Exhibit 10.5
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT (this "Agreement") is made and entered
into as of January 1, 1998, by and among NATIONAL MEDICAL FINANCIAL SERVICES
CORPORATION, a Nevada corporation ("NMFS"); and XXXXXX XXXXXXXX, a resident
of the State of New York ("Seller").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Accounting Business Asset Purchase
Agreement dated as of the even date hereof (the "Accounting Business Asset
Purchase Agreement") among NMFS and Seller, NMFS has as of this date acquired
substantially all of the assets of the accounting business of Seller
operating under the tradename "Maybruch & Co., CPA's", the successor of
Seller's interest in the partnership "Maybruch & Xxxxxxxxx";
WHEREAS, to induce NMFS to perform under the Accounting Business Asset
Purchase Agreement, Seller has agreed not to engage in certain businesses
within a certain time period and within certain specified geographic areas,
and subject to certain conditions, all as more particularly set forth herein;
WHEREAS, in conjunction with this Agreement and to induce NMFS and
Seller to perform under the Accounting Business Asset Purchase Agreement,
Seller and NMFS have agreed to execute an employment agreement of even date
herewith (the "Employment Agreement") by which Seller will be employed by
NMFS;
NOW, THEREFORE, in consideration of the premises and other valuable
consideration, the receipt and adequacy of which are acknowledged by the
parties hereto, the parties hereto hereby agree as follows:
Section 1. Noncompetition.
(a) Seller agrees that for a period ending on the later of (i) the
fifth anniversary of the date of this Agreement, or (ii) the second
anniversary of the date that Seller is no longer employed under the
Employment Agreement for any reason. Seller will not knowingly, directly or
indirectly (either alone or as a partner, officer, director, employee,
independent contractor, consultant, investor, partner, lender or stockholder
of any company or business organization):
(1) recruit, solicit, or otherwise seek to induce employees or
customers of NMFS, to terminate
their employment or customer relationship with NMFS, to
terminate their employment relationship with NMFS, or to
violate any agreement with NMFS; or
(2) own, lease, manage or operate any medical billing or
accounting service business in the "Territory" (as
hereinafter defined); or
(3) provide any medical billing or accounting services in the
"Territory" in competition with NMFS;
provided, however, that:
(A) the record or beneficial ownership by Seller of 5% or less of the
outstanding publicly traded capital stock of any company
providing services described in Sections 1(a)(2) and (3) above
shall not be deemed to be a violation thereof so long as Seller
is not an officer, consultant, director, independent contractor
or employee of such company;
(B) services provided by Seller to NMFS under the Employment
Agreement shall not be deemed in violation of this Section 1;
(C) services rendered by Seller as a certified public accountant
shall be deemed not to be in competition with NMFS; and
(D) the restrictions under this Section 1 shall terminate in the
event of a default by NMFS under the Accounting Business Asset
Purchase Agreement, the Employment Agreement, or the Buy-Back
Agreement.
(b) Seller will not, without the prior written consent of NMFS,
disclose, other than in connection with the Employment Agreement, any
"Confidential Information" of Seller or NMFS to any person not authorized by
NMFS to receive such information. This covenant shall not apply to any
Confidential Information now or hereafter voluntarily disseminated by NMFS to
the public, or which otherwise has become part of the public domain through
lawful means. "Confidential Information", for purposes of this Agreement,
shall mean information that is proprietary to the Company or proprietary to
others and entrusted to the Company, whether or not trade secrets.
Confidential information includes, but is not limited to, information
relating to business plans and to business as conducted and to past and
current products,
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services or procedures. Confidential information also includes, without
limitation, customer names, customer addresses, customer lists, fee
scheduless, managed care contracts and rates, quality assurance policies and
procedures, staffing models, design maintenance and operation of centers, and
information concerning research, development, purchasing, marketing, selling
and services. Confidential Information does not include: (i) information
which is public information at the time such information is disclosed by
Seller, or thereafter becomes public through no violation of this Agreement;
(ii) information which was in the possession of Seller or any entity with
which he was affiliated prior to its disclosure by NMFS to Seller; (iii) any
disclosure of information to the extent required by applicable law, or
regulation, or judicial or regulatory process; or (iv) use by Seller as
evidence in or in connection with any arbritration or litigation relating to
this Agreement, the Accounting Business Asset Purchase Agreement, or the
Employment Agreement or any other agreement related to the above-mentioned
agreements.
(c) Seller acknowledges and agrees (i) that Seller has received
pursuant to the Accounting Business Asset Purchase Agreement adequate
consideration for the covenants and obligations of Seller contained in this
Agreement, and (ii) that the nature and the periods of restriction imposed in
this Section 1 are fair, reasonable and necessary to protect and preserve for
NMFS the benefits of this Agreement and that such restrictions shall not
prevent Seller from earning a livelihood.
(d) The term "Territory" as used herein shall mean the
geographical area within a fifty- (50-) mile radius of 000 Xxxxx 00, Xxxxxxx,
Xxx Xxxx 00000.
Section 2. Notices. All notices, demands and other communications
hereunder shall be written and shall be deemed to have been duly given if (i)
sent by fascimile transmission and mailed by regular mail, (ii) delivered in
person, or (iii) sent by nationally recognized overnight carrier prepaid, to
the address set forth below:
To NMFS: National Medical Financial
Services Corporation
0000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, M.D.
Fax: (000) 000-0000
with a copy to: Xxxxx X. Xxxxxxx & Associates, P.C.
X.X. Xxx 000
Xxxxxxx, XX 00000
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Fax: (000) 000-0000
To Seller: Xxxxxx Xxxxxxxx
000 Xxxxx 00
Xxxxxxx, XX 00000
Fax: (000) 000-0000
with a copy to: Xxxxx Xxxxxxxx, Esq.
Xxxxxxxx & Xxxxxxxxxxx LLP
000 Xxxxx Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
or to such other address as NMFS or Seller may designate by written notice to
the other. Notices delivered in person or by fascimile transmission shall be
deemed delivered on the date of delivery or transmission respectively.
Notices sent by nationally recognized overnight carrier shall be deemed
delivered forty-eight (48) hours after the date sent. Rejection or other
refusal to accept or inability to deliver because of a changed address of
which no notice was given shall be deemed to be a receipt of the notice,
request or other communication. Any notice, request or other communication
required or permitted to be given by any party may be given by such party's
legal counsel.
Section 3. Assignment. Except as provided below, neither party
shall assign this Agreement without first obtaining the written consent of
the other party. Notwithstanding the foregoing to the contrary, NMFS shall
have the right, without any other party's consent, to assign all or any
portion of this Agreement to any entity controlled by, controlling or under
common control with, NMFS, and/or to any lender providing financing or
refinancing funds or credit facilities to NMFS or its affiliates, and/or to
any transferee of any of the stock, assets or business of NMFS; provided no
such assignment shall release NMFS from any liability hereunder.
Section 4. Governing Law; Attorneys' Fees. This Agreement is executed
in and is governed by the laws of the State of New York, exclusive of the
principles of conflicts of laws. In the event that a suit, action,
arbitration, or other proceeding of any nature whatsoever, including, without
limitation, any proceeding under the U.S. Bankruptcy Code and involving
issues peculiar to federal bankruptcy law, any action seeking a declaration
of rights or any action for rescission, is instituted to interpret or enforce
this Agreement or any provision of this Agreement, the prevailing party shall
be entitled to recover from the losing party, prevailing party's reasonable
attorneys',
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paralegals', accountants', and other experts' professional fees and all other
fees, costs, and expenses actually incurred and reasonably necessary in
connection therewith, as determined by the judge or arbitrator at trial or
other proceeding, or on any appeal or review, in addition to all other
amounts provided by law.
Section 5. Severability; Reformation. If any of the provisions, or
portions thereof, of this Agreement are held to be unenforceable or invalid
by any arbitrator or court, the validity and enforceability of the remaining
provisions, or portions thereof, will not be affected and shall continue in
force. If any arbitrator or court determines that the scope, duration or
geographical limit of any of the restrictions contained in this Agreement is
unenforceable, it is the intention of the parties that the restrictions and
covenants shall not thereby be terminated but rather shall be amended and
revised to the extent required to render them valid and enforceable.
Section 6. Separate Agreement. Seller agrees that the covenants and
agreements contained herein shall be construed as agreements independent of
any other agreements with NMFS and are independently supported by good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and further agrees that this Agreement shall be interpreted,
construed and enforced separate and apart from any other agreements between
or among the parties hereto. Seller further agrees that any claim or cause
of action of Seller against NMFS and any other party hereto arising out of
any other agreement or arising out of any set of facts shall not constitute a
defense to the enforcement by NMFS or its successors or assigns of the
covenants and agreements of Seller contained herein; provided however, that
that if Article VI (Non-Competition) of the Employment Agreement is no longer
enforceable or binding upon Seller in accordance with the terms of the
Employment Agreement, then this Agreement shall terminate and no longer be
enforceable or binding upon Seller.
Section 7. Injunctive Relief. The parties hereto recognize and hereby
acknowledge that it is impossible to measure in money the damages which would
result to NMFS or its successors or assigns by reason of a failure by Seller
to perform any of the obligations imposed upon him under this Agreement.
Therefore, NMFS and its respective successors or assigns shall be entitled to
injunctive and other equitable relief to enforce the terms of this Agreement,
without the necessity of showing irreparable harm and without the necessity
of posting bond or security. If NMFS or its respective successors or assigns
should institute an action or proceeding to enforce the provisions hereof,
Seller hereby waives the claim or defense that any such party has an adequate
remedy at law, and Seller agrees he shall not urge in
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any action or proceeding the claim or defense that such a remedy at law
exists. At the discretion of the court or arbitrator before which an
injunctive proceeding is brought, the running of the covenants in Section
1(a) hereof may be tolled and extended for a period of time equal to the time
period Seller shall be in violation of any such covenant.
Section 8. Arbitration. All disputes hereunder shall be resolved by
arbitration in the manner specified in the Accounting Business Asset Purchase
Agreement.
Section 9. No Other Parties. Seller acknowledges and agrees that the
only other party to this Agreement is NMFS and that Xxxxxxx X. Xxxxxxx, M.D.
individually is not a party, in any capacity, to this Agreement.
IN WITNESS WHEREOF, this Agreement is entered into and effective as of
the day and year first written above.
NMFS:
NATIONAL MEDICAL FINANCIAL
SERVICES CORPORATION, a Nevada
corporation
By:
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Title:
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SELLER:
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XXXXXX XXXXXXXX
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