STOCKHOLDER NON-COMPETITION AGREEMENT
THIS STOCKHOLDER NON-COMPETITION AGREEMENT (the "Agreement") is entered
into as of July 1, 1997, by and between SUN VALLEY ORTHOPAEDIC SURGEONS, an
Arizona general partnership (the "Medical Group"), each of the individuals
identified on the signature page hereof (each, a "Stockholder," and
collectively, the "Stockholders"), and BONE, MUSCLE AND JOINT, INC., a Delaware
corporation ("BMJ"), with reference to the following facts:
A. The Medical Group is a general partnership comprised of individual
physicians and Arizona professional corporations, and 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. (Each partner in the Medical Group is referred to herein as a
"Partner," and each shareholder of a professional corporation that is a
Partner is referred to herein as a "Principal.")
B. Each Stockholder is a Partner, Principal or other person identified
as an Eligible Party in the Management Services Agreement entered into as
of the date hereof (the "Management Services Agreement").
C. BMJ is a corporation engaged in the business of providing
management, administrative, financial, marketing, information technology,
and related services to medical groups and related facilities.
D. The Medical Group and BMJ, under the terms of the Management
Services Agreement, have agreed to cause the Stockholders to execute this
Agreement.
E. Each 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 among the Stockholders and BMJ,
effective as of the date hereof (the "Restricted Stock Agreement").
F. Concurrently herewith, Xxxxxx X. Xxxxxx, M.D., P.C. and Xxxxxx X.
Xxxxxx, M.D. ("Xxxxxx") are entering into a separate Stockholder
Non-Competition Agreement with the Management Company (which agreement is
substantially identical to this Agreement), under which Xxxxxx is the
Stockholder, and Xxxxxx therefore shall not be considered to be a
Stockholder under this 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 each Stockholder's
status as a Partner or Principal, or other interest in the Medical Group, each
Stockholder hereby severally agrees with the Medical Group and BMJ as follows:
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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), (iii) any other services provided by BMJ, or (iv) any other business
proposed to be conducted by BMJ if such business has been approved by the Board
of Directors of BMJ and BMJ has allocated human resources or financial resources
to such proposed business.
2. Agreement Not to Compete or Interfere with Business.
(a) Each 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 Sun City West, Arizona, 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, each 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, (iii) rescission! disengagement by the Medical
Group pursuant to Section 14 thereof, or (iv) the effective date of the
Stockholder's resignation or termination of employment with the Medical Group or
sale, transfer, or other disposition of all or substantially all of the
Stockholder's equity interest in the Medical Group, he or she will not, except
as otherwise provided herein --
(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 Partner or Principal, or any
employee or independent contractor of the Medical Group, BMJ, any affiliate
of the Medical Group, or any subsidiary of BMJ to terminate his or her
employment or contract with any of the foregoing or to 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
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terminate or materially diminish its relationship with the Medical Group,
BMJ, any affiliate of the Medical Group, or any subsidiary of BMJ;
(E) enter into a contractual or other relationship with a provider of
management services which provides a range of management services which is
substantially similar to that which is provided by BMJ; or
(F) 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 any
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 Stockholder has carefully considered the nature and extent of the
restrictions set forth herein and acknowledges that the same are reasonable with
respect to scope, duration and territory. It is the desire and intent of the
parties that the provisions of this Agreement 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
without any action by any party shall be deemed amended to delete therefrom or
to modify the provisions thereof so as to restrict (including, without
limitation, a reduction in duration, geographical area or prohibited business
activity) the portion adjudicated to be invalid or unenforceable, such deletion
or modification to apply only with respect to the operation of such provision in
the particular jurisdiction in which such adjudication is made, and such
deletion or modification to be made only to the extent necessary to cause the
provision as amended to be valid and enforceable.
(c) The Medical Group and BMJ acknowledge and agree that a 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 Services Agreement
terminates such agreement pursuant to Section 13.3 thereof, or (iii) the Medical
Group terminates, without cause, the Stockholder's right to conduct his, her or
its professional practice with the Medical Group (unless such termination is not
permitted under any applicable agreement with the Medical Group) and such
termination is approved by BMJ.
(d) BMJ shall consult with the Medical Group in connection with the
identification and selection of additional medical groups and physicians with
whom BMJ may contract and regarding the development of New Ancillary Services
within twenty-five (25) miles of the Medical Group's principal office.
3. Confidentiality.
(a) Each 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
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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, its affiliates,
and BMJ 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.
Each 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
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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.
Each Stockholder's covenants under this Agreement shall survive termination
of the Stockholder's status as a Partner or Principal, and/or the Stockholder's
employment with the Medical Group. Each Stockholder acknowledges that a breach
by the Stockholder of this Agreement will cause irreparable and material loss
and damage to the Medical Group and/or BMJ and 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:
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If to the Medical Group, to:
Sun Valley Orthopaedic Surgeons
14506 Xxxx Xxxxxxx Xxxxxx Xxxxx, #000
Xxx Xxxx Xxxx, Xxxxxxx 00000
If to a Stockholder, to:
[Name of Stockholder]
Sun Valley Orthopaedic Surgeons
00000 Xxxx Xxxxxxx Xxxxxx Xxxxx, #000
Xxx Xxxx Xxxx, Xxxxxxx 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:
Bone, Muscle and Joint, Inc.
00000 Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxx, Vice President, Western Region
and to:
Xxxxxxx and Xxxxxx Law Corporation
1900 Avenue of the Stars, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, 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 parties 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. Relationship Among Stockholders.
No Stockholder shall have any responsibility for any breach of this
Agreement by any other Stockholder or for any representations, warranties, acts,
or omissions of any other Stockholder. Each Stockholder is entering into this
Agreement for and on behalf of such
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Stockholder only, and no partnership, joint venture, unincorporated association,
or any other legal entity is intended to be formed by or among the Stockholders
as a result of or in connection with this Agreement. The parties have chosen to
execute a single instrument for convenience only, and this Agreement shall be
construed as separate and several agreements between the Medical Group, BMJ, and
each of the respective Stockholders for all purposes. This Agreement may be
executed in separate counterparts.
10. Entire Agreement; Amendments; Prior Agreements.
The foregoing, together with any related provisions of any other agreement
entered into in connection herewith, 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 among the parties
hereto with respect to the matters covered hereby.
11. Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of California.
12. 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
losing party all costs and expenses, including attorneys' fees and accountants'
fees, incurred in connection with such dispute or controversy.
13. Headings.
The headings of the sections of this Agreement have been inserted for
convenience only and shall not be deemed to be part of this Agreement.
* * *
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IN WITNESS WHEREOF, this Agreement has been executed and delivered as of
the date first above written.
SUN VALLEY ORTHOPAEDIC SURGEONS
By: XXXXXX X. XXXXXX, M.D., P.C., General Partner
By: /s/ Xxxxxx X. Xxxxxx, M.D.
------------------------------------------
Xxxxxx X. Xxxxxx, M.D., President
By: /s/ Xxx Xxxxx Xxxxxx, M.D.
---------------------------------------------
XXX XXXXX XXXXXX, M.D., General Partner
By: /s/ Xxxxxx X. Xxxxxxxx, M.D.
---------------------------------------------
XXXXXX X. XXXXXXXX, M.D., General Partner
By: /s/ Xxxxxx Xxxxxxx
---------------------------------------------
XXXXXX XXXXXXX, M.D., General Partner
BONE, MUSCLE AND JOINT, INC.
By: /s/ Xxxxxx Xxxxxx
---------------------------------------------
Xxxxxx Xxxxxx, M.D., President
STOCKHOLDERS
/s/ /s/ Xxx Xxxxx Xxxxxx, M.D.
------------------------------
Xxx Xxxxx Xxxxxx, M.D.
/s/ /s/ Xxxxxx X. Xxxxxxxx
------------------------------
Xxxxxx X. Xxxxxxxx, M.D.
/s/ /s/ Xxxxxx Xxxxxxx
------------------------------
Xxxxxx Xxxxxxx, M.D.
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