EXHIBIT 10.9
STOCK REDEMPTION AGREEMENT
THIS STOCK REDEMPTION AGREEMENT, dated as of December 31, 1996, by and
between OPTION CARE CAMILLA, INC (the "Company"), OPTION CARE ENTERPRISES, INC.,
a California corporation ("OCE"), and OPTION CARE, INC., a California
corporation ("OCI").
WITNESSETH:
WHEREAS, OCE owns Eight Hundred (800) shares and OCI owns Fifty (50) shares
of the common stock of Option Care Camilla, Inc., a Georgia corporation
(collectively, the "Subject Shares");
WHEREAS, the Company deems it to be in its best interest to redeem all of
the Subject Shares from OCE and OCI on the terms and conditions set forth below;
and
WHEREAS, OCE and OCI desire the Company to redeem the Subject Shares.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, it is hereby agreed between the Company and OCE and OCI
as follows:
1. Redemption. The Company hereby agrees to redeem all, but not less
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than all, of the Subject Shares from OCE and OCI on the terms and subject to the
conditions contained herein, and OCE and OCI agree to such redemption.
2. Consideration. In consideration of the redemption of the Subject
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Shares from OCE and OCI, the Company shall enter into a Franchise Agreement with
OCI. This Franchise Agreement shall be in the form of attached Exhibit B (the
"Franchise Agreement") and the Company shall deliver to OCI all royalties, as
determined pursuant to the Franchise Agreement, over the course of the Franchise
Agreement (the "Royalty Stream"), which Royalty Stream is estimated to total at
least One Million One Hundred Thousand Dollars ($1,100,000).
3. Payment and Delivery.
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(a) This redemption shall take place by facsimile with subsequent exchange
of stock powers transferring the subject shares to the Company and executed
originals on or before December 31, 1996 (the "Closing Date"). The Company
shall evidence its redemption of the Subject Shares by delivering to OCE and
OCI on the Closing Date a fully executed copy of this Stock Redemption
Agreement and the Franchise Agreement.
(b) On the Closing Date, OCE and OCI shall deliver to the Company or the
Company's representative stock certificates representing the Subject Shares
along with stock powers executed in blank directing transfer of the Subject
Shares on the books of Option Care Camilla, Inc. to the Company.
4. Representations of OCE. OCE and OCI represent and warrant to the
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Company as follows:
(a) Authority. OCE and OCI each has full power and authority, without the
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consent or approval of any court, agency or other third party, to enter into
this Agreement and to perform its obligations hereunder.
(b) Title to the Shares. OCE and OCI each now has, and on the Closing
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Date will have, valid and marketable title to its Subject Shares, free and clear
of any claims, liens, encumbrances or other restrictions on sale or transfer.
(c) No Default or Violation. The execution, delivery and performance of
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this Agreement by OCE and OCI will not result in a breach of or constitute a
default under or a violation of any agreement, judgment, decree, order or other
instrument to which either is a party or by which either is bound.
5. Representations of the Company. The Company represents and warrants
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to OCE and OCI as follows:
(a) Authority. The Company has full power and authority to enter
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into this Agreement and to perform its obligations hereunder.
(b) No Default or Violation. The execution, delivery and performance
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of this Agreement by the Company will not result in a breach of or constitute a
default under or a violation of any agreement, judgment, decree, order or other
instrument to which it is a party or by which it is bound.
6. Liabilities. OCE and OCI shall be responsible for and shall timely
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pay all liabilities identified on the December 31, 1996 balance sheet of Option
Care Camilla, Inc. and for all other accrued and contingent liabilities of the
Company as of and including December 31, 1996, provided that such liabilities
were incurred for use by Option Care Camilla, Inc. in the ordinary course of
business in quantities normal and customary for the business. OCE and OCI shall
be liable for and shall timely pay all federal, state, local, sales and income
taxes of OCC for 1996 and all previous years from November 15, 1991 forward,
including interest, penalty, etc. and shall indemnify and hold harmless the
Company therefrom.
7. OCE's and OCI Indemnity. OCE and OCI agree to jointly and severally
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indemnify and hold the Company and its officers, employees, directors,
shareholders, affiliates, successors and assigns harmless from and against any
and all losses, liabilities, costs, obligations, damages, deficiencies and
expenses (including reasonable attorneys' fees and related costs) of whatsoever
kind, description or nature which may be sustained, incurred or suffered by it
or them as a result of or relating to:
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(a) a breach by OCE or OCI of any representation, warranty, covenant
or agreement made by OCE or OCI in this Agreement;
(b) the operation of the business of Option Care Camilla, Inc. (the
"Business") by OCE, the filing, reporting or failure to file or report by OCE or
the Business of any information or documents with third party payors relating to
the Business or OCE on or before the Closing Date;
(c) any failure of OCE or OCI to timely pay or otherwise discharge or
satisfy any of their liabilities retained under Section 6 hereof; and
(d) any other liabilities, obligations or claim of or with respect to
the Business involving or arising from any act, omission or occurrence during
any period prior to the Closing Date, including the conduct of the Business.
8. Miscellaneous.
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(a) Expenses. Each of the parties hereto shall bear its own expenses in
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connection with this Agreement and the transactions contemplated herein,
including fees and expenses of its attorneys.
(b) Entire Agreement; No Oral Change. This Agreement embodies the entire
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agreement and understanding between OCI, OCE and the Company and supersedes any
and all prior agreements and understandings relating to the subject matter
hereof and may not be changed orally but only by an agreement in writing signed
by both parties.
(c) Benefits. All the terms and provisions of this Agreement shall be
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binding upon and inure to the benefit of the parties and their respective
successors and assigns.
(d) Survival of Representations and Warranties. All representations and
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warranties made herein shall survive the Closing Date.
(e) Assignment. None of the parties shall assign this Agreement or any
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rights or obligations hereunder without the prior written consent of the other
parties.
(f) Controlling Law. This Agreement shall be construed and enforced in
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accordance with the laws of the State of Illinois.
(g) Counterparts. This Agreement may be executed in any number of
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counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to execute this Agreement on one or more counterparts hereof, of
which shall be read and construed as but one and the same document, as of the
date first written above.
OPTION CARE CAMILLA, INC.,
By: /s/ Xxxxxx Xxxxxx
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Name: Xxxxxx Xxxxxx
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Its: President
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OPTION CARE ENTERPRISES, INC.,
a California corporation
By: /s/ Xxxxx Xxxxxxxxxxx
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Name: Xxxxx Xxxxxxxxxxx
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Its: Secretary
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By: /s/ Xxxxx Xxxxxxxxxxx
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Name: Xxxxx Xxxxxxxxxxx
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Its: Vice President
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STOCK POWER AND ASSIGNMENT
FOR VALUE RECEIVED, Option Care Enterprises, Inc. does hereby sell, assign
and transfer unto Option Care Camilla, Inc. 800 shares of common stock of
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Option Care Camilla, Inc., and does hereby irrevocably constitute and appoint
the Secretary of such corporation as its attorney to transfer said stock on the
books of the within-named corporation with full power of substitution in the
premises.
Dated as of: December 31 , 1996
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OPTION CARE ENTERPRISES, INC.,
a California corporation
By: /s/ Xxxxx Xxxxxxxxxxx
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Name: Xxxxx Xxxxxxxxxxx
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Its: Secretary
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OPTION CARE, INC.,
a California corporation
By: /s/ Xxxxx Xxxxxxxxxxx
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Name: Xxxxx Xxxxxxxxxxx
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Its: Vice President
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In the presence of:
/s/ Xxxx Xxxxx
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5
OPTION CARE, INC.
FRANCHISE AGREEMENT
This Franchise Agreement ("Agreement") between Option Care, Inc., a
California corporation, with its principal place of business at Bannockburn,
Illinois ("Franchisor") and Option Care Camilla, Inc., a Georgia corporation,
("Franchise Owner"), is made and entered into effective the date signed by
Franchisor on the signature page hereof (the "Effective Date").
RECITALS
A. Franchisor has developed and owns a proprietary business method and
concept (the "System") relating to the operation of an outpatient health care
business that compounds pharmaceuticals, dispenses and administers
pharmaceuticals and physician prescribed biologicals, nutrients, medications and
solutions via parenteral and enteral routes in the home and in, subacute,
extended care, and other outpatient settings, furnishes clinical, pharmaceutical
and nursing services necessary to the provision of such therapies, sells related
products and supplies and sells or leases related equipment. For purposes of
this Agreement, "parenteral" shall mean any administration route other than by
way of the intestines (e.g., without limitation, inhalation, transdermal and
intravenous).
B. The therapies under the System (the "Therapies") are set forth in the
Confidential Franchise Operations Manual (the "Manual") and include "Core
Therapies" and "Permitted Therapies", both as defined in the Manual.
C. The distinguishing characteristics of the System are set forth in the
Manual, which contains, without limitation, policies and procedures for the
Therapies; uniform standards, specifications and procedures for operation of the
business under the System, including the nature and manner of products and
services offered; procedures for quality improvement; training requirements;
group purchasing availability; and management, operational, and marketing
methods, techniques, materials, assistance and programs.
D. Pursuant to a license from Franchisor, each of Franchisor's franchise
owners does business under the name and xxxx "Option Care," and such other names
and marks as Franchisor may designate for use by each franchise owner under the
System (collectively, the "Proprietary Marks").
E. Franchise Owner wishes to obtain a franchise in order to operate a
business utilizing the System and the Proprietary Marks, as well as to receive
the Manual, the training and other assistance provided by Franchisor in
connection with the System pursuant to this Agreement.
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F. The business to be conducted by Franchise Owner pursuant to and under
the license granted by this Agreement is sometimes referred to herein as the
"Franchised Business".
G. Franchise Owner understands and acknowledges the importance of
Franchisor's high and uniform standards of quality and service and the necessity
of operating the Franchised Business in conformity with Franchisor's standards
and specifications, including the Manual.
H. Franchise Owner acknowledges that it has received a copy of this
Agreement, and the related exhibits and agreements, at least five (5) business
days prior to the date on which this Agreement was executed by Franchise Owner.
Franchise Owner further acknowledges that it has received the disclosure
document required by the Trade Regulation Rule of the Federal Trade Commission,
entitled "Offering Circular for Prospective Franchise Owners," at least ten (10)
business days prior to the date on which this Agreement was executed.
NOW, THEREFORE, Franchisor and Franchise Owner, in consideration of the
undertakings and commitments of each party to the other party set forth herein
and the recitals set forth above, which are incorporated into and made a part
of this Agreement, mutually agree as follows:
1. GRANT
1.1 Grant of Franchise. Franchisor hereby grants to Franchise Owner, on
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the terms and conditions contained in this Agreement, the right and franchise,
and Franchise Owner undertakes the obligation, to operate the Franchised
Business and to use solely in connection with the Franchised Business the System
and the Proprietary Marks.
1.2 Deliveries on Grant. Contemporaneous with Franchise Owner delivering
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this executed Agreement to Franchisor, it shall also deliver to Franchisor the
following:
(a) A check in the amount specified in Section 5.1 hereof;
(b) A copy of the fronts and backs of its issued stock certificates,
the backs of which shall contain the following legend: "The transfer of this
stock is subject to the terms and conditions of a Franchise Agreement with
Option Care, Inc. dated _____________________, 1996";
(c) An executed "Site Selection Addendum; and
(d) A fully executed "Guarantee".
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2. TERRITORY
2.1 Territory Defined. Franchisor hereby grants to Franchise Owner the
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right to operate the Franchised Business during the term of this Agreement
within the defined area (the "Territory") described on attached Exhibit A, which
Exhibit is incorporated herein by reference thereto. Franchise Owner
acknowledges and agrees that this Agreement affords it no right, title or
interest in or to additional franchises or any right to acquire additional
franchises or territory, nor does it obligate Franchisor in any way to grant or
sell any additional franchises or territory to Franchise Owner.
2.2 Patient Freedom of Choice. Notwithstanding the grant of the Territory,
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Franchise Owner acknowledges and agrees that (i) patients residing within the
Territory are entitled to the freedom to choose their health care provider and
may seek health care services of the type provided by Franchise Owner from
others, including another franchise owner of Franchisor; and (ii) health care
referral sources may refer patients residing within the Territory to health care
providers of their choosing, including to another franchise owner of Franchisor.
2.3 Marketing Efforts in Territory. Franchise Owner agrees to devote its
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best efforts to serving patients that reside within the Territory. Except as
otherwise permitted herein or as approved in advance and in writing by
Franchisor, Franchise Owner's marketing and promotional activities shall be
directed only toward obtaining patients who reside within the Territory.
Franchise Owner acknowledges and agrees that Franchisor, as part of its business
strategy, may advertise or market on behalf of the System in the Territory and
may maintain itself, or through its affiliates, a presence in the Territory for
the purpose of providing a managed care program offering services of the type
provided by the Franchised Business. Franchise Owner agrees to abide by
Franchisor's then current policies on marketing outside of the Territory, and on
cooperating with neighboring Option Care franchisees, as the same may be set
forth from time to time in the Manual.
2.4 Presence in Territory. Franchise Owner shall maintain such manner and
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degree of presence in the Territory as from time to time required by the Manual.
Such presence requires Franchise Owner to maintain an I.V. pharmacy within the
Territory unless Franchise Owner has the prior written approval of Franchisor to
utilize the I.V. pharmacy services of another Option Care Franchise and utilize
such services on the basis approved by Franchisor. Even if Franchise Owner is
not required to itself maintain an I.V. pharmacy in the Territory, it must
maintain a physical presence in the Territory consistent with Franchisor's
requirements therefor as then set forth in the current Manual. The initial
pharmacy and/or office site must be selected by Franchise Owner and disclosed to
Franchisor at the time of filing the application for a franchise, but not later
than sixty (60) days after execution of the Franchise Agreement. A location
shall be selected by Franchise Owner in accordance with the then-current Site
Selection Addendum. The Franchise Owner's presence within the Territory shall
at all times comply with Franchisor's reasonable standards and conditions and
any relocations of a physical pharmacy or office or change in the manner or
degree of presence must be approved in advance in writing by Franchisor.
Franchise Owner shall not relocate any part of
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the Franchised Business without the prior written consent of Franchisor.
Franchise Owner agrees that disapproval of a location will not be unreasonable
if the proposed location does not meet Franchisor's reasonable standards,
including spacing between franchised offices.
2.5 Servicing Unowned Territory. Franchise Owner acknowledges that while
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it is granted the right hereunder only to the Territory, Franchise Owner may
provide goods and services to patients in unowned areas until such time as those
areas are granted by Franchisor to a party. Franchise Owner acknowledges and
agrees that it is obligated to pay royalties to Franchisor, in accordance with
Section 5 hereof, on all Gross Receipts (as hereafter defined), whether from
patients residing within or outside the Territory. Franchise Owner further
acknowledges and agrees that neither the ability to service nor the grant of our
permission to service patients residing outside the Territory affords it any
right, title or interest in or to such area whatsoever (including any right to
acquire such area or any right of first refusal as to such area).
3. TERM ; RENEWAL; CONSEQUENCES OF EXPIRATION (NON-RENEWAL)
3.1 Term. Unless sooner terminated as hereinafter provided, this Agreement
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shall expire twenty (20) years from the Effective Date of this Agreement. If
this Agreement reaches the end of its term and is not renewed, it will be said
to have "expired" and the "consequences of expiration" set forth at Section 3.3,
below, shall apply.
3.2 Renewal. If Franchise Owner, in Franchisor's sole interpretation,
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meets all of the requirements described in this Section 3.2, then Franchise
Owner shall have the right to extend the right to operate the Franchised
Business for one (1) consecutive additional period of ten (10) years. To
exercise the right to extend, Franchise Owner shall send to Franchisor, at least
one six (6) months, but not more than twelve (12) months, prior to the
expiration date of this Agreement a written notice of intention to extend. At
the time of the notice and at the time of the execution of the renewal franchise
agreement, Franchise Owner must satisfy the following conditions:
3.2.1 Franchise Owner shall not be in default of any provision of
this Agreement and shall have substantially complied with all the terms and
conditions of this Agreement, as amended, throughout its term;
3.2.2 Franchise Owner shall have satisfied all of its monetary
obligations to Franchisor and Franchisor's affiliates and shall have met those
obligations in a timely manner throughout the term of this Agreement;
3.2.3 Franchise Owner shall execute Franchisor's then-current form of
renewal franchise agreement for the renewal term, which franchise agreement may
have terms different from the terms of this Agreement, and such other ancillary
agreements as Franchisor may require for the Franchised Business. The Territory
described in this Agreement shall remain the same;
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3.2.4 Franchise Owner shall pay, in lieu of an initial fee, a renewal
fee not to exceed the conversion fee that would then be charged a conversion
candidate for this Territory;
3.2.5 Franchise Owner shall execute a general release, in a form
prescribed by Franchisor, of any and all claims against Franchisor and
Franchisor's affiliates, and their respective shareholders, partners, directors,
officers, employees and agents, in this capacity and in their individual
capacities, to the fullest extent permitted by law; and
3.2.6 Franchise Owner shall comply with Franchisor's then-current
qualification and training requirements.
3.3 Consequences of Expiration. If either Franchise Owner or Franchisor
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elects not to renew this Agreement, then, upon expiration of its term, all
rights granted Franchisor Owner by this Agreement shall terminate, and Franchise
Owner shall immediately:
3.3.1 Cease to operate the Franchised Business and not, directly or
indirectly, represent itself as a franchise owner of Franchisor;
3.3.2 Permanently cease to use, in any manner whatsoever, any
Confidential Information associated with the System, as well as the Proprietary
Marks and all signs, equipment, marketing materials, stationery, forms and other
items which display the Proprietary Marks;
3.3.3 Pay all liquidated or ascertainable sums owing from Franchise
Owner to Franchisor, without set-off or other reduction on account of
unliquidated claims, including, without limitation, any fees accruing after the
expiration of the term on Gross Receipts attributable to accounts receivable
from goods or services furnished during the term of this Agreement;
3.3.4 Deliver to Franchisor via U.P.S. or comparable carrier, via
first class service, the Manual, all patient file lists and business records
(other than prescriptions, patient records, tax returns and bank statements),
files and brochures, and any and all other materials relating to the operation
of the Franchised Business, all of which are acknowledged to be Franchisor's
property, and shall retain no copy or record of any of the foregoing, except
Franchise Owner's copy of this Agreement and any other agreements with
Franchisor or any affiliate, copies of any correspondence between the parties,
and any copies of other documents which Franchise Owner reasonably needs for
compliance with any provision of law; and
3.3.5 Comply with the applicable covenants contained in Section 9 of
this Agreement, which covenants shall survive the expiration of this Agreement.
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4. DUTIES OF FRANCHISOR
4.1 Provide the Manual. Franchisor shall provide to Franchise Owner one
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copy of the Manual for Franchise Owner's use during the term of this Agreement.
Franchisor shall also provide Franchise Owner with updates to the Manual. The
Manual, updates and all copies thereof shall be promptly returned to Franchisor
upon expiration or termination of this Agreement, unless this Agreement is
renewed. The Manual is proprietary to the Franchisor, and is provided for use
exclusively by Franchise Owner and its employees in the operation of the
Franchised Business and is subject to the provisions of Sections 8.1-8.5 below.
4.2 Policies and Procedures. Franchisor shall include within the Manual
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policies and procedures on Therapies and Services encompassed within the System.
Franchisor shall make available such clinical consultative support services for
the System as Franchisor deems appropriate.
4.3 Training Opportunities. Franchisor shall provide such training and
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educational opportunities including training on newly designated core and
permitted therapies, and initial franchise training as deemed necessary by
Franchisor.
4.4 Install Program. Franchisor shall provide to Franchise Owner guidance
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in, and a specific program for, the opening and start-up of the Franchised
Business (the "Install Program"), as currently described in the Manual.
4.5 Accreditation Assistance. Franchisor shall counsel and assist
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Franchise Owner in complying with the certification or accreditation or standard
requirements of those organizations whose accreditation is deemed necessary by
Franchisor to the operation of the Franchised Business.
4.6 Management Advice. Franchisor shall provide consultation and
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assistance to Franchise Owner on a continuing basis on such terms and conditions
as Franchisor deems advisable, concerning the management and operation of the
Franchised Business.
4.7 Referral Opportunity. Franchisor shall provide Franchise Owner with an
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opportunity to participate in such referral arrangements as are established by
Franchisor from time to time which are applicable to the Franchised Business.
4.8 Sales, Marketing Advice. Franchisor shall provide, on such terms and
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conditions as Franchisor deems advisable, advice and consultation to Franchise
Owner in the preparation of sales, marketing and promotional campaigns and
materials.
4.9 Group Purchasing Opportunity. Franchisor shall provide Franchise Owner
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with an opportunity to participate in such group purchasing plans as Franchisor
may provide from time to time.
5. FEES; ROYALTY; PAYMENT
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5.1 Initial Fee. Franchise Owner shall pay an initial fee of
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_____________________________________________________________________ Dollars ($
__________________) for the grant of this franchise. Upon execution of this
Agreement, Franchise Owner shall deliver the initial fee to Franchisor in cash
or other immediately available funds or, if permitted by Franchisor, execute and
deliver to Franchisor a promissory note in form and substance satisfactory to
Franchisor. The initial fee, whether financed or not, is fully earned by
Franchisor upon execution and delivery of this Agreement by Franchisor and is
not refundable under any circumstances.
5.2 Continuing Royalty. In addition to the initial fee, during the initial
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term of this Agreement, and for so long thereafter as Franchise Owner realizes
Gross Receipts (as defined in Section 5.7), Franchise Owner agrees to pay to
Franchisor a continuing monthly royalty fee (the "Continuing Monthly Royalty
Fee") in the amount equal to nine percent (9%) of the first $1,000,000 of Gross
Receipts during each calendar year, seven percent (7%) of the next $1,000,000 of
Gross Receipts during each calendar year, and five percent (5%) of all Gross
Receipts in excess of $2,000,000 during each calendar year. The dollar amounts
subject to the 9%, 7% and 5% royalty percentage rates ("Dollar Amounts") shall
be subject to annual revision as provided herein. On each January 1st, the
Dollar Amounts shall be multiplied by a fraction (the "Fraction") determined as
follows: The numerator shall be equal to the Consumer Price Index for all Urban
Consumers, Medical Care Component ("index"), published for the preceding October
by the United States Bureau of Labor Statistics. The denominator shall be the
index published for the month one (1) year prior to the month used in
calculating the numerator. The Dollar Amounts shall be replaced with the
product resulting from multiplying each Dollar Amount by such Fraction rounded
down to the nearest One Dollar ($1.00), but not less than the then-existing
Dollar Amounts. All royalty payments due Franchisor during the calendar year of
the adjustment shall be calculated based on the replacement Dollar Amounts. If
the index is changed such that the base year differs for the two months used in
determining the Fraction, the index shall be converted in accordance with the
conversion factor published by the United States Department of Labor, Bureau of
Labor Statistics. If the index is discontinued or revised during the term of
this Agreement, such other governmental index or computation with which it is
replaced shall be used to obtain substantially the same result as would be
obtained if the index had not been discontinued or revised.
5.3 Minimum Royalty. If the total of the Continuing Monthly Royalty Fees
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owed Franchisor for any period during the term of this Agreement is less than
the minimum royalty fee (the "Minimum Royalty Fee") applicable to that period,
Franchise Owner also agrees to pay to Franchisor the difference between the
Minimum Royalty Fee applicable to that period and the total Continuing Monthly
Royalty Fees owed for that period. The Minimum Royalty Fee is the following
amounts:
5.3.1 During the period commencing with the first full month
following Franchisor's execution of the Agreement and continuing through
December 31st of the second calendar year of this Agreement, the Minimum Royalty
Fee shall be Two Hundred Dollars ($200.00) per month. For example, if the
Agreement is signed by Franchisor on April 15,
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1996, then the $200.00 monthly Minimum Royalty Fee shall commence May 1, 1996
and continue through December 31, 1997;
5.3.2 For the third calendar year, the Minimum Royalty Fee shall be a
sum equal to the population of the Territory multiplied by three cents;
5.3.3 For the fourth calendar year, the Minimum Royalty Fee shall be
a sum equal to the population of the Territory multiplied by six cents;
5.3.4 For the fifth calendar year, the Minimum Royalty Fee shall be a
sum equal to the population of the Territory multiplied by nine cents; and
5.3.5 For the sixth and subsequent calendar years, the Minimum
Royalty Fee shall be a sum equal to the population of the Territory multiplied
by twelve cents.
5.3.6 For purposes of this Section 5.3 and Section 5.4, below,
"calendar year" means the period from January 1-December 31, and any partial
year. For example, if you sign this Agreement on March 1, 1996, the first
calendar ends December 31, 1996 and your second calendar year ends December 31,
1997.
5.3.7 For purposes of this Agreement, the population of the Territory
shall be _______________ persons.
5.4 National Fund Contribution. Subject to Section 10.3, below, Franchise
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Owner agrees to pay to Franchisor for the National Advertising and Educational
Fund (the "National Fund") a monthly contribution in the amount equal to one and
one-half percent (1.5%) of the Gross Receipts, but not more than a maximum
contribution of $10,000 per calendar year. The National Fund shall be
administered as provided in Section 10.3.
5.5 Due Date. The Continuing Monthly Royalty Fee and the National Fund
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contribution due Franchisor on Gross Receipts received in a particular month are
both due and payable on or before the fifteenth (15th) day of the following
month, or on such other day as Franchisor may reasonably specify. The Minimum
Royalty Fee during calendar years 1 and 2 shall be due and payable and on or
before the fifteenth (15th) day of the month. The Minimum Royalty Fee during
calendar year 3 and subsequent calendar years shall be due and payable on the
January 15th which next follows the close of that calendar year. Each payment
shall be accompanied by the reports or statements required by this Agreement or
otherwise reasonably required by Franchisor from time to time.
5.6 INTEREST. FRANCHISE OWNER AGREES TO PAY INTEREST TO FRANCHISOR (OR ITS
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DESIGNATED AFFILIATE) ON ALL PAYMENTS REQUIRED HEREUNDER THAT ARE OVERDUE.
INTEREST SHALL ACCRUE AT THE RATE OF TWO PERCENT (2%) PER MONTH OR AT THE
MAXIMUM RATE PERMITTED BY LAW, WHICHEVER IS LESS, STARTING THE DAY FOLLOWING THE
DUE DATE AND CONTINUING UNTIL THE OVERDUE AMOUNT IS PAID. ENTITLEMENT TO SUCH
INTEREST SHALL BE IN ADDITION TO ANY OTHER REMEDIES FRANCHISOR MAY HAVE.
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5.7 Gross Receipts Defined. As used in this Agreement, "Gross Receipts"
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shall include all amounts received by Franchise Owner in connection with the
operation of the Franchised Business other than amounts collected from
compounding services rendered for other franchise owners of Franchisor. "Gross
Receipts" includes, without limitation, amounts collected for Core Therapies and
Permitted Therapies, even if such Therapies are added to the System subsequent
to the execution of this Agreement. "Gross Receipts" also include, without
limitation, all amounts collected, regardless of whether the patient to whom
goods or services were provided resided within or outside of the Territory.
"Gross Receipts" shall also include, without limitation, all payments to
Franchise Owner under any business interruption insurance or similar insurance
policy, and income of every kind and nature related to the Franchised Business.
"Gross Receipts" shall not, however, include any taxes collected by Franchise
Owner for transmittal to appropriate taxing authorities.
6. DUTIES OF FRANCHISE OWNER
6.1 Preserve Integrity of System. Franchise Owner understands and
----------------------------
acknowledges that every detail of the Franchised Business is important to
Franchise Owner, Franchisor, and other franchise owners in order to maintain
high and uniform operating standards, to increase the demand for the services
offered as part of the System, and to protect the name, reputation and goodwill
of the System and Franchisor.
6.2 Commence and Operate Franchised Business. Franchise Owner agrees that
----------------------------------------
time is of the essence both as to its completion of the Install Program and its
commencement of operation of the Franchised Business. Franchise Owner shall
complete the "Foundation Phase" of the Install Program (as described in the
Manual) within four (4) months of signing an initial Franchise Agreement and
within two (2) months of signing a conversion or re-sale Franchise Agreement.
Franchise Owner shall complete the "Building for Success Phase" of the Install
Program (as described in the Manual) within six (6) months of signing an initial
Franchise Agreement and within three (3) months of signing a conversion or re-
sale Franchise Agreement. Franchise Owner acknowledges and agrees that it may
accept patients only after receiving a certificate of completion from Franchisor
stating that Franchise Owner successfully completed the Foundation Phase of the
Install Program and Franchisor's Operations Review (as described in the Manual).
Franchise Owner also agrees to operate the Franchised Business continuously
throughout the term of this Agreement.
6.3 Manager. Franchise Owner agrees, throughout the term of this
-------
Agreement, to designate and retain a full-time Manager for the Franchised
Business. The Manager shall be designated in writing to Franchisor and approved
by Franchisor, which approval will not be unreasonably withheld. Franchise
Owner agrees to ensure that the Manager devotes full time and effort to the
active management and operation of the Franchised Business, and the Manager
shall be granted and have full authority to act on behalf of Franchise Owner in
all dealings with Franchisor.
14
6.4 Personnel Trained. Franchise Owner acknowledges that properly trained
-----------------
personnel are essential to the maintenance of the highest degree of quality and
service and agrees to comply with Franchisor's reasonable training requirements.
Franchise Owner agrees that:
6.4.1 Franchise Owner, prior to commencing business under the System,
shall retain core service supervisory staff (manager, pharmacist, nurse, sales,
reimbursement) prior to completion of the Foundation Phase of the Install
Program. The core service supervisory staff then required by Franchisor shall
attend and complete, to Franchisor's reasonable satisfaction, the first
available basic franchise training program offered by Franchisor subsequent to
their hire date. The core supervisors of Franchise Owner shall assume
responsibility for training their respective staff members and future personnel
of the Franchise Owner; all training shall follow the then current guidelines of
Franchisor.
6.4.2 Personnel reasonably specified by Franchisor shall attend such
additional or supplemental training programs and seminars offered by Franchisor
as Franchisor may designate.
6.4.3 Franchise Owner agrees to be responsible for all costs and
expenses required for its personnel to attend both the basic franchise training
program and all other training programs and seminars. With the exception of the
basic franchise training program attended by Franchise Owner's initial
personnel, Franchisor may charge a fee for attending programs and seminars.
6.5 Provide Therapies. Franchise Owner shall provide all Therapies
-----------------
identified in the Manual as "Core Therapies". Franchise Owner may provide all
Therapies identified in the Manual as "Permitted Therapies". Franchise Owner
may also provide such other therapies as are approved in writing by Franchisor
from time to time, even if such therapies are not incorporated into the Manual.
6.6 Joint Commission on Accreditation of Health Care Organizations (JCAHO).
-------------------------------------------------------------- ------
Franchise Owner agrees to obtain, within such reasonable times as may be
specified by Franchisor, accreditation by those organizations specified by
Franchisor. Franchise Owner agrees to maintain required accreditation(s) during
the entire term of this Agreement. Franchise Owner must apply for and obtain
JCAHO accreditation at the earliest possible time. Time is of the essence. All
costs of obtaining and maintaining accreditation(s) shall be borne and paid by
Franchise Owner.
6.7 Provide Quality Service. Franchise Owner agrees at all times to insure
-----------------------
that the highest degree of quality and service is maintained.
6.7.1 To offer all Core Therapies and sell all types of supplies,
equipment and services related thereto; to refrain from any deviation from
Franchisor's then existing standards and specifications, as set forth in the
Manual, without Franchisor's prior written
15
consent; and to discontinue offering such therapies as Franchisor may disapprove
in writing at any time;
6.7.2 To operate the Franchised Business in strict conformity with
all lawful and reasonable methods, standards and specifications as Franchisor
may prescribe from time to time. In particular, Franchise Owner agrees to comply
with such policies and procedures as are reasonably specified by Franchisor in
the Manual from time to time for the compounding, delivery and administration of
pharmaceuticals, and for the teaching, monitoring and care of patients;
6.7.3 To maintain an inventory of (or demonstrate immediate access to
a compounding center approved by Franchisor) pharmaceuticals, supplies and
equipment adequate to fulfill the demand in the Territory for Core Therapies and
any other therapies provided by Franchise Owner; and
6.7.4 To purchase all pharmaceuticals, supplies, equipment and
services for use in the Franchised Business solely from suppliers who
demonstrate, to the continuing reasonable satisfaction of Franchisor, the
ability to meet Franchisor's then-current standards and specifications for such
items; who possess adequate quality controls; and who have been approved in
writing by Franchisor and not thereafter disapproved. If Franchise Owner desires
to purchase any pharmaceuticals, supplies, equipment or services from an
unapproved supplier, Franchise Owner shall submit to Franchisor a written
request for approval, or shall request the supplier itself to do so. Franchisor
shall have the right to require that Franchisor's representatives be permitted
to inspect the supplier's facilities, and that samples from the supplier (where
a good is at issue) be delivered for evaluation and testing either to Franchisor
or to an independent testing facility designated by Franchisor. A charge not to
exceed the reasonable cost of the evaluation and testing shall be paid by
Franchise Owner or the supplier. Franchisor reserves the right, at its option,
to re-inspect the facilities and pharmaceuticals, supplies, equipment or
services of any such approved supplier and to revoke its approval upon the
supplier's failure to continue to meet any of Franchisor's then-current
criteria.
6.8 Presence in Territory. Prior to commencing business under the System
---------------------
and during the entire term of this Agreement, Franchise Owner agrees to maintain
a presence in the Territory, at Franchise Owner's expense, in accordance with
Section 2.4 hereof and the then applicable provisions of the Manual.
6.9 Appropriate Personnel. Franchise Owner agrees to maintain a competent,
---------------------
conscientious, trained staff. Franchise Owner shall be solely responsible for
all employment decisions and functions. Franchise Owner shall employ and
maintain in full-time employment throughout the term of this Agreement such
number and types of pharmacists, nurses, reimbursement specialists, marketing
representatives and other employees as may be reasonably specified by
Franchisor. Franchise Owner agrees to require all employees to comply with all
federal, state and local laws that apply to the Franchised Business.
16
6.10 Hours of Operation. Franchise Owner agrees to provide 24-hour-per-day,
------------------
7-day-per-week patient care service availability. Franchise Owner agrees to
staff any office for such minimum hours per day and days per year as Franchisor
may then specify in the Manual.
6.11 Telephone. Franchise Owner agrees to maintain a telephone line and
---------
number which shall be used exclusively in the conduct of the Franchised
Business. Incoming calls on this line shall be answered by a reference to the
name "Option Care" only, unless Franchisor, in Franchisor's sole discretion,
approves otherwise in advance. This line shall be answered by an employee of
Franchise Owner, and not by an answering service, during such hours as
Franchisor may specify in the Manual.
6.12 Use of Proprietary Marks. Franchise Owner agrees to display the
------------------------
Proprietary Marks in the form and manner prescribed by Franchisor on all
business, promotional, sales and marketing materials of every kind and nature.
Franchise Owner agrees to disclose, in the manner specified by Franchisor, that
the Franchised Business is independently owned and operated by Franchise Owner
pursuant to a franchise from Franchisor.
6.13 Inspection and Audit Rights. Franchise Owner agrees to permit
---------------------------
Franchisor and its employees or agents to inspect the Franchised Business and
its books and records at any reasonable time during the term of this Agreement,
and for two (2) years following the expiration or termination of this Agreement.
Franchise Owner agrees to cooperate fully with Franchisor's representatives in
such inspections by rendering such assistance as they may reasonably request,
and, upon written notice from Franchisor or its employees or agents, and without
limiting Franchisor's other rights under this Agreement, shall immediately take
such steps as may be necessary to correct any deficiencies detected during such
inspections. Franchise Owner shall allow Franchisor to inspect and copy the
records, prescriptions and charts of Franchise Owner's patients. Franchise
Owner agrees to solicit the consent of its patients to Franchisor's inspection
and copying of their prescriptions and medical records.
6.14 Compliance with Laws. Franchise Owner agrees to comply with all
--------------------
applicable federal, state and local laws, rules and regulations. Franchise
Owner shall timely obtain, and keep or require to be kept in force at all times
during the term of this Agreement, all permits, certificates and licenses
necessary for the full and proper conduct of the Franchised Business, including,
without limitation, the necessary pharmacy permits, professional pharmacy and
nursing licenses, licenses to do business, fictitious name registrations and
sales tax permits. Franchise Owner shall, at Franchisor's request, provide
Franchisor with copies of any professional and other licenses and permits
required to conduct the Franchised Business.
6.15 Discoveries and Ideas. Franchise Owner agrees to disclose promptly to
---------------------
Franchisor all discoveries made or ideas conceived by Franchise Owner or a
person affiliated with Franchise Owner that pertain to the System. Franchise
Owner hereby grants to Franchisor all right, title and interest to such
discoveries and ideas, and agrees to cooperate with Franchisor in securing
Franchisor's rights to such discoveries and ideas. "Discoveries" and "ideas"
shall be interpreted broadly and shall not be limited to those discoveries or
ideas
17
which are potentially patentable or copyrightable. Franchisor shall not be
obligated to compensate Franchise Owner for any such discoveries or ideas.
6.16 Comply with Agreement. Franchise Owner agrees to comply with all other
---------------------
requirements set forth in this Agreement and with all agreements with Franchisor
and any affiliate of Franchisor.
6.17 Audit Rights, Etc. If Franchise Owner conducts business other then the
-----------------
Franchised Business, then Franchise Owner shall permit Franchisor to audit the
books pertaining to all business conducted by Franchise Owner. If Franchise
Owner is affiliated with another entity which possesses a pharmacy license and
Franchisee is unable to obtain a pharmacy license owing to such affiliation,
Franchise Owner shall enter into, and provide Franchisor with copies of, written
agreements, in a form approved by Franchisor, with the affiliated licensed
pharmacy to fill the prescriptions of Franchise Owner's patients.
6.18 Disclose Owners. Franchise Owner shall maintain a current list of all
---------------
of its general, managing, and limited partners and shareholders and owners in
addition to the profit interest of each such person, and shall furnish a copy of
these lists to Franchisor. Franchise Owner shall promptly furnish a revised
copy of these lists to Franchisor each time a change occurs to the information
on any list.
7. PROPRIETARY MARKS
7.1 Representations of Franchisor. Franchisor represents with respect to
-----------------------------
the Proprietary Marks that:
7.1.1 Franchisor is the owner of all rights, title and interest in
and to the Proprietary Marks in the United States; and
7.1.2 Franchisor has taken and will take steps reasonably necessary
to preserve and protect the ownership and validity of such Proprietary Marks in
the United States.
7.2 Franchise Owner's Use of Marks. With respect to Franchise Owner's
------------------------------
licensed use of the Proprietary Marks pursuant to this Agreement, Franchise
Owner agrees that:
7.2.1 Franchise Owner shall use only the xxxx "Option Care" and such
other Proprietary Marks as are designated from time to time in writing by
Franchisor for Franchise Owner's current use, and may use them only in the
manner authorized and permitted by Franchisor;
7.2.2 Franchise Owner shall use the Proprietary Marks only in
connection with the operation of the Franchised Business and only in the manner
specified by Franchisor. Unless otherwise approved by Franchisor, Franchise
Owner agrees to operate the Franchised
18
Business under the name "Option Care" with such prefix or suffix as may be
approved from time to time by Franchisor;
7.2.3 Franchise Owner's right to use the Proprietary Marks is limited
to such uses as are authorized under this Agreement, and any unauthorized use
thereof shall constitute an infringement of Franchisor's rights;
7.2.4 Franchise Owner shall not use the Proprietary Marks to incur
any obligation or indebtedness on behalf of Franchisor;
7.2.5 Franchise Owner shall not use the Proprietary Marks as part of
its corporate or other legal name;
7.2.6 Franchise Owner shall file and maintain requisite fictitious or
assumed name registrations as required by laws applicable to the location of the
Territory;
7.2.7 Except as provided in Section 7.2.6, Franchise Owner agrees to
execute any documents deemed necessary by Franchisor to obtain protection for
the Proprietary Marks or to maintain their continued validity and
enforceability. Franchise Owner shall not register the Proprietary Marks at the
state, federal or international level; and
7.2.8 In the event that litigation involving the Proprietary Marks is
instituted or threatened against Franchise Owner, Franchise Owner agrees to
promptly notify Franchisor and to cooperate fully with Franchisor in defending
or settling such litigation.
7.3 Acknowledgement of Franchisor's Rights in Marks. Franchise Owner
-----------------------------------------------
expressly understands and acknowledges that:
7.3.1 Franchisor is the owner of all right, title and interest in and
to the Proprietary Marks and the goodwill associated with and symbolized by
them;
7.3.2 The Proprietary Marks are valid and serve to identify the
System and those who are franchised under the System;
7.3.3 Franchise Owner shall not directly or indirectly contest the
validity or the ownership of the Proprietary Marks;
7.3.4 Franchise Owner's use of the Proprietary Marks pursuant to this
Agreement does not give Franchise Owner any ownership interest or any other
interest in or to the Proprietary Marks, except the franchise granted herein;
7.3.5 Any and all goodwill arising from Franchise Owner's use of the
Proprietary Marks and the System shall inure solely and exclusively to
Franchisor's benefit, and upon termination of this Agreement and the franchise
herein granted, no monetary amount
19
shall be assigned as attributable to any goodwill associated with Franchise
Owner's use of the Proprietary Marks or the System;
7.3.6 The right and license of the Proprietary Marks granted to
Franchise Owner is nonexclusive, and Franchisor thus has and retains the rights,
among others:
7.3.6.1 To use the Proprietary Marks itself in connection
with selling products and services;
7.3.6.2 To grant other licenses for the Proprietary Marks, in
addition to those licenses already granted to existing franchise owners;
7.3.6.3 To develop and establish other systems using the same
or similar Proprietary Marks, or any other proprietary marks, and to grant
licenses or franchises thereto without providing any rights therein to Franchise
Owner; and
7.3.7 Franchisor reserves the right to substitute different
Proprietary Marks for use in identifying the System and the businesses operating
under the System if Franchisor, in its sole discretion, determines that
substitution of different Proprietary Marks will be necessary or beneficial to
the System.
8. CONFIDENTIAL FRANCHISE OPERATIONS MANUAL
8.1 In General. In order to protect the reputation and goodwill of
----------
Franchisor and to maintain operating standards under the System and the
Proprietary Marks, Franchise Owner shall conduct the Franchised Business in
accordance with the terms of this Agreement and in compliance with the
provisions of the Manual, as updated from time to time (which may consist of
more than one volume, and which may include information provided by means of
audio, video, computer or other media). Franchise Owner acknowledges having
received one copy of the Manual on loan from Franchisor for so long as this
Agreement shall remain in effect.
8.2 Manual Confidential. Franchise Owner agrees to at all times treat the
-------------------
Manual and the information contained therein as confidential, and agrees to use
all reasonable efforts to maintain such information as secret and confidential.
Franchise Owner agrees not to copy, duplicate, record or otherwise reproduce the
foregoing materials, in whole or in part, nor otherwise make the same available
to any unauthorized person, except as such sharing may be permitted by the
Manual.
8.3 Property of Franchisor. The Manual, written directives, other manuals
----------------------
and any other confidential communications provided or approved by Franchisor,
and any copies thereof, shall at all times remain the sole property of
Franchisor, shall at all times be kept in a secure and convenient place and
shall be returned to Franchisor immediately upon termination of this Agreement.
20
8.4 Revisions of Manual. Franchisor, at its discretion, may alter, modify
-------------------
or supplement the Manual from time to time. Changes to and additions of
Therapies and policies of an accreditation body shall be effective immediately
upon notification to Franchise Owner of the change or addition.
Notwithstanding the foregoing, other changes to the Manual shall be effective
ten (10) days following notification of the change to Franchise Owner. Any
change which results in adding a Core Therapy, while effective immediately upon
notice, need not be implemented as a Core Therapy until thirty (30) days
following notice of such change to Franchise Owner. Franchise Owner expressly
agrees to comply with each new or changed provision, standard, policy or
procedure. Revisions to the Manual shall not unreasonably affect Franchise
Owner's obligations, including economic requirements, under this Agreement.
8.5 Obligation to Maintain Manual. Franchise Owner shall at all times
-----------------------------
ensure that its copy of the Manual is kept current and up-to-date. In the event
of any dispute as to the contents of the Manual, the terms of the master copy of
the Manual maintained by Franchisor at Franchisor's home office shall be
controlling. All costs to bring an outdated copy of Franchise Owner's Manual up
to date shall be borne by Franchise Owner.
9. CONFIDENTIAL INFORMATION
9.1 Obligation of Confidentiality. Franchise Owner shall not, during the
-----------------------------
term of this Agreement or thereafter, communicate, divulge or use for the
benefit of any other person, partnership, association or corporation any
proprietary information, trade secrets, knowledge, techniques or know-how
concerning the methods of operation of the Franchised Business which may be
communicated to Franchise Owner or of which Franchise Owner may be apprised by
virtue of Franchise Owner's operation of the Franchised Business, including all
information conceived, originated, discovered or developed by Franchisor,
Franchise Owner or any other franchise owner which pertains to the Franchised
Business (the "Confidential Information"). Franchise Owner shall divulge the
Confidential Information only to such of its employees and contractors as must
have access to it in order to operate the Franchised Business. Any and all
information, knowledge, know-how and techniques which Franchisor designates as
confidential shall be deemed Confidential Information for purposes of this
Agreement, except information which Franchise Owner can demonstrate came to its
attention prior to disclosure thereof by Franchisor; or which, at or after the
time of disclosure by Franchisor to Franchise Owner, had become or later becomes
a part of the public domain, through lawful publication or communication by
others.
9.2 Employees Bound to Confidentiality. All employees and contractors
----------------------------------
having access to any Confidential Information from Franchisor shall execute such
covenants as Franchisor may require covenanting that they will maintain the
confidentiality of information they receive in connection with their association
with Franchise Owner. Such covenants shall be in a form satisfactory to
Franchisor, including, for example, specific identification of Franchisor as a
third party beneficiary of such covenants. The original of each executed
covenant shall be sent promptly to Franchisor.
21
9.3 Irreparable Injury. Franchise Owner acknowledges that any failure to
------------------
comply with the requirements of this Section 9 will cause Franchisor irreparable
injury, and Franchise Owner agrees to pay all court costs and reasonable
attorneys' fees incurred by Franchisor in obtaining specific performance of, or
an injunction against violation of, the requirements of this Section 9.
10. MARKETING AND PROMOTION; NATIONAL FUND
Recognizing the value of marketing and promotion and the importance of the
standardization of marketing programs to the furtherance of the System, the
parties agree as follows:
10.1 Comply with Marketing Policies. Franchise Owner agrees to comply with
------------------------------
all reasonable marketing and promotion policies and procedures prescribed by
Franchisor. Such policies and procedures may include opening and ongoing
marketing and promotional campaigns; a direct mail campaign directed to a list
representative of Franchise Owner's local referral sources; and advertising
programs or campaigns in which Franchise Owner's participation shall be deemed
necessary by Franchisor.
10.2 Submit Marketing Plans. Franchise Owner agrees to submit to
----------------------
Franchisor, through the mail, return receipt requested, for its prior approval
(except with respect to prices to be charged), samples of all marketing and
promotional plans and materials that Franchise Owner desires to use and which
have not been prepared or previously approved by Franchisor within the prior
twelve month period. If written disapproval thereof is not received by
Franchise Owner from Franchisor within fifteen (15) days of receipt by
Franchisor of such samples or materials, Franchisor shall be deemed to have
given the required approval. Franchisor reserves the right to communicate, in
whole or in part, marketing and promotional plans and materials which it
receives from the Franchise Owner to other franchise owners for their use, or to
use the same in any marketing and promotion by Franchisor.
10.3 National Fund. Franchise Owner's monthly contribution to the National
-------------
Fund may be increased to exceed one and one-half percent (1.5%) of Gross
Receipts, and/or the maximum annual contribution may exceed $10,000, if two-
thirds (2/3) of all franchise owners who are obligated to contribute to the
National Fund vote for an increase in the contribution to the National Fund. In
connection with any vote to increase contributions to the National Fund,
Franchise Owner shall have one vote for each franchise agreement under which
Franchise Owner is required to become a member of the National Fund. The
National Fund shall be maintained and administered by Franchisor or its
designee, as follows:
10.3.1 The National Fund, all contributions thereto, and any earnings
thereon shall be used exclusively to meet any and all costs of preparing,
offering, distributing, obtaining, conducting and administering marketing, and
educational activities, and providing training opportunities for Option Care
franchisees;
22
10.3.2 Franchisor shall direct all activities of the National Fund
with sole discretion over the concepts, materials, and media used and the
placement and allocation thereof. Franchise Owner agrees and acknowledges that
Franchisor undertakes no obligation in administering the National Fund to make
expenditures for Franchise Owner which are equivalent or proportionate to
Franchise Owner's contribution or to insure that any particular franchise owner
benefits directly or pro rata from expenditures by the National Fund;
10.3.3 Franchise Owner agrees to contribute to the National Fund by
separate check made payable to the National Fund. All sums paid by Franchise
Owner to the National Fund shall be maintained in an account separate from the
other monies of Franchisor and shall not be used to defray any of Franchisor's
expenses, except for such reasonable administrative costs and overhead, if any,
as Franchisor may incur in activities reasonably related to the conduct of
activities under and maintenance and administration of the National Fund. The
National Fund and its earnings shall not otherwise inure to the benefit of
Franchisor. Franchisor shall maintain separate bookkeeping accounts for the
National Fund, which shall not be an asset of Franchisor. A statement of the
operations of the National Fund as shown on the books of the National Fund shall
be prepared annually and shall be made available to Franchise Owner;
10.3.4 It is intended that contributions to, and earnings of, the
National Fund shall not be taxable income to Franchisor. Toward this end, it is
anticipated that all contributions to and earnings of the National Fund will be
expended for marketing, educational training and promotional purposes during the
taxable year of receipt. If, however, excess amounts remain in the National
Fund at the end of a taxable year, all expenditures in the following taxable
year(s) shall be made first out of accumulated earnings from previous years,
next out of earnings in the current year and finally from contributions; and
10.3.5 Although the National Fund is intended to be of perpetual
duration, Franchisor maintains the right to terminate the National Fund. The
National Fund shall not be terminated, however, until all monies in the National
Fund have been expended in accordance with the provisions of this Section 5.4
or returned to contributors on the basis of their respective contributions.
11. ACCOUNTING AND RECORDS
11.1 Preserve Records. Franchise Owner shall preserve, for at least five
----------------
(5) years from the dates of their preparation, full, complete and accurate
books, records and accounts for the Franchised Business in accordance with
generally accepted accounting principles and in the form and manner prescribed
by Franchisor from time to time in the Manual or otherwise in writing.
11.2 Provide Financial Statements. Franchise Owner shall, at its expense,
----------------------------
provide to Franchisor financial statements, including a balance sheet and income
statement, accompanied by a review report prepared by an independent certified
public accountant in a form satisfactory to Franchisor, within ninety (90) days
after the end of each fiscal year of the
23
Franchised Business, showing the results of operations of the Franchised
Business during the fiscal year.
11.3 Provide Other Business Records. Franchise Owner shall also submit to
------------------------------
Franchisor, for review or auditing, such other forms, reports, records,
information and data as Franchisor may reasonably designate, including but not
limited to income tax returns, in the form and manner, and at the times and
places, as are reasonably specified by Franchisor.
11.4 Right to Inspect Business Records. Franchisor or its designated agents
---------------------------------
shall have the right at all reasonable times to inspect, audit and copy, at
Franchisor's expense, without notice, Franchise Owner's books, business tax
returns and other business records for the Franchised Business. Franchisor
shall also have the right, at any time, to have an independent audit made of the
books and records of the Franchised Business. If an inspection or audit should
reveal that any Gross Receipts have been understated in any report to
Franchisor, then Franchise Owner shall immediately pay to Franchisor, upon
demand, all royalties due on the amount understated, in addition to interest
from the date such royalties were due until paid, at the rate which is two
percent (2%) per month or the maximum rate permitted by law, whichever is less.
If an inspection or audit discloses an understatement of five percent (5%) or
more in any report of Gross Receipts, Franchise Owner shall, in addition,
reimburse Franchisor for any and all costs and expenses connected with the
inspection or audit (including, without limitation, travel, lodging and wage
expenses and reasonable accounting and legal costs). The foregoing remedies
shall be in addition to any other remedies Franchisor may have.
12. INSURANCE
12.1 Procure and Maintain Insurance. Franchise Owner agrees to procure,
------------------------------
prior to the commencement of business, and maintain in full force and effect
during the term of this Agreement, at Franchise Owner's expense, an insurance
policy or policies protecting Franchise Owner and Franchisor, and each of their
respective shareholders, partners, directors, employees and agents against any
loss, liability, personal injury, death, property damage or expense whatsoever
arising or occurring in connection with the establishment or operation of the
Franchised Business. All insurance required by this Agreement, with the
exception of worker's compensation insurance, shall name Franchisor as an
additional insured and shall expressly provide that any interests it may have in
the policies shall not be affected by any breach by Franchise Owner of any
policy provisions.
12.2 Types of Insurance. Each insurance policy shall be written by an
------------------
insurance company satisfactory to Franchisor in accordance with standards and
specifications prescribed by Franchisor from time to time, and shall include at
a minimum the following:
12.2.1 Comprehensive general liability insurance, expressly including
coverage for contractual liability; broad form property damage;
product/completed operations liability; and automobile liability and personal
injury coverage in the amount of One Million Dollars
24
($1,000,000) per person, per occurrence and Three Million Dollars ($3,000,000)
in the aggregate;
12.2.2 Professional liability insurance in the amount of Three Million
Dollars ($3,000,000) in the aggregate, with a minimum limit of One Million
Dollars ($1,000,000) per occurrence. Coverage shall be on an occurrence basis,
and not on a claims made basis, unless otherwise approved in advance and in
writing by Franchisor;
12.2.3 Worker's compensation and employer's liability insurance, as
well as such other insurance, as may be required by statute or rule of the state
in which the Franchised Business is operated;
12.2.4 Such other policies or additional amounts of insurance as may
be required under the terms of any lease or sublease applicable to any office
maintained by the Franchised Business; and
12.2.5 Franchise Owner agrees that Franchisor may, upon adequate
notice, and for its reasonable business purposes, from time-to-time specify
additional types of coverage and higher policy limits than as described in this
Section 12.2.
12.3 No Limitation. Franchise Owner's obligations to obtain and maintain
-------------
the required policy or policies in the amounts specified shall not be limited in
any way by reason of any insurance which may be maintained by Franchisor, nor
shall Franchise Owner's performance of that obligation relieve it of liability
under the indemnity provisions set forth in Section 20 of this Agreement.
12.4 Evidence of Insurance. At least thirty (30) days prior to the time any
---------------------
insurance is first required to be carried by Franchise Owner, and thereafter
upon renewal or replacement of any such policy, Franchise Owner shall deliver to
Franchisor Certificates of Insurance evidencing the proper coverage with limits
not less than those required by this Agreement. All Certificates shall expressly
provide that no less than thirty (30) days' prior written notice shall be given
to Franchisor in the event of material alteration to, or cancellation or lapse
of, the coverages evidenced by such Certificates.
12.5 Franchisor's Right to Procure. Should Franchise Owner, for any reason,
-----------------------------
fail to procure or maintain the insurance required by this Agreement, Franchisor
shall have the right and authority (without, however, any obligation to do so)
to immediately procure such insurance and to charge the same to Franchise Owner.
The foregoing remedies shall be in addition to any other remedies Franchisor may
have.
12.6 Waiver of Subrogation. To the maximum extent permitted by insurance
---------------------
policies which may be owned by Franchisor and Franchise Owner, Franchise Owner
and Franchisor, for the benefit of each other, waive any and all rights of
subrogation which might otherwise exist.
25
13. TRANSFER OF INTEREST
13.1 Transfer by Franchise Owner.
---------------------------
13.1.1 Franchise Owner understands and acknowledges that the rights
and duties set forth in this Agreement are personal to Franchise Owner, and that
Franchisor has granted this franchise in reliance on Franchise Owner's business
skill, financial capacity, personal character and professional reputation.
Accordingly:
13.1.1.1 Neither Franchise Owner nor any individual,
partnership, corporation or other legal entity which directly or indirectly owns
any interest in this Franchise (as defined below) shall sell, assign, transfer,
convey, give away, pledge, mortgage or otherwise encumber (all of which shall be
referred to as a "Transfer" for purposes of this Section only) any direct or
indirect interest in Franchise Owner, this Agreement, the Franchised Business or
all or a substantial portion of the stock or assets of the Franchise Owner or
the Franchised Business, including any portion of the Territory (all of which
shall be referred to as the "Franchise" for purposes of this Section 13 only)
without the prior written consent of Franchisor;
13.1.1.2 Franchisor's prior written consent shall not be
required for a transfer of less than a five percent interest in a publicly-held
corporation; and
13.1.1.3 Any purported assignment or transfer, by operation of
law or otherwise, not having the prior written consent of Franchisor shall be
null and void and shall constitute a material breach of this Agreement, for
which Franchisor may terminate without opportunity to cure pursuant to Section
14.1.6 of this Agreement;
13.1.2 Franchisor shall not unreasonably withhold its consent to a
Transfer of an interest in the Franchise, provided that Franchisor may require
any or all of the following of the Franchise Owner and its beneficial owners
(collectively referred to as "Transferor" for purposes of this Section) and the
transferee and its beneficial owners (collectively referred to as "Transferee"
for purposes of this Section) as conditions of its approval:
13.1.2.1 Each Transferee shall execute the form of personal
guarantee attached to this Agreement;
13.1.2.2 All of Transferor's accrued monetary obligations and
other outstanding obligations to Franchisor and its affiliates shall have been
satisfied;
13.1.2.3 Transferor is not in default of any provision of this
Agreement, any amendment to this Agreement, or any other agreement between
Transferor and Franchisor or its affiliates;
13.1.2.4 Transferor shall have executed a general release in a
form satisfactory to Franchisor of any and all claims against Franchisor and its
affiliates and
26
their respective shareholders, partners, directors, officers, employees and
agents, in their corporate and individual capacities, to the fullest extent
permitted by law;
13.1.2.5 Each Transferee shall enter into a written assignment
in a form satisfactory to Franchisor, assuming and agreeing to discharge all of
Franchise Owner's obligations under this Agreement;
13.1.2.6 Each Transferee shall demonstrate to Franchisor's
satisfaction that such Transferee meets Franchisor's professional, educational,
managerial, financial and business standards, and possesses a good moral
character;
13.1.2.7 Any person who is to be substituted as Manager of the
Franchised Business shall have been approved by Franchisor and, unless waived in
writing by Franchisor, shall successfully complete the next available franchise
training and complete the Install Program training course then in effect;
13.1.2.8 Transferor shall pay to Franchisor a non-refundable
transfer fee to cover Franchisor's legal, accounting, record keeping and other
costs related to the Transfer in an amount not to exceed fifty percent (50%) of
the initial fee that then would be charged to new franchise owners under the
System for a comparable territory;
13.1.2.9 Transferor shall agree to remain liable for all of
the obligations to Franchisor in connection with the Franchised Business prior
to the effective date of the Transfer;
13.1.2.10 In the event that the proposed Transfer is to a
corporation formed by Franchise Owner for the convenience of ownership,
Transferor shall be the owner of all the voting stock of the corporation; and
13.1.2.11 In the event a Transfer, alone or together with other
Transfers, would have the effect of transferring a controlling interest in the
Franchise, the Transferee shall execute, for a term ending on the expiration
date of this Agreement, the standard form of franchise agreement then offered to
new franchise owners, which franchise agreement may have terms different from
the terms of this Agreement; provided, however, in lieu of any initial fee, the
Transferor shall pay the transfer fee described in Section 13.1.2.8 above, and
the royalty fee, the National Fund contribution limitation, and the Territory
shall remain the same. The Transferee shall also execute such other ancillary
agreements as Franchisor may require for the Franchised Business.
13.2 Offerings by Franchise Owner. Securities or partnership interests in
----------------------------
Franchise Owner may be sold, by public or private offering or otherwise, only
with the prior written consent of Franchisor (whether or not Franchisor's
consent is required under Section 13.1 hereof), which consent shall not be
unreasonably withheld. All materials required for such offering by federal or
state law shall be
27
submitted to Franchisor for review prior to being filed with any government
agency; and any materials to be used in any exempt offering shall be submitted
to Franchisor for review prior to their use. Franchise Owner shall provide all
such materials to Franchisor at least thirty (30) days prior to the commencement
of any offering. No Franchise Owner offering shall imply (by use of the
Proprietary Marks or otherwise) that Franchisor is participating as an
underwriter, issuer or offeror of securities; and Franchisor's review of any
offering shall be limited solely to the subject of the relationship between
Franchise Owner and Franchisor. Franchise Owner and the other participants in
the offering must fully indemnify Franchisor in connection with the offering.
For each proposed offering, Franchise Owner shall pay to Franchisor a non-
refundable fee, not to exceed fifty percent (50%) of the initial fee that then
would be charged to new franchise owners under the System for a comparable
territory, to reimburse Franchisor for its reasonable costs and expenses
associated with reviewing the proposed offering.
13.3 Right of First Refusal.
----------------------
13.3.1 Any party holding any interest in the Franchise who desires to
accept any offer from a third party to purchase such interest shall notify
Franchisor in writing of the offer, and shall provide such information and
documentation relating to the offer as Franchisor may require.
13.3.2 Except for a Transfer among the original owners who were
granted the franchise hereunder or a Transfer from an original owner to that
owner's spouse or child(ren), Franchisor shall have the right and option,
exercisable within sixty (60) days after receipt of written notification and
receipt of any required information or documentation, to send written notice to
the seller that Franchisor intends to purchase the seller's interest on the same
terms and conditions contained in a bona fide offer from the third party, or the
---- ----
cash equivalent. In the event that Franchisor elects to purchase the seller's
interest, closing on such purchase must occur within sixty (60) days from the
date of notice to the seller of the election to purchase by Franchisor. In the
event that Franchisor does not elect to purchase the sellers' interest, closing
on such purchase shall occur within ninety (90) days after the expiration of
Franchisor's right to purchase. Failure to close the sale within said period or
any material change in the terms of the offer prior to closing shall constitute
a new offer subject to the same rights of first refusal by Franchisor described
in this Section 13.3.
13.3.3 Failure of Franchisor to exercise the option afforded by this
Section 13.3 shall not constitute a waiver of any other provision of this
Agreement, including all the requirements of this Section 13, with respect to a
proposed Transfer.
13.4 Transfer Upon Death or Mental Incapacity. Upon the death or finding
----------------------------------------
by a court of mental incapacity of any person with an interest in the Franchise,
the executor, administrator or personal representative of such person shall
transfer within six (6) months after such death or mental incapacity the
deceased or incompetent owner's interest to a third party approved by
Franchisor. Such transfers, including transfers by devise or inheritance, shall
be subject to the same conditions as any Transfer. However, in the case of
transfer by devise or inheritance, if the heirs or beneficiaries of any such
person are not approved by Franchisor, the personal representative of the
deceased shall have a reasonable time to dispose
28
of the deceased's interest, which disposition shall be subject to all the terms
and conditions for Transfers contained in this Agreement. If the interest is not
disposed of within six (6) months, Franchisor may terminate this Agreement.
13.5 Non-Waiver of Claims. Franchisor's consent to a Transfer shall not
--------------------
constitute a waiver of any claims it may have against the Transferor, nor shall
it be deemed a waiver of Franchisor's right to demand exact compliance with any
of the terms of this Agreement by the Transferee.
13.6 Transfer by Franchisor. Franchisor shall have the right to transfer
----------------------
or assign all or any part of its rights or obligations herein to any person or
legal entity.
14. DEFAULT AND TERMINATION
14.1 Termination by Franchisor With Notice But Without Opportunity to Cure.
---------------------------------------------------------------------
Franchisor may, without providing an opportunity to cure, terminate this
Agreement by giving written notice to Franchise Owner stating the reasons for
and effective date of termination if:
14.1.1 Franchise Owner abandons the Franchised Business or otherwise
forfeits the right to transact business in the Territory. However, if such
abandonment results from the governmental exercise of the power of eminent
domain or is due to fire, flood, earthquake or other similar cause beyond
Franchise Owner's control, then in such event this Agreement shall not be
terminated for that reason for sixty (60) days thereafter, provided Franchise
Owner recommences operation of the Franchised Business within that time;
14.1.2 Franchise Owner engages in a pattern of material, willful and
repeated deception of patients concerning the source, nature or quality of
products sold or services rendered;
14.1.3 Franchise Owner fails to comply with the ethical standards
established in the state(s) where the professional services of the Franchised
Business are performed. Franchise Owner shall be deemed to have failed to comply
with those ethical standards whenever a state agency regulating the practice of
pharmacy or nursing initially determines that actions of Franchise Owner merit
the suspension or revocation of Franchise Owner's pharmacy permit or any nursing
license Franchise Owner may have obtained;
14.1.4 Franchise Owner fails, for a period of ten (10) days after
notification of noncompliance from any applicable agency, to comply with any
federal, state or local law applicable to the operation of the Franchised
Business;
29
14.1.5 Franchise Owner is convicted of a felony or any other criminal
misconduct which is relevant to the operation of the Franchised Business or is
disbarred or suspended from participation in the Medicare or any Medicaid
programs;
14.1.6 Franchise Owner, or any partner or shareholder in Franchise
Owner, purports to transfer any rights or obligations under this Agreement to
any third party without Franchisor's prior written consent, contrary to the
terms of Section 13;
14.1.7 Franchise Owner fails to permit Franchisor or Franchisor's
agents or representatives to inspect the Franchised Business or the books or
records associated with the Franchised Business, at such times and places as
provided for under this Agreement;
14.1.8 Franchise Owner misuses or makes any unauthorized use of the
Proprietary Marks or other identifying characteristics of the System, or
otherwise materially impairs the goodwill associated with the System or
Franchisor's rights therein;
14.1.9 Franchise Owner knowingly maintains false books or records or
submits any false reports to Franchisor;
14.1.10 Franchise Owner is repeatedly or habitually in default under
Section 14.1 or in material default pursuant to any other agreement with
Franchisor or any affiliate of Franchisor, or, after curing any default
following notice pursuant to Section 14.3, commits the same default, whether or
not cured after notice;
14.1.11 Franchise Owner fails to comply with the in-term covenants in
Section 16 or fails to obtain execution of the covenants required under Section
9 or Section 16;
14.1.12 Franchise Owner discloses or divulges the contents of the
Manual or other Confidential Information contrary to the terms of this
Agreement;
14.1.13 Franchise Owner or any beneficial owner makes a material
misrepresentation or omits to disclose material information to Franchisor in
connection with the application to Franchisor for this Franchise Agreement;
14.1.14 Franchisor determines that continued operation of the
Franchised Business poses a material threat to public health or safety; or
14.1.15 The Franchised Business fails to obtain or maintain any
required accreditation.
14.2 Termination by Franchisor Without Notice or Opportunity to Cure.
---------------------------------------------------------------
Should any of the following events occur, Franchise Owner shall be deemed to be
in default under this Agreement, and this Agreement shall automatically
terminate without notice to Franchise Owner:
30
14.2.1 Franchise Owner becomes insolvent, makes an assignment for the
benefit of its creditors of all or any part of the assets used in the Franchised
Business, or a petition of bankruptcy is filed by Franchise Owner or such a
petition is filed against and not opposed by Franchise Owner;
14.2.2 Franchise Owner is adjudicated a bankrupt or insolvent;
14.2.3 A xxxx in equity or other proceeding or the appointment of a
receiver of Franchise Owner or other custodian for Franchise Owner's business or
assets is filed and consented to by Franchise Owner, or a receiver or other
custodian (permanent or temporary) of Franchise Owner's business or assets, or
any part thereof, is appointed by any court of competent jurisdiction;
14.2.4 Proceedings for a composition with creditors under any state or
federal law is initiated by or against Franchise Owner;
14.2.5 A final judgment against Franchise Owner remains unsatisfied or
of record for thirty (30) days or longer (unless a supersedeas bond is filed),
execution is levied against Franchise Owner's business or assets, a suit to
foreclose any lien or mortgage against Franchise Owner is filed and not
dismissed within thirty (30) days, or the real or personal property of Franchise
Owner is sold after levy thereupon by any sheriff, marshal or constable; or
14.2.6 Franchise Owner is dissolved and if such dissolution is by
reason of failure to file a franchise tax return with the state, the corporation
is not re-instated in good standing within thirty (30) days following
dissolution.
14.3 Termination by Franchisor With Notice and Opportunity to Cure. Except
-------------------------------------------------------------
as provided in Section 14.1 and 14.2 of this Agreement, Franchisor may terminate
this Agreement only by giving written notice of termination to Franchise Owner
stating the nature of the default or breach at least thirty (30) days prior to
the effective date of termination or such longer period as applicable law may
require (the "Cure Period"); provided, however, that Franchise Owner may avoid
termination by immediately initiating a remedy to cure such default or breach
and curing it to Franchisor's satisfaction within the Cure Period. If any such
default is not cured within the Cure Period, this Agreement shall terminate
without further notice to Franchise Owner effective immediately upon the
expiration of the Cure Period.
15. OBLIGATIONS UPON TERMINATION
15.1 Post-Termination Obligations of Franchise Owner. Except as otherwise
-----------------------------------------------
provided in this Section 15, upon termination of this Agreement all rights
granted hereunder to Franchise Owner by this Agreement are terminated, and
Franchise Owner shall immediately:
15.1.1 Cease to operate the Franchised Business and not, directly or
indirectly, represent itself as a franchise owner of Franchisor;
31
15.1.2 Permanently cease to use, in any manner whatsoever, any
Confidential Information associated with the System, and the Proprietary Marks
and all signs, equipment, marketing materials, stationery, forms and other items
which display the Proprietary Marks;
15.1.3 Cease utilizing, directly or indirectly, Franchise Owner's
telephone numbers, and complete all paperwork necessary to transfer immediately
Franchise Owner's telephone numbers to the party Franchisor designates
(Franchise Owner acknowledges and agrees that no additional consideration is due
Franchise Owner for this transfer);
15.1.4 Pay all liquidated or ascertainable sums owing from Franchise
Owner to Franchisor, without set-off or other reduction on account of
unliquidated claims, together with any fees accruing after the termination or
expiration on Gross Receipts attributable to accounts receivable from goods or
services furnished during the term of this Agreement;
15.1.5 Pay to Franchisor all damages, costs and expenses, including
reasonable attorneys' fees, incurred by Franchisor as a result of the
termination of this Agreement, including those incurred in obtaining injunctive
or other relief for the enforcement of any provisions of this Agreement, which
obligation shall give rise to and remain, until paid in full, a lien in favor of
Franchisor against any and all of the personal property, trade furnishings,
equipment, signs, fixtures and inventory owned by Franchise Owner and used in
connection with the Franchised Business;
15.1.6 Deliver to Franchisor via U.P.S. or comparable carrier, via
first class service, the Manual, all business records (other than
prescriptions, patient records, tax returns and bank statements), files, and
brochures, and any and all other materials relating to the operation of the
Franchised Business, all of which are acknowledged to be Franchisor's property,
and shall retain no copy or record of any of the foregoing, except Franchise
Owner's copy of this Agreement and any other agreements with Franchisor or any
affiliate, copies of any correspondence between the parties, and any copies of
other documents which Franchise Owner reasonably needs for compliance with any
provision of law;
15.1.7 Comply with the applicable covenants contained in Sections 9
and 16 of this Agreement, which covenants shall survive the termination of this
Agreement;
15.1.8 Offer Franchisor the first right of refusal to assume Franchise
Owner's existing lease for the premises of the Franchised Business; and
15.1.9 Offer Franchisor the first right of refusal to purchase
Franchise Owner's equipment, supplies, signs and marketing material used in
operation of the Franchised Business, on the terms described in Section 15.2,
hereof.
15.2 Post-Termination Right of Franchisor. Upon termination of this
------------------------------------
Agreement, Franchisor shall have the right (but not the duty) to assume
Franchise Owner's occupancy rights under any existing lease for any premises of
the Franchised Business. Franchisor also shall have the right (but not the
duty) to purchase any or all equipment, supplies, signs and
32
marketing materials used in operation of the Franchised Business, in addition to
any items bearing Franchisor's Proprietary Marks and Franchise Owner's Medicare
Part B Provider Number (collectively, the "Assets"). Franchisor may exercise
this right to purchase by giving notice of intent to do so within thirty (30)
days after termination of this Agreement. Franchisor shall pay Franchise Owner
the lower of Franchise Owner's cost or fair market value of the Assets. If the
parties cannot agree on fair market value of the Assets within a reasonable
time, an independent appraiser shall be designated by Franchisor and its
determination shall be binding.
16. COVENANTS
16.1 Confidentiality Covenant. Franchise Owner and, if Franchise Owner is a
------------------------
corporation, partnership or limited liability company, its shareholders,
partners or owners, as the case may be (collectively, the "Owners"), each
specifically acknowledge that Franchise Owner and its Owners will receive
valuable specialized training and Confidential Information by entering into this
Agreement. Franchise Owner and each of its Owners covenant that during the term
of this Agreement, except as otherwise approved in advance and in writing by
Franchisor, neither Franchise Owner nor any of its Owners shall, either directly
or indirectly, for itself, or through, on behalf of, or in conjunction with any
person, persons or legal entity, own, maintain, operate, engage in, be employed
by or have any interest in any business which provides health-care services
similar to, or the same as, those provided by Franchise Owner pursuant to this
Agreement.
16.2 Non-Competition Restriction. Franchise Owner and each of its Owners
---------------------------
covenant that, except as otherwise approved in advance and in writing by
Franchisor, neither Franchise Owner nor any of its Owners shall, for a
continuous uninterrupted period commencing upon the termination (but not the
expiration) of this Agreement (or if the termination of this Agreement is
contested by Franchise Owner or an Owner, upon the final resolution of any
dispute concerning the termination of this Agreement) regardless of the cause
for termination and continuing for two (2) years thereafter, either directly or
indirectly, for itself, or through, on behalf of, or in conjunction with any
person, persons or legal entity:
16.2.1 Own, maintain, operate, engage in, be employed by or have any
interest in any business which provides within the Territory health-care
services similar to, or the same as, those Franchise Owner could provide
pursuant to this Agreement;
16.2.2 Seek or accept referrals for the provision of health-care
services similar to, or the same as, those provided by Franchise Owner pursuant
to this Agreement from any referral source which referred patients to Franchise
Owner for goods or services of the Franchised Business at any time during the
two (2) years prior to the termination of this Agreement; or
16.2.3 Provide health-care services similar to, or the same as, those
provided by Franchise Owner pursuant to this Agreement to any patient to whom
Franchise Owner provided any health-care services under this Agreement at any
time during the two (2) years
33
prior to the termination of this Agreement, provided, however, that Franchise
Owner shall be obligated to provide all current patients with notice to seek
alternate arrangements and shall assume that arrangements have been made for the
provision of such services.
16.3 Exceptions from Non-Competition Restrictions. Notwithstanding the
--------------------------------------------
foregoing, Section 16.2 shall not prohibit an Owner who is a licensed pharmacist
or nurse from: (a) engaging in activities which are unrelated to Therapies
provided under the System; (b) having an interest in any business (e.g., a
retail pharmacy, home health agency or durable medical equipment business) which
does not compound or dispense pharmaceuticals, or sell, rent or lease equipment,
associated with the Therapies provided under the System; or (c) being employed
in an acute-care facility solely to provide products or services to in-patients
of that facility. Section 16.2 also shall not apply to ownership by Franchise
Owner or any Owner of less than one percent (1%) beneficial interest in the
outstanding equity securities of any publicly-held corporation. Section 16.2
also shall not prohibit any person from owning an interest in other Option Care
franchises, or from being employed by any Option Care franchises.
16.4 Enforcement of Covenants. Franchise Owner and its Owners expressly
------------------------
agree that the existence of any claims they may have against Franchisor, whether
or not arising from this Agreement, shall not constitute a defense to the
enforcement by Franchisor of the covenants in this Section 16. Franchise Owner
and its Owners jointly and severally agree to pay all costs and expenses
(including reasonable attorneys' fees) incurred by Franchisor in connection with
the enforcement of this Section 16.
16.5 Irreparable Injury. Franchise Owner and its Owners acknowledge that
------------------
Franchise Owner's violation of the terms of this Section 16 would result in
irreparable injury to Franchisor for which no adequate remedy at law may be
available, and Franchise Owner and its Owners accordingly agree that Franchisor
may seek an injunction prohibiting any conduct by Franchise Owner and its Owners
in violation of the terms of this Section 16.
16.6 Employee Covenants. At Franchisor's request, Franchise Owner agrees to
------------------
obtain execution of covenants similar to those set forth in this Section 16,
including covenants that are operative upon the termination of a person's
relationship with Franchise Owner, from supervisory personnel, officers and
directors, and other persons reasonably determined by Franchisor to be in a
position to use information gained from their association with Franchise Owner
to compete with the Franchise Owner and the System. Every covenant required by
this Section 16.6 shall be in a form satisfactory to Franchisor, including,
without limitation, specific identification of Franchisor as a third party
beneficiary of such covenants with the independent right to enforce them.
17. CORPORATE AND PARTNERSHIP FRANCHISE OWNERS
34
17.1 Evidence of Legal Entity. If Franchise Owner is a corporation, limited
------------------------
liability company or a partnership, Franchise Owner agrees that the entity will
confine its activities to the operation of the Franchised Business throughout
the term of this Agreement. Franchise Owner agrees to have a written
partnership agreement, unit ownership agreement or buy-sell agreement in effect
during the entire term of this Agreement. Franchise Owner agrees to provide to
Franchisor information about Franchise Owner's organization and management,
including copies of documents, as may be reasonably specified by Franchisor from
time-to-time. The requested information may include the following items as
applicable:
17.1.1 Copies of Franchise Owner's Articles of Incorporation or
Partnership Agreement, or Unit Ownership Agreement, Bylaws, and any other
governing documents, and any amendments to any of these documents.
17.1.2 A current list of the name and title of each officer and
director or managing partner, and a list of each owner of record or beneficial
owner of Franchise Owner showing the number of shares of each class of stock in
Franchise Owner owned by each shareholder, or the capital and profit interests
of each partner. Franchise Owner also agrees to furnish a revised copy of these
lists to Franchisor each time a change occurs to the information.
17.1.3 Franchise Owner shall maintain stop transfer instructions
against the transfer on its records of any equity securities. If Franchise
Owner is a corporation, Franchise Owner shall legibly and conspicuously maintain
on the face of all the securities the following legend:
The transfer of this stock is subject to the terms and conditions of a
Franchise Agreement with Option Care, Inc. dated _________19_____.
17.1.4 If Franchise Owner is a partnership, or limited liability
company, the Partnership Agreement or Unit Ownership Agreement (as the case may
be) shall contain a reference to the terms and conditions of this Agreement.
18. TAXES AND INDEBTEDNESS
18.1 Franchise Owner agrees to promptly pay when due all taxes, accounts and
other indebtedness of every kind levied or assessed against, or incurred by,
Franchise Owner. Franchise Owner agrees to pay to Franchisor an amount equal to
any sales, gross receipts or similar tax (other than income tax) imposed on
Franchisor with respect to any payments to Franchisor required under this
Agreement, unless the tax is credited against income tax otherwise payable by
Franchisor.
18.2 In the event of any bona fide dispute as to Franchise Owner's liability
for taxes, accounts, or other indebtedness, Franchise Owner may contest the
validity or the amount of the tax, account or indebtedness in accordance with
procedures of the taxing authority or
35
applicable law; however, in no event shall Franchise Owner permit a tax sale or
seizure by levy of execution or similar writ or warrant, or attachment by a
creditor, to occur against the Franchised Business, any office, any improvements
to any office, or any other asset of Franchise Owner.
18.3 Franchise Owner shall notify Franchisor in writing within five (5) days
of the commencement of any action, suit or proceeding, and of the issuance of
any order, writ, injunction, award or decree of any court, agency or other
governmental instrumentality, which may adversely affect the operation or
financial condition of the Franchised Business.
19. INDEPENDENT CONTRACTOR; AUTHORITY
It is understood and agreed by the parties hereto that this Agreement does
not create a fiduciary relationship between them; that Franchise Owner shall be
an independent contractor and shall hold itself out to the public as an
independent contractor including in such manner as Franchisor may reasonably
specify; and that nothing in this Agreement is intended to constitute either
party an agent, legal representative, subsidiary, joint venturer, partner,
employee or servant of the other for any purpose whatsoever.
It is understood and agreed that nothing in this Agreement authorizes
Franchise Owner to make any contract, agreement, warranty or representation on
Franchisor's behalf, or to incur any debt or other obligation in Franchisor's
name, and that Franchisor shall in no event assume liability for, or be deemed
liable under this Agreement as a result of, any such action or by reason of any
act or omission of Franchise Owner in its conduct of the Franchised Business, or
any claim or judgment arising therefrom against Franchisor.
20. INDEMNIFICATION
20.1 Franchise Owner assumes sole responsibility for losses arising out of
the operation of the Franchised Business, and the acts or omissions of Franchise
Owner and its agents, servants and contractors. Franchise Owner shall
indemnify, defend and hold Franchisor and its shareholders, partners, directors,
officers, employees and agents harmless against and to reimburse them for all
losses arising out of or in any way connected with the operation of the
Franchised Business or the acts or omissions of Franchise Owner or its agents,
servants or contractors. These indemnities shall continue in full force and
effect subsequent to and notwithstanding the expiration or termination of this
Agreement. "Losses", as used in this Section 20.1, shall include all
liabilities, penalties, costs, losses, damages, expenses, causes of action,
claims or judgments, including reasonable attorneys' fees and costs.
20.2 Under no circumstances shall any person entitled to indemnity under
this Agreement be required or obligated to seek recovery from third parties or
otherwise mitigate their losses in order to maintain a claim against the
indemnifying party, nor shall a failure to seek such recovery or mitigate losses
in any way reduce the amounts recoverable from the indemnifying party.
36
21. APPROVALS AND WAIVERS
Whenever this Agreement requires the prior approval or consent of
Franchisor, Franchise Owner shall make a timely written request to Franchisor,
and such approval or consent shall be obtained in writing signed by the
President or any Vice President of Franchisor. No other communication from any
officer, employee or agent of Franchisor, whether oral or in writing, shall
constitute a valid approval or consent of Franchisor pursuant to this Section
21.
Franchisor makes no warranties or guarantees upon which Franchise Owner may
rely, and assumes no liability or obligation to Franchise Owner, by providing
any waiver, approval, consent or suggestion to Franchise Owner in connection
with this Agreement, or by reason of any neglect, delay, or denial of any
request therefor.
No delay, waiver, omission or forbearance on the part of Franchisor to
exercise any right, option, duty or power arising out of any breach or default
by Franchise Owner under any of the terms, provisions, covenants or conditions
hereof, shall constitute a waiver by Franchisor to enforce any such right,
option, duty or power as against Franchise Owner, or as to any subsequent breach
or default by Franchise Owner.
22. NOTICES
Any and all notices required or permitted under this Agreement shall be in
writing and shall be personally delivered or mailed by certified mail, return
receipt requested, postage prepaid, to the respective parties at the following
addresses unless and until a different address has been designated by written
notice duly given in accordance with this section to the other party:
Notices to Franchisor: General Counsel
Option Care, Inc.
000 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxxx, XX 00000
Notices to Franchise Owner: Manager
X. Xxxxxx Xxxxxx, Jr.
000 Xxxx Xxxxx Xxxxxx, Xxx 000
Xxxxxxx, XX 00000
Notices Post-Termination to ________________________________________
Franchise Owner: ________________________________________
37
________________________________________
Any notice by certified mail shall be deemed to have been given at the earlier
of (i) three (3) days after the date and time of mailing, or (ii) the date and
time of actual receipt.
23. ENTIRE AGREEMENT
This Agreement and the Exhibits attached hereto constitute the entire, full
and complete Agreement between Franchisor and Franchise Owner concerning the
subject matter hereof, and supersede all prior agreements, no other
representations having induced Franchise Owner to execute this Agreement. No
representations, inducements, promises or agreements, oral or otherwise, not
embodied herein or attached hereto (unless of subsequent date) were made by
either party, and none shall be of any force or effect with reference to this
Agreement or otherwise, except for purposes of Section 14.1.13. Franchisor is
nonetheless permitted, in its sole discretion, to reduce the scope of any
covenant or portion thereof set forth in Section 16, without Franchise Owner's
consent, effective immediately upon receipt by Franchise Owner of written
notice, and Franchise Owner agrees that it shall comply with the modified
covenant which shall be fully enforceable. Except for those permitted to be
made by Franchisor hereunder, no amendment, change, or variance from this
Agreement shall be binding on either party unless mutually agreed to by the
parties and executed by their authorized officers or agents in writing.
24. SEVERABILITY AND CONSTRUCTION
Except as expressly provided to the contrary in this Agreement, nothing in
this Agreement is intended, nor shall be deemed, to confer any rights or
remedies under or by reason of this Agreement upon any person or legal entity
other than Franchise Owner, Franchisor, Franchisor's officers, directors and
employees, and such of Franchise Owner's and Franchisor's respective successors
and assigns as may be contemplated and permitted by Section 13 hereof.
Franchise Owner agrees that each promise or covenant of this Agreement that
may result from striking any portion or portions which a court may hold to be
unreasonable and unenforceable in a final decision to which Franchisor is a
party, or from reducing the scope of any promise or covenant to the extent
required to comply with such a court order, is separately enforceable to the
maximum extent permitted by law.
All captions in this Agreement are intended solely for the convenience of
the parties, and none shall be deemed to affect the meaning or construction of
any provision hereof.
All references herein to the masculine, neuter, singular or plural shall be
construed to include the masculine, feminine, neuter, singular or plural, where
applicable; and all acknowledgments, promises, covenants, agreements and
obligations herein made or undertaken
38
by Franchise Owner shall be deemed jointly and severally undertaken by all those
executing this Agreement on behalf of Franchise Owner.
This Agreement may be executed in several counterparts and each copy so
executed shall be deemed one and the same document.
25. APPLICABLE LAW
This Agreement takes effect upon its acceptance and execution by Franchisor
in Illinois, and shall be interpreted and construed under the laws of Illinois,
which laws shall prevail in the event of any conflict of law; provided, however,
that if any of the provisions of this Agreement would not be enforceable under
the laws of Illinois, then such provisions shall be interpreted and construed
under the laws of the state in which the Franchised Business is located.
The parties agree that any action brought by either party against the other
in any court, whether federal or state, shall be brought within the State of
Illinois in the Xxxx County judicial district and do hereby waive all questions
of personal jurisdiction or venue for the purpose of carrying out this
provision.
No right or remedy conferred upon or reserved to Franchisor or
Franchise Owner by this Agreement is intended to be, nor shall be deemed,
exclusive of any other right or remedy herein or permitted by law or equity, but
each shall be cumulative of every other right or remedy.
Nothing herein contained shall bar Franchisor's right to obtain
injunctive relief against threatened conduct that will cause it loss or damages,
under the usual equity rules, including the applicable rules for obtaining
restraining orders and preliminary injunctions.
26. ACKNOWLEDGMENTS
Franchise Owner acknowledges that it has conducted an independent
investigation of the Franchised Business, and recognizes that the business
venture contemplated by this Agreement involves business risks and that the
success of the Franchised Business will be largely dependent upon the ability of
Franchise Owner as an independent businessperson. Franchisor expressly disclaims
the making of, and Franchise Owner acknowledges that it has not received, any
warranty or guarantee, express or implied, as to the potential volume, profits
or success of the business venture contemplated by this Agreement.
Franchise Owner acknowledges that it has received, read and understood
this Agreement, including all related exhibits and agreements, and that
Franchisor has accorded Franchise Owner ample time and opportunity to consult
with advisors of its own choosing about the potential benefits and risks of
entering into this Agreement.
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Franchise Owner acknowledges that this Agreement shall not become
effective until signed by Franchisor's President or any Vice President of
Franchisor.
IN WITNESS WHEREOF, each party hereto has signed and delivered or has
caused its duly authorized representative to sign and deliver this Agreement on
the date first above written.
FRANCHISOR:
OWNERS OPTION CARE, INC.,
(as to Section 16 only) a California corporation
/s/ Xxxxxx Xxxxxx, Xx. Date: 12-20-96
------------------------------- ----------------------------
X. Xxxxxx Xxxxxx, Jr. By: /s/ Xxxxx Bellhumeur
------------------------------- ------------------------------
Print Name
Name: Xxxxx Xxxxxxxxxxx
_______________________________ ----------------------------
Title: Secretary
_______________________________ ---------------------------
FRANCHISE OWNER:
OPTION CARE CAMILLA, INC.,
a Georgia corporation
_______________________________
Print Name
Date: 12/31/96
----------------------------
By: /s/ Xxxxxx Xxxxxx
------------------------------
Name: Xxxxxx Xxxxxx
----------------------------
Title: President
---------------------------
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GUARANTEE
As an inducement to Option Care, Inc. ("Franchisor") to execute the
Franchise Agreement dated ______12-31_______________, 1996 including any
amendments thereto whenever made (the "Agreement"), the undersigned, jointly and
severally, hereby agree to be individually bound by all the terms and conditions
of the Agreement, copies of which the undersigned acknowledge reading. The
undersigned, jointly and severally, also hereby unconditionally guarantee to
Franchisor and its successors and assigns that all of Franchise Owner's
obligations under the Agreement will be punctually paid and performed.
Upon default by Franchise Owner or notice from Franchisor, the undersigned
will immediately make each payment and perform each obligation required of
Franchise Owner under this Agreement. Without affecting the obligations of the
undersigned under this Guarantee, Franchisor may without notice to the
undersigned extend, modify, or release any indebtedness or obligation of
Franchise Owner, or settle, adjust or compromise any claims against Franchise
Owner. The undersigned waive notice of demand for payment or performance by
Franchise Owner.
Upon the death of an individual guarantor, the estate of such guarantor will
be bound by this Guarantee but only for defaults and obligations hereunder
existing at the time of transfer of the interest of the individual guarantor as
required by the Agreement and the obligations of the other guarantors will
continue in full force and effect.
IN WITNESS WHEREOF, each of the undersigned has signed this Guarantee as of
the date of the above Agreement.
GUARANTOR(S)
/S/ XXXXXX XXXXXX
----------------------------------
X. Xxxxxx Xxxxxx, Jr.
__________________________________
__________________________________
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ADDENDUM TO
OPTION CARE, INC.
FRANCHISE AGREEMENT
This Addendum ("Addendum") is made and entered into this 31st day of
December, 1996, by and between Option Care, Inc., a California corporation
("Franchisor"), and Option Care Camilla, Inc., a Georgia corporation ("Franchise
Owner").
RECITALS
A. Of even date herewith, Franchisor and Franchise Owner entered into a
Franchise Agreement for the operation of an Option Care franchised business (the
"Franchised Business").
B. Franchisor and Franchise Owner desire to amend the Franchise Agreement
as set forth herein.
NOW, THEREFORE, Franchisor and Franchise Owner, in consideration of the
undertakings and commitments of each party to the other party set forth herein,
agree as follows:
1. DISCOUNT ON ROYALTIES
Until the termination of this Addendum, Sections 5.2 and 5.3 of the
Franchise Agreement shall be deleted in their entirety and replaced by the
following provisions:
"5.2. Commencing upon execution of the Franchise Agreement, and for
so long thereafter as Franchise Owner realizes Gross Receipts (as defined in
Section 5.7), Franchise Owner agrees to pay to Franchisor a continuing monthly
royalty fee (the "Continuing Monthly Royalty Fee") as follows:
5.2.1 The Continuing Monthly Royalty Fee shall be in an amount equal
to nine percent (9%) of Gross Receipts during each calendar year; provided,
--------
however, that but the Continuing Monthly Royalty Fee together with the National
-------
Fund Payment under Section 5.4 shall, in the aggregate, not exceed One Hundred
Thousand Dollars ($100,000) in any given year."
"5.3. There shall be no minimum annual royalty fee owed by Franchise Owner
to Franchisor during the term of this Addendum."
2. TERMINATION OF THE FRANCHISE AGREEMENT BY THE FRANCHISE OWNER
The following Section 14.4 shall be added to the Franchise Agreement:
"14.4 Termination by Franchise Owner.
------------------------------
42
14.4.1 Franchise Owner may not terminate this Agreement within the
first five (5) years of the Franchise Agreement.
14.4.2 Following the first five (5) years of the Franchise
Agreement, the Franchise Owner may buy out the Franchise Agreement for a sum
equal to the dollar amount of Franchise Owner's last full calendar year's
Continuing Monthly Royalty Fee, determined in accordance with Section 5.2 of the
Franchise Agreement multiplied by the number of years left on the term of the
Franchise Agreement, which sum shall be adjusted for net present value."
3. TERM AND TERMINATION OF THIS ADDENDUM
This Addendum shall become effective on the Effective Date of the Franchise
Agreement and shall continue, unless terminated earlier, until the expiration
date of the Franchise Agreement. This Addendum shall earlier terminate upon the
occurrence of any of the following:
3.1. The termination of the Franchise Agreement.
3.2. Any transfer described in Section 13 of the Franchise Agreement which,
alone or together with other previous, simultaneous or proposed transfers, would
have the effect of transferring a controlling interest in Franchise Owner, the
Franchise Agreement, the Franchised Business or all or a substantial portion of
the assets of the Franchise Owner or the Franchised Business.
Upon termination or expiration of this Addendum, Sections 5.2 and 5.3 of the
Franchise Agreement, as originally stated in the Franchise Agreement, shall
become applicable for so long as the Franchise Agreement remains in full force
and effect.
4. USE OF OPTION CARE NAME
Notwithstanding the provisions of the Franchise Agreement to the contrary,
the Franchise Owner may utilize "Option Care Camilla, Inc." as its corporate
name.
5. REMAINDER OF FRANCHISE AGREEMENT
Except as expressly provided for herein, all of the terms and conditions of
the Franchise Agreement shall remain in full force and effect.
6. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
IN WITNESS WHEREOF, each party hereto has caused its duly authorized
representative to duly execute and deliver this Addendum on the date first above
written.
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FRANCHISE OWNER: FRANCHISOR:
OPTION CARE CAMILLA, INC. OPTION CARE, INC.
By: /s/ Xxxxxx Xxxxxx By: /s/ Xxxxx Xxxxxxxxxxx
---------------------------------- -------------------------------
Name: Xxxxxx Xxxxxx Name: XXXXX XXXXXXXXXXX
-------------------------------- -----------------------------
Title: President Title: Vice President
------------------------------- ----------------------------
Date: 12/31/96 Date: 12/20/96
-------------------------------- -----------------------------
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