EXHIBIT 10.68
AMENDED AND RESTATED
MASTER FRANCHISE AGREEMENT
BETWEEN
INTEGRATED HEALTH SERVICES FRANCHISING CO., INC.
AND
LYRIC HEALTH CARE LLC
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DATED AS OF DECEMBER 31, 1998
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TABLE OF CONTENTS
ARTICLES
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ARTICLE 1. Definitions
ARTICLE 2. Grant and Acceptance of Franchise
ARTICLE 3. [Intentionally Omitted]
ARTICLE 4. Term
ARTICLE 5. Annual Continuing Fees
ARTICLE 6. Proprietary Materials; Trade Names; IHS Systems
ARTICLE 7. Preferred Provider Status
ARTICLE 8. "800" Telephone Number
ARTICLE 9. Enhancement of the IHS Systems
ARTICLE 10. Other Business
ARTICLE 11. [Intentionally Omitted]
ARTICLE 12. Statements, Records and Fee Payments
ARTICLE 13. Additional Covenants of Lyric
ARTICLE 14. Franchisor Not to Compete
ARTICLE 15. Negative Covenants of Lyric
ARTICLE 16. Transfer and Assignment
ARTICLE 17. Rights of Aggrieved Party upon Default
ARTICLE 18. [Intentionally Omitted]
ARTICLE 19. Indemnification and Independent Contractor
ARTICLE 20. Written Approvals, Waivers and Amendment
ARTICLE 21. Enforcement
ARTICLE 22. Entire Agreement
ARTICLE 23. Notices
ARTICLE 24. Governing Law and Dispute Resolution
ARTICLE 25. Severability, Construction and Other Matters
ARTICLE 26. Post Term Obligations
ARTICLE 27. Taxes, Permits and Indebtedness
ARTICLE 28. Acknowledgments
ARTICLE 29. Guaranty of Franchisee Obligations
EXHIBITS
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EXHIBIT 1 - Facility Franchise Agreement
EXHIBIT 2 - List of Facilities
EXHIBIT 3 - [Intentionally Omitted]
EXHIBIT 4 - List of Individual Franchisee Names, Names of Businesses, and
Territories
EXHIBIT 5 - Guidelines for Determining Territories
AMENDED AND RESTATED
MASTER FRANCHISE AGREEMENT
THIS AMENDED AND RESTATED MASTER FRANCHISE AGREEMENT (this "Agreement") is
made and entered into as of December 31, 1998, between INTEGRATED HEALTH
SERVICES FRANCHISING CO., INC. ("Franchisor"), a Delaware corporation, with its
principal office at 00000 Xxx Xxx Xxxxxxxxx, Xxxxxx Xxxxx, Xxxxxxxx 00000 and
LYRIC HEALTH CARE LLC ("Lyric"), a Delaware limited liability company, with its
principal office at 0000 Xxxxxxx Xxx Xxxxxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxx
00000.
INTRODUCTORY STATEMENT
Integrated Health Services, Inc. ("IHS") developed valuable "Trade Names"
and "Proprietary Materials" (including the "IHS Systems"), all as defined below,
relating to businesses which IHS operates and services which IHS provides. These
have substantial value and materially enhance and facilitate IHS's business and
operations. Lyric and its subsidiaries desire to obtain the benefit of the
Proprietary Materials and the Trade Names, and Franchisor, on behalf of IHS, is
willing to grant a franchise for such purpose, subject to the terms and
conditions set forth below. Neither IHS nor Franchisor has previously franchised
to others the use of such Trade Names and Proprietary Materials, except to Lyric
pursuant to a Master Franchise Agreement, dated as of January 13, 1998, as
amended by the First Amendment to Master Franchise Agreement, dated as of March
31, 1998 and by the Second Amendment to Master Franchise Agreement, dated as of
December 3, 1998 (the "Prior Franchise Agreement"), between Franchisor and
Lyric.
Franchisor and Lyric now wish to amend and restate the Prior Master
Franchise Agreement pursuant to the terms and conditions of this Agreement.
An affiliate of Franchisor (the "Manager") has entered into agreements (the
"Management Agreements") to manage the health care facilities which the
Franchisees (defined below) lease or own. The Manager will be responsible, to
the extent specified in the Management Agreements, for assisting the respective
Franchisees to comply with their obligations under this Agreement.
ARTICLE 1. DEFINITIONS
1.1 The following words and phrases have the following meanings in this
Agreement:
"Affiliate" means any person, corporation or other entity, which, directly
or indirectly, controls, is controlled by, or is under common control with,
another person, corporation, or other entity.
"Business Day" means any day other than Saturday, Sunday or any other day
on which banking institutions in the State of Maryland are authorized by law or
executive action to close.
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"Control" means the power, directly or indirectly, to direct or cause the
direction of the management and policies of a corporation or other entity.
"EBITDA" means earnings before interest, taxes, depreciation, and
amortization of Lyric on a consolidated basis as shown on Lyric's monthly
financial statements regularly prepared by Lyric.
"Facility" means a facility owned or leased by Lyric or a Franchisee in
which any Health Care Business is conducted.
"Facility Franchise Agreement" means the facility franchise agreement
between Franchisor and a Franchisee in the form attached as Exhibit 1 hereto.
"Franchisee" means, as of any particular date, any entity designated as
such pursuant to a Facility Franchise Agreement.
"GAAP" means United States generally accepted accounting principles
consistently applied.
"Gross Revenues" means, for any period, all revenues and income of any kind
derived directly or indirectly by the entity specified during such period
(including rental or other payment from concessionaires, licensees, tenants, and
other users of such entity's facilities and from the sale of products and/or the
furnishing of services, including all revenues or receipts derived from or
associated with the Proprietary Materials (but excluding therefrom all bequests,
gifts, or similar donations), whether on a cash basis or on credit, paid or
unpaid, collected or uncollected, as determined in accordance with GAAP,
excluding, however:
(a) federal, state, and municipal excise, sales, and use taxes
collected directly from patients as a part of the sales prices of any goods
or services;
(b) proceeds of any life insurance policies;
(c) gains or losses arising from the sale or other disposition of
capital assets;
(d) any reversal or accrual of any contingency or tax reserve;
(e) interest earned on sinking funds, Special Security Accounts, bonds
funds, etc. originally and specifically formed as a requirement of any bond
issue (if any) utilized to finance the Facility; and
(f) bad debt expense.
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The proceeds of business interruption insurance or proceeds as a result of
Medicare and Medicaid audits shall be included in Gross Revenues. However, funds
required to be repaid as a result of Medicare and Medicaid audits shall be
deducted from Gross Revenues.
"Health Care Business" means any business now or in the future operated by
IHS, Franchisor, Lyric, or any Franchisee involving the provision of health care
services of any and every kind.
"IHS Systems" means the systems, protocols, procedures, software, contracts
and contract forms and documentation, manuals, guides, instructions, forms,
employee benefit plans and programs, used and developed by IHS previously, now,
and in the future for the treatment, servicing, and processing of patients,
customers, and/or clients for the financial, administrative, human resources,
procurement, management, and other operations of IHS's businesses and
activities.
"Lease" means any net lease of a Facility.
"Lessor" means each lessor or lessors from time to time under a Lease.
"Lyric's Business" means and includes the business of Lyric and all Lyric
Franchisees on a consolidated basis.
"Operating Agreement" means the Amended and Restated Operating Agreement of
Lyric, as amended or restated from time to time.
"Proprietary Materials" means Trade Names; trademarks; service marks;
copyrighted materials and copyrightable materials; software, manuals, protocols,
procedures, systems, documentation, methods, contracts and contract forms and
documents; trade dress; uniforms; and other materials for treatment, servicing,
and processing of patients, customers, and/or clients and for the financial,
administrative, procurement, human resources, quality control, management, and
operations of the Health Care Business (including the IHS Systems).
"Territory" means each territory within which Lyric and the Franchisees may
operate a Health Care Business. The Territories of the Franchisees are described
in the Facility Franchise Agreements. Lyric's Territory is the aggregate of the
Territories of the Franchisees (as such Territories change from time to time) as
such Territories are defined in the respective Facility Franchise Agreements.
"Trade Names" means "Integrated Health Services," "IHS" and every other
name or description previously, now, or in the future used in, or associated
with the Health Care Business, including any and all "doing-business-as" names
or trade names.
1.2 Wherever used in this Agreement:
(a) the words "include" or "including" shall be construed as
incorporating, also, "but not limited to" or "without limitation";
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(b) the word "day" means a calendar day unless otherwise specified;
(c) the word "party" means each and every person or entity whose
signature is set forth at the end of this Agreement;
(d) the word "law" (or "laws") means any law, rule, regulation, order,
statute, ordinary, resolution, regulation, order, statute, ordinance,
resolution, regulation, code, decree, judgment, injunction, mandate or
other legally binding requirement of a government entity;
(e) each reference to a Facility (or any part or component thereof)
shall be deemed to include "and/or any portion thereof";
(f) the word "notice" shall mean notice in writing (whether or not
specifically so stated);
(g) "month" means a calendar month unless otherwise specified; and
(h) the word "amended" means "amended, modified, extended, renewed,
changed, or otherwise revised"; and the word "amendment" means "amendment,
modification, extension, change, renewal, or other revision".
1.3 Certain other words and phrases are defined elsewhere in this
Agreement, including the Exhibits and Schedules hereto. Words and phrases
defined in any part of this Agreement shall have the same meaning in all parts
of this Agreement.
ARTICLE 2. GRANT AND ACCEPTANCE OF FRANCHISE
2.1 Existing and New Facilities and Businesses. Subject to Section 2.2 and
the other terms and conditions of this Agreement, Franchisor grants to Lyric and
to each Franchisee the right and franchise to use and employ the Proprietary
Materials in accordance with this Agreement. Franchisor shall enter into a
Franchise Agreement:
(a) for each facility listed on Exhibit 2 hereto with the Franchisee
specified in such Exhibit for the Territory listed on Exhibit 4 hereto; and
(b) with Lyric or any of its subsidiaries which develop, acquire, or
lease any additional Health Care Business, provided that such additional
business meets Franchisor's standards and requirements (which shall be
consistent with those set forth in the Confidential Operating Manual and
otherwise required of Lyric and the Franchisees hereunder) and provided
further that such additional business is not located (i) in the Territory
of any other Franchisee (or other franchisee of Franchisor) or (ii) in a
geographic area in which Franchisor is prohibited by law or contract from
granting a franchise to operate a Health Care Business. The Territories of
such future franchises shall be determined in accordance with Exhibit 5
hereto.
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2.2 Condition. The grant of each franchise pursuant to Section 2.1, and
Franchisor's obligation to enter into any Franchise Agreement, shall be subject
to: (a) execution and delivery of the particular Facility Franchise Agreement to
Franchisor by the particular Franchisee; and (b) compliance by Franchisor and
the respective Franchisee with laws, rules and regulations applicable to the
creation of such Facility Franchise Agreement (and Franchisor and Lyric agree to
use commercially reasonable best efforts to comply with such laws, rules and
regulations).
ARTICLE 3. [INTENTIONALLY OMITTED]
ARTICLE 4. TERM
4.1 Initial Term. Unless sooner terminated pursuant to Article 16, this
Agreement shall extend for an initial term (the "Initial Term") commencing on
the date hereof and continuing for the same period as the Lease Term, as defined
in the Lease.
4.2 Extended Terms. This Agreement shall automatically renew for two
consecutive thirteen year renewal terms (collectively, the "Extended Terms").
Each Extended Term shall commence on the day succeeding the end of the Initial
Term or the preceding Extended Term, as applicable. All terms, covenants,
conditions, and provisions of this Agreement shall apply to each Extended Term
(except that Lyric may not extend the Term beyond the expiration of the Extended
Term). Notwithstanding the foregoing, Franchisor may decide not to renew in any
such case by giving notice to Lyric not less than six (6) months prior to the
last day of the Term or Extended Term.
4.3 Effect on Franchisees. Any extension of the Term by Lyric under this
Article shall automatically extend the Term for the same period, and upon the
same terms and conditions, of each Franchise Agreement between Franchisor and a
Franchisee.
ARTICLE 5. ANNUAL CONTINUING FEES
5.1 Annual Continuing Fee. For each "Contract Year" (as hereinafter
defined) during the Initial Term, Lyric shall pay Franchisor an annual
continuing fee (the "Annual Continuing Fee") in the amount of one percent (1%)
of the annual Lyric Gross Revenues (as defined below).
5.2 Definition of "Contract Year". In this Agreement, "Contract Year" means
any period which begins on January 1st and ends on the earlier of the following
December 31st or the effective date of expiration or termination of this
Agreement (except that the first Contract Year may be a partial year which
commences on the date hereof and ends on December 31st and the last Contract
Year may end on a date earlier than December 31st).
5.3 Monthly Installments. During each Contract Year, Lyric shall make
monthly installments on account of the Annual Continuing Fee for such Contract
Year. The installment for each month shall be equal to one percent (1%) of the
Lyric Gross Revenues for each month, and shall be paid on or before the 25th day
of the following calendar month, subject to Section 5.5.
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5.4 Annual Continuing Fee for Short Contract Year. If the Term includes any
Contract Year of less than three hundred and sixty-five (365) days, the Annual
Continuing Fee for such Contract Year shall be equal to the product of the
Annual Continuing Fee for such Contract Year multiplied by a fraction, the
numerator of which is the number of days this Agreement was in effect during
such Contract Year and the denominator of which is three hundred and sixty-five
(365).
5.5 Credit for Payments by Lyric Franchisees. Amounts paid directly by
Franchisees to Franchisor (if any) pursuant to the Facility Franchise Agreements
shall reduce dollar for dollar Lyric's obligation under Sections 5.1, 5.3 and
5.4. If and to the extent that Lyric and its Franchisees experience bad debts or
poor collections exceeding the amounts reserved for such items in their
respective current revenue budgets, and as a result Lyric is unable to pay all
or any part of the monthly installment of the Annual Continuing Fee for a
particular month, the unpaid portion of such installment shall accrue and be
payable as soon as cash flow permits but in no event later than at the end of
the current Contract Year. The foregoing sentence shall not apply for more than
one Contract Year.
5.6 Payment Following Contract Year End. If the aggregate dollar amount of
payments delivered by Lyric to Franchisor in payment of the Annual Continuing
Fee for any Contract Year under Section 5.3 differs from the Annual Continuing
Fee for such Contract Year, the appropriate party shall pay to the other the
amount of such overpayment or underpayment within one hundred five (105) days
after the end of such Contract Year.
5.7 Taxes. Lyric shall pay to Franchisor the amount of all sales taxes, use
taxes, and similar taxes imposed upon or required to be collected on account of
the Annual Continuing Fee and of goods or services furnished to Lyric and Lyric
Franchisees by Franchisor, whether such goods or services are furnished by sale,
lease or otherwise.
5.8 Lyric Gross Revenues. "Lyric Gross Revenues" means the sum of:
(a) the Gross Revenues of all Franchisees; plus
(b) the Gross Revenues of all the businesses which are the subject of
joint ventures to which Lyric and/or any Franchisee is a party (the "Joint
Venture Businesses") and the businesses which are the subject of management
agreements and other agreements and arrangements of Lyric or any Franchisee
pursuant to which Lyric or any Franchisee provides management, consulting
or other services for so long as any such agreements or arrangements are in
effect (the "Managed Businesses"); plus
(c) all other Gross Revenues of Lyric.
5.9 Additional Remedies for Past Due Annual Continuing Fees. In addition to
all other rights and remedies under this Agreement and at law or in equity, if
any Annual Continuing Fees are past due from Lyric to Franchisor (subject to
Section 5.5) for more than 120 days after notice from Franchisor, Franchisor
shall have the right, in addition to Franchisor's other rights and remedies
under this Agreement, to require reconsideration and revision of Lyric's current
annual and
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capital budgets and to require Lyric to comply with the negative covenants of
Lyric under Article 15 as if Franchisor had sold its interest in Lyric. The
foregoing rights are cumulative. Lyric agrees that, upon the exercise of any
such right by Franchisor, Lyric will cease taking any prohibited action and will
take the action required by Franchisor and will otherwise cooperate with
Franchisor in carrying out the purpose and intent of this Section.
5.10 Interest. Lyric shall pay Franchisor interest on any amounts past due
at the lower of (i) the maximum rate permitted by law or (ii) the prime rate of
Citibank, N.A. plus two percent (2%) per annum (the "Prime Rate"); but interest
shall not accrue on past due amounts to the extent Lyric (or a particular
Franchisee) fails to achieve EBITDA sufficient to pay such amounts (as long as
Lyric or the applicable Franchisee is operating within its then-current budget).
5.11 Negotiation of Fees. Each party agrees that: (a) the Annual Continuing
Fee payable under this Article 5 was established by extensive, good faith,
arms-length negotiations between the parties in which each party was represented
by counsel and advised by accountants familiar with the health care industry and
franchising, and (b) each party is satisfied that the Annual Continuing Fee
payable pursuant to this Article 5 represents the present, and (as applicable)
reasonably anticipated during the Initial Term, fair market value of the
franchise.
5.12 Advances by Franchisor. Lyric shall pay to Franchisor all amounts, if
any, advanced by Franchisor or which Franchisor has paid (or for which
Franchisor has become obligated) on behalf of Lyric or any Lyric Franchisees.
ARTICLE 6. PROPRIETARY MATERIALS; TRADE NAMES; IHS SYSTEMS
6.1 Proprietary Materials. Franchisor hereby grants Lyric the right to use
the Proprietary Materials in connection with the businesses franchised by
Franchisor pursuant to Article 2, the management and administration of existing
Joint Venture Businesses, the existing Managed Businesses, and any Other
Business pursuant to Article 10. To enhance the public image and reputation of
businesses operating under the IHS Systems, to protect the goodwill associated
with the Proprietary Materials, and to increase the demand for services and
products provided by Franchisor and all Franchisees, the parties agree to the
further provisions set forth below.
6.2 Ownership. Franchisor represents and warrants that IHS owns the
Proprietary Materials and the IHS Systems and that Franchisor is duly authorized
to grant Lyric and the Franchisees the rights in the Proprietary Materials and
the IHS Systems described in this Agreement on behalf of IHS. Lyric expressly
acknowledges IHS' and Franchisor's rights in and to the Proprietary Materials
and agrees not to represent or claim in any manner that Lyric has acquired any
ownership rights in the Proprietary Materials. Lyric agrees further that any and
all goodwill associated with the IHS Systems and identified by the Proprietary
Materials shall inure directly and exclusively to the benefit of Franchisor and
IHS.
6.3 Authorized Use. Lyric agrees that any use of the Proprietary Materials
except as expressly authorized by this Agreement may constitute an infringement
of Franchisor's and/or IHS' rights and that any right to use the Proprietary
Materials granted under this Agreement shall not
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extend beyond the termination or expiration of this Agreement. Lyric agrees
that, during the term of this Agreement and thereafter, Lyric shall not,
directly or indirectly, commit any act of infringement or contest or aid others
in contesting the validity or registration of Franchisor's and/or IHS' right to
use the Proprietary Materials or take any other action in derogation thereof.
6.4 Infringement. Lyric shall notify Franchisor promptly of any claim,
demand or cause of action that Franchisor may have based upon or arising from
any unauthorized attempt by any person or legal entity to use the Proprietary
Materials, any colorable variation thereof, or any other xxxx, name or indicia
in which Franchisor or IHS has or claims a proprietary interest (an
"Unauthorized Third Party Use"). Lyric shall assist Franchisor, upon request and
at Franchisor's expense, in taking such action (if any) as Franchisor deems
appropriate to halt such Unauthorized Third Party Use, but shall take no action
nor incur any expense on Franchisor's behalf without Franchisor's prior written
approval. If Franchisor undertakes the defense or prosecution of any litigation
relating to the Proprietary Materials, Lyric agrees to execute any and all
documents and to do such acts and things as may, in the opinion of Franchisor's
legal counsel, be reasonably necessary to carry out such defense or prosecution.
If Franchisor does not take action to halt any Unauthorized Third Party Use,
Lyric at its expense may take action as it deems appropriate to halt such
Unauthorized Third Party Use.
6.5 Operation With Proprietary Materials. Lyric and the Franchisees further
agree to operate and advertise only under the names or marks from time to time
designated by Franchisor for use as part of the Proprietary Materials; to adopt
and use the Proprietary Materials solely in the manner prescribed by Franchisor;
to refrain from using the Proprietary Materials to perform any activity or to
incur any obligation or indebtedness in such a manner as may, in any way,
subject Franchisor or IHS to liability therefor; to observe all laws with
respect to the registration of trade names and assumed or fictitious names, to
include in any application therefor a statement that Lyric's use of the
Proprietary Materials is limited by the terms of this Agreement; to provide
Franchisor with a copy of any such application and other registration
document(s); to observe such requirements with respect to trademark and service
xxxx registrations and copyright notices as Franchisor may, from time to time,
require, including, without limitation, affixing "SM", "TM" or (R) adjacent to
any portions of the Proprietary Materials in any and all uses thereof as
requested by Franchisor; and to utilize such other appropriate notice of
ownership, registration and copyright as Franchisor may require.
6.6 Modification/Replacement of Proprietary Materials. Franchisor reserves
the right, in its sole discretion, to designate one or more new, modified or
replacement Proprietary Materials for use by Lyric and/or any Franchisee and to
require the use by Lyric and/or any Franchisee of any such new, modified or
replacement Proprietary Materials in addition to or in lieu of any previously
designated Proprietary Materials. Any expenses or costs associated with the use
by Lyric and/or any Franchisee of any such new, modified or replacement
Proprietary Materials shall be the sole responsibility of Lyric and/or the
respective Franchisees.
6.7 Use of IHS Systems. Franchisor hereby grants to Lyric the right and
license to utilize the IHS Systems in connection with the management and
administration of the businesses franchised by Franchisor pursuant to Article 2,
the management and administration of existing Joint
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Venture Businesses, the existing Managed Businesses and all Other Business
pursuant to Article 10. Franchisor shall establish and Lyric shall maintain
standards of quality, appearance and operation for Lyric's Business.
6.8 Compliance with IHS Systems. Lyric agrees in connection with Lyric's
business, and each Franchisee agrees for itself, to use and comply with all
treatment protocols, treatment, financial, legal and other programs and
procedures, quality standards, quality assessment methods, performance
improvement and monitoring programs and other matters which now or hereafter
comprise the IHS Systems, and to comply with the rules, regulations, policies
and standards of the IHS Systems, including all such contained in the
"Confidential Operating Manual" (as hereinafter defined).
6.9 Compliance With Law. Lyric and each Franchisee agree at all times to
operate its business, and to keep all premises at which it and each Franchisee
operates, in compliance with all applicable federal, state and local laws, rules
and regulations.
6.10 Joint Commission on Accreditation of Health Care Organizations
(JCAHO). Lyric agrees to cause any applicable Franchisee to maintain throughout
the term of this Agreement any accreditation by the Joint Commission on
Accreditation of Healthcare Organizations ("JCAHO") previously issued to the
particular Franchisee (and Lyric shall cause the Franchisees to use commercially
reasonable best efforts to seek and obtain such accreditation if and as
necessary or appropriate). Lyric agrees also to endeavor to obtain and maintain
accreditation by other organizations which may be necessary or desirable in a
particular case. Lyric (or the applicable Franchisee) shall pay all costs of
obtaining and maintaining any such accreditation(s).
6.11 Maintenance of Standards. Lyric and each Franchisee agree to maintain
all premises from or at which its business is conducted, and all furnishings and
equipment thereon, in conformity with Franchisor's then-current standards, at
all times during the term of this Agreement, and to make such repairs and
replacements thereto as Franchisor may require. Without limiting the generality
of the foregoing, Lyric and each Franchisee agree:
(a) to keep all such premises at all times in a high degree of
sanitation, repair, order and condition, including such periodic repainting
of the exterior and interior of the premises, and such maintenance and
repairs to all fixtures, furnishings, signs and equipment, as Franchisor
may from time to time reasonably direct; and
(b) to meet and maintain at all times governmental standards,
certifications and ratings applicable to the operation of the premises and
such business or such higher minimum standards, certifications and ratings
as reasonably set forth by Franchisor from time to time in its Confidential
Operating Manual or otherwise in writing.
6.12 Operation in Conformity with Prescribed Methods, Standards and
Specifications. Lyric and each Franchisee agree to operate its business in
conformity with such methods, standards and specifications as Franchisor may
prescribe from time to time in its Confidential Operating Manual to insure that
Franchisor's required degree of quality, service and
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image is maintained; and to refrain from deviating therefrom or otherwise
operating in any manner which adversely reflects on Franchisor's or IHS' name
and goodwill, or on the Proprietary Materials.
6.13 Printed Materials; Marketing. Lyric and each Franchisee shall use only
marketing and advertising materials which have been approved in advance by
Franchisor; and Lyric and each Franchisee shall use business stationery,
business cards, and similar materials which are consistent with the Proprietary
Materials and their obligations under this Agreement. Lyric and each Franchisee
shall not employ any person to act as a representative of Lyric or such
Franchisee in connection with local promotion of their business in any public
media without the prior written approval of Franchisor. Supplies or materials
purchased, leased or licensed by Lyric or any Franchisee shall meet the
standards reasonably specified by Franchisor from time to time.
6.14 Ownership Identification. In all advertising displays and materials
and at all premises from or at which their respective business is conducted,
Lyric and each Franchisee shall, in such form and manner as may be specified by
Franchisor in the Confidential Operating Manual, notify the public that Lyric or
the respective Franchisee is operating the business licensed hereunder as a
franchisee of Franchisor and shall identify its business location in the manner
specified by Franchisor in the Confidential Operating Manual.
6.15 Patient Relations. Lyric and each Franchisee shall respond promptly to
patient complaints and shall take such other steps as may be required to insure
positive patient relations.
6.16 Right to Inspect. Lyric and each Franchisee hereby grant to Franchisor
and its agents the right to enter upon any premises from which they conduct
their business, without notice, at any reasonable time for the purpose of
conducting inspections of the premises and their books and records; and each
agrees to render such assistance as may reasonably be requested and to take such
steps as may be necessary to correct any deficiencies upon the request of
Franchisor or its agents.
6.17 Variation of Standards. Because complete and detailed uniformity under
many varying conditions may not be possible or practical, Franchisor
specifically reserves the right and privilege, in its sole discretion and as it
may deem in the best interests of all concerned in any specific instance, to
vary standards for any Franchisees based upon the peculiarities of a particular
circumstance, or any other conditions which Franchisor deems to be of importance
to the successful operation of the particular business. Neither Lyric nor any
Franchisee shall have recourse against Franchisor on account of any variation
from standard specifications and practices granted to Lyric or any Franchisee
and shall not be entitled to require Franchisor to grant others a like or
similar variation hereunder.
6.18 Accounting Equipment and Software. Lyric and each Franchisee agree to
maintain, develop, update and replace any equipment and software as reasonably
necessary for the purpose of recording, collecting or otherwise supporting
revenues.
6.19 Discoveries and Ideas. Lyric and each Franchisee agree to disclose
promptly to Franchisor all discoveries made or ideas conceived by Lyric or such
Franchisee, their Affiliates, or their employees, pertaining to the IHS Systems
(including any enhancements and updates). To
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the fullest extent permitted by law, Lyric and each Franchisee hereby grant to
Franchisor all right, title and interest to such discoveries and ideas, and
agree 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 which are potentially
patentable or copyrightable. Franchisor shall not be obligated to compensate
Lyric or any Franchisee for any such discoveries or ideas.
6.20 Compliance with Confidential Operating Manual. In order to protect the
reputation and goodwill of the businesses operating under the IHS Systems and to
maintain standards of operation under the Proprietary Materials, Lyric and each
Franchisee shall conduct its business operated under the IHS Systems in
accordance with various written instructions and confidential manuals
(hereinafter and previously referred to as the "Confidential Operating Manual"),
including such amendments thereto as Franchisor may publish from time to time,
all of which Lyric and each Franchisee acknowledge belong solely to Franchisor
and shall be on loan from Franchisor during the term of this Agreement. When any
provision in this Agreement requires that Lyric or a Franchisee comply with any
standard, specification or requirement of Franchisor, unless otherwise
indicated, such standard, specification or requirement shall be such as is set
forth in this Agreement or as may, from time to time, be set forth by Franchisor
in the Confidential Operating Manual.
6.21 Revisions to Confidential Operating Manual. Lyric and each Franchisee
understand and acknowledge that Franchisor may, from time to time, revise the
contents of the Confidential Operating Manual to implement new or different
requirements for the operation of their business, and Lyric and each Franchisee
expressly agree to comply at their expense with all such reasonable changed
requirements which are by their terms mandatory; provided that such requirements
shall also be applied in a reasonably nondiscriminatory manner to comparable
businesses operated under the IHS Systems by other Franchisees.
6.22 Operating Assistance. Franchisor reserves the right to require Lyric
and each Franchisee to maintain standards of quality, appearance and service at
all their Facilities, thereby maintaining the public image and reputation of the
IHS Systems and the demand for the services and products provided thereunder,
and to that end Franchisor shall provide Lyric and each Franchisee with the
following ongoing assistance:
(a) advertising and marketing assistance including consultation,
access to media buying programs and access to broadcast and other
advertising pieces and materials produced by Franchisor from time to time;
(b) risk management services, including risk financing planning, loss
control and claims management;
(c) outcomes monitoring; and
(d) consultation by telephone or at Franchisor's offices with respect
to matters relating to their business in which Franchisor has expertise,
including matters relating
11
to reimbursement, government relations, clinical strategies, regulatory
matters, strategic planning and business development.
ARTICLE 7. PREFERRED PROVIDER STATUS
Franchisor shall use commercially reasonable best efforts, subject to
applicable law, to cause the Franchisees to have "preferred provider" status in
connection with Franchisor's managed behavioral Health Care Business on a basis
substantially consistent with existing covenants, terms and conditions, unless
the customer directs otherwise.
ARTICLE 8. "800" TELEPHONE NUMBER
Franchisor agrees to continue to operate or will provide a toll free "800"
telephone number and related service facility (the "800 Call Center"), to
provide a telephone "Help" line and also a telephone "Fraud and Abuse" line to
the Franchisees substantially the same as those now provided by IHS' 800 Call
Center operating immediately prior to the execution of this Agreement, subject
to such modifications as Franchisor deems advisable from time to time to comply
with applicable law or subject to such restructuring as Lyric and Franchisor
shall agree. Each party agrees to use commercially reasonable best efforts to
negotiate any such restructuring to comply with applicable law. Lyric and the
Franchisees shall have the right (and Lyric agrees to cause all Franchisees) to
advertise such "800" telephone number and otherwise cooperate with Franchisor to
use the 800 Call Center for the intended purposes. Lyric and the Franchisees
shall each pay, from time to time promptly following receipt of an invoice from
Franchisor, a proportionate share of the costs of operating the 800 Call Center.
ARTICLE 9. ENHANCEMENT OF THE IHS SYSTEMS
Franchisor, Lyric, and all Franchisees agree to cooperate in the creation,
enhancement and updating of written manuals and materials setting forth the
treatment, financial, legal and other protocols, programs and procedures,
quality standards, quality assessment methods, performance improvement and
monitoring programs and other matters comprising the IHS Systems. Such manuals
and other materials (together, the "IHS Systems Materials") shall be prepared in
a manner suitable for use by Franchisor in franchising others to use the IHS
Systems. No changes shall be made by Lyric or any Franchisee to the IHS Systems
or the IHS Systems Materials without the Franchisor's express written consent
which shall not be unreasonably withheld. All protocols, programs, procedures,
standards and methods, all IHS Systems Materials, and all upgrades,
enhancements, and modifications to same (whether developed by Franchisor, Lyric
or any Franchisee), shall be owned by Franchisor and may be used by Lyric and
the Franchisees only under and pursuant to this Agreement and the Facility
Franchise Agreements.
ARTICLE 10. OTHER BUSINESS
Lyric and each Franchisee agree not to enter into any new Joint Venture
Businesses, Managed Businesses or consulting or other agreements or arrangements
relating to a Health Care Business (collectively, "Other Business") during the
Term of this Agreement except and unless (i)
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Franchisor and Lyric or the respective Franchisee enter into a Facility
Franchise Agreement with respect to such Other Business, or (ii) with
Franchisor's written consent in each instance, and in each instance in which
Franchisor has given such written consent, Franchisor and Lyric (or the
applicable Franchisee) have previously agreed (A) to pay Franchisor, in addition
to all other amounts payable pursuant to this Agreement, a percentage of the
gross receipts from such Other Business agreeable to Franchisor or (B) to the
inclusion in Gross Revenues of any such Other Business.
ARTICLE 11. [INTENTIONALLY OMITTED]
ARTICLE 12. STATEMENTS, RECORDS AND FEE PAYMENTS
12.1 Maintenance of Records; Audit Rights. Lyric and each Franchisee shall
maintain, in a manner reasonably satisfactory to Franchisor, original, full and
complete records, accounts, books, data, licenses, contracts and invoices which
accurately reflect all particulars relating to their business and such
statistical and other information or records as Franchisor may require (and
shall keep such information for not less than three years even after termination
of this Agreement). Lyric and each Franchisee shall compile and provide to
Franchisor any statistical or financial information regarding the operation of
their business, services, and products, or data of a similar nature. Franchisor
(and its agents) may examine and audit such records, accounts, books and data at
all reasonable times to monitor compliance with this Agreement. In connection
with any such examination or audit, Franchisor shall not be entitled to any
adjustment to the extent that Gross Revenues for Lyric or the applicable
Franchisee have been computed in accordance with Section 5.8. If such inspection
discloses that Gross Revenues during any scheduled reporting period exceeded the
amount reported by Lyric by two percent (2%) or more of the amount originally
reported to Franchisor, Lyric shall bear the cost of such inspection and audit
and shall pay, on demand, any such deficiency (with interest from the date due
at the lesser of the highest rate permitted by applicable law, or the Prime Rate
plus two percent (2%) per annum).
12.2 Financial Statements. Lyric and the Franchisees shall prepare and
deliver (or cause to be prepared and delivered) to Franchisor, with respect to
each Facility and Other Business, all monthly, quarterly, and annual financial
statements and compliance reports and other reports, in the same form, and
within the same periods, as Lyric prepares or receives under Article 12 of
Lyric's Operating Agreement.
12.3 Tax Reports. Upon Franchisor's request, Lyric shall furnish Franchisor
with a copy of each of Lyric's and any or all Franchisees' reports and returns
of sales, use and gross receipt taxes and complete copies of any state or
federal income tax returns covering the operation of the businesses of Lyric and
all Franchisees.
12.4 Reports. Upon Franchisor's request, Lyric shall furnish Franchisor
with a copy of each of reports filed by Lyric and/or any Franchisees under
applicable federal and state laws, rules and regulations (including but not
limited to reports required under "Medicare" and "Medicaid" laws, rules and
regulations).
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ARTICLE 13. ADDITIONAL COVENANTS OF LYRIC
13.1 Covenant During Term. During the Term of this Agreement, Lyric and
each Franchisee covenant not to engage directly or indirectly as an owner,
operator, in any managerial capacity, or otherwise in any business other than
(i) as a franchisee of the Proprietary Materials pursuant to a Facility
Franchise Agreement; (ii) Other Business (but only as permitted by Franchisor
pursuant to Article 10); or (iii) through management and administration of the
businesses franchised by Franchisor pursuant to Article 2.
13.2 Covenant Not to Compete Post-Term. For a period expiring three (3)
years after the expiration, termination or assignment of this Agreement, Lyric
and each Franchisee covenant not to engage (directly or indirectly) as an owner,
operator, franchisee, or consultant in any business which was conducted at any
of the Facilities or any Other Business on the date of expiration, termination
or assignment of this Agreement or during the two (2) years prior thereto. The
geographic area of the restrictions under this Section 13.2 shall be limited to
(i) the Territories of Lyric and all Franchisees at the date of the termination,
expiration or assignment of this Agreement and during the two years prior
thereto; and (ii) the geographic areas within a ten (10) mile radius of any
Other Business in existence at the date of the expiration, termination or
assignment of this Agreement or during the two (2) years prior thereto.
13.3 Acknowledgment of Reasonableness. The parties agree that Sections 13.1
and 13.2 have been negotiated fully and fairly by the parties, each being
represented and advised by counsel. Lyric and each Franchisee acknowledge that
Lyric and such Franchisee willingly and freely accept the provisions of Section
13.1 and 13.2 as reasonable and necessary under the circumstances. One of the
acknowledged reasonable business purposes of Franchisor is to protect
Franchisor's goodwill and proprietary rights. Lyric and each Franchisee
acknowledge further that Franchisor would not enter into this Agreement without
the covenants of Sections 13.1 and 13.2, and that it is fair and reasonable for
Lyric and every Franchisee to be subject to such covenants.
13.4 Confidential Information. During the Term of this Agreement and
following the expiration, termination or assignment of the Agreement, Lyric and
each Franchisee covenant not to communicate directly or indirectly, nor to
divulge to or use for its benefit or the benefit of any other person or legal
entity, any trade secrets included in the Proprietary Materials or which are
otherwise proprietary to Franchisor or IHS or any information, knowledge or
know-how otherwise deemed confidential by Franchisor except as permitted by
Franchisor (all such, "Confidential Information"). Notwithstanding the
foregoing, "Confidential Information" shall not include information: (a) which
at the time of disclosure is readily available to the trade or public; (b) which
after disclosure becomes readily available to the trade or public other than
through breach of this Agreement; (c) which is subsequently lawfully and in good
faith obtained by such party from an independent third party without breach of
this Agreement; or (d) which is disclosed to others in accordance with the terms
of a prior written authorization between the parties to this Agreement. In event
of any termination, expiration, assignment, or non-renewal of this Agreement,
Lyric and each Franchisee agree that Lyric and such Franchisee will never use
the Proprietary Materials or any other confidential information, trade secrets,
methods of operation or any proprietary components of Franchisor in the design,
development or operation of any Health Care Business. The protection
14
granted hereunder shall be in addition to and not in lieu of all other
protections for such trade secrets and confidential information as may otherwise
be afforded in law or in equity.
13.5 Confidential Agreements with Certain Employees. Consistent with
Franchisor's existing policies with respect to employee non-disclosure
agreements, Lyric and each Franchisee agree to maintain and cause new employees
of Lyric to execute employee non- disclosure agreements, in the form used by IHS
as of the date hereof (or such other form as reasonably requested by
Franchisor), which shall prohibit disclosure by such parties to any other person
or legal entity of any Confidential Information. Franchisor shall be a third
party beneficiary of each such agreement; and Lyric or the respective Franchisee
shall not amend, modify or terminate any such agreement without Franchisor's
prior written consent.
13.6 Severability. The parties agree that each of the foregoing covenants
shall be construed as independent of any other covenant or provision of this
Agreement. If any part of one or more of these restrictions is deemed
unenforceable by virtue of its scope in terms of area, business activity
prohibited or length of time, and if such part is capable of enforcement by
reduction of any or all thereof, Lyric and Franchisor agree that the same shall
be enforced to the fullest extent permissible under the law. Also, Franchisor
may at any time, in its sole discretion, revise any of the covenants in this
Article 13 so as to reduce the obligations of Lyric or any one or more
Franchisees hereunder. The running of any period of time specified in this
Article 13 shall be tolled and suspended for any period of time in which Lyric
is found by a court of competent jurisdiction to have been in violation of any
covenant under this Agreement. Lyric agrees further that the existence of any
claim Lyric may have against Franchisor (whether or not arising under this
Agreement) shall not be a defense to enforcement by Franchisor of the covenants
in this Article 13.
ARTICLE 14. FRANCHISOR NOT TO COMPETE
Franchisor agrees not to compete with Lyric or the applicable Franchisee in
any business which is covered by a Facility Franchise Agreement in the Territory
covered by such Facility Franchise Agreement.
ARTICLE 15. NEGATIVE COVENANTS OF LYRIC
If Integrated Health Services, Inc. sells its entire membership interest in
Lyric pursuant to Article 16 of the Operating Agreement, Lyric shall not do any
of the following, without the prior written consent of Franchisor, if Lyric is
in default in paying any monthly installment of the Annual Continuing Fee for
(30) thirty days after written notice from Franchisor:
15.1 Restriction of Indebtedness. Create, incur or assume any indebtedness
for borrowed money or the deferred purchase price of any asset (including
obligations under capitalized leases), except indebtedness subordinated to all
debts, obligations and liabilities of Lyric to Franchisor and its Affiliates
pursuant to a subordination agreement on terms and conditions acceptable to
Franchisor.
15
15.2 Restrictions on Liens. Create or permit to be created any mortgage,
pledge, encumbrance or other lien or security interest in any property or
assets, except for any such that individually or in the aggregate are immaterial
to Lyric.
15.3 Dividends and Redemptions. Make any distribution to Lyric's members,
or redeem, purchase or otherwise acquire directly or indirectly, any membership
interest of Lyric's members, except that Lyric shall have the right to make cash
distributions to its members so long as no default has occurred and is
continuing in the payment of any amount due from Lyric to Franchisor pursuant to
this Agreement and so long as, after giving effect to the payment of the
distribution sufficient working capital is available to pay Annual Continuing
Fees and budgeted operating expenses for the three full calendar months
following the payment of such distribution.
15.4 Acquisitions and Investments. Acquire any material assets or any other
business or make any material loan, advance or extension of credit to, or
investment in, any other person, corporation or other entity, including
investments acquired in exchange for stock or other securities or obligations of
any nature (other than to subsidiaries or in connection with cash management
functions in the ordinary course of business), or create or participate in the
creation of any subsidiary or joint venture.
15.5 Liquidation; Merger; Disposition of Assets. Liquidate or dissolve; or
merge with or into or consolidate with or into any corporation or other entity;
or sell, lease, transfer or otherwise dispose of all or any substantial part of
its property, assets or business (other than sales made in the ordinary course
of business).
15.6 Increases in Salaries. Increase any salaries, bonuses, profit-sharing
payments, or other compensation of any kind (including severance agreements) for
any employees receiving (or likely to receive) more than One Hundred Thousand
Dollars ($100,000) in total annual compensation.
15.7 Affiliates. Amend any Lease to increase the amount or accelerate the
payment of the rent under such Lease or any installment thereof or engage in any
material transaction with (i) any Affiliate, (ii) Lessor or (iii) an Affiliate
of Lessor, other than pursuant to contracts or ongoing arrangements existing at
the time Integrated Health Services, Inc. sells its membership interest in
Lyric, including amending in any material respect any such contracts or other
ongoing arrangements existing at the time of such sale.
15.8 No Bankruptcy. (i) Dissolve or liquidate, in whole or in part, or
institute proceedings to be adjudicated bankrupt or insolvent, (ii) consent to
the institution of bankruptcy or insolvency proceedings against it, (iii) file a
petition seeking or consenting to reorganization or relief under any applicable
federal or state law relating to bankruptcy, (iv) consent to the appointment of
a receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of Lyric or a substantial part of its property, (v) make a general
assignment for the benefit of creditors, (vi) admit in writing its inability to
pay its debts generally as they become due, or (vii) take any corporate or other
action to authorize any of the actions set forth in clauses (i) through (vi) of
this paragraph.
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ARTICLE 16. TRANSFER AND ASSIGNMENT
16.1 Assignment by Franchisor. This Agreement and all rights and duties
hereunder may not be assigned or transferred by Franchisor except (i) with
Lyric's prior written consent (which shall not be unreasonably withheld,
conditioned or delayed); or (ii) to an entity which simultaneously acquires all
or substantially all of Franchisor's business and assets, provided that such
transferee/assignee assumes each and every obligation of Franchisor under this
Agreement. Franchisor may grant a security interest for collateral purposes in
Franchisor's rights and interest (but not its obligations) under this Agreement
to any of Franchisor's (or its Affiliates') lenders.
16.2 Assignment by Lyric. This Agreement and all rights and duties
hereunder may not be assigned or transferred by Lyric except (i) with the
written consent of Franchisor, or (ii) to an entity which simultaneously
acquires all or substantially all of Lyric's business and assets (including
ownership of all Franchisees), provided that such transferee/assignee assumes
each and every obligation of Lyric under this Agreement (and executes an
assumption agreement to such effect in form and substance satisfactory to
Franchisor). At the time of assignment of Lyric's rights pursuant to the
preceding sentence, Lyric may transfer simultaneously the Franchisees' interests
in all of the Facility Franchise Agreements to the same person or entity to whom
Lyric's interest in this Agreement is assigned.
16.3 Consent Not a Waiver. Franchisor's consent (if granted) to an
assignment by Lyric shall not constitute a waiver of any claims of Franchisor
against the transferring party, nor a waiver of Franchisor's right to demand
exact compliance with all terms of this Agreement by the transferee.
16.4 Parties Bound and Benefitted. This Agreement shall be binding on the
parties and their respective successors and assigns. This Agreement shall inure
to the benefit of the parties and their respective permitted successors and
assigns.
ARTICLE 17. RIGHTS OF AGGRIEVED PARTY UPON DEFAULT
17.1 Franchisor's Right to Terminate. Franchisor may terminate this
Agreement prior to the expiration of its term for "good cause", which shall
exist, at Franchisor's election, if:
(a) Lyric or any Franchisee violates any prohibition against transfer
and assignment in Article 16;
(b) Lyric or any Franchisee violates any covenant of confidentiality
or non-disclosure contained in Section 13.4 or Section 13.5;
(c) Lyric fails to keep, observe, or perform any covenant, agreement,
term or provision of this Agreement (other than payments covered by (f)
below) and such failure continues for sixty (60) days after notice from
Franchisor, provided that if such failure can be cured but such cure cannot
be completed with due diligence within such period and if Lyric commences
to cure such failure promptly after notice thereof and thereafter
prosecutes
17
such cure with due diligence, such period shall be extended as necessary to
cure such failure with due diligence;
(d) Lyric shall apply for or consent to the appointment of a receiver,
trustee, or liquidator of Lyric or of all or a substantial part of its
assets, file a voluntary petition in bankruptcy or admit in writing its
inability to pay its debts as they become due, make a general assignment
for the benefit of creditors, file a petition or any answer seeking
reorganization or arrangement with creditors or take advantage of any
insolvency law, or if an order, judgment or decree shall be entered by a
court of competent jurisdiction, on the application of a creditor,
adjudicating Lyric bankrupt or appointing a receiver, trustee, or
liquidator of Lyric with respect to all or a substantial part of the assets
of Lyric, and such order, judgment or decree shall continue unstayed and in
effect for any period of ninety (90) consecutive days;
(e) Lyric or any Franchisee defaults under any Lease or mortgage of
any Facility, and the respective Lessor or mortgagee commences legal
proceedings to enforce its rights thereunder;
(f) subject to Section 5.5 Lyric fails to pay the Annual Continuing
Fee owed to Franchisor under this Agreement when due or within sixty (60)
days thereafter, or fails to pay any other amounts owed to Franchisor under
this Agreement within sixty (60) days after notice from Franchisor of such
obligation.
Upon the happening of any of the foregoing events, Franchisor may terminate the
rights of Lyric and all Franchisees hereunder by notice to Lyric; and the rights
of Lyric and all Franchisees hereunder shall terminate automatically effective
thirty (30) days after the giving of such notice. If in any jurisdiction a
franchisee is entitled by law to notice and/or cure periods longer than those
set forth above, then with respect to any Facility Franchise Agreement (to which
Lyric or a Franchisee is a party) governed by the law of such jurisdiction, the
notice and/or cure periods, as applicable, shall be deemed to be extended
automatically to the minimum notice and/or cure periods required in such
jurisdiction.
17.2 Lyric's Right to Terminate. Lyric may not terminate this Agreement
prior to the expiration of its term (whether because of Franchisor's breach,
material or otherwise) except with the prior written consent of Franchisor.
17.3 Defaults Caused by Manager. Notwithstanding anything in this Agreement
to the contrary, during any period while an Affiliate of Franchisor is acting as
the Manager of any Facility of a Franchisee pursuant to a Management Agreement,
if and to the extent that such Manager, through its action or failure to act,
shall have caused Lyric or the respective Franchisee to be in default of their
obligations under this Agreement, then such default shall not be the basis for
Franchisor to exercise any rights under this Article or under Section 5.9;
provided, however, the foregoing sentence shall not apply if the respective
Manager is unable to act (or prevented from acting) by reason of the failure of
Lyric or the respective Franchisee to comply with its own
18
obligation under the particular Management Agreement (including the payment of
funds to Manager to cover necessary expenditures, the giving of required
approvals or directions, etc.).
ARTICLE 18. [INTENTIONALLY OMITTED]
ARTICLE 19. INDEMNIFICATION AND INDEPENDENT CONTRACTOR
19.1 Indemnification and Hold Harmless. Lyric agrees to protect, defend,
indemnify, and hold Franchisor, IHS and their respective directors, officers,
agents, attorneys and shareholders, harmless from and against all claims,
actions, proceedings, damages, costs, expenses and other losses and liabilities,
directly or indirectly incurred (including without limitation reasonable
attorneys' and accountants' fees) as a result of, arising out of, or connected
with the operation of Lyric's Business, except those directly resulting from
Franchisor's or IHS' willful misconduct or fraud. Franchisor agrees to protect,
defend, indemnify and hold Lyric and each Franchisee, and their respective
directors, officers, agents, attorneys and members, harmless from and against
all claims, actions, proceedings, damages, costs, expenses and other losses and
liabilities, directly or indirectly arising out of or connected with the
operation of Lyric's Business arising directly from Franchisor's willful
misconduct or fraud.
19.2 Independent Contractor. In all dealings with third parties including
employees, suppliers and patients, Lyric shall disclose in an appropriate manner
reasonably acceptable to Franchisor that it is an independent entity. Nothing in
this Agreement is intended to create a fiduciary relationship between the
parties hereto nor to constitute Lyric an agent, legal representative,
subsidiary, joint venturer, partner, employee or servant of Franchisor for any
purpose. It is agreed that Lyric is an independent contractor and is not
authorized to make any contract, warranty or representation or to create any
obligation on behalf of Franchisor.
ARTICLE 20. WRITTEN APPROVALS, WAIVERS AND AMENDMENT
20.1 Prior Approvals. Whenever this Agreement requires Franchisor's prior
approval, Lyric shall make a timely written request. Unless a different time
period is specified in this Agreement, Franchisor shall respond with its
approval or disapproval within fifteen (15) days of receipt of such request. If
Franchisor has not specifically approved a request within such fifteen (15) day
period, such failure to respond shall be deemed disapproval of any such request.
20.2 No Waiver. No failure of Franchisor to exercise any power reserved to
it by this Agreement and no custom or practice of the parties at variance with
the terms hereof shall constitute a waiver of Franchisor's right to demand exact
compliance with any of the terms herein. No waiver or approval by Franchisor of
any particular breach or default by Lyric, nor any delay, forbearance or
omission by Franchisor to act or give notice of default or to exercise any power
or right arising by reason of such default hereunder, nor acceptance by
Franchisor of any payments due hereunder shall be considered a waiver or
approval by Franchisor of any preceding or subsequent breach or default by Lyric
of any term, covenant or condition of this Agreement.
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20.3 Written Amendments. Except as otherwise specifically provided in this
Agreement, no amendment, change or variance from this Agreement shall be binding
upon either Franchisor or Lyric except by mutual written agreement.
ARTICLE 21. ENFORCEMENT
21.1 Inspections. In order to ensure compliance with this Agreement and to
enable Franchisor to carry out its obligations under this Agreement, Lyric
agrees that Franchisor and its designated agents shall be permitted, with or
without notice, full and complete access during business hours to inspect all
premises at which Lyric's Business is conducted and all records thereof,
including, but not limited to, records relating to Lyric's and Lyric's
Franchisees' patients, suppliers, employees and agents. Lyric shall cooperate
fully with Franchisor and its designated agents requesting such access.
21.2 No Right to Offset. Lyric will not, for any reason, withhold payment
of any monthly payment, fee or any other fees or payments due to the Franchisor
under this Agreement or pursuant to any other contract, agreement or obligation
to the Franchisor or any of its Affiliates. Lyric shall not have the right to
"offset" any liquidated or unliquidated amounts, damages or other funds
allegedly due to Lyric from the Franchisor against any monthly payment, fee or
any other fees or payments due to the Franchisor or any of its Affiliates under
this Agreement or otherwise.
ARTICLE 22. ENTIRE AGREEMENT
This Agreement and the Facility Franchise Agreements contain the entire
agreement of the parties. No other agreements, written or oral, shall be deemed
to exist, and all prior agreements and understandings are superseded hereby.
There are no conditions to this Agreement which are not expressed herein or in
the Facility Franchise Agreements.
ARTICLE 23. NOTICES
All notices, consents or other communications under this Agreement (any
such, a "notice") must be in writing and addressed to each party at its
respective addresses set forth above (or at any other address which the
respective party may designate by notice given to the other party). Any notice
required by this Agreement to be given or made within a specified period of
time, or on or before a date certain, shall be deemed given or made if sent by
hand, by fax with confirmed answerback received, or by registered or certified
mail (return receipt requested and postage and registry fees prepaid). Delivery
"by hand" shall include delivery by commercial express or courier service. A
notice sent by registered or certified mail shall be deemed given on the date of
receipt (or attempted delivery if refused) indicated on the return receipt. All
other notices shall be deemed given when actually received.
ARTICLE 24. GOVERNING LAW AND DISPUTE RESOLUTION
24.1 Governing Law. This Agreement shall be interpreted, construed, applied
and enforced in accordance with the laws of the State of Maryland (without
giving effect to principles
20
of conflicts of laws). Subject to Sections 24.2 and 24.3, any action to enforce,
arising out of, or relating in any way to, any of the provisions of this
Agreement may be brought and prosecuted in such court or courts located in the
State of Maryland, and the parties consent to the jurisdiction of said court or
courts.
24.2 In the event of any dispute or controversy arising under or in
connection with this Agreement, the parties shall attempt to resolve such
dispute or controversy by mediation as provided in this Section prior to
exercising any rights under the remaining provisions of Article 24. Either party
may commence mediation by notice to the other party (the "Mediation Notice"),
which notice shall name a proposed Mediator (as defined below) to resolve the
dispute. The party receiving the Mediation Notice, within seven days after
receipt, shall send the other party notice accepting the proposed Mediator (the
"Acceptance Notice") or proposing an alternate Mediator (the "Alternate
Notice"). Within seven (7) days after receipt of an Alternate Notice, the
receiving party shall deliver notice accepting or rejecting the alternate
Mediator. Within five (5) days after the Mediator has been selected the dispute
shall be submitted to him or her by both parties, and the Mediator shall decide
the dispute within fourteen (14) days thereafter. The decision of the Mediator
shall not be binding upon the parties, and after the Mediator issues a decision
either party may submit the dispute to arbitration, as provided in Section 24.3
and 24.4. If the parties fail to agree upon a Mediator within twenty (20) days
after receipt of the Mediation Notice, the dispute may be resolved as provided
in Section 24.3. "Mediator" means an individual with experience relevant to the
matter in dispute who is not employed by or affiliated with either party and who
does not have (and is not an officer, employee or director of an entity which
has) significant business contacts with either party. Franchisor and Lyric shall
share equally all costs of the Mediator.
24.3 (a) Subject to Section 24.2, any dispute between Lyric and Franchisor
regarding a financial, tax, or accounting issue shall be resolved exclusively
through arbitration conducted by a principal of KPMG Peat Marwick (the
"Financial Arbitrator"). Either party may commence arbitration hereunder by
notice to the other party and to the Financial Arbitrator, who shall decide the
dispute. Franchisor and Lyric shall share equally all costs of the Financial
Arbitrator. The Financial Arbitrator shall conduct the arbitration in any manner
he or she elects; however, the Financial Arbitrator shall issue a final decision
with respect to such dispute within thirty (30) days after the dispute is
referred to him or her. The decision of such Financial Arbitrator shall be final
and binding upon the parties and shall not be subject to appeal. Judgment upon
the award rendered by the Financial Arbitrator may be entered in any court
having in personam and subject matter jurisdiction over the parties.
(b) Subject to Sections 24.2 and 24.3(a), any dispute or controversy
arising under or in connection with this Agreement shall be settled exclusively
by arbitration, conducted before a panel of three arbitrators in Baltimore,
Maryland, in accordance with the rules of the American Arbitration Association
then in effect, and judgement may be entered on the arbitrators' award in any
court having in personam and subject matter jurisdiction over the parties.
Franchisor and Lyric shall share equally the costs of the American Arbitration
Association and the arbitrators. Each party shall select one arbitrator, and the
two so designated shall select a third arbitrator. If either party shall fail to
designate an arbitrator within seven (7) days after arbitration is requested, or
if the two arbitrators shall fail to select a third arbitrator within fourteen
(14) days after arbitration is requested, then an
21
arbitrator shall be selected by the American Arbitration Association upon
application of either party. In considering any issue under this Agreement, the
arbitrators shall construe and interpret this Agreement strictly in accordance
with the specific terms and provisions hereof and in accordance with the
judicial decisions, statutes, and other indicia of Maryland law.
ARTICLE 25. SEVERABILITY, CONSTRUCTION AND OTHER MATTERS
25.1 Severability. Should any provision of this Agreement be for any reason
held invalid, illegal or unenforceable by a court of competent jurisdiction,
such provision shall be deemed restricted in application to the extent required
to render it valid; and the remainder of this Agreement shall in no way be
affected and shall remain valid and enforceable for all purposes. In the event
that any provision of this Agreement should be for any reason held invalid,
illegal or unenforceable by a court of competent jurisdiction, or in the event
the performance or compliance by any party with any provision of this Agreement
shall result in such party being in violation of any law, rule or regulation of
any governmental authority, then in any of such events the parties agree to use
commercially reasonable best efforts to amend in a manner reasonably consistent
with each party's economic interests the obligations of the parties under and
pursuant to the Agreement so as to cause the parties' obligations hereunder to
be enforceable and not in violation of any law, rule or regulation of any
governmental authority. In the event such total or partial invalidity or
unenforceability of any provision of this Agreement exists only with respect to
the laws of a particular jurisdiction, this paragraph shall operate upon such
provision only to the extent that the laws of such jurisdiction are applicable
to such provision. Each party agrees to execute and deliver to the other any
further documents which may be reasonably required to effectuate fully the
provisions hereof. Lyric understands and acknowledges that Franchisor shall have
the right, in its sole discretion, on a temporary or permanent basis, to reduce
the scope of any covenant or provision of this Agreement binding upon Lyric, or
any portion hereof, without Lyric's consent, effective immediately upon receipt
by Lyric of written notice thereof, and Lyric agrees that it will comply
forthwith with any covenant as so modified, which shall be fully enforceable.
25.2 Regulatory Reports. Each party agrees to reasonably cooperate with the
other in providing on a timely basis all documents and information in its
possession or reasonably available to it, reasonably required by the other for
reports or filings required by any governmental or other regulatory authority.
25.3 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, but such counterparts together shall constitute one and the same
instrument.
25.4 Table of Contents, Headings and Captions. The table of contents,
headings and captions contained herein are for the purposes of convenience and
reference only and are not to be construed as a part of this Agreement. All
terms and words used herein shall be construed to include the number and gender
as the context of this Agreement may require. The parties agree that each
section of this Agreement shall be construed independently of any other section
or provision of this Agreement.
22
ARTICLE 26. POST TERM OBLIGATIONS
Upon the expiration, termination or assignment of this Agreement, Lyric and
every Franchisee shall immediately:
26.1 Cease Operations. Cease to be a Franchisee of Franchisor under this
Agreement and cease to operate its business under the IHS Systems. Lyric and
each Franchisee shall not thereafter, directly or indirectly, represent to the
public that their business is or was operated or in any way connected with the
IHS Systems or hold itself out as a present (or, publicly, as a former)
franchisee of Franchisor at or with respect to any premises from or at which its
business operated.
26.2 Pay All Sums Outstanding. Pay all sums owing to Franchisor.
26.3 Return Confidential Operating Manual. Return to Franchisor the
Confidential Operating Manual and all trade secret and other confidential
materials, equipment and other property owned by Franchisor, and all copies
thereof, including all such provided to any third party by Lyric or any
Franchisee with Franchisor's prior consent pursuant to this Agreement. Lyric and
the Franchisees shall retain no copy or record of any of the foregoing.
26.4 Cease Use of IHS Systems. Cease to use in advertising, or in any
manner whatsoever, any methods, procedures, protocols, programs, procedures or
techniques associated with the IHS Systems in which Franchisor or IHS has a
proprietary right, title or interest; cease to use the Proprietary Materials and
any other marks and indicia of operation associated with the IHS Systems and
remove all trade dress, physical characteristics, color combinations and other
indications of operation under the IHS Systems from any premises from or at
which Lyric or any Franchisee operated. Without limiting the foregoing, Lyric
and each Franchisee agree that in the event of any termination or expiration of
this Agreement, it will remove all signage bearing the Proprietary Materials,
and will remove from their respective premises any items which are
characteristic of the IHS Systems "trade dress".
ARTICLE 27. TAXES, PERMITS AND INDEBTEDNESS
27.1 Payment. Lyric and each Franchisee shall promptly pay when due any and
all federal, state and local taxes (including unemployment and sales taxes)
levied or assessed with respect to any services or products furnished, used or
licensed pursuant to this Agreement and all accounts or other indebtedness of
every kind incurred by Lyric and each Franchisee in the operation of their
business.
27.2 Compliance with all Laws and Regulations. Lyric and each Franchisee
shall comply with all federal, state and local laws, rules and regulations and
timely obtain any and all permits, certificates and licenses required for the
full and proper conduct of their business.
27.3 Full Responsibility. Lyric and each Franchisee hereby expressly
covenant and agree to accept full and sole responsibility for any and all debts
and obligations incurred in the operation of their business.
23
ARTICLE 28. ACKNOWLEDGMENTS
28.1 LYRIC AND EACH FRANCHISEE ACKNOWLEDGE THAT FRANCHISOR OR ITS AGENT HAS
PROVIDED LYRIC AND EACH FRANCHISEE WITH A FRANCHISE OFFERING CIRCULAR NOT LATER
THAN THE EARLIER OF TEN (10) BUSINESS DAYS BEFORE THE EXECUTION OF THIS
AGREEMENT, OR TEN (10) BUSINESS DAYS BEFORE ANY PAYMENT BY LYRIC OR A FRANCHISEE
OF ANY CONSIDERATION IN CONNECTION WITH THIS AGREEMENT. LYRIC AND EACH
FRANCHISEE FURTHER ACKNOWLEDGE THAT LYRIC AND EACH FRANCHISEE HAVE READ SUCH
FRANCHISE OFFERING CIRCULAR AND UNDERSTAND ITS CONTENTS.
28.2 LYRIC ACKNOWLEDGES THAT FRANCHISOR HAS PROVIDED LYRIC WITH A COPY OF
THIS AGREEMENT AND ALL RELATED DOCUMENTS, FULLY COMPLETED, AT LEAST FIVE (5)
BUSINESS DAYS PRIOR TO LYRIC'S EXECUTION HEREOF OR SUCH FRANCHISEE'S EXECUTION
OF ITS FACILITY FRANCHISE AGREEMENT.
28.3 LYRIC AND EACH FRANCHISEE ARE AWARE OF THE FACT THAT OTHER PRESENT OR
FUTURE FRANCHISE OWNERS OF FRANCHISOR MAY OPERATE UNDER DIFFERENT FORMS OF
AGREEMENT(S), AND CONSEQUENTLY THAT FRANCHISOR'S OBLIGATIONS AND RIGHTS WITH
RESPECT TO ITS VARIOUS FRANCHISE OWNERS MAY DIFFER MATERIALLY IN CERTAIN
CIRCUMSTANCES.
28.4 LYRIC AND EACH FRANCHISEE ACKNOWLEDGE THAT THIS INSTRUMENT CONSTITUTES
THE ENTIRE AGREEMENT OF THE PARTIES RELATING TO THE SUBJECT MATTER HEREOF.
EXCEPT AS SET FORTH IN THE TRANSACTION DOCUMENTS, THIS AGREEMENT TERMINATES AND
SUPERSEDES ANY PRIOR AGREEMENT BETWEEN THE PARTIES CONCERNING THE SAME SUBJECT
MATTER.
28.5 LYRIC AND EACH FRANCHISEE ACKNOWLEDGE THAT COMPUTER SOFTWARE LICENSED
HEREUNDER IS FURNISHED "AS IS". FRANCHISOR MAKES NO WARRANTIES, WHETHER EXPRESS
OR IMPLIED WITH RESPECT TO SUCH SOFTWARE AND DOCUMENTATION DESCRIBING SUCH
SOFTWARE, ITS QUALITY, ITS PERFORMANCE, MERCHANTABILITY, OR FITNESS FOR A
PARTICULAR PURPOSE. THE ENTIRE RISK AS TO THE QUALITY AND PERFORMANCE OF
SOFTWARE AND DOCUMENTATION DESCRIBING SUCH SOFTWARE IS WITH LYRIC.
28.6 LYRIC AND EACH FRANCHISEE ACKNOWLEDGE THAT THIS FRANCHISE OFFER WAS
MADE TO LYRIC AND THE FRANCHISEES IN THE STATE OF FLORIDA.
ARTICLE 29. GUARANTY OF FRANCHISEE OBLIGATIONS
29.1 Definition of "Obligations". In this Article 29 "Obligations" means
any and all debts, obligations, and liabilities of every Franchisee to
Franchisor arising out of or relating to
24
the Franchisees' respective Facility Franchise Agreements with Franchisor,
whether such Facility Franchise Agreements and/or such debts, obligations and
liabilities are previously, now, or subsequently made, incurred, or created,
whether voluntary or involuntary, liquidated or unliquidated, secured or
unsecured, and whether or not any or all such debts, obligations and liabilities
are or become unenforceable by operation of bankruptcy or insolvency laws.
29.2 Guaranty. Lyric hereby (a) unconditionally guarantees the full and
prompt payment and performance of the Obligations when due, whether by
acceleration or otherwise, (b) agrees to pay all costs, expenses and reasonable
attorneys' fees incurred by Franchisor in enforcing this guaranty and the
Obligations and realizing on any collateral therefor, and (c) agrees to pay to
Franchisor the amount of any payments which were made to Franchisor or another
in full or partial satisfaction of the Obligations and which are recovered from
Franchisor by a trustee, receiver, creditor or other party pursuant to
applicable law. This is a guarantee of payment, and not of collection.
Franchisor shall not be obligated to: (i) take any steps to collect from, or to
file any claim of any kind against, any Franchisee, any guarantor, or any other
person or entity liable for payment or performance of the Obligations, or (ii)
take any steps to protect, accept, obtain, enforce, take possession of, perfect
its interest in, foreclose or realize on collateral or security (if any) for
payment or performance of any of the Obligations or any guarantee of any of the
Obligations, or (iii) in any other respect exercise any diligence in collecting
or attempting to collect any of the Obligations.
29.3 Liability Absolute. Lyric shall have the right to assert any defenses
to enforcement of the Obligations that would be available to Franchisees, other
than defenses based on bankruptcy or insolvency laws. However, except for the
preceding sentence, Lyric's liability for payment and performance of the
Obligations shall be absolute and unconditional; and Lyric unconditionally and
irrevocably waives each and every defense which, under principles of guaranty or
suretyship law, would otherwise operate to impair or diminish such liability;
and nothing except actual full payment and performance to Franchisor of the
Obligations shall operate to discharge Lyric's liability under this Article 29.
Without limiting the foregoing, Franchisor shall have the right, from time to
time and without notice, to: (a) extend any credit to any Franchisee, (b) accept
any collateral, security or guarantee for any Obligations or any other credit,
(c) determine how, when and what application of payments, credits and
collections, if any, shall be made on the Obligations and any other credit and
accept partial payments, (d) determine what (if anything) shall be done with
respect to any collateral or security, (e) subordinate, sell, transfer,
surrender, release or otherwise dispose of any such collateral or security, and
purchase or otherwise acquire any such collateral or security at foreclosure or
otherwise, and (f) with or without consideration grant, permit or enter into any
waiver, amendment, extension, modification, refinancing, indulgence, compromise,
settlement, subordination, discharge or release of any of the Obligations.
29.4 Additional Waivers. Lyric waives (a) presentment, notice of dishonor,
protest, demand for payment and all notices of any kind, including notice of
acceptance hereof, notice of the creation of any of the Obligations, notice of
nonpayment, nonperformance or other default on any of the Obligations, and
notice of any action taken to collect upon or enforce any of the Obligations,
(b) any claim for contribution against any co-guarantor, until the Obligations
have been paid or performed in full and such payments are not subject to any
right of recovery, and (c) any setoffs
25
against Franchisor which would otherwise impair Franchisor's rights against
Lyric or any Franchisee hereunder.
29.5 Continuing Effect. This is a continuing guarantee which shall continue
in effect as to those of the Obligations arising out of or relating to each
Facility Franchise Agreement until the particular Facility Franchise Agreement
has terminated in accordance with its terms.
SIGNATURE PAGE FOLLOWS
26
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Amended and Restated Master Franchise Agreement as of the date first
written above.
FRANCHISOR:
INTEGRATED HEALTH SERVICES
FRANCHISING CO., INC.
By: (Seal)
-----------------------------------
Name: Xxxxxx X. Xxxxx
---------------------------------
Title: Senior Vice President
--------------------------------
LYRIC:
LYRIC HEALTH CARE LLC
By: Integrated Health Services, Inc., its Member
By: (Seal)
-----------------------------------
Name: Xxxxxx X. Xxxxx
---------------------------------
Title: Senior Vice President
--------------------------------
S-1
EXHIBIT 1
---------
FACILITY FRANCHISE AGREEMENT
----------------------------
FACILITY FRANCHISE AGREEMENT
AMONG
LYRIC HEALTH CARE LLC,
[INSERT SUBSIDIARY]
AND
INTEGRATED HEALTH SERVICES FRANCHISING CO., INC.
----------
DATED AS OF DECEMBER ___, 1998
----------
Xxx. 0-0
XXXXXXXX XXXXXXXXX AGREEMENT
THIS FACILITY FRANCHISE AGREEMENT (this "Agreement") is made as of December
__, 1998, among LYRIC HEALTH CARE LLC, having an office at 0000 Xxxxxxx Xxx
Xxxxxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxx 00000 ("Lyric"); [INSERT SUBSIDIARY],
having an office at [Insert Address] ("Franchisee"); and INTEGRATED HEALTH
SERVICES FRANCHISING CO., INC., having an office at 00000 Xxx Xxx Xxxxxxxxx,
Xxxxxx Xxxxx, Xxxxxxxx 00000 ("Franchisor").
INTRODUCTORY STATEMENT
Pursuant to a Master Lease, dated as of the date hereof, between Monarch
Properties, LP, as lessor, and Lyric Health Care Holdings III, Inc.
("Holdings"), as lessee, and a Facility Sublease, dated as of the date hereof,
between Holdings, as sublessor, and Franchisee, as sublessee, Franchisee is the
sublessee and operator of a health care facility named [Insert Facility Name]
located at [Insert Facility Address], together with the equipment, furnishings,
and other tangible personal property to be used in connection therewith (the
"Facility"). Franchisee is wholly owned, directly or indirectly, by Lyric.
Lyric and Franchisor have entered into an Amended and Restated Master
Franchise Agreement, dated as of the date hereof (the "Master Franchise
Agreement") franchising the use of the "Trade Names" and the "Proprietary
Materials" (including the "IHS Systems") as defined therein. Franchisee desires
to obtain all the rights and benefits which are granted to "Franchisees" under
the Master Franchise Agreement; and Franchisor and Lyric are willing to accord
such rights and benefits to Franchisee, upon the terms and conditions set forth
below.
NOW, THEREFORE, in consideration of their mutual promises, and intending to
be legally bound hereby, the parties agree as follows:
ARTICLE 1. DEFINITIONS
1.1 Words and phrases defined in the Master Franchise Agreement shall have
the same meanings in this Agreement, unless otherwise defined herein.
1.2 In this Agreement:
(a) "Included Provisions" means all provisions of the Master Franchise
Agreement except the Excluded Provisions.
(b) "Excluded Provisions" means the following Sections and/or Articles
of the Master Franchise Agreement: Section 2.1(b); Section 5.1; Section
12.2; Section 12.3; Section 12.4; Article 15; Section 16.2; Article 23; and
Article 29.
Exh. 1-1
(c) "Territory" means the area within a fifteen-mile radius of the
Facility.
1.3 Other words and phrases are defined in this Agreement.
ARTICLE 2. GRANT OF FRANCHISE
2.1 Franchisor hereby grants to Franchisee, but only with respect to the
Facility described in the Introductory Statement and the Territory described in
Section 1.2(c) above, all rights and benefits granted to Lyric or a "Franchisee"
under the Master Franchise Agreement, except for any rights of Lyric under the
Excluded Provisions.
2.2 Franchisee accepts the foregoing grant and hereby assumes and agrees to
keep, observe, and perform, but only with respect to the Facility described in
the Introductory Statement and the Territory described in Section 1.2(c) above,
all obligations and responsibilities of a "Franchisee" and/or Lyric under the
Master Franchise Agreement, except for any obligations of Lyric under the
Excluded Provisions.
2.3 In furtherance (and not in limitation) of the foregoing, the Included
Provisions are incorporated by reference in this Agreement. References to
"Lyric" in the Included Provisions shall be deemed to include "Franchisee."
ARTICLE 3. ANNUAL FEE
3.1 Franchisee shall pay to Lyric an"Annual Fee" equal to one percent (1%)
of Franchisee's annual Gross Revenues. Franchisee's Annual Fee shall be paid in
installments, and otherwise upon the same terms and conditions, as Lyric's
Annual Continuing Fee under the Master Franchise Agreement; and references to
the "Annual Continuing Fee" in the Included Provisions shall be deemed to mean
the Annual Fee under this Agreement.
ARTICLE 4. TERMINATION
4.1 This Agreement may be terminated by Franchisor--even if the Master
Franchise Agreement does not terminate--upon the occurrence of a default or
other failure by Franchisee under Article 17 of the Included Provisions.
Termination of this Agreement shall not per se terminate the Master Franchise
Agreement (although such termination may otherwise result from, or allow,
termination of the Master Franchise Agreement according to its terms).
Franchisee may not terminate this Agreement prior to the expiration of its term
(whether because of Franchisor's breach, material or otherwise) except with the
prior written consent of Franchisor.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of Franchisee. Franchisee represents and
warrants to Franchisor that:
Exh. 1-2
(a) Franchisee is a corporation duly organized, validly existing and
in good standing under the laws of the State of [Insert];
(b) Franchisee's execution and delivery of this Agreement, and
Franchisee's performance of its obligations under this Agreement, have been
duly authorized by all necessary corporate action;
(c) this Agreement is the legal, valid, and binding obligation of
Franchisee, enforceable in accordance with its terms; and
(d) Franchisee has reviewed carefully and acknowledges and accepts
Article 28 of the Included Provisions.
ARTICLE 6. NOTICES
6.1 Any notice or other communication by either party to the other shall be
in writing and shall be given and be deemed to have been duly given, upon the
date delivered if delivered personally (including by commercial express service)
or upon the date received if mailed postage pre-paid, registered, express, or
certified mail, addressed as follows:
To Franchisee: [Insert Subsidiary]
00000 Xxx Xxx Xxxxxxxxx
Xxxxxx Xxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx
Copy to: Xxxxxxxx X. Xxxxxx, Esq.
To Lyric: Lyric Health Care LLC
0000 Xxxxxxx Xxx Xxxxxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxx
Copy to: Xxxxxxxx X. Xxxxxx, Esq.
Exh. 1-3
To Franchisor: Integrated Health Services Franchising Co., Inc.
00000 Xxx Xxx Xxxxxxxxx
Xxxxxx Xxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx
Copy to: Xxxxxxxx X. Xxxxxx, Esq.
ARTICLE 7. ASSIGNMENT
7.1 Assignment by Franchisee. Franchisee shall have no right to assign this
Agreement. Franchisee's interest in this Agreement may be assigned only as part
of an assignment of the interest of Lyric and all Franchisees in the Master
Franchise Agreement and all Facility Franchise Agreements pursuant to Section
16.2 of the Master Franchise Agreement.
7.2 Assignment by Franchisor. Franchisor shall have the same assignment
rights with respect to this Agreement as it does with respect to the Master
Franchise Agreement.
ARTICLE 8. WAIVER OF COVENANT NOT TO COMPETE POST-TERM
8.1 In the event that Franchisor fails to extend the term of this
Agreement, Franchisor shall be deemed to have waived section 13.2 of the Master
Franchise Agreement concerning the covenant of Lyric and Franchisee not to
compete post-term unless Franchisor provides notice to Franchisee at least six
(6) months prior to the expiration date of this Agreement that section 13.2 of
the Master Franchise Agreement is not waived.
SIGNATURE PAGE FOLLOWS
Exh. 1-4
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Facility Franchise Agreement as of the day and year first above written.
FRANCHISEE: FRANCHISOR:
[INSERT SUBSIDIARY] INTEGRATED HEALTH
SERVICES FRANCHISING CO., INC.
By: By:
------------------------------ ------------------------------
Name: Xxxxxx X. Xxxxx Name: Xxxxxx X. Xxxxx
---------------------------- ----------------------------
Title: Senior Vice President Title: Senior Vice President
--------------------------- ---------------------------
LYRIC:
LYRIC HEALTH CARE LLC
By: Integrated Health Services, Inc.
Its: Member
By:
------------------------------
Name: Xxxxxx X. Xxxxx
----------------------------
Title: Senior Vice President
---------------------------
CONSENTED TO BY:
LYRIC HEALTH CARE HOLDINGS III, INC.
By:
------------------------------
Name: Xxxxxx X. Xxxxx
----------------------------
Title: Senior Vice President
---------------------------
Exh. 1-5
EXHIBIT 2
---------
LIST OF FACILITIES
------------------
-----------------------------------------------------------------------------------------
1. Integrated Health Services at Gainesville 0000 X.X. 00xx Xxxxxx
Xxxxxxxxxxx, Xxxxxxx 00000
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
2. Integrated Health Services of Chestnut Hill 0000 Xxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxxx 00000
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
3. Integrated Health Services of New Hampshire RFD 3 Xxx 00, Xxxxxxx Xxxxxx Ext.
at Xxxxxxxxx Xxxxxxxxx, Xxx Xxxxxxxxx 00000
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
4. Crestwood Care Center 000 Xxxx Xxxx Xxxxxx
Xxxxxx, Xxxx 00000
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
5. Governor's Park 0000 Xxxxx Xxxxxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
6. Integrated Health Services of Florida at 0000 Xxxxxxxxx Xxxxxx
Sarasota Nursing Xxxxxxxx Xxxxxxxx, Xxxxxxx 00000
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
7. Integrated Health Services of Pinellas Park 0000 00xx Xxxxxx X.
Xxxxxxxx Xxxx, Xxxxxxx 00000
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
8. Integrated Health Services of Tarpon Springs 000 Xxxxxxx Xxx
Xxxxxx Xxxxxxx, Xxxxxxx 00000
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
9. Integrated Health Services at Waterford 000 Xxxxxx Xxxx Xxxx
Xxxxxxx Xxxxxx, Xxxx 00000
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
10. Integrated Health Services of Hershey at 820 Xxxx Xxxx Xxxx
Woodlands Xxxxxxxxxxx, Xxxxxxxxxxxx 00000
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
Exh. 2-1
-----------------------------------------------------------------------------------------
11. Integrated Health Services of Colorado 0000 Xxxxxxxx Xxxxxxx
Xxxxxxx Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
12. Horizon Healthcare & Specialty Center 0000 X. Xxxx Xxxx
(HHC- Daytona) Xxxxxxx Xxxxx, Xxxxxxx 00000
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
13. Integrated Health Services of Vero Beach 0000 00xx Xxx.
Xxxx Xxxxx, Xxxxxxx 00000
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
14. Integrated Health Services of Florida at 000 Xxx Xxxxxx Xxxxx Xx.
Xxxxxxxxxx Xxxxxxxxxx, Xxxxxxx 00000
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
15. Integrated Health Services of Florida at 0000 Xxxxxxxx Xxxxxx
Xxxxxxxxxx Xxxxxxxxxx, Xxxxxxx 00000
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
16. Integrated Health Services of Florida at Fort 000 Xxxxx 00xx Xx.
Xxxxxx Xxxx Xxxxxx, Xxxxxxx 00000
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
17. Integrated Health Services of Atlanta at 0000 Xxxxxxxxxx Xx.
Xxxxxxxxxx Xxxxx Xxxxxxx, Xxxxxxx 00000
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
18. Xxxxxxx Xxxxx 000 Xxxxxx Xxxx
Xxxxxx, Xxxxxxxx 00000
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
19. Integrated Health Services of St. Louis at Big 000 Xxxxxxxx Xxx.
Xxxx Xxxxx Xxxxxx Xxxx, Xxxxxxxx 00000
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
20. Integrated Health Services of New Hampshire 000 Xxxxxxx Xxxx Xx.
at Manchester Xxxxxxxxxx, Xxx Xxxxxxxxx 00000
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
21. Ruidoso Care Xxxxxx 0xx & X Xxxxxx
Xxxxxxx, Xxx Xxxxxx
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
Exh. 2-2
-----------------------------------------------------------------------------------------
22. Meadowview Care Center 00 Xxxx Xxxxxx
Xxxxxxx, Xxxx 00000
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
23. Washington Square 000 Xxxxxxxxxx Xx. XX
Xxxxxx, Xxxx 00000
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
24. HSH Midwest City 0000 Xxxxxxxx Xxxxxx
Xxxxxxx Xxxx, Xxxxxxxx 00000
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
25. Midwest City Nursing 0000 Xxxxxxxx Xxxxxx
Xxxxxxx Xxxx, Xxxxxxxx 00000
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
26. Integrated Health Services at Whitemarsh 0000 Xxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
27. Amarillo Specialty Hospital 0000 Xxxx Xxxxx Xxxxx
Xxxxxxxx, Xxxxx 00000
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
28. Doctors Healthcare Center 0000 Xxxxx Xxxx Xxxxx
Xxxxxx, Xxxxx
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
29. Harbor View Care Center 0000 Xxxxx Xxxxxx
Xxxxxx Xxxxxxx, Xxxxx 00000
(Nueces County)
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
30. Heritage Estates 000 Xxxxxxxx Xxxxxx Xx.
Xx. Xxxxx, Xxxxx 00000
(Tarrant County)
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
31. Heritage Gardens 0000 Xxxxx Xxxxxx Xxxxx
Xxxxxxxxxx, Xxxxx 00000
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
Exh. 2-3
-----------------------------------------------------------------------------------------
32. Heritage Manor Longview 000 Xxxx Xxxx Xxxxx
Xxxxxxxx, Xxxxx 00000
(Xxxxx County)
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
33. Heritage Manor Plano 0000 Xxxx Xx.
Xxxxx, Xxxxx 00000
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
34. Heritage Place Grand Prairie 000 Xxxxx Xxxxxx
Xxxxx Xxxxxxx, Xxxxx 00000
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
35. Horizon Healthcare - El Paso 0000 X. Xxxxxx Xx.
Xx Xxxx, Xxxxx 00000
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
36. HSH- Corpus Christi 0000 Xxxxx Xxxxxx
Xxxxxx Xxxxxxx, Xxxxx 00000
(Nueces County)
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
37. HSH- El Paso 0000 X. Xxxxxx Xx.
Xx Xxxx, Xxxxx 00000
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
38. Integrated Health Services of Amarillo 0000 Xxxx Xxxxx Xxxxx
Xxxxxxxx, Xxxxx 00000
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
39. Mountain View Place 0000 Xxxxxxxxx Xxxx
Xx Xxxx, Xxxxx 00000
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
40. Parkwood Place 000 X. Xxxxx
Xxxxxx, Xxxxx 00000
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
41. Plano Specialty Hospital (HSH- Plano) 0000 Xxxx Xxxx
Xxxxx, Xxxxx 00000
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
42. Silver Springs Nursing and Rehabilitation 00000 Xxxx Xxxxx Xxxxx
Xxxxxx Xxxxxxx, Xxxxx 00000
000-000-0000
000-000-0000 (fax)
-----------------------------------------------------------------------------------------
Exh. 2-4
EXHIBIT 3
---------
INTENTIONALLY OMITTED
Exh. 3-1
EXHIBIT 4
---------
LIST OF INDIVIDUAL FRANCHISEE NAMES,
------------------------------------
NAMES OF BUSINESSES,
--------------------
AND TERRITORIES
---------------
-----------------------------------------------------------------------------------------------------------------
OWNER FACILITY TERRITORY
-----------------------------------------------------------------------------------------------------------------
Bethamy Living Center Limited Partnership Integrated Health The area within a
Services of Florida fifteen-mile radius of
at Clearwater Integrated Health
Services of Florida
at Clearwater
-----------------------------------------------------------------------------------------------------------------
Briar Hill, Inc. Integrated Health The area within a
Services of Florida fifteen-mile radius of
at Auburndale Integrated Health
Services of Florida
at Auburndale
-----------------------------------------------------------------------------------------------------------------
Cambridge Group of Pennsylvania, Inc. Integrated Health The area within a
Services of Hershey fifteen-mile radius of
at Woodlands Integrated Health
Services of Hershey
at Woodlands
-----------------------------------------------------------------------------------------------------------------
Cedarcroft Health Services, Inc. Integrated Health The area within a
Services of St. Louis fifteen-mile radius of
at Big Bend Xxxxx Integrated Health
Services of St. Louis
at Big Bend Xxxxx
-----------------------------------------------------------------------------------------------------------------
Central Park Lodges (Tarpon Springs), Inc. Integrated Health The area within a
Services of Tarpon fifteen-mile radius of
Springs Integrated Health
Services of Tarpon
Springs
-----------------------------------------------------------------------------------------------------------------
Claremont Integrated Health, Inc. Integrated Health The area within a
Services of New fifteen-mile radius of
Hampshire at Integrated Health
Claremont Services of New
Hampshire at
Claremont
-----------------------------------------------------------------------------------------------------------------
Exh. 4-1
-----------------------------------------------------------------------------------------------------------------
OWNER FACILITY TERRITORY
-----------------------------------------------------------------------------------------------------------------
F. L. C. Sarasota Nursing Pavilion, Inc. Integrated Health The area within a
Services of Florida fifteen-mile radius of
at Sarasota Nursing Integrated Health
Pavilion Services of Florida
at Sarasota Nursing
Pavilion
-----------------------------------------------------------------------------------------------------------------
Gainesville Health Care Center, Inc. Integrated Health The area within a
Services at fifteen-mile radius of
Gainesville Integrated Health
Services at
Gainesville
-----------------------------------------------------------------------------------------------------------------
IHS Acquisition No. 103, Inc. Horizon Healthcare The area within a
& Specialty Center fifteen-mile radius of
(HHC - Daytona) Horizon Healthcare
& Specialty Center
(HHC - Daytona)
-----------------------------------------------------------------------------------------------------------------
IHS Acquisition No. 114, Inc. Xxxxxxx Xxxxx The area within a
fifteen-mile radius of
Xxxxxxx Xxxxx
-----------------------------------------------------------------------------------------------------------------
IHS Acquisition No. 121, Inc. Ruidoso Care Center The area within a
fifteen-mile radius of
Ruidoso Care Center
-----------------------------------------------------------------------------------------------------------------
IHS Acquisition No. 123, Inc. Crestwood Care The area within a
Center fifteen-mile radius of
Crestwood Care
Center
-----------------------------------------------------------------------------------------------------------------
IHS Acquisition No. 124, Inc. Washington Square The area within a
fifteen-mile radius of
Washington Square
-----------------------------------------------------------------------------------------------------------------
IHS Acquisition No. 125, Inc. Meadowview Care The area within a
Center fifteen-mile radius of
Meadowview Care
Center
-----------------------------------------------------------------------------------------------------------------
IHS Acquisition No. 127, Inc. Midwest City The area within a
Nursing fifteen-mile radius of
Midwest City
Nursing
-----------------------------------------------------------------------------------------------------------------
Exh. 4-2
-----------------------------------------------------------------------------------------------------------------
OWNER FACILITY TERRITORY
-----------------------------------------------------------------------------------------------------------------
IHS Acquisition No. 128, Inc. Doctors Healthcare The area within a
Center fifteen-mile radius of
Doctor Healthcare
Center
-----------------------------------------------------------------------------------------------------------------
IHS Acquisition No. 129, Inc. Heritage Manor The area within a
Plano fifteen-mile radius of
Heritage Manor
Plano
-----------------------------------------------------------------------------------------------------------------
IHS Acquisition No. 131, Inc. Horizon Healthcare - The area within a
El Paso fifteen-mile radius of
Horizon Healthcare -
El Paso
-----------------------------------------------------------------------------------------------------------------
IHS Acquisition No. 132, Inc. Heritage Gardens The area within a
fifteen-mile radius of
Heritage Gardens
-----------------------------------------------------------------------------------------------------------------
IHS Acquisition No. 133, Inc. Heritage Place of The area within a
Grand Prairie fifteen-mile radius of
Heritage Place of
Grand Prairie
-----------------------------------------------------------------------------------------------------------------
IHS Acquisition No. 134, Inc. Heritage Estates The area within a
fifteen-mile radius of
Heritage Estates
-----------------------------------------------------------------------------------------------------------------
IHS Acquisition No. 136, Inc. Silver Springs The area within a
Nursing and fifteen-mile radius of
Rehabilitation Center Silver Springs
Nursing and
Rehabilitation Center
-----------------------------------------------------------------------------------------------------------------
IHS Acquisition No. 138, Inc. Heritage Manor The area within a
Longview fifteen-mile radius of
Heritage Manor
Longview
-----------------------------------------------------------------------------------------------------------------
IHS Acquisition No. 139, Inc. Parkwood Place The area within a
fifteen-mile radius of
Parkwood Place
-----------------------------------------------------------------------------------------------------------------
Exh. 4-3
-----------------------------------------------------------------------------------------------------------------
OWNER FACILITY TERRITORY
-----------------------------------------------------------------------------------------------------------------
IHS Acquisition No. 140, Inc. Harbor View Care The area within a
Center fifteen-mile radius of
Harbor View Care
Center
-----------------------------------------------------------------------------------------------------------------
IHS Acquisition No. 168, Inc. HSH Midwest City The area within a
fifteen-mile radius of
HSH Midwest City
-----------------------------------------------------------------------------------------------------------------
IHS Acquisition No. 170, Inc. HSH - Corpus The area within a
Christi fifteen-mile radius of
HSH - Corpus
Christi
-----------------------------------------------------------------------------------------------------------------
IHS Acquisition No. 171, Inc. HSH - El Paso The area within a
fifteen-mile radius of
HSH - El Paso
-----------------------------------------------------------------------------------------------------------------
IHS Acquisition No. 174, Inc. Plano Specialty The area within a
Hospital fifteen-mile radius of
Plano Specialty
Hospital
-----------------------------------------------------------------------------------------------------------------
Integrated Health Services at Briarcliff Integrated Health The area within a
Haven, Inc. Services at Briarcliff fifteen-mile radius of
Haven Integrated Health
Services at Briarcliff
Haven
-----------------------------------------------------------------------------------------------------------------
Integrated Health Services at Central Integrated Health The area within a
Florida, Inc. Services of Florida fifteen-mile radius of
at Fort Xxxxxx Integrated Health
Services of Florida
at Fort Xxxxxx
-----------------------------------------------------------------------------------------------------------------
Integrated Health Services at Central Integrated Health The area within a
Florida, Inc. Services at Vero fifteen-mile radius of
Beach Integrated Health
Services at Vero
Beach
-----------------------------------------------------------------------------------------------------------------
Exh. 4-4
-----------------------------------------------------------------------------------------------------------------
OWNER FACILITY TERRITORY
-----------------------------------------------------------------------------------------------------------------
Integrated Health Services at Hanover Mountain View The area within a
House, Inc. Place fifteen mile radius of
Integrated Health
Services at Mountain
View Place
-----------------------------------------------------------------------------------------------------------------
Integrated Health Services of Colorado Integrated Health The area within a
Springs, Inc. Services of Colorado fifteen-mile radius of
Springs Integrated Health
Services of Colorado
Springs
-----------------------------------------------------------------------------------------------------------------
Integrated Health of Waterford Commons, Integrated Health The area within a
Inc. Services at fifteen-mile radius of
Waterford Commons Integrated Health
Services at
Waterford Commons
-----------------------------------------------------------------------------------------------------------------
Integrated of Amarillo, Inc. Integrated Health The area within a
Services of Amarillo fifteen-mile radius of
Integrated Health
Services of Amarillo
-----------------------------------------------------------------------------------------------------------------
Integrated of Amarillo, Inc. Amarillo Specialty The area within a
Hospital fifteen-mile radius of
Amarillo Specialty
Hospital
-----------------------------------------------------------------------------------------------------------------
Integrated Management - Governor's Park, Governor's Park The area within a
Inc. Nursing and fifteen-mile radius of
Rehabilitation Center Governor's Park
Nursing and
Rehabilitation Center
-----------------------------------------------------------------------------------------------------------------
Manchester Integrated Health, Inc. Integrated Health The area within a
Services of New fifteen-mile radius of
Hampshire at Integrated Health
Manchester Services of New
Hampshire at
Manchester
-----------------------------------------------------------------------------------------------------------------
Exh. 4-5
-----------------------------------------------------------------------------------------------------------------
OWNER FACILITY TERRITORY
-----------------------------------------------------------------------------------------------------------------
Pinellas Park Nursing Home, Inc. Integrated Health The area within a
Services of Pinellas fifteen-mile radius of
Park Integrated Health
Services of Pinellas
Park
Rest Haven Nursing Center (Chestnut Hill), Integrated Health The area within a
Inc. Services of Chestnut fifteen-mile radius of
Hill Integrated Health
Services of Chestnut
Hill
-----------------------------------------------------------------------------------------------------------------
Rest Haven Nursing Center (Whitemarsh), Integrated Health The area within a
Inc. Services at fifteen-mile radius of
Whitemarsh Integrated Health
Services at
Whitemarsh
-----------------------------------------------------------------------------------------------------------------
Exh. 4-6
EXHIBIT 5
---------
GUIDELINES FOR DETERMINING TERRITORIES
--------------------------------------
The "Territory" for each "Health Care Business" shall be determined on a
case-by-case basis (with the specific "Territory" for each business listed in
Exhibit 2 to the Franchise Agreement for such business) based on the following
guidelines:
o The location of a majority of the main facility's patients (based on Zip
Codes);
o The drive time to the main facility for a majority of its patients;
o The population of the relevant metropolitan area where the main facility is
located;
o The location of all competitors in the relevant market area;
o The location of ancillary services offered by the business; and
o The territorial restrictions agreed to by IHS or competitors in previous
sales of facilities in comparable geographical areas.
Based on the foregoing factors, a "Territory" will be determined for each
facility measured in miles from a radius originating at the facility's main
operation (Hospital or RTC).
Exh. 5-1
