx, co-trustee
THE XXXXXXX XXXXXX AND XXXXXXXX
XXXXXX REVOCABLE TRUST
By:
-----------------------------
Xxxxxxx Xxxxxx, M.D.,
co-trustee
By:
-----------------------------
Xxxxxxxx Xxxxxx, co-trustee
XXXX X. XXXXXXXX AND XXXXX X.
XXXXXXXX FAMILY TRUST
By:
-----------------------------
Xxxx X. Xxxxxxxx, M.D.,
co-trustee
By:
-----------------------------
Xxxxx X. Xxxxxxxx, co-trustee
THE HANKER LIVING TRUST
By:
-----------------------------
Xxxxxxx X. Xxxxxx, M.D.,
co-trustee
By:
-----------------------------
Xxxx Xxx Xxxxxx, co-trustee
--------------------------------
Xxxxxxx X. Xxxxxxxxxx, M.D.
--------------------------------
Xxxxxx X. Xxxxx, M.D.
--------------------------------
Xxxx X. Xxxxxxxxx, M.D.
KARZEL FAMILY TRUST
By:
-----------------------------
Name:
Title:
--------------------------------
A. Xxxxxxxxx Xxxxx, M.D.
--------------------------------
Xxxx X. Xxxxxx, M.D.
--------------------------------
Xxxxxx X. Xxxxxxxx, M.D.
--------------------------------
Xxxxxxxx X. Jaivan, M.D.
--------------------------------
Xxxxxx X. Xxxx, M.D.
--------------------------------
Xxxxxxxx X. XxXxxxxx, M.D.
--------------------------------
Xxxxx X. Xxxxxxxx, M.D.
--------------------------------
Xxxxxx Xxxxxxx
--------------------------------
Xxxxx Xxxxx
ACCEPTED AND AGREED
AS TO SECTION 3:
SOUTHERN CALIFORNIA ORTHOPEDIC
INSTITUTE MEDICAL GROUP
By Its Partners:
XXXXX X. XXX, M.D., INC.
By:
-----------------------------
Xxxxx X. Xxx, M.D., President
XXXXXX DEL XXXXX, M.D., INC.
By:
-----------------------------
Xxxxxx Del Xxxxx, M.D.,
President
XXXX X. XXXXXXXX, M.D., INC.
By:
-----------------------------
Xxxx X. Xxxxxxxx, M.D.,
President
--------------------------------
Xxxxxxx X. Xxxxxx, M.D.
--------------------------------
Xxxxxxx X. Xxxxxx, M.D.
--------------------------------
Xxxx X. Xxxxxxxx, M.D.
--------------------------------
Xxxxxxx X. Xxxxxx, M.D.
XXXXXXX XXXXXX XXXXXXXXXX, M.D., INC.
By:
-----------------------------
Xxxxxxx Xxxxxx Xxxxxxxxxx, M.D.,
President
--------------------------------
A. Xxxxxxxxx Xxxxx, M.D.
--------------------------------
Xxxx X. Xxxxxx, M.D.
XXXXXX X. XXXXX, M.D., A MEDICAL
CORPORATION
By:-----------------------------
Xxxxxx X. Xxxxx, M.D.,
President
XXXX X. XXXXXXXXX, M.D., INC.
By:-----------------------------
Xxxx X. Xxxxxxxxx, M.D.,
President
--------------------------------
Xxxxxx X. Xxxxxxxx, M.D.
--------------------------------
Xxxxxx X. Xxxxxx, M.D.
--------------------------------
Xxxxxxxx X. Jaivan, M.D.
--------------------------------
Xxxxxx X. Xxxx, M.D.
--------------------------------
Xxxxxxxx X. XxXxxxxx, M.D.
--------------------------------
Xxxxx X. Xxxxxxxx, M.D.
