NON-COMPETITION AGREEMENT
EXHIBIT
10.9
THIS
NON-COMPETITION AGREEMENT (this “Agreement”)
is
made and entered into as of 12/13/05, by and among Basic Health Care Networks
of
Texas, L.P., a Texas limited partnership (“Purchaser”)
and
Xxxx Xxxxxx (“Obligor”).
The
Closing Date (as defined in the Master Transaction Agreement (as defined below))
shall be the “Effective
Date”
of
this
Agreement. Capitalized terms used and not defined herein shall have the same
meanings assigned to such terms in the Master Transaction Agreement.
RECITALS
A. This
Agreement is being entered into pursuant to a certain MASTER TRANSACTION
AGREEMENT (“Master
Transaction Agreement”),
dated
and effective as of 12/13/05, by and among Purchaser on the one hand, and 303
MEDICAL CLINIC, P.A. , a Texas professional association, XXXXX XXXXXX’, D.O.,
P.A., a Texas professional association, IBERIA MEDICAL CLINIC, P.A., a Texas
professional association, XXXXXXXX MEDICAL CLINIC, P.A., a Texas professional
association, LAKE JUNE MEDICAL CENTER, P.A., a Texas professional association,
NORTHSIDE MEDICAL CLINIC, P.A., a Texas professional association, X’XXXXXX
MEDICAL CENTER, P.A., a Texas professional association, and RED BIRD URGENT
CARE
CLINIC, P.A., a Texas professional association, (collectively, the “Clinics”)
and
Xxxxx X. Xxxxxxx, D.O.
B.
The
undersigned Obligor is an employee, director, officer and sole member of the
Clinics
C.
This
Non-Competition Agreement is being entered into between the Purchaser and
Obligor as a condition of closing pursuant to the Master Transaction Agreement,
pursuant to which the Purchaser shall acquire certain assets (“Acquired
Assets”)
of the
Clinics (the “Acquisition”)
under
a series of separate acquisition agreements. The Master Transaction Agreement,
together with each of the exhibits attached thereto, including each of the
Asset
Purchase Agreements (and documents to be executed in connection therewith),
are
hereinafter collectively referred to as the “Transaction
Documents.”
D.
In
connection with the Acquisition, one or more newly formed Texas professional
associations (“New
PA”)
shall
be formed by Texas-licensed physician(s) who shall conduct the medical practices
formerly conducted by the Clinics, and such New PA will hire certain physicians
and staff of the former Clinics.
E. Purchaser
will pay the Obligor significant cash consideration in the Acquisition.
F.
The
Obligor has valuable knowledge, relationships, experience and expertise in
the
management and operation of clinics for the delivery of physical therapy,
rehabilitation, family and general medical services, and as a condition to
closing of the Acquisition, the Purchaser shall concurrently enter into a
consulting agreement with the Obligor pursuant to which Obligor will provide
consulting services to the Purchaser (the “Consulting
Agreement”).
1
G.
The
Purchaser intends to develop, establish, operate and manage additional medical
clinics (the “New
Clinics”)
at one
or more locations to be determined by the Purchaser.
H. As
a
condition and mutual inducement to the Acquisition, the Transaction Documents
contemplate, among other things, that the Obligor shall enter into this
Non-Competition Agreement effective on the Effective Date.
AGREEMENT
NOW,
THEREFORE, in consideration of the mutual promises made herein, Purchaser and
the Obligor hereby agree as follows:
1. Covenant
Not to Compete or Solicit.
Obligor
and the Purchaser acknowledge and agree that, as a result of Obligor’s
consulting relationship with the Purchaser, (a) the Purchaser will provide
to
Obligor and Obligor will become informed of, and have access to, the Proprietary
Information (defined below), including without limitation monthly financial
statements, pricing terms under managed care agreements and other contracts
and
pricing terms under vendor agreements, the unauthorized use or disclosure of
which would cause irreparable injury to Purchaser, and (b) the Purchaser may
integrate Obligor into its established practice, including the introduction
of
Obligor to referring doctors, to the Purchaser’s existing patients, and to the
Purchaser’s existing hospital relations. Further, Obligor acknowledges that
Obligor will be provided with special training in the Purchaser’s methods of
practice. Separately, Obligor recognizes that entering into a competitive
practice with the Purchaser would deprive the Purchaser of some or all of its
practice sources to the substantial detriment of the Purchaser’s ongoing
practice and Obligor acknowledges that the Purchaser has a substantial interest
in protecting itself from unfair competition, including the improper use of
Proprietary Information. In consideration for being provided with, and having
access to, the Proprietary Information, the special training provided to Obligor
by the Purchaser, the integration into the Purchaser’s practice, the substantial
compensation paid to Obligor by the Purchaser, and the other benefits received
by Obligor hereunder, Obligor agrees with the Purchaser that the following
restrictive covenants are reasonably designed to protect the legitimate
interests of the Purchaser:
1.1 Covenant
Not to Compete.
Obligor
agrees that during the term of this Agreement and for a period of three (3)
years following termination of the Obligor’s consulting relationship with
Purchaser (“Restricted
Period”),
with
or without cause, Obligor shall not, directly or indirectly, as an employee,
employer, contractor, consultant, agent, principal, shareholder, corporate
officer, director, or in any other individual or representative capacity, engage
or participate in any business or practice within the Practice Territory (as
defined herein) that is in competition in any manner whatsoever with the
practice of the Purchaser, the New PA, and the New Clinics. The parties mutually
acknowledge and agree as follows:
(a) If
Obligor should set up an office and practice medicine within the Practice
Territory in competition with the practice of the Purchaser, it would cause
economic harm and loss of goodwill to the Purchaser resulting in immediate
and
irreparable loss, injuries, and damage to the Purchaser.
2
(b) Notwithstanding
anything to the contrary in this Section 1.1, physician is not prohibited from
owning less than five percent (5%) of the equity of any publicly-traded
entity.
(c) Neither
the public in general nor any patients will be adversely affected by the
enforcement of the non-competition covenant, in that other similar providers
of
professional medical services are readily available within the restricted
area.
1.2 Practice
Territory.
The
Purchaser is actively engaged in the practice of general
family and urgent care and ancillary medical services such as rehabilitation
and
physical medicine
in the
clinics with locations specified in the Master Lease Agreement (defined in
the
Master Transaction Agreement) and it is therefore agreed that the term of
“Practice
Territory”
shall
mean: a ten (10) mile radius of any of such practice sites. In the event that
the provisions of this Section 1.2 are deemed by a court of competent
jurisdiction to exceed the time, geographic or scope limitations permitted
by
applicable law, then such provisions shall be reformed to the maximum time,
geographic or scope limitations, as the case may be, permitted by applicable
laws. Notwithstanding the foregoing, Obligor may engage in such practice within
the Practice Territory as necessary to provide continuing care and treatment
to
a specific patient or patients of the Obligor (with whom the Obligor treated
prior to the Acquisition) during the course of an acute illness of said patient
or patients.
1.3 Remedies.
Without
limiting other possible remedies to Purchaser for breach of this covenant,
Obligor agrees that injunctive or other equitable relief will be available
to
enforce the covenants of this provision, such relief to be without the necessity
of posting a bond, cash or otherwise. In any action to enforce any provision
of
this Section, the court may award reasonable attorneys’ fees, costs, and
expenses to the prevailing party.
1.4 Buyout.
Notwithstanding the prior provisions of this Section 1, in the event Obligor
desires to pursue the practice of medicine in the Practice Territory in
violation of these restrictive covenants, Obligor shall be released from the
restrictive covenants in Section 1.1 and may practice in competition with the
Purchaser within the Practice Territory after the termination of this Agreement
by payment to the Purchaser of the Buyout Amount set forth in this Section
1.4.
The Buyout Amount shall be calculated as follows: (i) Fifty Percent (50%) of
the
Total Cash Consideration (as defined in the Master Transaction Agreement)
received by the Obligor in the Acquisition, times (ii) a fraction equal to
the
number of months (rounding up to the nearest month) after the commencement
of
the Restricted Period, divided by thirty six (36) months. The parties agree
that
any estimation of actual damages would be difficult to calculate and, further,
agree that the foregoing calculation represents a fair and reasonable estimation
of actual damages to Obligor for purposes of this Agreement.
1.5 Limitations
On Covenants.
Notwithstanding anything contained in this Section 1 or anywhere else in this
Agreement:
(a) Under
no
circumstance shall any provision of this Agreement be deemed to deny Obligor
access to a list of patients whom Obligor had seen or treated prior to or within
two (2) years after the closing of the Acquisition.
3
(b) After
closing of the Acquisition, the Purchaser (at its expense) shall provide Obligor
reasonably convenient and ready access to medical records of any or all of
the
Obligor’s patients upon authorization of such patient or patients and shall
provide copies of any such medical records for a reasonable fee as established
by the Texas State Board of Medical Examiners under Section 165.5 of Title
22,
Part 9, Chapter 165, of the Texas Administrative Code and Section 5.08(o) of
the
Texas Medical Practice Act.
(c) Any
access by Obligor to a list of patients or to patients’ medical records after
closing of the Acquisition shall not require that such list or records be
provided in a format different from that by which such records are maintained,
except by mutual consent of the Purchaser and Obligor.
(d) In
no
event shall Obligor be prohibited by this Agreement from providing continuing
care and treatment to a specific patient or patients (whom the Obligor treated
prior to the closing of the Acquisition) during the course of an acute illness
even after Obligor’s consulting relationship with the Purchaser has
terminated.
(e) The
covenants contained in this Agreement shall not apply to Obligor’s ownership,
management or other interest in (either directly or indirectly) those entities
listed on Exhibit
“A”
attached
hereto and made a part hereof for all purposes.
1.6 Proprietary
Information.
For
purposes of this Agreement, “Proprietary Information” means any and all
information and material disclosed by the Purchaser to the Obligor, or obtained
by Obligor through inspection or observation of Purchaser’s property or
facilities, including but not limited to intellectual property rights obtained
by Purchaser under the Master Transaction Agreement (whether any of the
foregoing is in writing, or in oral, graphic, electronic or any other form).
Proprietary Information, includes, without limitation, any (a) trade secret,
know-how, idea, invention, process, protocol, procedure, technique, algorithm,
program, hardware, device, design, schematic, drawing, formula, data, plan,
strategy and forecast of, and (b) technical, engineering, manufacturing,
product, marketing, servicing, financial, personnel and other information and
materials of, Purchaser and its employees, consultants (other than Obligor),
investors, affiliates, licensors, suppliers, vendors, customers, clients and
other persons and entities.
1.7 Exception
for Master Lease Agreement.
Reference is made to a Master Lease Agreement dated an even date herewith
entered into pursuant to the Master Transaction Agreement (“Master
Lease”),
under
which the Purchaser shall lease office space from BEW Financing, L.P., a Texas
limited partnership (the “Lessor”) of which Obligor is a beneficial owner. The
Purchaser and the Obligor hereby expressly agree that in the event that the
Master Lease (or any “Site Lease” thereunder) is terminated, or if the Lessor
elects to re-let the premises covered by any Site Lease after an event of
default by the lessee thereunder without terminating the Site Lease, the
re-leasing thereafter of the same office space by the Lessor to a third party
clinic, medical practice, or management company in the same or similar line
of
business or in direct or indirect competition with the Purchaser, shall not
be
deemed to be a violation of the non-competition covenants set forth in Sections
1.1 and 1.2 of this Agreement.
2. Covenant
Not to Solicit.
During
the term of this Agreement and for a further period of three (3) years after
termination of the Obligor’s consulting relationship, Obligor shall not request
or advise, solicit or attempt to solicit for the benefit of Obligor or any
other
person or entity any present or future employee of the Purchaser, the New PA,
or
the New Clinics, to terminate employment with such parties or to become an
employee of Obligor or any other person or entity.
4
3.
Survival.
Obligor’s obligations under this Agreement shall remain in effect if the
consulting arrangement between the Purchaser and Obligor is terminated for
any
reason.
4.
Miscellaneous.
(a) Governing
Law; Consent to Personal Jurisdiction.
(i) This
Agreement shall be governed by the laws of the State of Texas without reference
to rules of conflicts of law. Obligor and Purchaser each hereby consent to
the
personal jurisdiction of the state and federal courts located in Texas for
any
action or proceeding arising from or relating to this Agreement or relating
to
any arbitration in which the parties are participants.
(ii)
Any
claim, dispute or other controversy having a monetary amount of $100,000 or
less
(a “Controversy”)
relating to this Agreement shall be settled and resolved by binding arbitration
in Dallas, Texas before a single arbitrator under the rules of the American
Arbitration Association (“AAA”)
in
effect at the time a demand for arbitration is made. If there is any conflict
between the AAA rules and this arbitration clause, this arbitration clause
will
govern and determine the rights of the parties. The parties to this Agreement
(the “Parties”)
shall
be entitled to full discovery regarding the Controversy as permitted by
applicable codes of civil procedure. The arbitrator’s decision on the
Controversy shall be a final and binding determination of the Controversy and
shall be fully enforceable as an arbitration award in any court having
jurisdiction and venue over the Parties. The arbitrator shall also award the
prevailing Party any reasonable attorneys’ fees and reasonable expenses the
prevailing Party incurs in connection with the arbitration, and the
non-prevailing Party shall pay the arbitrator’s fees and expenses. The
arbitrator shall determine who is the prevailing Party. Each Party also agrees
to accept service of process for all arbitration proceedings in accordance
with
AAA’s rules.
(iii) The
obligation to arbitrate shall not be binding upon either party with respect
to a
controversy exceeding a monetary amount of $100,000, requests for temporary
restraining orders, preliminary injunctions or other procedures in a court
of
competent jurisdiction to obtain interim relief when deemed necessary by such
court to preserve the status quo or prevent irreparable injury pending
resolution by arbitration of the actual dispute between the
Parties.
(iv) The
provisions of this Section shall be construed as independent of any other
covenant or provision of this Agreement; provided that, if a court of competent
jurisdiction determines that any such provisions are unlawful in any way, such
court shall modify or interpret such provisions to the minimum extent necessary
to have them comply with the law.
5
(v) This
arbitration provision shall be deemed to be self-executing and shall remain
in
full force and effect after expiration or termination of this Agreement. In
the
event either party fails to appear at any properly noticed arbitration
proceeding, an award may be entered against such party by default or otherwise
notwithstanding said failure to appear.
(b) Severability.
If any
portion of this Agreement is held by a court of competent jurisdiction to
conflict with any federal, state or local law, or to be otherwise invalid or
unenforceable, such portion of this Agreement shall be of no force or effect
and
this Agreement shall otherwise remain in full force and effect and be construed
as if such portion had not been included in this Agreement.
(c) No
Assignment.
Because
the nature of the Agreement is specific to the actions of Obligor, Obligor
may
not assign this Agreement. This Agreement shall inure to the benefit of
Purchaser and its successors and assigns.
(d) Notices
.
All notices, consents and other communications hereunder shall be in writing
and
shall be deemed to have been given when delivered personally, on the next
business day when sent overnight by Federal Express or other nationally
recognized overnight courier service, or five (5) days after being mailed if
mailed by first-class, registered or certified mail, postage prepaid,
addressed:
If
to
Purchaser, addressed to:
Xxxxxx
X.
Xxxxxxxx, CEO
Basic
Health Care Networks of Texas, L.P.
00000
Xxxxx Xxxxxx, Xxxxx Xxx
Xxx
Xxxxxxx, Xxxxxxxxxx 00000
Facsimile:
(000) 000-0000
With
copies to:
Xxxxx
X.
Xxxxx, Esq.
Xxxxxxxxxx
& Xxxxx, LLP
00000
Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx
Xxxxxxx, Xxxxxxxxxx 00000
Facsimile:
(000) 000-0000
If
to
the Obligor, addressed to:
Xxxx
Xxxxxx
0000
Xxxxxx Xx.
Xxxxx
Xxxxx, 00000
000
000
0000
6
or
at
such other address or addresses as the respective parties shall have furnished
to the other parties in writing.
(e) Entire
Agreement.
This
Agreement contains the entire agreement and understanding of the parties and
supersedes all prior discussions, agreements and understandings relating to
the
subject matter hereof. This Agreement may not be changed or modified, except
by
an agreement in writing executed by Purchaser and Obligor.
(f) Waiver
of Breach.
The
waiver of a breach of any term or provision of this Agreement, which must be
in
writing, shall not operate as or be construed to be a waiver of any other
previous or subsequent breach of this Agreement.
(g) Headings.
All
captions and section headings used in this Agreement are for convenience only
and do not form a part of this Agreement.
(h) Counterparts.
This
Agreement may be executed in counterparts, and each counterpart shall have
the
same force and effect as an original and shall constitute an effective, binding
agreement on the part of each of the undersigned.
(i) Termination.
This
Agreement shall terminate and be of no force and effect upon the earlier of
(a)
the third anniversary of the termination of Obligor’s consultancy with
Purchaser, or (b) upon the complete cessation of the Purchaser’s business as a
going concern in the Restricted Area.
[Remainder
of Page Left Blank Intentionally]
7
IN
WITNESS WHEREOF, the Parties have executed this Non-Competition Agreement as
of
the date first written above.
BASIC
HEALTH CARE NETWORKS
OF
TEXAS, LP
By:
Basic
Health Care Networks of Texas I, LLC, a Delaware limited liability company,
General Partner
By:
/s/
Xxxxxx Xxxxxxxx
____________________________________
Xxxxxx Xxxxxxxx,
Chief Executive Officer
Xxxxxx Xxxxxxxx,
Chief Executive Officer
OBLIGOR:
/s/
Xxxx
Xxxxxx
____________________________________
Xxxx Xxxxxx
____________________________________
Xxxx Xxxxxx
8
