NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT ("Agreement") is made effective as of the
14th day of July, 1997, by and between Prospect Medical Group, Inc., a
California professional corporation ("Purchaser"), and Xxxxxx X. Xxxxx, D.O.
("Physician"). All capitalized terms used herein and not otherwise expressly
defined shall have the same meanings set forth in the Stock Purchase Agreement.
R E C I T A L S
A. Purchaser is developing an integrated delivery system, a key
component of which is a strong network of physicians who can provide the
necessary professional medical services to payors in a designated geographic
area.
B. To build the physician component of its integrated delivery
systems, Purchaser provides a range of alternative services to and relationships
with physicians including the recruitment of physicians to a designated
geographic area, the management of physician practices, the acquisition of
assets and/or physician practices, the consolidation of physician practices, the
formation of medical groups, the establishment of outpatient clinics, etc.
C. Physician owns all of the issued and outstanding capital stock
of the Santa Xxx/Tustin Physicians Group, Inc. ("Company").
D. Physician is selling to Purchaser and Purchaser is purchasing
from Physician all of Physician's stock in Company ("Stock") pursuant to that
certain Agreement for the Purchase and Sale of Stock ("Stock Purchase
Agreement") of even date herewith, by and among Purchaser, Company and
Physician.
E. Purchaser desires to purchase the Stock pursuant to
Purchaser's goal of developing an integrated delivery system.
F. Physician will benefit from the sale of the Stock to
Purchaser.
G. As conditions to the Closing of the Stock Purchase Agreement,
Physician shall have entered into an agreement in the form of this Agreement to
be delivered to Purchaser, and shall have entered into an Employment Agreement
with Purchaser.
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. PHYSICIAN'S COVENANTS.
1.1 As a material inducement to Purchaser to enter into the Stock
Purchase Agreement and except as set forth herein, or as permitted under the
Employment Agreement between Physician and Purchaser, Physician shall not
(directly or indirectly through any business, enterprise, venture, partnership,
corporation or any other entity controlled directly or indirectly by Physician
whether alone or as a partner, stockholder, creditor or otherwise) in the
Service Area described in Section 4 below:
A. During the term of Physician's employment with Company,
(i) practice medicine, or engage, participate, aid, assist,
or hold any interest in any business or provision of any service which is, or as
of Physician's engagement or participation, would become, competitive with any
aspect of Purchaser's or any of Purchaser's Affiliates' outpatient or other
healthcare services;
(ii) sell, transfer, assign or otherwise permit another
party to benefit from, any remaining goodwill attributable to Physician based
upon the provision of physician services by or through Physician;
(iii) engage or contract (other than with Purchaser or any of
Purchaser's Affiliates) for the provision of any management services to
Physician or any physician employed or under contract to Physician (as
applicable) which are the same as or substantially similar to any of the
services that Purchaser furnishes;
(iv) commit any other act or assist others to commit any
other act which might injure the business of Purchaser or Purchaser's
Affiliates;
B. During the term of Physician's employment with Company and for
a period of two (2) years thereafter,
(i) solicit or assist any other person to solicit any
business relating to a competing line of business (other than for Purchaser or
any of its affiliates) from any present or potential customer (including all
third party payors) of Physician, Seller, Purchaser, or any of their affiliates;
(ii) directly or indirectly employ, contract, solicit or
encourage any employee or other person under contract with Purchaser or any of
its Affiliates to leave the employ of any such entity, except pursuant to the
terms of the Stock Purchase Agreement; and
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(iii) directly or indirectly solicit, request, advise, or
encourage any present or future supplier, customer, patient or employee of
Purchaser or its Affiliates (including practices managed by Purchaser) to
withdraw, curtail, disenroll, or become enrolled with another provider of health
care, or cancel its business dealings with Purchaser or its affiliates, or take
any actions that might impair the relations of Purchaser or any of its
affiliates and their respective suppliers, customers, employees or others.
1.2 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, Physician shall keep
secret and retain in strictest confidence, and shall not use for the benefit of
any other party, except for Purchaser or any of Purchaser's Affiliates, trade
secrets known to Physician relating to the business and operations of Physician,
Seller, Purchaser or any of their affiliates, including without limitation,
customer lists, utilization data, patient records, business acquisition plans,
relating to the business and operations of Physician, Seller, Purchaser or any
of their affiliates learned by Physician before or after the date of this
Agreement, and shall not disclose them to anyone outside of Purchaser and its
Affiliates, provided however, that this section shall not apply to information
in the public domain or to information that is sought from Physician pursuant to
subpoena or court order (but Physician must provide notice to Purchaser or its
Affiliates in order for them to contest such subpoenas or court orders).
3. PHYSICIAN'S REPRESENTATION. Physician specifically acknowledges,
represents, and warrants that (i) Physician's covenants set forth in this
Agreement are being purchased in connection with the sale of the Stock to
Purchaser, (ii) such covenants are reasonable and necessary to protect the
legitimate interests of Purchaser, and (iii) Purchaser would not have entered
into the Stock Purchase Agreement in the absence of such restrictions.
Physician acknowledges that this Agreement is subject to all representations,
warranties and covenants in the Stock Purchase Agreement.
4. SERVICE AREA. The Service Area to which Physician's covenants in Section 1
applies is set forth in Exhibit A attached hereto.
5. TERM. Except for the provisions contained in Section 1.1.B, 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 termination of Physician's employment under the Employment
Agreement; or
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(ii) the date on which the Stock Purchase between Purchaser and
Physician is terminated due to a "Jeopardy Event" as defined in Section 10.1 of
the Stock Purchase Agreement; or
(iii) the date upon which Employer is in material default of any of
Employer's obligations under its Employment Agreement with Physician or the
Stock Purchase Agreement, and Physician terminates the Employment Agreement as a
result of such material breach. In the event of termination of Physician's
Employment Agreement by Physician for cause, as set forth therein, Employer
shall be required to pay to Physician the remaining compensation and benefits
owed under the Employment Agreement at such times as if the Employment Agreement
were still in full force and effect.
6. MISCELLANEOUS.
A. 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 shall
be null and void.
B. MEDICAL STAFF PRIVILEGES. Nothing in this Agreement is intended to
prohibit Physician from maintaining professional staff membership or clinical
privileges at any acute care hospital or other health facility licensed to
provide patient care for stays in excess of twenty-four (24) hours, so long as
maintaining such privileges does not in any manner result in Physician competing
with Employer in the Service Area.
C. 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.
D. 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 Stock Purchase Agreement.
E. STOCKHOLDER IN PUBLIC COMPANY. Notwithstanding any provision to the
contrary, nothing contained herein shall prevent Physician from purchasing or
otherwise acquiring equity securities of a company that has a class of
securities traded on a national securities exchange whose business competes with
that of the Company, so long as Physician's ownership of such securities does
not exceed one percent (1%) of the total outstanding shares of such competitive
company.
F. AMENDMENT. This Agreement may not be amended except in writing and
as executed by all parties.
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G. 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.
H. 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 Physician: Xxxxxx X. Xxxxx, D.O.
0000 Xxxxxxxx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
With copy to: Xxxxxx Xxxx, Esq.
Palmieri, Tyler, Xxxxxx, Xxxxxxx and Xxxxxxx
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxxxx 00000
If to Purchaser: Xxxxx XxXxxxxx, M.D.
Prospect Medical Group, 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
I. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
J. 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 Stock Purchase 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.
K. ARBITRATION. The parties firmly desire to resolve all disputes
arising hereunder without resort to litigation in order to protect their
respective business reputations and the
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confidential nature of certain aspects of their relationship. Accordingly, any
controversy or claim arising out of or relating to this Agreement, or the breach
thereof, shall be settled by arbitration as set forth below.
(i) All disputes which in any manner arise out of or relate to
this Agreement or the subject matter thereof, shall be resolved exclusively by
arbitration in accordance with the provisions of this Section K. Either party
may commence arbitration by sending a written demand for arbitration to the
other party, setting forth the nature of the controversy, the dollar amount
involved, if any, and the remedies sought, and attaching a copy of this Section
to the demand.
(ii) The parties stipulate to arbitration before a single, mutually
agreed upon arbitrator sitting on the Los Angeles, California Judicial
Arbitration Mediation Services (JAMS) panel. In the event that the parties are
unable to agree upon the person chosen as arbitrator within 30 days of the
demand for arbitration, the arbitrator shall be selected in the sole discretion
of the JAMS administrator. The arbitrator shall be a member of the California
bar.
(iii) The parties shall share all costs of arbitration. The
prevailing party shall be entitled to reimbursement by the other party of such
party's attorneys' fees and costs and any arbitration fees and expenses incurred
in connection with the arbitration hereunder.
(iv) The substantive law of the State of California shall be
applied by the arbitrator. All proceedings in arbitration shall be in
accordance with the California Code of Civil Procedure, as amended, and the
parties shall have the right to legal discovery in any matter submitted to
arbitration in satisfaction of California Code of Civil Procedure Section
1283.05, as permitted by California Code of Civil Procedure Section 1283.1(b).
(v) Arbitration shall take place in Los Angeles, California unless
the parties otherwise agree. As soon as reasonably practicable, a hearing with
respect to the dispute or matter to be resolved shall be conducted by the
arbitrator. As soon as reasonably practicable thereafter, the arbitrator shall
arrive at a final decision, which shall be reduced to writing, signed by the
arbitrator and mailed to each of the parties and their legal counsel.
(vi) All decisions of the arbitrator shall be final, binding and
conclusive on the parties and shall constitute the only method of resolving
disputes or matters subject to arbitration pursuant to this Agreement. The
arbitrator or a court of appropriate jurisdiction may issue a writ of execution
to enforce the arbitrator's judgment. Judgment may be entered upon such a
decision in accordance with applicable law in any court having jurisdiction
thereof.
(vii) Notwithstanding the foregoing, because time is of the essence
of this Agreement, the parties specifically reserve the right to seek a judicial
temporary restraining order, preliminary injunction, or other similar equitable
relief.
(viii) The decision and award of the arbitrator shall be kept
confidential by the
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parties to the greatest extent possible. No disclosure of such decision or
award shall be made by the parties except as required by law or as necessary or
appropriate to effect the enforcement thereof.
(ix) Should either Employer or Physician 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.
"Purchaser"
PROSPECT MEDICAL GROUP, INC.
By: /s/ Xxxxx XxXxxxxx
--------------------------------
Xxxxx XxXxxxxx, M.D., President
"Physician"
By: /s/ Xxxxxx X. Xxxxx
--------------------------------
Xxxxxx X. Xxxxx, D.O.
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