INDIVIDUAL NON-COMPETITION AGREEMENT
THIS INDIVIDUAL NON-COMPETITION AGREEMENT ("Agreement") is made as of this
5th day of June, 1996 by and between Prospect Medical Group, Inc., a California
professional corporation ("Prospect Medical Group") and Xxxxx XxXxxxxx, M.D.,
("Physician"). All capitalized terms used herein and not otherwise expressly
defined shall have the same meanings set forth in the Assignable Option
Agreement (defined below).
RECITALS
A. Prospect Medical Group and Prospect Medical Group's Affiliates are in
the business of developing and operating an integrated healthcare delivery
system in the State of California and other areas. Such system includes primary
care physicians, specialty care physicians, other outpatient and ancillary
services, and management and administrative services.
B. To develop an integrated healthcare delivery system, Prospect Medical
Group previously caused the formation of a management services organization,
Prospect Medical Systems, Inc., a Delaware corporation ("Prospect Medical
Systems"), to provide management and administrative services to Prospect Medical
Group and its other Affiliates.
C. Following formation of Prospect Medical Systems, Prospect Medical
Group and Prospect Medical Systems entered into an Asset Transfer Agreement
providing for the transfer of certain non-professional assets to Prospect
Medical Systems from Prospect Medical Group.
D. In connection therewith Prospect Medical Group, Physician and Prospect
Medical Systems previously entered into an Assignable Option Agreement, dated as
of June 5, 1996 (the "Assignable Option Agreement") pursuant to which Prospect
Medical Group granted to Prospect Medical Systems an assignable option to
purchase all of Prospect Medical Group's remaining assets and the right to
designate the purchaser of all or a part of the issued and outstanding stock in
Prospect Medical Group under certain circumstances.
E. Prospect Medical Group and Prospect Medical Systems previously entered
into a Management Services Agreement pursuant to which Prospect Medical Systems
provides management and administrative services to Prospect Medical Group in
return for a management fee which is calculated based upon the revenues derived
by Prospect Medical Group from its medical practices and other sources.
F. Physician is the sole director, officer and shareholder of Prospect
Medical Group and as such has exclusive control over the operations and
condition of Prospect Medical Group and is a director, officer and shareholder
of Prospect Medical Systems.
G. Pursuant to the Assignable Option Agreement, if Physician or Prospect
Medical Group transfers all or any of the Assets or Stock or under certain other
circumstances, Prospect
Medical Systems may exercise the Stock Option or the Assets Option. In such
event pursuant to the terms of the Assignable Option Agreement, Physician
shall execute this Agreement.
NOW, THEREFORE, in consideration of the foregoing promises 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. As a material inducement to Prospect Medical Group
to enter into the Assignable Option Agreement and during the term of this
Agreement in the Service Area described in Section 4 below and except as
permitted under the Primary Care Physician Services Agreement, Physician
(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) shall not:
practice medicine, or engage, participate, aid, assist, or hold any
interest in any business or provision of any healthcare service which is,
or as of Physician's engagement or participation, would become, competitive
with any aspect of Prospect Medical Group's or any of Prospect Medical
Group's Affiliates's (including Prospect Medical Systems') healthcare
services;
solicit or assist any other person to solicit any business relating to a
competing line of healthcare business (other than for Prospect Medical
Group or any of its affiliates) from any present or potential patient or
other healthcare customer (including all third party payors) of Prospect
Medical Systems, Prospect Medical Group, or any of their affiliates;
sell, transfer, assign or otherwise permit another party to benefit from
any of the remaining assets including but not limited to goodwill, of
Prospect Medical Group attributable to Physician based upon the provision
of physician services by or through Physician;
engage or contract (other than with Prospect Medical Group or any of
Prospect Medical Group's Affiliates) for the provision of any management
services to Physician or any physician employed by or under contract to
Physician (as applicable) which are the same as or substantially similar to
any of the services that Prospect Medical Group or any of Prospect Medical
Group's Affiliates furnishes;
commit any other act or assist others to commit any other act which might
injure the healthcare business of Prospect Medical Group or Prospect
Medical Group's Affiliates;
directly or indirectly employ, contract, solicit or encourage any employee
or other person under contract with Prospect Medical Group or any of its
Affiliates to leave the employ of any such entity; or
directly or indirectly solicit, request, advise, or encourage any present
or future supplier, customer or employee of Prospect Medical Group or its
Affiliates (including practices
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managed by Prospect Medical Group or its Affiliates) to withdraw,
curtail or cancel its business dealings with Prospect Medical Group or
its affiliates, or take any actions that might impair the relations of
Prospect Medical Group or any of its Affiliates and their respective
suppliers, customers, employees or others.
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 Physician or others, except on behalf of Prospect Medical Group or any of
Prospect Medical Group's Affiliates, all confidential matters and trade
secrets known to Physician relating to the healthcare business and operations
of Physician, Prospect Medical Systems, Prospect Medical Group or any of
their affiliates, including without limitation, customer lists, pricing
policies, operational methods, marketing plans or strategies, product
development techniques or plans, business acquisition plans, new personnel
designs and design projects, invention and research projects and other
business affairs relating to the business and operations of Physician,
Prospect Medical Systems, Prospect Medical Group or any of their affiliates
learned by Physician heretofore or hereafter, and shall not disclose them to
anyone outside of Prospect Medical Group 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 Prospect Medical Group
or its Affiliates in order for them to have the opportunity 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 made in connection with the granting of the Option to
Prospect Medical Systems, (ii) such covenants are reasonable and necessary to
protect the legitimate interests of Prospect Medical Group, and (iii) Prospect
Medical Group would not have entered into the Assignable Option Agreement in the
absence of such restrictions. Physician acknowledges that this Agreement is
subject to all representations, warranties and covenants of Prospect Medical
Group and in the Assignable Option Agreement.
4. SERVICE AREA. The Service Area to which Physician's covenants in Section 1
apply is defined as the area within a fifteen (15) mile radius (or the maximum
radius permitted by law, if less) of each facility of Physician or Prospect
Medical Group now existing or hereafter established. For reference, the current
facilities are listed in Attachment A hereto.
5. TERM. The term of this Agreement commences as of the day and year first
above written and terminates upon the later to occur of:
(i) the date which is three (3) years following the day and year first
above written; or
(ii) the date which is three (3) years following the termination or
expiration of the Primary Care Physician Services Agreement through no
fault of Physician.
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6. MISCELLANEOUS.
6.1 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; PROVIDED, however, Prospect Medical Group may, (i) assign any or all
of its rights and interests hereunder to one or more of its Affiliates and (ii)
designate one or more of its Affiliates to perform its obligations hereunder (in
any or all of which cases Prospect Medical Group shall remain liable and
responsible for the performance of all of its obligations hereunder). Any
assignment or delegation in contravention of this Section shall be null and
void.
6.2 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.
6.3 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 Agreement.
6.4 AMENDMENT. This Agreement may not be amended except by a writing
executed by all parties.
6.5 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.
6.6 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: Xxxxx XxXxxxxx, M.D.
00000 Xxxxx Xxxxx Xxxx., Xxxxx 000
Xxxxx Xxxxx, XX 00000
If to Prospect Medical Group: Prospect Medical Group, Inc.
00000 Xxxxx Xxxxx Xxxx., Xxxxx 000
Xxxxx Xxxxx, XX 00000
Attn: President
6.7 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
6.8 INJUNCTIVE RELIEF. The parties hereto acknowledge and agree that a
breach by Physician of this Agreement will cause irreparable damage to
Prospect Medical Group, the exact
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amount of which will cause difficult to ascertain, and that remedies at law
for any such breach will be inadequate. Accordingly, Physician agrees that
if Physician breaches this Agreement, then Prospect Medical Group shall be
entitled to injunctive relief, and Physician agrees not to assert in any
proceeding that Prospect Medical Group has an adequate remedy at law.
Physician shall pay the reasonable fees and expenses, including attorneys
fees, incurred by Prospect Medical Group or any successor or assign in
enforcing this Agreement.
6.9 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 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 geographic area as any court of competent
jurisdiction may determine to be reasonable.
6.10 ATTORNEYS' FEES. Should either Prospect Medical Group 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 as of
the day and year first written above.
"Prospect Medical Group"
PROSPECT MEDICAL GROUP, INC.,
a California professional medical corporation
By: /s/ Xxxxx XxXxxxxx
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Xxxxx XxXxxxxx, M.D., President
"PHYSICIAN"
/s/ Xxxxx XxXxxxxx
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ATTACHMENT A
FACILITY ADDRESSES
18200 Xxxxx Xxxxx Blvd., Suites 102, 104, 108, 401 and 000
Xxxxx Xxxxx, XX 00000
00000 Xxxxx Xx Xx Xxxxxxxxx, Xxxxx 000
Xxxxxx Xxxxx, XX
0000 Xxxx Xxxxxxx Xxxxxx, Xxxxx X
Xxxxxxxxx, XX 00000
00000 Xxxxx Xxxxx Xxxxxxxxx, Xxxxx 00 and Xxxxx 000
Xxxxx Xxxxx, XX 00000
00000 Xxxxxxx Xxxxxx, Xxxxxx X,X,X
Xxxxxx, XX 00000
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