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Naden v. Numerex Corp.

January 20, 2009

GARY NADEN, ET AL., PLAINTIFFS,
v.
NUMEREX CORP., DEFENDANT.



The opinion of the court was delivered by: Lewis A. Kaplan, District Judge

MEMORANDUM OPINION

The individual plaintiffs here seek a preliminary injunction barring defendant from enforcing covenants not to compete that plaintiffs signed when they agreed to work for defendant following their sale to defendants of the assets of their company. This is the Court's decision following an evidentiary hearing.

Facts

A. Background

This case is a skirmish in a larger war between plaintiffs David Ronsen, Scott Rosenzweig and Gary Naden, shareholders and former executives of Orbit One Communications, Inc. ("Orbit"), on the one hand, and defendant Numerex Corporation, to whom plaintiffs sold their business, on the other.

David Ronsen, a former firefighter and resident of Bozeman, Montana, created Orbit in 2000.*fn1 The company, also located in Bozeman,*fn2 provided satellite communications and tracking services to government agencies, contractors, and private businesses.*fn3

As Orbit grew, Ronsen hired others to assist him with the business. In 2005, he hired plaintiff Scott Rosenzweig, a business development executive.*fn4 A year later, Ronsen hired plaintiff Gary Naden, an experienced engineer in the satellite communications technology industry.*fn5 Rosenzweig and Naden eventually became, respectively, ten percent and six percent equity owners of Orbit.*fn6 Ronsen retained an eighty-four percent ownership interest in the company.*fn7

Some time in 2006, Orbit, already a leading provider of satellite GPS tracking devices,*fn8 became interested in expanding its services to include cellular communications technology.*fn9 It entered into a contract for cellular data services with defendant Numerex Corporation ("Numerex"), a Pennsylvania corporation headquartered in Atlanta, Georgia,*fn10 that provides cellular, wireless, and satellite based communications services to clients located across the country.*fn11

During the negotiation of this contract, Numerex broached with Ronsen the question whether he was interested in selling the company.*fn12 A week after Orbit concluded its contract with Numerex, Stratton Nicolaides, Numerex's chief executive officer, flew to Bozeman to meet with Ronsen*fn13 and began what matured into negotiations that culminated in the execution by Orbit and Numerex of an asset purchase agreement on July 31, 2007 (the "APA").*fn14

B. The Acquisition

The APA provided in substance that Numerex would acquire all of Orbit's assets.*fn15 Numerex agreed to pay $5.5 million at closing into an escrow account, with an additional $500,000 due sixty days after closing in exchange.*fn16 The APA contained also an earn out provision under which Numerex agreed to pay Orbit additional compensation, in equity and cash, if Orbit met certain revenue and other targets.*fn17

At the same time, Ronsen, Rosenzweig and Naden entered into employment agreements with Numerex pursuant to which they agreed to run the Numerex satellite division that formerly had been Orbit.*fn18 The employment agreements contained, among other things, severance and non-competition provisions.*fn19

Both the APA and the employment agreements contained New York governing law clauses and provisions consenting to ...


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