STOCKHOLDER NON-COMPETITION AGREEMENT
THIS STOCKHOLDER NON-COMPETITION AGREEMENT (the "Agreement") is entered
into as of October 16, 1997, among ORTHOPAEDIC SURGERY ASSOCIATES, INC., a
Florida corporation (the "Medical Group"), each of the individuals identified on
the signature page hereof (each, a "Stockholder" and collectively, the
"Stockholders"), and BMJ MEDICAL MANAGEMENT, 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. Each Stockholder is a partner in or an equity owner or employee of the
Medical Group.
C. BMJ is engaged in the business of providing management, administrative,
financial, marketing, information technology and related services to
professional medical organizations.
D. The Medical Group and BMJ have entered into a Management Services
Agreement effective as of September 1, 1997 (the "Management Services
Agreement"), under which the Medical Group has 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 and pursuant to a Restricted
Stock Agreement entered into among the Stockholders 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 such Stockholder's
status as a partner in or equity owner or employee of the Medical Group, each
Stockholder (for himself or herself only) hereby agrees for the benefit of both
the Medical Group and BMJ 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
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services to the general public, as may be provided from time to time by the
Medical Group, 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).
2. Agreement Not to Compete or Interfere with Business.
(a) Each Stockholder acknowledges that (i) he or she is receiving benefits
from the acquisition of securities from BMJ pursuant to the Restricted Stock
Agreement, (ii) the Medical Group and its affiliates conduct their business
primarily in Palm Beach County, Florida, 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 such
Stockholder engaged in a Competitive Business. Accordingly, each Stockholder
hereby agrees that, during the period (such period being referred to herein as
the "Non-Compete Period") commencing on the date hereof and ending two years
after the earliest to occur of (x) the expiration of the Management Services
Agreement, (y) the termination of the Management Services Agreement by BMJ
pursuant to Section 13.2 thereof, or (z) the effective date of such
Stockholder's resignation or termination of equity owner status or employment
with the Medical Group (the earliest to occur of clause (x), (y) or (z) being
referred to herein as the "Exit Date"), 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 or stockholder of, or any
partner in, the Medical Group, BMJ, or any affiliate or subsidiary of the
Medical Group or BMJ to terminate his or her employment or partnership or
stockholder status with such entity or to engage in any Competitive
Business within the Restricted Territory;
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(D) solicit, entice or induce any vendor, customer or distributor of
the Medical Group, BMJ, or any affiliate or subsidiary of the Medical Group
or BMJ to terminate or materially diminish its relationship with the
Medical Group, BMJ, or any affiliate or subsidiary of the Medical Group or
BMJ; or
(E) otherwise knowingly damage, disparage or interfere with the
Medical Group, BMJ, or any affiliate or subsidiary of the Medical Group or
BMJ;
provided, however, that nothing contained in this Agreement shall prohibit any
Stockholder from (1) owning in the aggregate less than one percent (1.0%) of a
class of publicly-traded securities issued by any Competitive Business or
(2) performing those activities set forth opposite such Stockholder's name on
Annex I attached hereto.
(b) BMJ and the Medical Group acknowledge and agree that such 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 the Management Services Agreement pursuant to Section 13.6
thereof.
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 and its affiliates constitutes the confidential and proprietary trade
secrets of the Medical Group or of BMJ, as the case may be, and that such
Stockholder's non-disclosure thereof is essential to this Agreement and a
condition to such Stockholder's use and possession thereof. Each Stockholder
shall retain in strict confidence any and all such confidential information
received from the Medical Group and/or any of its affiliates (the "Medical Group
Confidential Information") or from BMJ and/or any of its affiliates (the "BMJ
Confidential Information") (collectively, the "Confidential Information") and
under no circumstances shall such Stockholder distribute or in any way
disseminate Confidential Information, directly or indirectly, to any third party
or use Confidential Information for such 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, no Stockholder shall have any liability to
the Medical Group or its affiliates or to BMJ or its affiliates with respect to
Confidential Information which:
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(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 such Stockholder;
(ii) is disclosed with the prior written consent of the Medical Group
or BMJ, as the case may be;
(iii) becomes known to such Stockholder from a source other than the
Medical Group or its affiliates or BMJ or its affiliates without breach of
this Agreement by such Stockholder, without breach of any agreement between
the Medical Group or BMJ, as the case may be, and such source, and
otherwise not in violation of the Medical Group's or its affiliates' rights
or the rights of BMJ or its affiliates;
(iv) is disclosed pursuant to the order or requirement of a court,
administrative agency, or other governmental body; provided, however, that
such Stockholder shall provide prompt, advance notice thereof to enable the
Medical Group or its affiliate or BMJ or its affiliates to seek a
protective order or otherwise prevent such disclosure; or
(v) is disclosed pursuant to the reasonable advice of such
Stockholder's legal counsel in connection with such Stockholder's defense
against a medical malpractice claim; provided, however, that such
Stockholder shall provide prompt, advance notice thereof to enable the
Medical Group or its affiliate or BMJ or its affiliates to seek a
protective order or otherwise prevent such disclosure.
(c) Each Stockholder agrees to indemnify the Medical Group or its
affiliates and BMJ or its affiliates for any damages the same may suffer as a
result of such Stockholder's or his or her agents' failure to abide by the
provisions of this Section 3.
4. Acknowledgment.
Each Stockholder acknowledges that the provisions of this Agreement are not
designed to prevent such 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 such 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 such Stockholder's participation in any Competitive Business. Each
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
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result of losing any employment or other professional opportunity as a result of
entering into and fulfilling his or her obligations under this Agreement.
5. Buyout of Non-Compete Covenant.
(a) At any time from and after the Exit Date, a Stockholder (if and only if
such Stockholder was, as of the Exit Date, an equity owner of the Medical Group)
may request (a "Termination Request") that BMJ and the Medical Group terminate
such Stockholder's obligations under paragraph (A) of Section 2(a) hereof;
provided, however, that if such Exit Date occurs on or before the fourth
anniversary of the Commencement Date (as defined in the Management Services
Agreement), such Stockholder may not so request, and such noncompetition
covenant shall not be terminated. The Termination Request shall be made by the
Stockholder in writing and shall be delivered to the Medical Group and BMJ in
accordance with Section 9 hereof. The copy of the Termination Request addressed
to BMJ shall be accompanied by a certified check payable to BMJ in an amount
equal to one-half of that amount (the "Buyout Amount") determined in accordance
with the calculation set forth below. The Stockholder shall deliver the
remaining one-half (the "Second Payment") of the Buyout Amount to BMJ no later
than the first anniversary of the initial payment pursuant to the previous
sentence (such one year period being referred to herein as the "Payment
Period"). Notwithstanding the foregoing, in the event the Stockholder fails to
deliver the Second Payment by the end of the Payment Period, then the terms of
this Section 5(a) shall automatically be deemed null and void and the provisions
of paragraph (A) of Section 2(a) hereof shall be deemed operative again (with
the duration of the Payment Period not to be counted as part of the Non-Compete
Period).
The Buyout Amount equals:
2 x (MF x 1/P) x T/24
where;
MF = the Management Fee (as defined in the Management Services Agreement)
payable by the Medical Group for the 12-month period ending on the
fourth anniversary of the Commencement Date (as defined in the
Management Services Agreement), provided that if the Medical Group
has, during such 12-month period, combined its medical practice with
the medical practice of Lighthouse Orthopaedic Associates, P.A.
("LOA"), then MF shall equal the sum of the Management Fees payable
for such period by each of the Medical Group and LOA;
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P = the aggregate number of equity owners of the Medical Group (including
the Stockholder) as of the Exit Date; and
T = the number of months remaining (rounded up to the nearest whole
number) in the Non-Compete Period (determined as of the date of the
Termination Request).
(b) Notwithstanding anything to the contrary contained herein, under no
circumstances will more than one Stockholder be permitted to terminate his
noncompetition covenant under paragraph A of Section 2(a) in any 12-month period
during the Term. In the event two or more Termination Requests are received by
the Medical Group and the Management Company, the Medical Group shall determine
which of such requests shall be approved.
(c) Nothing contained herein shall be construed to in any way limit or
reduce the remedies available to the Medical Group and BMJ hereunder in the
event of a breach of Section 2(a) hereof prior to the delivery of a Termination
Request.
(d) Notwithstanding anything to the contrary contained herein, in the event
that the Stockholder delivers a Termination Request to the Medical Group and BMJ
and complies with the other provisions of Section 5(a) above, any solicitation
by the Stockholder of those patients to which the Stockholder provided medical
services prior to the Exit Date shall not be deemed a breach of Section 2
hereof.
6. Survival; Remedies.
Each Stockholder's covenants under this Agreement shall survive termination
of his or her equity owner status or employment with the Medical Group. Each
Stockholder acknowledges that a breach or threatened breach by such Stockholder
of this Agreement will cause irreparable damage and material loss to BMJ and the
Medical Group 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
each of the Medical Group and 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.
7. Benefits of Agreement.
This Agreement and the rights and obligations of the parties hereto shall
bind and inure to the benefit of any successors of the Medical Group and
successors of BMJ by reorganization, merger or consolidation or otherwise and
any
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assignee of all or substantially all of the business and properties of the
Medical Group or BMJ.
8. 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.
9. 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:
(i) If to the Medical Group, to:
Orthopaedic Surgery Associates, Inc.
▇▇▇▇ ▇.▇. ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇;
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, P.A.
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇;
(ii) If to any Stockholder, to his or her address set forth on the
signature page hereto beneath his or her name; and
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(iii) If to BMJ, to:
BMJ Medical Management, Inc.
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▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇, M.D.
President
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇;
with a copy to:
▇'▇▇▇▇▇▇▇▇ Graev & Karabell, LLP
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. Held, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇;
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.
10. 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 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 among the Medical Group, BMJ and each of the respective Stockholders
for all purposes. This Agreement may be executed in separate counterparts.
11. Entire Agreement; Amendments; Prior Agreements.
This Agreement, the Management Services Agreement and the Restricted Stock
Agreement constitute the entire agreement among 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 the parties hereto. This
Agreement supersedes any and all prior agreements among the parties hereto with
respect to the matters covered hereby.
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12. Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Florida without regard to the laws and principles thereof
or of any other jurisdiction which would direct the application of the laws of
another jurisdiction.
13. 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.
14. 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.
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IN WITNESS WHEREOF, this Stockholder Non-Competition Agreement has been
executed and delivered as of the date first above written.
ORTHOPAEDIC SURGERY ASSOCIATES, INC.
By:_________________________________
Name:
Title:
BMJ MEDICAL MANAGEMENT, INC.
By:_________________________________
Name:
Title:
STOCKHOLDERS:
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, M.D.
Address for notices:
____________________________________
____________________________________
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▇▇▇▇ ▇▇▇▇▇▇▇▇▇, M.D.
Address for notices:
____________________________________
____________________________________
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▇▇▇▇▇▇ ▇▇▇▇, M.D.
Address for notices:
____________________________________
____________________________________
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▇▇▇▇ ▇▇▇▇▇▇▇, M.D.
Address for notices:
____________________________________
____________________________________
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▇▇▇▇▇ ▇▇▇▇▇▇, M.D.
Address for notices:
____________________________________
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇, M.D.
Address for notices:
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