NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT ("Agreement") is made effective as of the
25th day of September, 1997, by and between Sierra Medical Management, Inc., a
Delaware corporation formerly known as Prospect Acquisition Corporation, Inc.
("Sierra Medical Management"), and Xxxxxxxxxx Xxxxxxxxx ("Employee").
R E C I T A L S
A. Employee owned 3,032 shares of the issued and outstanding
capital stock of Sierra Medical Management.
B. Employee is exchanging his shares of Sierra Medical
Management for those of Prospect Medical Holdings, Inc. pursuant to the terms of
that certain Agreement and Plan of Reorganization made and entered into as of
September 23, 1997, by and among Prospect Medical Holdings, Inc., Sierra Medical
Management, Sinnadurai X. Xxxxxxx, M.D., Karunyan Xxxxxxxxxxxx, M.D., and
Employee ("Merger Agreement").
C. All capitalized terms used herein and not otherwise expressly
defined shall have the same meanings set forth in the Merger Agreement.
D. Employee will benefit from the Merger.
E. As conditions to the Closing of the Merger Agreement,
Employee shall have entered into an agreement in the form of this Agreement to
be delivered to Sierra Medical Management, and shall have entered into an
Employment Agreement with Sierra Medical Management.
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows.
1. EMPLOYEE'S COVENANTS.
(a) As a material inducement to Sierra Medical Management to enter into
the Merger Agreement and during the term of this Agreement in the Service Area
described in Section 4 below and except as set forth herein or as permitted
under the Employment Agreement between Employee and Sierra Medical Management,
Employee (directly or indirectly through any business, enterprise, venture,
partnership, corporation or any other entity controlled directly or indirectly
by Employee whether alone or as a partner, stockholder, creditor or otherwise):
(i) shall not engage or contract for (other than with Sierra
Medical Management or any of Sierra Medical Management's Affiliates) any medical
management services which are the
same as or substantially similar to any of the services that Sierra Medical
Management or any of Sierra Medical Management's Affiliates furnishes;
(ii) shall not solicit or assist any other person to solicit any
business relating to a competing line of business (other than for Sierra Medical
Management or any of Sierra Medical Management's Affiliates) from any present or
potential customer (including all third party payors) of Employee, any other
Seller, Sierra Medical Management, or any of their affiliates;
(iii) shall not commit any other act or assist others to commit any
other act which might injure the business of Sierra Medical Management or Sierra
Medical Management's Affiliates;
(iv) shall not directly or indirectly employ, contract, solicit or
encourage any employee or other person under contract with Sierra Medical
Management or any of Sierra Medical Management's Affiliates to leave the employ
of any such entity, except pursuant to the terms of the Merger Agreement; and
(v) shall not directly or indirectly solicit, request, advise, or
encourage any present or future supplier, customer, patient or employee of
Sierra Medical Management or Sierra Medical Management's Affiliates (including
practices managed by Sierra Medical Management or Sierra Medical Management's
Affiliates) to withdraw, curtail, disenroll, or become enrolled with another
provider of health care, or cancel its business dealings with Sierra Medical
Management or Sierra Medical Management's Affiliates, or take any actions that
might impair the relations of Sierra Medical Management or any of Sierra Medical
Management's Affiliates and their respective suppliers, customers, employees or
others.
(b) If any term or provision of this Section is determined to be
illegal, unenforceable or invalid in whole or in part for any reason, such
illegal, unenforceable or invalid provision or part thereof shall be stricken
from this Agreement, and such provision shall not affect the legality,
enforceability or validity of the remainder of this Agreement. If any provision
or part thereof of this Agreement is stricken from this Agreement, in accordance
with the provisions of this Section, then the stricken provision shall
automatically be replaced to the extent possible, with a legal, enforceable and
valid provision which is as similar in tenor to the stricken provision as is
legally possible.
2. CONFIDENTIALITY. From and after the Closing Date, Employee shall keep
secret and retain in strictest confidence, and shall not use for the benefit of
any other party, except for Sierra Medical Management or any of Sierra Medical
Management's Affiliates, all confidential matters and trade secrets known to
Employee relating to the business and operations of Employee, any other Seller,
Sierra Medical Management or any of their affiliates, including without
limitation, customer lists, pricing policies, operational methods, utilization
data, provider contract terms, patient records, marketing plans or strategies,
product development techniques or plans, business acquisition plans, new
personnel designs and design projects, invention and research projects and other
business affairs relating to the business and operations of Employee, any other
Seller, Sierra Medical Management or any of their affiliates learned by Employee
before or after the date of this Agreement, and shall not disclose them to
anyone outside of Sierra Medical Management and Sierra Medical Management's
Affiliates, provided however, that this section shall not apply to information
in the
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public domain or to information that is sought from Employee pursuant to
subpoena or court order (but Employee must provide notice to Sierra Medical
Management or Sierra Medical Management's Affiliates in order for them to
contest such subpoenas or court orders).
3. EMPLOYEE'S REPRESENTATION. Employee specifically acknowledges, represents,
and warrants that (i) Employee's covenants set forth in this Agreement are being
purchased in connection with the Merger, (ii) such covenants are reasonable and
necessary to protect the legitimate interests of Sierra Medical Management, and
(iii) Sierra Medical Management would not have entered into the Merger Agreement
in the absence of such restrictions. Employee acknowledges that this Agreement
is subject to all representations, warranties and covenants in the Merger
Agreement.
4. SERVICE AREA. The Service Area to which Employee's covenants in Section 1
apply is defined as the fifteen (15) mile radius area around 0000 X. Xxxxxxxx
Xxxx., Xxxxxxxx, Xxxxxxxxxx 00000; 00000 00xx Xxxxxx Xxxx, Xxxxxxxxx, Xxxxxxxxxx
00000; and 00000 00xx Xxxxxx Xxxx, Xxxxxxxxx, Xxxxxxxxxx 00000.
5. TERM. The term of this Agreement commences as of the day and year first
above written and terminates upon the earlier to occur of:
(i) the date which is five (5) years following the day and year
first above written; or
(ii) the date of the termination or expiration of the Employment
Agreement through no fault of Employee; or
(iii) the date upon which Employer is in material default of any of
Employer's obligations under its Employment Agreement with Employee, and
Employee terminates the Employment Agreement as a result of such material
breach.
6. DEFAULT. Any default by Prospect Medical Holdings, Inc., a Delaware
corporation in the payment when due, of any amount owed by Prospect Medical
Holdings, Inc., to Employee under the Promissory Note, of even date herewith,
issued from Prospect Medical Holdings, Inc. to Employee, in the principal amount
of $250,000, which default continues for a period of ten (10) days, shall
constitute a default under this Agreement. Upon written notice from Employee of
such default, Prospect Medical Holdings, Inc. shall have a thirty (30) day
period in which to cure such default. In the event Prospect Medical Holdings,
Inc. fails to cure such default within thirty (30) days of such notice, at
Employee's option, this Agreement shall terminate and Employee shall have no
further obligations hereunder.
7. MISCELLANEOUS.
7.1 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties and their respective heirs (as
applicable), legal representatives, and permitted successors and assigns. No
party may assign this Agreement or the rights, interests or obligations
hereunder. Any assignment or delegation in contravention of this Section 7
shall be null and void.
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7.2 COUNTERPARTS. This Agreement, and any amendments thereto, may be
executed in counterparts, each of which shall constitute an original document,
but which together shall constitute one and the same instrument.
7.3 HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
7.4 AMENDMENT. This Agreement may not be amended except in writing and
as executed by all parties.
7.5 TIME OF ESSENCE. Time is expressly made of the essence of this
Agreement and each and every provision hereof of which time of performance is a
factor.
7.6 NOTICES. Any notices required or permitted to be given hereunder by
any party to the other shall be in writing and shall be deemed delivered upon
personal delivery; twenty-four (24) hours following deposit with a courier for
overnight delivery; or seventy-two (72) hours following deposit in the U.S.
Mail, registered or certified mail, postage prepaid, return-receipt requested,
addressed to the parties at the following addresses or to such other addresses
as the parties may specify in writing:
If to Employee: Xxxxxxxxxx Xxxxxxxxx
00000 Xxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
With copy to: Xxxx Xxxxxxx, Esq.
Xxxxx & Xxxxxx
000 X. Xxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
If to Sierra Medical Management: Xxxxx XxXxxxxx, M.D.
Sierra Medical Management, Inc.
00000 Xxxxx Xxxxx Xxxx., Xxxxx 000
Xxxxx Xxxxx, Xxxxxxxxxx 00000
With copy to: Xxxx X. Xxxxxx, Esq.
Xxxxxx & Xxxxxxx
0000 Xxxxxxx Xxxx Xxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
7.7 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
7.8 INJUNCTIVE RELIEF. The parties hereto acknowledge and agree that a
breach by Employee of this Agreement will cause irreparable damage to Sierra
Medical Management, the exact amount of which will be difficult to ascertain,
and that remedies at law for any such breach will be
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inadequate. Accordingly, Employee agrees that if Employee breaches this
Agreement, then Sierra Medical Management shall be entitled to injunctive
relief, without bond, and Employee agrees not to assert in any proceeding that
Sierra Medical Management has an adequate remedy at law. Employee shall pay the
reasonable fees and expenses, including attorneys' fees, incurred by Sierra
Medical Management or any successor or assign in enforcing this Agreement.
7.9 SEVERABILITY. If any provision or portion of this Agreement is held
by a court of competent jurisdiction to be invalid or unenforceable, the
remainder of this Agreement will nevertheless continue in full force and effect
and shall not be invalidated or rendered unenforceable or otherwise adversely
affected, unless such invalidity or unenforceability would defeat an essential
business purpose of this Agreement. Without limiting the generality of the
foregoing, if the provisions of this Agreement shall be deemed to create a
restriction which is unreasonable as to either duration or geographical area, or
both, the parties agree that the provisions of this Agreement shall be enforced
for such duration and in such geographical area as any court of competent
jurisdiction may determine to be reasonable.
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7.10 ATTORNEYS' FEES. Should either Sierra Medical Management or
Employee institute any action or procedure to enforce this Agreement or any
provision hereof, or for damages by reason of any alleged breach of this
Agreement or of any provision hereof, or for a declaration of rights hereunder
(including without limitation arbitration), the prevailing party in any such
action or proceeding shall be entitled to receive from the other party all costs
and expenses, including without limitation reasonable attorneys' fees, incurred
by the prevailing party in connection with such action or proceeding.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement of the
day and year first written above.
"Sierra Medical Management":
SIERRA MEDICAL MANAGEMENT, INC.
By: /s/ Xxxxx X. Xxxxxx, M.D.
-----------------------------------------
Xxxxx X. Xxxxxx, M.D. Chief Executive Officer
"Employee":
/s/ Xxxxxxxxxx Xxxxxxxxx
----------------------------------------------
Xxxxxxxxxx Xxxxxxxxx
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