Non-competition And Non-circumvention Agreement

EXHIBIT 10.38


NON-COMPETITION AND NON-CIRCUMVENTION AGREEMENT


This Non-Competition and Non-Circumvention Agreement (the "Agreement") is entered into effective as of March 1, 1997 by and among QuadraMed Corporation, a Delaware corporation ("QuadraMed"), Healthcare Recovery Acquisition Corporation, a Delaware corporation ("Acquisition Co."), and Eugene M. Arnone (the "Shareholder").


WHEREAS, QuadraMed and Acquisition Co. have entered into that certain Acquisition Agreement and Plan of Merger dated as of March 1, 1997 (as amended) with Healthcare Recovery Incorporated, a New Jersey corporation (the "Company"), and the shareholders of the Company (the "Acquisition Agreement"), pursuant to which the Company will be merged within and into Acquisition Co.


WHEREAS, the Company has heretofore operated a healthcare accounts receivable management, collection and financing and business office outsourcing and reimbursement consulting business.


WHEREAS, the Shareholder owns a majority of the issued and outstanding shares of the capital stock of the Company.


WHEREAS, QuadraMed and Acquisition Co. desire to assure themselves that the Shareholder will not compete with QuadraMed and Acquisition Co. for a period of five (5) years from the termination of his employment with QuadraMed or any affiliate thereof in a business which is the same as, substantially similar to or in competition with the healthcare accounts receivable management, collection and financing and business office outsourcing and reimbursement consulting operations of QuadraMed and/or Acquisition Co. (including the business and goodwill of the Company) as now being conducted and as they may evolve in the ordinary course in all of the states and territories of the United States.


WHEREAS, this Agreement is a material inducement to QuadraMed and Acquisition Co. to enter into the Acquisition Agreement, and the Shareholder is agreeable to entering into this Agreement with QuadraMed and Acquisition Co. on the terms herein set forth.


NOW, THEREFORE, in consideration of the premises and mutual covenants and agreements contained herein, the parties hereby covenant and agree as follows:


1. Subject to the terms and conditions hereof, the Shareholder covenants and agrees that, for the period commencing on the Closing and ending on the fifth (5th) anniversary of the termination of his employment with QuadraMed or any affiliate thereof (the "Restricted Period"), the Shareholder will not, either directly or indirectly through an affiliated or controlled entity or person, on his own behalf or as a partner, consultant, proprietor, principal, agent, stockholder, creditor, security holder, trustee or otherwise (except by ownership of five percent (5%) or less of the outstanding stock of any publicly held corporation), or in any other capacity, invest, participate or engage in, or devote any material endeavor or effort to an entity or business which is the same as, substantially similar to or in 2 competition with the healthcare accounts receivable management, collection and financing and business office outsourcing and reimbursement consulting operations of QuadraMed and/or Acquisition Co. (including the business and goodwill of the Company) as now being conducted and as they may evolve in the ordinary course (the "Restricted Business") in all of the states and territories of the United States (the "Restricted Territory").


2. The Shareholder acknowledges that he has knowledge of information of substantial value regarding the Restricted Business, which is not generally known and which gives QuadraMed and Acquisition Co. an advantage over competitors who do not know it, including, without limitation, computer programs, names and expertise of employees and consultants, know-how, trade secrets, formulae, processes, ideas, inventions and other sales, business, financial, customer and product-developments, plans, lists, forecasts, strategies and information of the Company (collectively, the "Confidential Information"). The term "Confidential Information" shall not include information which is (i) ...