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EXHIBIT 10.17
NON-COMPETITION AGREEMENT
(Xx. Xxxxxx)
NON-COMPETITION AGREEMENT dated this 5th day of February, 1996 by and
between Monarch Dental Corporation, a Delaware corporation (the "Company"), and
Xx. Xxxxxxx X. Xxxxxx ("Xx. Xxxxxx") and Shears Vanguard Inc., Shears Vanguard
SMI Inc., Shears Vanguard, Ltd., (the "Partnership"), Shears Vanguard General,
Inc. and MDC Dental, Inc. (collectively, the "Seller Entities" and individually
a "Seller Entity"). Reference is made to that certain Asset Contribution
Agreement (the "Purchase Agreement") effective as of January 31, 1996, by and
among the Company, Xx. Xxxxxx and the Seller Entities relating to the
acquisition by the Company from the Partnership of the assets and certain
liabilities comprising the MacGregor Dental Centers business in consideration
of a substantial cash payment and the issuance of 1,400,000 shares of Common
Stock of the Company to the Partnership, in each case subject to the terms and
conditions set forth in the Purchase Agreement. Capitalized terms used in this
Agreement and not defined herein shall have the meanings ascribed to them in
the Purchase Agreement.
WITNESSETH
WHEREAS, Xx. Xxxxxx beneficially owns a substantial portion of the
outstanding equity interest in the entities that have heretofore conducted the
MacGregor Dental Centers business and has served as President and Chief
Executive Officer of such entities, having founded such business many years
ago;
WHEREAS, as a material inducement to the Company to enter into the
Purchase Agreement and in consideration of the Company's covenants and
agreements contained in the Purchase Agreement, including the payment of the
substantial consideration specified therein for the assets conveyed thereunder,
and of the payment made pursuant to Section 1(b) hereof, and in further
consideration of the covenants and agreements set forth herein, Xx. Xxxxxx and
the Seller Entities have agreed to execute and deliver this Agreement; and
WHEREAS, the execution and delivery by Xx. Xxxxxx and the Seller
Entities of this Agreement is a condition to the Company's willingness to
consummate the transactions specified in the Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
Section 1. Non-Competition. In view of the fact that any activity of
Xx. Xxxxxx or any Seller Entity in violation of the terms hereof would deprive
the Company and its subsidiaries (as defined below) of the benefit of the
Company's bargain under the Purchase Agreement, as a material inducement to and
a condition precedent of the Company's payment of substantial consideration
under the Purchase Agreement for the assets to be acquired by it thereunder, in
consideration of the payment of the consideration to be paid by the Company
pursuant to Section 1(b) below and the other covenants set forth herein, and to
preserve the goodwill
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associated with the MacGregor Dental Centers business, Xx. Xxxxxx and each
Seller Entity hereby agree to the following restrictions on his and their
activities:
(a) Non-Competition Agreement. Xx. Xxxxxx and each Seller
Entity hereby agree that during the period commencing on the date hereof and
ending on the date which is three (3) years after the date hereof, he and they
will not, without the express written consent of the Company, directly or
indirectly, anywhere in the geographic area set forth in Section 1(c) below,
engage in any activity which is, or participate or invest in, or provide or
facilitate the provision of financing to, or assist (whether as owner,
part-owner, shareholder, partner, director, officer, trustee, employee, agent
or consultant, or in any other capacity), any business, organization or person
other than the Company (or any affiliate of the Company), and including
particularly any such business, organization or person involving, or which is,
a family member of Xx. Xxxxxx, whose business, activities, products or services
are competitive with any of the business, activities, products or services
conducted or offered by the Company and its subsidiaries, (including for
purposes of this Agreement any associated professional corporation and the
employees and independent contractors thereof which or who provide dental
service in connection with the business of the Company and its subsidiaries
(herein "Dental Providers")) during any period in which Xx. Xxxxxx serves as an
officer or employee of the Company or any of its subsidiaries (but not during
any consulting period as provided below), which business, activities, products
and services shall include in any event the provision of dental health care
services (including, without limitation, the acquisition, ownership and/or
operation of one or more dental health care practices including group
practices). Without implied limitation, the forgoing covenant shall include
hiring or engaging or attempting to hire or engage for or on behalf of himself
or itself or any such competitor any officer or employee of, or any Dental
Provider who provides services in connection with the business of, the Company
or any of its direct and/or indirect subsidiaries, encouraging for or on behalf
of himself or itself or any such competitor, any such officer, employee or
Dental Provider to terminate his, her or its relationship or employment with
the Company or any of its direct or indirect subsidiaries (including Dental
Providers), soliciting for or on behalf of himself or itself or any such
competitor any client of the Company or any of its direct or indirect
subsidiaries (including Dental Providers) and diverting to any person (as
hereinafter defined) any client or business opportunity of the Company or of
any of its direct or indirect subsidiaries (including Dental Providers).
Notwithstanding anything herein to the contrary, (i) any business
activity consisting solely of the factoring of receivables arising from the
provision of dental services by dentists or professional corporations other
than those who or which provide services through facilities of the Company and
its affiliates, and the provision of dental services by Xx. Xxxxxx as a sole
practitioner, shall be exempt from the provisions of this Agreement, (ii) Xx.
Xxxxxx and the Seller Entities may engage on the business of underwriting
dental insurance, the provision of utilization review and case management
services and the provision of claims management or third party administrator
services provided that the relevant entity or entities involved in such
business do not offer (directly or through one or more associated professional
corporations or other licensed professionals) dental health care services to
patients (including without
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limitation any so-called "staff model" DMO), and (iii) Xx. Xxxxxx and the
Seller Entities may make passive investments in any enterprise the shares of
which are publicly traded if such investment constitutes less than five (5)
percent of the equity of such enterprise.
Neither Xx. Xxxxxx nor any Seller Entity nor any business entity
controlled by him or them is a party to any contract, commitment, arrangement
or agreement which could, following the date hereof, restrain or restrict the
Company or any subsidiary or affiliate of the Company from carrying on the
MacGregor Dental Centers business or restrain or restrict Xx. Xxxxxx from
performing his obligations under his Employment Agreement with the Company and
a subsidiary of the Company of even date, and as of the date of this Agreement
neither Xx. Xxxxxx nor any Seller Entity has any business interests in the
health care industry whatsoever other than his interest in the Company.
For purposes of this Agreement, any reference to the subsidiaries of the
Company shall be deemed to include all entities directly or indirectly
controlled by it through an ownership interest of more than fifty percent (50%)
of the voting interests as well as any Dental Provider, and the term "person"
shall mean an individual, a corporation, an association, a partnership, an
estate, a trust, and any other entity or organization.
(b) Non-Competition Payment. In consideration of the
execution and delivery by Xx. Xxxxxx and the Seller Entities of this Agreement,
on the date hereof the Company shall make a cash payment to Xx. Xxxxxx in the
amount of $10,000.
(c) Geographic Area. The provisions of Section 1 of this
Agreement shall apply in the following geographic areas:
(i) The state of Texas; and
(ii) All other states in which the Company or any of its
subsidiaries (including acquired businesses) commence conducting
business activities during the period during which Xx. Xxxxxx serves as
an officer or employee of the Company or any of its subsidiaries, or in
which any company or business acquired or to be acquired by the Company
or any of its subsidiaries pursuant to an agreement entered into during
the period during which Xx. Xxxxxx serves as an officer or employee of
the Company or any of its subsidiaries, conducts business, provided that
the Company shall notify Xx. Xxxxxx promptly upon commencement of
business activities in any new market, whether on a de novo basis or
through acquisition.
(d) Consulting. As additional consideration for the covenants
hereunder, the Company shall engage Xx. Xxxxxx, on an independent contractor
basis and not as an employee, as a consultant upon any termination of his
employment for any reason other than death or disability prior to the third
anniversary of the date hereof. Such engagement shall continue until the third
anniversary of the date hereof and Xx. Xxxxxx shall be paid $500 per month
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during such period, subject to withholding (if applicable), by the Company or a
subsidiary of the Company for his consulting services. Xx. Xxxxxx shall not be
required to devote more than one (1) hour per week to the performance of
consulting services or to travel from his principal location in his performance
of such services, and any consulting services performed shall otherwise be
mutually agreeable.
Section 2. Scope of Agreement. The parties acknowledge that the
time, scope, geographic area and other provisions of this Agreement have been
specifically negotiated by sophisticated commercial parties and agree that (a)
all such provisions are reasonable under the circumstances of the transactions
contemplated by the Purchase Agreement, (b) are given as an integral and
essential part of the transactions contemplated by the Purchase Agreement and
(c) but for the covenants of Xx. Xxxxxx and the Seller Entities contained in
this Agreement, the Company would not have entered into the Purchase Agreement
or consummated the transactions contemplated thereby. Xx. Xxxxxx and the
Seller Entities have independently consulted with their counsel and have been
advised in all respects concerning the reasonableness and proprietary of the
covenants contained herein, with specific regard to the business to be
conducted by Company and its subsidiaries.
Section 3. Certain Remedies; Severability. It is specifically
understood and agreed that any breach of the provisions of this Agreement by
Xx. Xxxxxx or any Seller Entity will result in irreparable injury to the
Company and its subsidiaries, that the remedy at law alone will be an
inadequate remedy for such breach and that, in addition to any other remedy it
may have, the Company and its subsidiaries (including, without limitation, the
limited partnership which employs Xx. Xxxxxx as an intended beneficiary hereof)
shall be entitled to enforce the specific performance of this Agreement by Xx.
Xxxxxx or the relevant Seller Entity through both temporary and permanent
injunctive relief without the necessity of proving actual damages or the
posting of any bond, but without limitation of their right to damages and any
and all other remedies available to them, it being understood that injunctive
relief is in addition to, and not in lieu of, such other remedies. In the
event that any covenant contained in this Agreement shall be determined by any
court of competent jurisdiction to be unenforceable by reason of its extending
for too great a period of time or over too great a geographical area or by
reason of its being too extensive in any other respect, it shall be interpreted
to extend only over the maximum period of time for which it may be enforceable
and/or over the maximum geographical area as to which it may be enforceable
and/or to the maximum extent in all other respects as to which it may be
enforceable, all as determined by such court in such action. The existence of
any claim or cause of action which Xx. Xxxxxx or any Seller Entity may have
against the Company or any of its subsidiaries or affiliates shall not
constitute a defense or bar to the enforcement of any of the provisions of this
Agreement.
Section 4. Jurisdiction. The parties hereby irrevocably submit to
the non-exclusive jurisdiction of the courts of the State of Texas to construe
and enforce the covenants contained in this Agreement. In the event that the
courts of any state shall hold such covenants unenforceable (in whole or in
part) by reason of the breadth of such scope or otherwise, it is the intention
of the parties hereto that such determination shall not bar or in any way
affect the
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right of the Company or any its subsidiaries to the relief provided for herein
in the courts of any other state within the geographic scope of such covenants,
as to breaches of such covenants in such other respective states, the above
covenants as they relate to each state being, for this purpose, severable into
diverse and independent covenants.
Section 5. Notices. All notices, requests, demands and other
communications hereunder shall be deemed to have been duly given if delivered,
telecopied or mailed by certified or registered mail:
To the Company: With a copy to:
Monarch Dental Corporation Xxxxxx and Xxxxx, L.L.P.
0000 Xxxxxxx Xxxx, Xxxxx 000 0000 XxxxxxxXxxx Xxxxx
Xxxxxx, XX 00000 Xxxxxx, XX 00000
Attn: President Attn: Xxxxxxx X. Xxxxxx, Esq.
Xxxxxxx, Procter & Xxxx
Exchange Place
Boston, MA 02109
Attn: Xxxx X. XxXxxxxx, P.C.
To Xx. Xxxxxx: With a copy to:
MacGregor Dental Centers Xxxxxxxx & Xxxxxx, P.C.
0000 XxXxxxxx Xxxx, Xxxxx 000 0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000 Xxxxxx, XX 00000-0000
Attn: Xxxxxx X. Xxxxxxx, Esq.
or to such other address of which any party may notify the other parties as
provided above. Notices shall be effective as of the date of such delivery or
mailing.
Section 6. Miscellaneous. This Agreement shall be governed by and
construed under the laws of the State of Texas, and shall not be modified or
discharged in whole or in part except by an agreement in writing signed by the
Company and Xx. Xxxxxx. The prevailing party in any controversy hereunder
shall be entitled to reasonable attorneys' fees and expenses. The failure of
any of the parties to require the performance of a term or obligation or to
exercise any right under this Agreement or the waiver of any breach hereunder
shall not prevent subsequent enforcement of such term or obligation or exercise
of such right or the enforcement at any time of any other right hereunder or be
deemed a waiver of any subsequent breach of the provision so breached, or of
any other breach hereunder. This Agreement shall inure to the benefit of, and
be binding upon, successors of the Company by way of merger, consolidation or
transfer of substantially all the assets of the Company, and
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may not be assigned by Xx. Xxxxxx or any Seller Entity. This Agreement
supersedes all prior understandings and agreements between the parties relating
to the subject matter hereof (without limitation of the Purchase Agreement and
the Employment Agreement executed by Xx. Xxxxxx and the Seller Entities as of
the date hereof).
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IN WITNESS WHEREOF, the parties have executed or caused this Agreement
to be executed under seal.
MONARCH DENTAL CORPORATION
By: /s/ XXXXXX X. XXXXXXX
------------------------------------
Name: Xxxxxx X. Xxxxxxx, D.D.S.
Title: President
/s/ XXXXXXX X. XXXXXX
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Xx. Xxxxxxx X. Xxxxxx
SHEARS VANGUARD, LTD.
ATTEST By: Shears Vanguard General, Inc.,
its General Partner
By: /s/ XXXXXXX X. XXXXXX
----------------------------------- --------------------------------
Secretary Name: Xxxxxxx X. Xxxxxx
[Seal] Title: President
ATTEST SHEARS VANGUARD INC.
By: /s/ XXXXXXX X. XXXXXX
----------------------------------- ------------------------------------
Secretary Name: Xxxxxxx X. Xxxxxx
[Seal] Title: President
ATTEST SHEARS VANGUARD SMI INC.
By: /s/ XXXXXX XXXXXX
----------------------------------- ------------------------------------
Secretary Name: Xxxxxx Xxxxxx
[Seal] Title: President
ATTEST SHEARS VANGUARD GENERAL, INC.
By: /s/ XXXXXXX X. XXXXXX
----------------------------------- ------------------------------------
Secretary Name: Xxxxxxx X. Xxxxxx
[Seal] Title: President
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ATTEST MDC DENTAL, INC.
By: /s/ XXXXXXX X. XXXXXX
----------------------------------- ------------------------------------
Secretary Name: Xxxxxxx X. Xxxxxx
[Seal] Title: President
