STOCKHOLDER NON-COMPETITION AGREEMENT
THIS STOCKHOLDER NON-COMPETITION AGREEMENT (the "Agreement") is entered
into as of November 22, 1996, effective as of November 1, 1996, by and between
SOUTHERN CALIFORNIA ORTHOPEDIC INSTITUTE MEDICAL GROUP, a California general
partnership (the "Medical Group"), the individual identified on the signature
page hereof (the "Stockholder"), and BONE, MUSCLE AND JOINT, INC., a Delaware
corporation ("BMJ"), with reference to the following facts:
A. The Medical Group is engaged in the business of providing orthopedic
medical and surgical services and related medical and ancillary services (the
"Medical Services") to the general public.
B. The Stockholder is a partner in or employee of the Medical Group.
C. The Medical Group and BMJ have entered into a Management Services
Agreement dated as of the date hereof (the "Management Services Agreement"),
under which the Medical Group has agreed to cause the Stockholder (among others)
to execute this Agreement.
D. The Stockholder is acquiring stock in BMJ in connection with the
execution of the Management Services Agreement, pursuant to a Restricted Stock
Agreement entered into by and between the Stockholder and BMJ, dated as of the
date hereof (the "Restricted Stock Agreement").
NOW, THEREFORE, in consideration of and as an inducement to BMJ's entering
into the Management Services Agreement, the Restricted Stock Agreement, and the
other agreements related thereto, and in consideration of the Stockholder's
status as a partner in or employee of the Medical Group, the Stockholder hereby
agrees with the Medical Group as follows:
1. Definition.
For all purposes of this Agreement, "Competitive Business" shall mean any
business that provides (i) orthopedic medical and surgical services and related
medical and ancillary services to the general public, or (ii) administrative,
billing, collection, financial, marketing, information technology and
operational services to professional medical groups relating to such groups'
provision of the professional medical and related services described in clause
(i), or any other services provided by BMJ.
2. Agreement Not to Compete or Interfere with Business.
(a) The Stockholder acknowledges that (i) he or she is receiving
benefits from the purchase of securities from BMJ pursuant to the Restricted
Stock Agreement, (ii) the Medical Group and its affiliates conduct their
business primarily in Los Angeles, California, and (iii) due to the highly
competitive nature of the Medical Group's and BMJ's businesses, the value and
goodwill of the Medical Group's and BMJ's businesses would be substantially
impaired if the Stockholder engaged in a Competitive Business. Accordingly, the
Stockholder hereby agrees that, during the period commencing on the date hereof
and ending two years after the earliest of (i) the expiration of the Management
Services Agreement, (ii) the termination of the Management Services Agreement by
BMJ pursuant to Section 13.2 thereof, or (iii) the effective date of the
Stockholder's resignation or termination of partnership status or employment
with the Medical Group, he or she will not:
(A) engage, directly or indirectly, in any Competitive Business
at any location within twenty-five (25) miles of any Medical Group office (the
"Restricted Territory"), whether such engagement shall be as an employee,
officer, director, owner, partner, advisor, consultant, stockholder or other
participant in any Competitive Business (or in any similar capacity in which the
Stockholder derives an economic benefit from a Competitive Business);
(B) assist others in engaging in any Competitive Business within
the Restricted Territory in the manner described in the foregoing clause (A);
(C) solicit, entice or induce any employee of (or partner in) the
Medical Group, BMJ, any affiliate of the Medical Group, or any subsidiary of BMJ
to terminate his or her employment (or partnership status) or engage in any
Competitive Business within the Restricted Territory;
(D) solicit, entice or induce any vendor, customer or distributor
of the Medical Group, BMJ, any affiliate of the Medical Group, or any subsidiary
of BMJ to terminate or materially diminish its relationship with the Medical
Group, BMJ, any affiliate of the Medical Group, or any subsidiary of BMJ; or
(E) otherwise knowingly damage, disparage or interfere with the
Medical Group, BMJ, any affiliate of the Medical Group, or any subsidiary of
BMJ; provided, however, that nothing contained in this Agreement shall prohibit
the Stockholder from owning in the aggregate less than one percent (1.0%) of a
class of publicly-traded securities issued by any Competitive Business.
(b) The Medical Group acknowledges and agrees that the Stockholder
shall have no further obligation pursuant to this Agreement in the event that
(i) the Medical Group terminates the Management Services Agreement pursuant to
Section 13.1 thereof, (ii) either party to the Management Agreement terminates
such agreement pursuant to Section 13.3 thereof, or (iii) the Stockholder's
status as a partner in or employee of the Medical Group is terminated without
cause (if permitted by the General Partnership Agreement of the Medical Group)
by the Medical Group and such termination is approved by BMJ.
3. Confidentiality.
(a) The Stockholder acknowledges and agrees that certain information
he or she has received or will receive from the Medical Group and its affiliates
or from BMJ constitutes the confidential and proprietary trade secrets of the
Medical Group or of BMJ and
that the Stockholder's non-disclosure thereof is essential to this Agreement
and a condition to the Stockholder's use and possession thereof. The Stockholder
shall retain in strict confidence any and all such confidential information
received from the Medical Group ("Medical Group Confidential Information") or
from BMJ ("BMJ Confidential Information") (collectively, "Confidential
Information") and under no circumstances shall the Stockholder distribute or in
any way disseminate Confidential Information, directly or indirectly, to any
third party or use Confidential Information for the Stockholder's personal
benefit without the prior written consent of the Medical Group (in the case of
Medical Group Confidential Information) or without the prior written consent of
BMJ (in the case of BMJ Confidential Information).
(b) Notwithstanding the above, the Stockholder shall have no liability
to the Medical Group or its affiliates or to BMJ with respect to Confidential
Information which:
(i) was generally known and available in the public domain at the
time it was disclosed or becomes generally known and available in the public
domain through no fault of the Stockholder;
(ii) is disclosed with the prior written consent of the Medical
Group or its affiliate or BMJ;
(iii) becomes known to the Stockholder from a source other than
the Medical Group or its affiliates without breach of this Agreement by the
Stockholder and otherwise not in violation of the Medical Group's or its
affiliates' rights; or
(iv) is disclosed pursuant to the order or requirement of a
court, administrative agency, or other governmental body; provided, however,
that the Stockholder shall provide prompt, advance notice thereof to enable the
Medical Group or its affiliate to seek a protective order or otherwise prevent
such disclosure.
(c) The Stockholder agrees to indemnify the Medical Group or its
affiliates for any damages the same may suffer as a result of the Stockholder's
or his or her agents' failure to abide by the provisions of this Section 3.
(d) The rights and obligations of the parties under this Section 3
shall survive for five (5) years following the expiration or termination of this
Agreement.
4. Acknowledgment.
The Stockholder acknowledges that the provisions of this Agreement are
not designed to prevent the Stockholder from earning a living or fostering his
or her own career. The provisions of this Agreement are designed to prevent any
third party from gaining unfair advantage from the Stockholder's knowledge of
confidential and proprietary information relating to the Medical Group or BMJ or
otherwise damaging or interfering with the business of the Medical Group or BMJ
or from his or her participation in any Competitive Business. The Stockholder
further acknowledges receiving sufficient consideration under the Restricted
Stock Agreement to compensate him or her for any losses he or she may suffer or
incur as a result of losing any employment or other professional opportunity as
a result of entering into and performing any obligations under this Agreement.
5. Survival; Remedies.
The Stockholder's covenants under this Agreement shall survive
termination of Stockholder's partnership status or employment with the Medical
Group. The Stockholder acknowledges that a remedy at law for any breach or
threatened breach of the provisions of this Agreement would be inadequate and
therefore agrees that either the Medical Group or BMJ shall be entitled to
injunctive relief; provided, however, that nothing contained herein shall be
construed as prohibiting the Medical Group or BMJ from pursuing any other
remedies available for any such breach or threatened breach.
6. Benefits of Agreement.
This Agreement and the rights and obligations of the parties hereto
shall bind and inure to the benefit of any successor or successors of either the
Medical Group or BMJ by reorganization, merger or consolidation or otherwise and
any assignee of all or substantially all of the business and properties of the
Medical Group or BMJ.
7. Severability.
It is the desire and intent of the parties hereto that the provisions
of this Agreement shall 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 to be invalid or unenforceable, such provision shall be deemed
amended to delete therefrom the portion thus adjudicated to be invalid or
unenforceable, such deletion to apply only with respect to the operation of such
provision in the particular jurisdiction in which such adjudication is made. In
addition, if any one or more of the provisions contained in this Agreement shall
for any reason be held to be excessively broad as to duration, geographical
scope, activity or subject, it shall be construed by limiting and reducing it,
so as to be enforceable to the extent compatible with the applicable law as it
shall then appear.
8. Notices.
All notices or other communications required or permitted hereunder
shall be in writing and sufficient if (a) delivered personally, (b) sent by
nationally-recognized overnight courier or (c) sent by certified mail, postage
prepaid, return receipt requested, addressed as follows:
If to the Medical Group, to:
Southern California Orthopedic
Institute Medical Group
0000 Xxxxx Xxxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Attention: Managing Partner
with a copy to:
Xxxxxxx and Xxxxxx Law Corporation
1900 Avenue of the Stars, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
If to the Stockholder, to:
[Name of Stockholder]
0000 Xxxxx Xxxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
If to BMJ, to:
Bone, Muscle and Joint, Inc.
0000 Xxxxx Xxxxxxx Xxxxxxx, Xxxxx 000X
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxxx Xxxxxx, M.D., President
with a copy to:
X'Xxxxxxxx Graev & Karabell, LLP
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Held, Esq.
or, in each case, to such other address as the party to whom notice is to be
given may have furnished to the other party in writing in accordance herewith.
Any such communication shall be deemed to have been given (a) when delivered, if
personally delivered, (b) on the business day after dispatch, if sent by
nationally-recognized overnight courier and (c) on the third business day after
dispatch, if sent by mail.
9. Entire Agreement; Amendments; Prior Agreements.
The foregoing is the entire agreement of the parties with respect to
the subject matter hereof and may not be amended, supplemented, canceled or
discharged except by a written instrument executed by both parties hereto. This
Agreement supersedes any and all prior agreements between the parties hereto
with respect to the matters covered hereby.
10. Governing Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of California without regard to the laws and principles
thereof or of any other jurisdiction which would direct the application of the
laws of another jurisdiction.
11. 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.
12. Headings.
The headings of the sections of this Agreement have been inserted for
convenience of reference only and shall not be deemed to be part of this
Agreement.
IN WITNESS WHEREOF, this Agreement has been executed and delivered the date
first above written.
SOUTHERN CALIFORNIA ORTHOPEDIC
INSTITUTE MEDICAL GROUP
By:___/s/ Xxxxxxx X. Xxxxxx, M.D.____________
Xxxxxxx X. Xxxxxx, M.D.,
Managing Partner
STOCKHOLDER
------------------------------------------
Signature
------------------------------------------
Printed Name
BONE, MUSCLE AND JOINT, INC.
By:_ /s/ Xxxxxx Xxxxxx, M.D., President______
Xxxxxx Xxxxxx, M.D., President
and Chief Executive Officer
