CHARTER FRANCHISE SERVICES, LLC
FRANCHISE AGREEMENT
TABLE OF CONTENTS
PAGE
1. GRANT OF FRANCHISE.................................................. 1
1.1. Grant............................................. 1
1.2. Modifications; Amendments to Charter System....... 2
1.3. New Products...................................... 2
1.4. Territory Exclusive............................... 2
1.5. Excepted Providers................................ 2
1.6 Reservation of Rights............................. 2
2. TERM AND RENEWAL.................................................... 3
3. OPERATING ASSISTANCE................................................ 3
4. FEES................................................................ 5
4.1. Franchise Fee..................................... 5
4.2. Annual Continuing Fee............................. 5
4.3. Definition of "Contract Year"..................... 5
4.4. Monthly Installments.............................. 6
4.5. Annual Continuing Fee for Short Contract Year..... 6
4.6. Payment Following Contract Year End............... 6
4.7. Taxes............................................. 6
4.8. Advances by Franchisor............................ 6
4.9. Interest.......................................... 6
4.10. Gross Revenues.................................... 7
4.11. Application of Payments........................... 8
5. LICENSED MARKS...................................................... 8
5.1. Ownership.......................................... 8
5.2. Authorized Use.................................... 8
5.3. Infringement...................................... 8
5.4. Operation Under Licensed Marks.................... 9
5.5. Modification/Replacement of Licensed Marks........ 9
6. STANDARDS OF OPERATION.............................................. 9
6.1. Signs............................................. 9
6.2. Compliance with System............................ 9
6.3. Compliance With Law............................... 10
6.4. Joint Commission on Accreditation of Health
Care Organizations (JCAHO)........................ 10
6.5. Maintenance of Standards.......................... 10
6.6. Operation in Conformity with Prescribed Methods,
i
PAGE
Standards and Specifications...................... 10
6.7. Printed Materials; Marketing...................... 10
6.8. Ownership Identification.......................... 11
6.9. Patient Relations................................. 11
6.10. Right to Inspect.................................. 11
6.11. Variation of Standards............................ 11
6.12. Accounting Equipment and Software................. 11
6.13. Discoveries and Ideas............................. 11
7. CONFIDENTIAL OPERATING MANUAL....................................... 12
7.1. Compliance with Confidential Operating Manual..... 12
7.2. Confidentiality................................... 12
7.3. Revisions......................................... 12
7.4. Current Copy.......................................12
8. ADVERTISING AND MARKETING........................................... 13
8.1. Local Advertising................................. 13
8.2. Approval of Advertising........................... 13
8.3. Participation in Cooperative Advertising and/or
Marketing Programs................................ 13
8.4. Operation of Call Center.......................... 13
9. STATEMENTS, RECORDS AND FEE PAYMENTS................................ 14
9.1. Maintenance of Records; Audit Rights.............. 14
9.2. Reports........................................... 14
9.3. Tax Reports....................................... 14
9.4. Unaudited Periodic Statements..................... 14
9.5. Annual Audited Statement.......................... 15
10. ADDITIONAL COVENANTS................................................ 15
10.1. Covenant ......................................... 15
10.2. Covenant Not to Compete........................... 15
10.3. Acknowledgment of Reasonableness.................. 15
10.4. Confidential Information.......................... 15
10.5. Confidential Agreements with Certain Employees.... 16
10.6. Severability...................................... 16
11. TRANSFER AND ASSIGNMENT............................................. 16
11.1. Assignment by Franchisor.......................... 16
11.2. Assignment by Franchisee.......................... 17
ii
PAGE
11.3. Conditions of Any Approval........................ 17
11.4. Consent Not a Waiver................................. 18
11.5. Parties Bound and Benefitted...................... 18
12. DEFAULT AND TERMINATION............................................. 18
12.1. Franchisor's Right to Terminate................... 18
12.2. Franchise Owner's Right to Terminate.............. 20
13. POST TERM OBLIGATIONS............................................... 22
13.1. Cease Operations.................................. 22
13.2. Pay All Sums Outstanding.......................... 22
13.3. Return Confidential Operating Manual.............. 22
13.4. Transfer of Certain Interests..................... 22
13.5. Cease Use of System............................... 22
14. INSURANCE .......................................................... 23
14.1. Maintenance of Insurance.......................... 23
14.2. Notices of Claims................................. 23
14.3. Notices of Other Claims/Events.................... 23
15. TAXES, PERMITS AND INDEBTEDNESS..................................... 23
15.1. Payment........................................... 23
15.2. Compliance with all Laws and Regulations.......... 23
15.3. Full Responsibility............................... 24
16. INDEMNIFICATION AND INDEPENDENT CONTRACTOR.......................... 24
16.1. Indemnification and Hold Harmless................. 24
16.2. Independent Contractor............................ 24
17. WRITTEN APPROVALS, WAIVERS, FORMS OF AGREEMENT
AND AMENDMENT....................................................... 24
17.1. Prior Approvals................................... 24
17.2. No Waiver......................................... 24
17.3. Form of Agreements................................ 24
17.4. Written Amendments................................ 25
18. ENFORCEMENT......................................................... 25
18.1. Inspections....................................... 25
18.2. Injunctive Relief................................. 25
iii
PAGE
18.3. Costs and Expenses................................ 25
18.4. No Right to Offset................................ 25
19. ENTIRE AGREEMENT.................................................... 26
20. NOTICES............................................................. 26
21. GOVERNING LAW AND DISPUTE RESOLUTION................................ 26
21.1. Governing Law..................................... 26
21.2. Arbitration....................................... 27
22. SEVERABILITY, CONSTRUCTION.......................................... 27
22.1. Severability...................................... 27
22.2. Regulatory Reports................................ 28
22.3. Counterparts...................................... 28
22.4. Table of Contents, Headings and Captions.......... 28
23. MANAGEMENT CONTRACTS/JOINT VENTURES/CONSULTING
AGREEMENTS.......................................................... 28
24. ACKNOWLEDGMENTS..................................................... 28
iv
CHARTER FRANCHISE SERVICES, LLC FRANCHISE AGREEMENT
THIS FRANCHISE AGREEMENT (the "Agreement or the "Franchise Agreement") is
entered into as of _________, 19____ (the "Effective Date") by and between
Charter Franchise Services, LLC, a Delaware limited liability company, with its
principal place of business at ________________________, ("Franchisor"), and
__________________________ ("Franchise Owner") with its principal place of
business at ------------------------------------------.
W I T N E S S E T H :
A. Franchisor owns or has the right to license certain trade names,
trademarks, service marks and/or indicia of origin identified on Exhibit "1"
hereto (the "Licensed Marks"), the uniqueness and value of which are
acknowledged by Franchise Owner. In connection therewith, Franchisor has
developed a plan for a system for the operation of Hospital/RTC Based Behavioral
Healthcare Businesses (as hereinafter defined) under the Licensed Marks, which
system includes the right and license to utilize certain computer software owned
by Franchisor or, subject to the terms of the respective license agreement,
licensed to Franchisor, treatment protocols, treatment, financial, legal and
other programs and procedures, quality standards, quality assessment methods,
performance improvement and monitoring programs, advertising and marketing
assistance, promotional materials, consultation and other matters relating to
the operation of Hospital/RTC Based Behavioral Healthcare Businesses (the
"Charter System"), all of which are designed to enhance the reputation and
goodwill with the public of establishments operated pursuant to the Charter
System. "Hospital/RTC Based Behavioral Healthcare Business" as used herein shall
mean the business of the operation of an acute care psychiatric hospital, part
of an acute care general hospital operating an acute care psychiatric unit, a
behavioral healthcare residential treatment center, a part of a facility
operating a behavioral healthcare residential treatment center, or other similar
facility providing 24-hour behavioral healthcare (together an "In Patient
Facility"), and the delivery of behavioral healthcare from such facility and
other affiliated facilities; such behavioral healthcare to include inpatient
hospitalization, partial hospitalization programs, outpatient therapy, intensive
outpatient therapy, ambulatory detoxification, behavioral modification programs
and related services.
B. Franchise Owner has investigated and become familiar with the Charter
System, and desires, upon the terms and conditions set forth herein, to obtain a
license to use the Charter System in the operation of its Hospital/RTC Based
Healthcare Business (the "Franchised Business"). Franchisor is willing, upon the
terms and conditions set forth herein, to license Franchise Owner to operate the
Franchised Business.
1. GRANT OF FRANCHISE
1.1. Grant. Subject to all of the terms and conditions herein, Franchisor
grants to Franchise Owner the non-exclusive right to use the Charter System in
the operation of the
1
Franchised Business at any present or future facilities located in the
geographic area described in Exhibit 3 to this Agreement (the "Territory"). The
rights herein granted are sometimes referred to in this Agreement as the
"Franchise." Franchise Owner agrees at all times during the continuance of this
Agreement to use its commercially reasonable best efforts to promote and operate
the Franchised Business. The Franchised Business shall be operated only under
the following name:____________________________________________________________.
1.2. Modifications; Amendments to Charter System. Franchisor reserves the
right from time to time to amend, modify, delete or enhance any portion of the
Charter System (including any of the Licensed Marks) as may be advisable in
Franchisor's sole judgment to change, maintain or enhance the Charter System,
Licensed Marks or the reputation, efficiency, competitiveness and/or quality of
the Charter System, or to adapt it to new conditions, laws, regulations or
technology, or to better serve the public. Franchise Owner, at its expense, will
fully comply with all such amendments, modifications, deletions and enhancements
designated as applicable to then existing franchise owners similarly situated.
1.3. New Products. Franchisor may from time to time develop new products
and new concepts for the delivery of behavioral healthcare and Behavioral
Modifications and Related Services (as hereinafter defined) ("New Concepts")
which may be suitable to be provided by the Franchised Business. Franchisor may,
at its sole discretion, designate such as applicable to Franchise Owner and/or
other existing franchise owners. To the extent that Franchisor does not
designate a New Product as applicable to Franchise Owner, does not elect to
utilize a New Product or elects to utilize a New Product but fails or refuses to
comply with such reasonable terms and conditions as Franchisor shall provide in
connection therewith (in which event Franchise Owner shall be deemed to have
elected not to utilize a New Product), then Franchisor may itself operate or
franchise others to operate businesses utilizing such New Product from
facilities in the Territory. As used herein, the term "Behavioral Modification
Programs and Related Services" shall mean any type of programs or services for
providing behavioral modification without regard to whether such behavioral
modification may be provided in an In Patient Facility or other affiliated
facility and shall include, for example, weight loss, stress management, smoking
cessation and similar products and programs.
1.4. Territory Exclusive. Franchisor agrees that during the term of this
Agreement, it will not establish or maintain, or franchise any other person or
firm to establish or maintain a facility located within the Territory using the
Charter System, except as otherwise provided in this Article 1.
1.5. Excepted Providers. Notwithstanding anything in this Article 1 to the
contrary, Franchisor may grant franchises or other licenses to individual
physicians, psychologists or other mental healthcare professionals or to groups
thereof or to entities employing such, to operate businesses for the delivery of
behavioral healthcare utilizing the Charter System at facilities within the
Territory, except that Franchisor will not grant any such franchise or license
for the operation of such a business at an In-Patient Facility in the Territory.
2
1.6 Reservation of Rights. Franchise Owner acknowledges and agrees that, in
addition to the rights contained in other subsections of this Article 1,
Franchisor may grant to another or others the right and franchise to operate, at
facilities outside the Territory, Hospital/RTC Based Behavioral Healthcare
Businesses utilizing the Charter System, even if such businesses compete with
Franchise Owner's Franchised Business, and that Franchisor may otherwise use and
grant to others the right to use the Licensed Marks, or any other names and
marks, for other businesses. It is understood that nothing contained in this
Agreement shall prevent Franchisor (i) from providing behavioral healthcare
incidental to the managed behavioral healthcare business or incidental to any
other business the principal purpose of which is not the operation of a
Hospital/RTC Based Behavioral Healthcare Business, and (ii) from, pursuant to
contracts with federal, state and local governments and governmental agencies,
providing health and human services, including behavioral healthcare services,
to the mentally retarded, the developmentally disabled, the elderly, persons
under the control or supervision of criminal/juvenile justice systems and other
designated populations.
2. TERM AND RENEWAL
(a) This Agreement, unless previously terminated pursuant to Paragraph
_____ hereof, shall extend for _____________ (_________) years from the
Effective Date (the "Initial Term").
(b) If Franchise Owner is not in default under this Agreement, and has
materially complied with all of its provisions during the Initial Term,
including the timely payment of all fees, and further provided that
Franchise Owner has the right to continue to occupy the Premises, Franchise
Owner may renew this Franchise for One (1) additional term of ___________
(________) years (the "Renewal Term"). At least thirty (30) days prior to
the Renewal Term, Franchise Owner shall pay to Franchisor a renewal fee in
an amount equal to ________ percent (______%) of the then-current initial
franchise fee charged by Franchisor to similarly situated franchise owners
executing new franchise agreements, and in accordance with Franchisor's
then-current terms and conditions for granting renewal franchises, which
may include: (i) execution of a new and modified agreement with different
performance standards, fee structures and/or increased fees; and (ii)
execution of a general release under seal, in a form satisfactory to
Franchisor, of any and all claims against Franchisor, its parent,
subsidiaries or affiliates (if applicable) and their officers, directors,
attorneys, shareholders and employees.
(c) Franchise Owner shall exercise its option to seek renewal by
giving Franchisor written notice of Franchise Owner's election to renew not
less than six (6) nor more than twelve (12) months prior to the expiration
of the Initial Term; otherwise, such renewal right shall expire
automatically.
3. OPERATING ASSISTANCE
3
(a) Prior to Franchise Owner's commencement of business under the
Charter System, Franchisor shall provide Franchise Owner with such of the
following assistance, on the same basis as it will from time to time make
available to other franchise owners of Franchisor:
(i) Information with respect to standards and specifications for
all signs, improvements, equipment and other related facilities for
use in typical or similar Charter System franchised businesses;
(ii) Information concerning possible sources of signs, equipment,
fixtures, furnishings, improvements and other products and services
available in connection with the operation of Charter System
franchised business;
(iii) [Describe training].
(iv) One (1) set of any written materials which Franchisor may
make available (known as the Confidential Operating Manual(s), as
defined in Paragraph 8 hereof), as the same may be amended from time
to time by Franchisor in its sole discretion;
(v) Computer software programs which may be required by
Franchisor to be utilized by Franchise Owner in the operation of the
Franchised Business and which may be updated or modified by Franchisor
from time to time during the term of this Agreement. Any such software
programs are proprietary and shall remain the property of Franchisor
and shall be on loan to Franchise Owner only during the term of this
Agreement.]
(b) Franchisor reserves the right to require Franchise Owner to
maintain standards of quality, appearance and service at all Franchised
Business facilities, thereby maintaining the public image and reputation of
the Charter System and the demand for the services and products provided
thereunder, and to that end Franchisor may in its sole discretion provide
Franchise Owner with the following ongoing assistance as it deems
appropriate:
(i) Periodic 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 for franchise owners.
(ii) Risk management services, including risk financing planning,
loss control and claims management.
(iii) Outcomes monitoring.
4
(iv) National and regional contracting services. (v) Consultation
by telephone or at Franchisor's offices with respect to matters
relating to the Franchised Business in which Franchisor has expertise,
including matters relating to reimbursement, government relations,
clinical strategies, regulatory matters, strategic planning and
business development.
4. FEES
4.1. Franchise Fee. In consideration of the execution of this Agreement,
Franchise Owner agrees to pay Franchisor an initial franchise fee in the amount
of _______________ ($________) which is being paid in full at the execution
hereof.
4.2. Annual Continuing Fee. For each "Contract Year" (as hereinafter
defined), Franchise Owner shall pay to Franchisor, subject to the terms of
Section 4.5 below, an annual continuing fee (the "Annual Continuing Fee") in the
amount of the greater of:
(a) _________________________________ Dollars ($____________) plus an
amount calculated by multiplying ___________________________ Dollars
($__________) by the percentage increase in the Consumer Price Index,
United States City Average for All Urban Consumers for All items (as
published by the U.S. Department of Labor, Bureau of Labor Statistics) (the
"CPI") between the end of the latest period for which said index has been
published prior to the date of this Agreement and the end of the latest
period for which said index has been published prior to the first day of
said Contract Year (the "Minimum Annual Continuing Fee"), except that no
adjustment to the Minimum Annual Continuing Fee shall be made for the
second Contract Year (Contract Year commencing October 1, 1997) it being
understood that the adjustment made for the third Contract Year (Contract
Year commencing October 1, 1998) shall take into consideration the change
in the CPI between the end of the latest period for which said index has
been published prior to the date of this Agreement and the end of the
latest period for which said index has been published prior to the first
day of the third Contract Year; or
(b) _____________________________ Dollars ($__________) plus (i) 3% of
Gross Revenues above _____________________________ Dollars ($_____________)
and less than _____________________________________ Dollars
($_____________) during said Contract Year, and (ii) 5% of Gross Revenues
above ____________________ _____________________ Dollars ($_____________)
during said Contract Year.
4.3. Definition of "Contract Year". As used in this Article 4, the term
"Contract Year" shall refer to any period which begins on the date of this
Agreement or any succeeding October 1 and ends on the earlier of the following
September 30 or the effective date of expiration or termination of this
Agreement.
5
4.4. Monthly Installments. During each Contract Year, Franchise Owner shall
make monthly installments against the Annual Continuing Fee for said Contract
Year. During each of the first and second Contract Years, each such monthly
installment shall be equal to 1/12th of the Minimum Annual Continuing Fee for
said Contract Year. During each subsequent Contract Year, each such monthly
installment shall be equal to 1/12th of the greater of (a) the Minimum Annual
Continuing Fee for said Contract Year or (b) the Annual Continuing Fee for the
preceding Contract Year. The first monthly installment shall be paid on the date
of this Agreement; and subsequent installments shall be paid on or before the
first day of each subsequent calendar month during the term of this Agreement.
4.5. Annual Continuing Fee for Short Contract Year. If the term of this
Agreement includes any Contract Year of less than 365 days (i.e., because the
date of this Agreement or the effective date of expiration or termination of
this Agreement is in the middle of a Contract Year), the Annual Continuing Fee
for such Contract Year shall be the greater of:
(a) the product of the Minimum Annual Continuing Fee for said Contract
Year times a fraction the numerator of which is the number of days that
this Agreement was in effect during said Contract Year (the "Effective
Days"), and the denominator of which is 365, or
(b) the product of the amount calculated pursuant to subsection 4.2(b)
above (provided, however, that for purposes of said calculation the "Gross
Revenues" for said Contract Year shall be "Gross Revenues" as defined in
Section 4.10 below for said Contract Year times a fraction the numerator of
which is 365 and the denominator of which is the Effective Days), times a
fraction the numerator of which is the Effective Days and the denominator
of which is 365.
4.6. Payment Following Contract Year End. If the aggregate dollar amount of
payments made by Franchise Owner to Franchisor in respect of any Contract Year
pursuant to Section 4.4 above is different than the Annual Continuing Fee for
said Contract Year, a payment in the amount of such overpayment or underpayment
shall be made by the appropriate party within seventy-five (75) days after the
end of said Contract Year.
4.7. Taxes. Franchise Owner 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 Fees and of goods or services furnished to
Franchise Owner by Franchisor, whether such goods or services are furnished by
sale, lease or otherwise.
4.8. Advances by Franchisor. Franchise Owner 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 Franchisee.
6
4.9. Interest. Franchise Owner shall pay to Franchisor interest on any
amounts which are past due at the lower of the maximum rate permitted by law or
the Prime Rate, plus six percent (6%) per annum. The term" Prime Rate" as used
in this Agreement shall mean the prime rate of interest from time to time as
published in The Wall Street Journal.
4.10. Gross Revenues. "Gross Revenues" shall mean the sum of the following:
(a) the aggregate gross patient charges from operation of the
Franchised Business at established billing rates, less provision for
contractual adjustments and provision for denied claims (where collection
is not pursued directly from the patient), determined in accordance with
generally accepted accounting principles, and the gross amount of all other
revenues from whatever source derived (whether in the form of cash, credit,
agreements to pay, or other consideration, and whether or not payment is
received at the time of the sale or provision of services) which arise from
or are derived by Franchise Owner or any other person affiliated with
Franchise Owner, directly or indirectly from products or services sold or
provided directly or indirectly by Franchise Owner, or from the sale of
services or products associated with the use of the Licensed Marks. Gross
Revenues shall not include amounts not actually collected (bad debts) to
the extent such have been included in Gross Revenues reported to Franchisor
for prior periods.
Plus,
(b) the gross revenues ("Business Gross Revenues") of all the
businesses which are the subject of joint venture agreements or
arrangements of Franchise Owner (the "Joint Venture Businesses") and the
businesses which are the subject of management agreements and other
agreements and arrangements of Franchise Owner pursuant to which Franchise
Owner provides management, consulting or other services for so long as any
such agreements or arrangements are in effect (the "Managed Businesses").
"Business Gross Revenues" shall mean the aggregate gross patient charges
from each of the Joint Venture Businesses and each of the Managed
Businesses at established billing rates, less provision for contractual
adjustments and provision for denied claims (where collection is not
pursued directly from the patient), determined in accordance with generally
accepted accounting principles, and the gross amount of all other revenues
from whatever source derived (whether in form of cash, credit, agreements
to pay, or other consideration, and whether or not payment is received at
the time of the sale or provisions of services) which arise from or are
derived by each of the Joint Venture Businesses and each of the Managed
Businesses, or any other person affiliated with such business, directly or
indirectly from products or services sold or provided directly or
indirectly by each of the Joint Venture Businesses and each of the Managed
Businesses or from the sale of products or services associated with the use
of the Licensed Marks. Business Gross Revenues shall not include amounts
not actually collected (bad debts) to the extent that such have been
included in Business Gross Revenues reported to Franchisor for prior
periods.
7
Plus,
(c) the gross amounts of all Franchise Owner's other revenues from
whatever source derived (whether in the form of cash, credit, agreements to
pay, or other consideration, and whether or not payment is received at the
time of the sale or provision of services), which arise from or are derived
by Franchise Owner, or any person affiliated with Franchise Owner, directly
or indirectly from products or services sold or provided directly or
indirectly by Franchise Owner or from the sale of services or products
associated with the use of the Licensed Marks, excluding any amounts
received by Franchise Owner from Joint Venture Businesses and Managed
Businesses, the Business Gross Revenue of which are included in Gross
Revenue pursuant to (b) above.
4.11. Application of Payments. All payments by Franchise Owner pursuant to
this Paragraph 4 shall be applied in such order as Franchisor may designate from
time to time. Franchise Owner agrees that it may not designate an order for
application of any fees different from that designated by Franchisor and
expressly acknowledges and agrees that Franchisor may accept fees paid pursuant
to different instructions without any obligation to follow such instructions,
even if such payment is made by its terms conditional on such instructions being
followed. This provision may be waived only by written agreement signed by
Franchisor, which written agreement must be separate from the check or other
document constituting payment.
5. LICENSED MARKS
5.1. Ownership. Franchise Owner expressly acknowledges Franchisor's rights
in and to the Licensed Marks and agrees not to represent in any manner that
Franchise Owner has acquired any ownership rights in the Licensed Marks.
Franchise Owner further acknowledges and agrees that any and all goodwill
associated with the Charter System and identified by the Licensed Marks shall
inure directly and exclusively to the benefit of Franchisor.
5.2. Authorized Use. Franchise Owner understands and agrees that any use of
the Licensed Marks other than as expressly authorized by this Agreement, without
Franchisor's prior written consent, may constitute an infringement of
Franchisor's rights therein and that the right to use the Licensed Marks granted
herein does not extend beyond the termination or expiration of this Agreement.
Franchise Owner expressly covenants that, during the term of this Agreement and
thereafter, Franchise Owner shall not, directly or indirectly, commit any act of
infringement or contest or aid others in contesting the validity or registration
of Franchisor's right to use the Licensed Marks or take any other action in
derogation thereof.
5.3. Infringement. Franchise Owner shall promptly notify Franchisor 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 Licensed
Marks, any colorable variation thereof, or any other mark, name or indicia in
which Franchisor has or claims a proprietary interest (an
8
"Unauthorized Third Party Use"). Franchise Owner shall assist Franchisor, upon
request and at Franchisor's expense, in taking such action, if any, as
Franchisor may deem appropriate to halt such Unauthorized Third Party Use, but
shall take no action nor incur any expenses on Franchisor's behalf without
Franchisor's prior written approval. If Franchisor undertakes the defense or
prosecution of any litigation relating to the Licensed Marks, Franchise Owner
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.
5.4. Operation Under Licensed Marks. Franchise Owner further agrees and
covenants to operate and advertise only under the names or marks from time to
time designated by Franchisor for use by similar Charter System franchise
owners; to adopt and use the Licensed Marks solely in the manner prescribed by
Franchisor; to refrain from using the Licensed Marks to perform any activity or
to incur any obligation or indebtedness in such a manner as may, in any way,
subject Franchisor 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 Franchise Owner's use of the Licensed
Marks is limited by the terms of this Agreement, and 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 mark registrations and
copyright notices as Franchisor may, from time to time, require, including,
without limitation, affixing "SM", "TM", or (R) adjacent to all such Licensed
Marks in any and all uses thereof; and to utilize such other appropriate notice
of ownership, registration and copyright as Franchisor may require.
5.5. Modification/Replacement of Licensed Marks. Franchisor reserves the
right, in its sole discretion, to designate one or more new, modified or
replacement Licensed Marks for use by franchise owners and to require the use by
Franchise Owner of any such new, modified or replacement Licensed Marks in
addition to or in lieu of any previously designated Licensed Marks. Any expenses
or costs associated with the use by Franchise Owner of any such new, modified or
replacement Licensed Marks shall be the sole responsibility of Franchise Owner.
6. STANDARDS OF OPERATION
Franchisor shall establish and Franchise Owner shall maintain standards of
quality, appearance and operation for the Franchised Business. For the purpose
of enhancing the public image and reputation of businesses operating under the
Charter System, protecting the goodwill associated with the Licensed Marks, and
for the purpose of increasing the demand for services and products provided by
Franchisor and its franchisees, the parties agree as follows:
6.1. Signs. Subject to compliance with applicable laws and regulations,
Franchise Owner shall acquire all signs as required by Franchisor for use at or
in connection with the Franchised Business.
6.2. Compliance with System. Franchise Owner agrees in connection with the
Franchised Business to utilize and comply with all treatment protocols,
treatment, financial, legal
9
and other programs and procedures, quality standards, quality assessment
methods, performance improvement and monitoring programs and other matters which
now or hereafter comprise the Charter System, and to comply with all Charter
System rules, regulations, policies and standards, including all such contained
in the "Confidential Operating Manual" (as hereinafter defined).
6.3. Compliance With Law. Franchise Owner agrees at all times to operate
the Franchised Business, and to keep all premises at which the Franchised
Business operates, in compliance with all applicable federal, state and local
laws, rules and regulations.
6.4. Joint Commission on Accreditation of Health Care Organizations
(JCAHO). Franchise Owner agrees to maintain throughout the term of this
Agreement accreditation by the Joint Commission on Accreditation of Healthcare
Organizations ("JCAHO"). Franchise Owner also agrees to obtain, within such
reasonable times as may be specified by Franchisor, and maintain throughout the
term of this Agreement accreditation by other organizations specified by
Franchisor. All costs of obtaining and maintaining accreditation(s) shall be
borne and paid by Franchise Owner.
6.5. Maintenance of Standards. Franchise Owner agrees to maintain all
premises from or at which the Franchised 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, Franchise Owner specifically agrees:
(a) To keep all such premises at all times in a high degree of
sanitation, repair, order and condition, including, without limitation,
such periodic repainting of the exterior and interior of the premises, 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 all governmental standards,
certifications and ratings applicable to the operation of the premises and
the Franchised Business or such higher minimum standards, certifications
and ratings as set forth by Franchisor from time to time in its
Confidential Operating Manual or otherwise in writing.
6.6. Operation in Conformity with Prescribed Methods, Standards and
Specifications. Franchise Owner agrees to operate the Franchised Business in
conformity with such methods, standards and specifications as Franchisor may
from time to time prescribe in its Confidential Operating Manual to insure that
Franchisor's required degree of quality, service and image is maintained; and to
refrain from deviating therefrom and from otherwise operating in any manner
which adversely reflects on Franchisor's name and goodwill, or on the Licensed
Marks.
6.7. Printed Materials; Marketing. Franchise Owner shall use only business
stationery, business cards, marketing materials, advertising materials, printed
materials or forms which have
10
been approved in advance by Franchisor. Franchise Owner shall not employ any
person to act as a representative of Franchise Owner in connection with local
promotion of the Franchised Business in any public media without the prior
written approval of Franchisor. Any and all supplies or materials purchased,
leased or licensed by Franchise Owner shall always meet those standards
specified by Franchisor in the Confidential Operating Manual or otherwise in
writing.
6.8. Ownership Identification. In all advertising displays and materials
and at all premises from or at which the Franchised Business is conducted,
Franchise Owner shall, in such form and manner as may be specified by Franchisor
in the Confidential Operating Manual, notify the public that Franchise Owner 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.
6.9. Patient Relations. Franchise Owner shall respond promptly to patient
complaints and shall take such other steps as may be required to insure positive
patient relations.
6.10. Right to Inspect. Franchise Owner hereby grants to Franchisor and its
agents the right to enter upon any premises from which Franchise Owner conducts
the Franchised Business, without notice, at any reasonable time for the purpose
of conducting inspections of the premises and Franchise Owner's books and
records; and Franchise Owner 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.
6.11. 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 of its 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 Franchised Business. Franchise
Owner shall have no recourse against Franchisor on account of any variation from
standard specifications and practices granted to any franchise owner and shall
not be entitled to require Franchisor to grant Franchise Owner a like or similar
variation hereunder.
6.12. Accounting Equipment and Software. Franchise Owner agrees to
maintain, develop, update and replace any equipment and software as reasonably
necessary for the purpose of recording, collecting or otherwise supporting
revenues.
6.13. Discoveries and Ideas. Franchise Owner agrees to disclose promptly to
Franchisor all discoveries made or ideas conceived by Franchise Owner or a
person affiliated with Franchise Owner that pertain to the Charter System.
Franchise Owner hereby grants to Franchisor all right, title and interest to
such discoveries and ideas, and agrees to cooperate with Franchisor in securing
Franchisor's rights to such discoveries and ideas. "Discoveries" and "ideas"
shall be interpreted broadly and shall not be limited to those discoveries or
ideas which are potentially patentable or
11
copyrightable. Franchisor shall not be obligated to compensate Franchise Owner
for any such discoveries or ideas and Franchise Owner has no expectation of any
such compensation.
7. CONFIDENTIAL OPERATING MANUAL
7.1. Compliance with Confidential Operating Manual. In order to protect the
reputation and goodwill of the businesses operating under the Charter System and
to maintain standards of operation under the Licensed Marks, Franchise Owner
shall conduct the Franchised Business operated under the Charter System 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 Franchise Owner acknowledges 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 Franchise Owner 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.
7.2. Confidentiality. Franchise Owner shall at all times use its best
efforts to keep the Confidential Operating Manual and any other manuals,
materials, goods and information created or used by Franchisor and designated
for confidential use, within the Charter System and the information contained
therein as confidential and shall limit access to employees of Franchise Owner
on a need-to-know basis. Franchise Owner acknowledges that the unauthorized use
or disclosure of Franchisor's confidential information or trade secrets will
cause irreparable injury to Franchisor and that damages are not an adequate
remedy. Franchise Owner accordingly covenants that it shall not at any time,
without Franchisor's prior written consent, disclose, use, permit the use
thereof (except as may be required by applicable law or authorized by this
Agreement), copy, duplicate, record, transfer, transmit or otherwise reproduce
such information, in any form or by any means, in whole or in part, or otherwise
make the same available to any unauthorized person or source. Any and all
information, knowledge and know-how not known about the Charter System and
Franchisor's products, services, standards, procedures, techniques and such
other information or material as Franchisor may designate as confidential shall
be deemed confidential for purposes of this Agreement.
7.3. Revisions. Franchise Owner understands and acknowledges 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
the Franchised Business, and Franchise Owner expressly agrees to comply at its
expense with all such 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 Charter
System by other of Franchisor's franchisees.
12
7.4. Current Copy. Franchise Owner shall at all times insure that its copy
of the Confidential Operating Manual is kept current and up to date. In the
event of any dispute as to the contents thereof, the terms and dates of the
master copy thereof maintained by Franchisor at its principal place of business
shall be controlling.
8. ADVERTISING AND MARKETING
Recognizing the value of standardized advertising and marketing programs to
the furtherance of the goodwill and public image of the Charter System, the
parties agree as follows:
8.1. Local Advertising. At its expense, Franchise Owner agrees to conduct
on an annual basis continuing local advertising in form, content and media
approved by Franchisor, in an amount equal to three percent (3%) of Gross
Revenues. Franchise Owner shall submit evidence of any such expenditures to
Franchisor on an annual basis not later than sixty (60) days after the close of
each fiscal year for the preceding fiscal year. In the event that Franchise
Owner shall fail to expend such sums on local advertising during any fiscal
year, the difference between the amount expended and the amount required to be
expended shall be paid to Franchisor, in addition to other amounts payable
pursuant to this Agreement.
8.2. Approval of Advertising. All advertising by Franchise Owner shall be
in such media, and of such type and format as Franchisor may approve; shall be
conducted in a dignified manner and shall conform to such standards and
requirements as Franchisor may specify. Advertising approved by Franchisor as
meeting the requirements of the preceding sentence shall continue to be deemed
approved unless and until Franchisor shall notify OpCo otherwise. Franchise
Owner shall not use any advertising or promotional plans or materials not
prepared by Franchisor unless and until Franchise Owner has received written
approval from Franchisor following the submission of samples thereof to
Franchisor. If written approval is not received by Franchise Owner from
Franchisor or its designee within fifteen (15) days of the date of receipt by
Franchisor of such samples, Franchisor shall be deemed to have disapproved such
advertising or promotional plans or materials.
8.3. Participation in Cooperative Advertising and/or Marketing Programs.
Franchise Owner shall participate in all cooperative advertising and/or
marketing programs as are from time to time prescribed by Franchisor, provided
however, that no such cooperative advertising and/or marketing programs shall
require Franchise Owner to adhere to any specific price(s). The terms and
conditions required for participation in any such cooperative advertising
program or programs shall be as specified in the Confidential Operations Manual.
8.4. Operation of Call Center. Franchisor agrees to operate or will provide
a toll free "800 telephone number" and related call center (the "800 Call
Center") to provide substantially the same services to Franchise Owner as those
provided by the 800 Call Center operating immediately prior to the execution of
this Agreement, subject to such modification as Franchisor deems advisable from
time to time to comply with applicable law or subject to such restructuring
13
as Franchisor shall reasonably require to comply with applicable law. Franchise
Owner agrees to advertise the "800 telephone number" and otherwise cooperate
with Franchisor to use the 800 Call Center as a means of assisting customers to
locate the places of business of franchisees of Franchisor.
9. STATEMENTS, RECORDS AND FEE PAYMENTS
9.1. Maintenance of Records; Audit Rights. Franchise Owner shall, in a
manner satisfactory to Franchisor, maintain original, full and complete records,
accounts, books, data, licenses, contracts and invoices which shall accurately
reflect all particulars relating to Franchised Business and such statistical and
other information or records as Franchisor may require, and shall keep all such
information for not less than three (3) years, even if this Agreement is no
longer in effect. Franchise Owner shall compile and provide to Franchisor any
statistical or financial information regarding the operation of the Franchised
Business, the services and products sold by it, or data of a similar nature as
Franchisor may reasonably request. Franchisor and its designated agents shall
have the right to examine and audit such records, accounts, books and data at
all reasonable times to insure that Franchise Owner is complying with the terms
of this Agreement. If such inspection discloses and it is ultimately determined
that the Gross Revenues during any scheduled reporting period actually exceeded
the amount reported by Franchise Owner as its Gross Revenues by an amount equal
to two percent (2%) or more of the Gross Revenues originally reported to
Franchisor, Franchise Owner shall bear the cost of such inspection and audit
(not including any premium or contingent fee arrangement) and shall pay any such
deficiency with interest from the date due until paid at the lesser of the Prime
Rate, plus six percent (6%) per annum or the highest rate permitted by
applicable law, immediately upon the request of Franchisor.
9.2. Reports. Upon Franchisor's request, Franchise Owner shall furnish
Franchisor with a copy of each of Franchise Owner's reports required under
applicable federal and state laws, rules and regulations, including but not
limited to all such reports required under "Medicare" and "Medicaid" laws, rules
and regulations.
9.3. Tax Reports. Upon Franchisor's request, Franchise Owner shall furnish
Franchisor with a copy of each of its 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 Franchised Business.
9.4. Unaudited Periodic Statements. Franchise Owner shall prepare and
deliver to Franchisor on a quarterly basis, no later than twenty-five (25) days
following the close of each fiscal quarter, an unaudited profit and loss
statement in a form reasonably satisfactory to Franchisor covering Franchise
Owner's business for the prior fiscal quarter and showing Gross Revenues for the
prior fiscal quarter and fiscal year to date, all of which shall be certified by
Franchise Owner to be true and correct. Franchise Owner shall also submit to
Franchisor no later
14
than twenty-five (25) days following the close of each fiscal quarter, an
unaudited balance sheet reflecting the financial position of the Franchised
Business as of the preceding fiscal quarter end.
9.5. Annual Audited Statement. In addition to the foregoing unaudited
statements, within 75 days after the close of each fiscal year of Franchise
Owner, Franchise Owner shall furnish to Franchisor, at Franchise Owner's
expense, an audited statement of income and retained earnings of Franchise Owner
for such fiscal year and an audited balance sheet of Franchise Owner as of the
end of such fiscal year, all prepared in accordance with generally accepted
accounting principles and certified to by a certified public accountant.
10. ADDITIONAL COVENANTS
10.1. Covenant During Term. During the term of this Agreement, Franchise
Owner covenants not to engage in the United States as an owner, operator, or in
any managerial capacity in any Hospital/RTC Based Behavioral Healthcare
Business, other than as a franchisee of the Charter System; provided, however,
that Franchise Owner shall not be prohibited hereby from owning equity
securities of any Hospital/RTC Based Behavioral Healthcare Business whose shares
are traded on a stock exchange or on the over-the-counter market so long as said
ownership interest represents five percent (5%) or less of the total number of
outstanding shares of such business.
10.2. Covenant Not to Compete Post-Term. Following the termination or
expiration of this Agreement and for a period expiring on the earlier of three
(3) years following the expiration or termination of this Agreement, Franchise
Owner covenants not to engage in the Territory as an owner, operator, or in any
managerial capacity in any Hospital/RTC Based Behavioral Healthcare Business,
other than as a franchisee of the Charter System pursuant to this Agreement;
provided, however, that Franchise Owner shall not be prohibited hereby from
owning equity securities of any Hospital/RTC Based Behavioral Healthcare
Business whose shares are traded on a stock exchange or on the over-the-counter
market so long as said ownership interest represents five percent (5%) or less
of the total number of outstanding shares of such business.
10.3. Acknowledgment of Reasonableness. The parties hereto acknowledge that
the provisions of Sections 10.1 and 10.2 have been negotiated fully and fairly
by the parties, each being represented and advised by counsel. Franchise Owner
acknowledges that it is willingly and freely agreeing to the provisions of
Sections 10.1 and 10.2 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. Franchise Owner further
acknowledges that Franchisor would not enter into this Agreement without the
covenants of Sections 10.1 and 10.2 and that it is fair and reasonable to
Franchise Owner that Franchise Owner be subject to such covenants.
10.4. Confidential Information. During the term of this Agreement and
following the expiration or termination of this Agreement, Franchise Owner
covenants not to communicate
15
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 which are proprietary to
Franchisor or any information, knowledge or know-how identified to Franchise
Owner by Franchisor in writing as confidential (including but not limited to the
Confidential Operating Manual), except as permitted by Franchisor.
Notwithstanding the foregoing, this obligation shall not apply to 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; (d) which was in possession of such party prior to the
date of disclosure; or (e) which is disclosed to others in accordance with the
terms of a prior written authorization between the parties to this Agreement. In
the event of any termination, expiration or non-renewal of this Agreement,
Franchise Owner agrees that it will never use Franchisor's confidential
information, trade secrets, methods of operation or any proprietary components
of the Charter System in the design, development or operation of any behavioral
healthcare business, including, without limitation, any Hospital/RTC Based
Behavioral Healthcare Business. The protection 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.
10.5. Confidential Agreements with Certain Employees. Franchise Owner
agrees to require each of its management employees to execute employee
non-disclosure agreements in a form approved by Franchisor which shall prohibit
disclosure by such parties to any other person or legal entity of any trade
secrets or any other information, knowledge or know-how identified as
confidential by Franchisor in writing to Franchise Owner concerning the
operation of the Franchised Business. Franchisor shall be a third party
beneficiary of such agreements and Franchise Owner shall not amend, modify or
terminate any such agreement without Franchisor's prior written consent.
10.6. Severability. The parties agree that each of the foregoing covenants
shall be construed as independent of any other covenant or provision of this
Agreement. Should any part of one or more of these restrictions be found to be
unenforceable by virtue of its scope in terms of area, business activity
prohibited or length of time, and should such part be capable of being made
enforceable by reduction of any or all thereof, Franchise Owner and Franchisor
agree that the same shall be enforced to the fullest extent permissible under
the law. In addition, Franchisor may, unilaterally, at any time, in its sole
discretion, revise any of the covenants in this Article 10 so as to reduce the
obligations of Franchise Owner hereunder. The running of any period of time
specified in this Article 10 shall be tolled and suspended for any period of
time in which the Franchise Owner is found by a court of competent jurisdiction
to have been in violation of any restrictive covenant. Franchise Owner further
expressly agrees that the existence of any claim it may have against Franchisor
whether or not arising from this Agreement, shall not constitute a defense to
the enforcement by Franchisor of the covenants in this Article 10.
11. TRANSFER AND ASSIGNMENT
16
11.1. Assignment by Franchisor. This Agreement and all rights and duties
hereunder may be freely assigned or transferred by Franchisor in its sole
discretion to any person or legal entity which agrees to assume Franchisor's
obligations hereunder, including a competitor of Franchisor, and shall be
binding upon and inure to the benefit of Franchisor's successors and assigns
including, without limitation, any entity which acquires all or a portion of the
capital stock of Franchisor or any entity resulting from or participating in a
merger, consolidation or reorganization in which Franchisor is involved, and to
which Franchisor's rights and duties hereunder are assigned or transferred.
11.2. Assignment by Franchisee. Franchise Owner understands and
acknowledges that the rights and duties created by this Agreement are personal
to Franchise Owner, and that Franchisor has granted this Franchise in reliance
on many factors, including, without limitation, the collective character, skill,
aptitude and business and financial capacity of Franchise Owner and any persons
owning an interest in Franchise Owner. Accordingly, Franchise Owner nor any
person owning any direct or indirect equity interest therein, shall, without
Franchisor's prior written consent, directly or indirectly sell, assign,
transfer, convey, give away, pledge, mortgage or otherwise encumber any
interest; (i) in this Agreement or any portion or aspect thereof, (ii) the
Franchised Business, or (iii) any equity or voting interest in Franchise Owner,
nor permit the Franchised Business to be operated, managed, directed or
controlled, directly or indirectly, by any person or entity other than Franchise
Owner (any such act or event is referred to as a "Transfer") without the prior
written approval of Franchisor. Any such purported Transfer occurring by
operation of law or otherwise, including any Transfer by a trustee in
bankruptcy, without Franchisor's prior written consent, shall be a material
default of this Agreement.
11.3. Conditions of Any Approval. Franchise Owner understands and
acknowledges the vital importance of the performance of Franchise Owner to the
market position and overall image of Franchisor. The consent of Franchisor to an
assignment or transfer by Franchise Owner shall be subject, but not be limited
to, the following conditions:
(a) The proposed transferee is a person or entity which meets the
Franchisor's standards of qualification then applicable with respect to all
new applicants for similar Charter System franchisees;
(b) The proposed transfer is upon terms and conditions which
Franchisor, in its sole judgment, shall deem reasonable;
(c) As of the effective date of the proposed transfer, all obligations
of Franchise Owner hereunder and under any other agreements between
Franchise Owner and Franchisor are fully satisfied;
(d) As of the effective date of the proposed transfer, all obligations
of the proposed transferee to the Franchisor under all other agreements of
any kind between the proposed transferee and Franchisor are fully
satisfied;
17
(e) Franchise Owner must request that Franchisor provide the
prospective transferee with the Franchisor's current form of disclosure
document required by the Federal Trade Commission's Trade Regulation Rule
on Franchising and/or other applicable state franchise
registration/disclosure laws, and a receipt for such document shall be
delivered to Franchisor, acknowledging that Franchisor shall not be liable
for any representations other than those contained in such disclosure
document;
(f) The proposed transferee must execute a new franchise agreement,
namely, Franchisor's then-current form of facility franchise agreement,
which may contain terms and conditions substantially different from those
in this Agreement, for an initial term equal to the time remaining in the
term of this Agreement;
(g) The transferor and the transferee shall have executed a general
release under seal where required, in a form reasonably satisfactory to
Franchisor, of any and all claims (including, without limitation, claims
arising under federal, state, and local laws, rules, and ordinances)
against Franchisor, its parent, subsidiaries, affiliates and their
officers, directors, attorneys, shareholders, and employees, in their
corporate and individual capacities, arising out of, or connected with, the
performance of this Agreement or any other agreement; and
(h) The transferee shall demonstrate to Franchisor's reasonable
satisfaction that (i) it meets all of Franchisor's requirements for
becoming one of its franchisees, including, without limitation, that it
meets Franchisor's managerial and business standards then in effect for
similarly situated franchise owners; (ii) possesses a good moral character,
business reputation, and satisfactory credit rating; and (iii) is not a
competitor of Franchisor, will comply with all instruction and training
requirements of Franchisor and has the aptitude and ability to operate the
Franchised Business (as may be evidenced by prior related business
experience or otherwise).
11.4. Consent Not a Waiver. Franchisor's consent to an assignment by the
Franchise Owner granted herein shall not constitute a waiver of any claims it
may have against the transferring party, nor shall it be deemed a waiver of
Franchisor's right to demand exact compliance with any of the terms of this
Agreement by the transferee.
11.5. 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.
18
12. DEFAULT AND TERMINATION
12.1. Franchisor's Right to Terminate. Franchisor may not terminate this
Agreement prior to the expiration of its term except for "good cause," which
shall mean the occurrence of any event of default described below. Upon the
occurrence of any event of default, Franchisor may, at its option, and without
waiving its rights hereunder or any other rights available at law or in equity,
including its rights to damages, terminate this Agreement and all of Franchise
Owner's rights hereunder effective immediately upon the date Franchisor gives
written notice of termination, upon such other date as may be set forth in such
notice of termination, or in those instances enumerated below in paragraph (a),
automatically upon the occurrence of an event of default. The occurrence of any
one or more of the following events shall constitute an event of default and
grounds for termination of this Agreement by Franchisor:
(a) Automatically, without notice or action required by Franchisor, if
Franchise Owner becomes insolvent or makes a general assignment for the
benefit of creditors, or, unless otherwise prohibited by law, if a petition
in bankruptcy is filed by Franchise Owner, or such a petition is filed
against and consented to by Franchise Owner or not dismissed within thirty
(30) days, or if a bill in equity or other proceeding for the appointment
of a receiver of Franchise Owner or other custodian for Franchise Owner's
business or assets is filed and consented to by Franchise Owner, or if a
receiver or other custodian (permanent or temporary) of Franchise Owner's
assets or property, or any part thereof, is appointed;
(b) If Franchise Owner fails to pay any financial obligation pursuant
to this Agreement within five (5) days of the date on which Franchisor
gives notice of such delinquency or immediately upon written notice if such
payment has not been made within sixty (60) days after the date on which it
is required to be paid, or immediately upon written notice if Franchise
Owner is determined to have underreported its Gross Revenues during any
period by three percent (3%) or more of the actual Gross Revenues during
such period on two or more occasions during the term of this Agreement,
whether or not Franchise Owner subsequently rectifies such deficiency;
(c) If there is any violation of any transfer and assignment provision
contained in Article 11 of this Agreement;
(d) If Franchise Owner receives from Franchise three (3) or more
notices to cure the same on similar defaults or violations of this
Agreement during any twelve (12) month period;
(e) If Franchise Owner fails, for a period of fifteen (15) days after
notification of non-compliance by appropriate authority to comply with any
law, rule or regulation applicable to the operation of the Franchised
Business; provided, however, that if such non-compliance is susceptible to
cure but such cure cannot be accomplished with
19
due diligence within such period of time, and if, in addition, Franchise
Owner commences to cure such non-compliance within 15 days after
notification of non-compliance and thereafter prosecutes the curing of such
non-compliance with due diligence, such period of time shall be extended to
such period of time (not to exceed an additional ninety (90) days in the
aggregate) as may be necessary to cure such non-compliance with due
diligence; provided, however, that if such [revise "Franchise Owner" and
"Franchise"];
(f) If Franchise Owner violates any covenant of confidentiality or
non-disclosure contained in Article 10 of this Agreement;
(g) If Franchise Owner or any person controlling, controlled by or
under common control with Franchise Owner, or any principal officer or
employee of Franchise Owner or any such person, owning an interest in the
Franchise is convicted of a felony, or any other crime or offense (even if
not a crime) that is reasonably likely, in the sole opinion of Franchisor,
to affect adversely the Charter System, any Charter System unit, the
Licensed Marks or the goodwill associated therewith;
(h) If Franchise Owner fails to perform or breaches any covenant,
obligation, term, condition, warranty or certification herein or fails to
operate the Franchised Business as specified by Franchisor herein or in the
Confidential Operating Manual and fails to cure such noncompliance or
deficiency within thirty (30) days after Franchisor's written notice
thereof; provided, however, that if such non-compliance or deficiency is
susceptible to cure but such cure cannot be accomplished with due diligence
within such period of time, and if, in addition, Franchise Owner commences
to cure such non-compliance or deficiency within 30 days after notification
of non-compliance or deficiency and thereafter prosecutes the curing of
such non-compliance or deficiency with due diligence, such period of time
shall be extended to such period of time (not to exceed an additional one
hundred eighty (180) days in the aggregate) as may be necessary to cure
such non-compliance or deficiency with due diligence;
(i) If Franchise Owner abandons the operation of all or any
substantial part of the Franchised Business conducted under this Agreement
for twenty-four (24) hours or longer (except as otherwise provided herein
or agreed to by Franchisor) or defaults under any mortgage, deed of trust
or lease with Franchisor or any third party covering the Franchised
Business or of any premises from or at which the Franchised Business is
operated and Franchisor or such third party treats such act or omission as
a default, and Franchise Owner fails to cure such default to the
satisfaction of Franchisor or such third party within any applicable cure
period granted Franchise Owner by Franchisor or such third party;
12.2. Franchise Owner's Right to Terminate.
20
(a) The Franchise Owner shall have the right to terminate this
Franchise Agreement, as provided herein, if: (1) the Franchise breaches any
material provision, term or condition of this Franchise Agreement; (2) the
Franchisor files for bankruptcy or is adjudicated a bankrupt under any
state or federal law; or (3) the Franchisor makes an assignment of its
assets for the benefit of creditors.
(b) The Franchise Owner shall not have the right to terminate this
Franchise Agreement or to commence an action or lawsuit against the
Franchisor for breach of this Franchise Agreement, injunctive relief,
violation of any state, federal or local law, violation of common law
(including allegations of fraud and misrepresentation), rescission, general
or punitive damages, or termination, unless and until: (1) written notice
by personal service or prepaid registered or certified United States mail
setting forth the alleged breach or violation in detail has been delivered
to the Franchisor by the Franchise Owner; and (2) the Franchisor fails to
correct the alleged breach or violation within thirty (30) days after
receipt of the written notice by personal service or prepaid registered or
certified United States mail; provided, however, that if such breach or
violation is susceptible to cure but such cure cannot be accomplished with
due diligence within such period of time, and if, in addition Franchisor
commences to cure such breach or violation within thirty (30) days after
receipt of the written notice from Franchise Owner and thereafter
prosecutes the curing of such breach or violation with due diligence, such
period of time shall be extended to such period of time (not to exceed an
additional one hundred eighty (180) days) as may be necessary to cure such
breach or violation with due diligence. If the Franchisor fails to correct
the alleged breach or violation as provided herein after receiving written
notice from the Franchise Owner, then this Franchise Agreement may be
terminated by the Franchise Owner as provided for in this Franchise
Agreement.
(c) The Franchise Owner must give the Franchisor immediate written
notice, as provided herein, of an alleged breach or violation of this
Franchise Agreement after the Franchise Owner has knowledge or determines,
or is of the opinion that there has been an alleged breach or violation of
this Franchise Agreement by the Franchisor. If the Franchise Owner fails to
give written notice to the Franchisor as provided herein of an alleged
breach or violation of this Franchise Agreement by the Franchisor within
one (1) year from the date the Franchise Owner has knowledge of,
determines, or is of the opinion that there has been an alleged breach by
the Franchisor, then the alleged breach or violation shall be deemed to be
condoned, approved and waived by the Franchise Owner, and the alleged
breach or violation shall not be deemed to be a breach or violation of this
Franchise Agreement by the Franchisor.
(d) Notwithstanding any of the foregoing provisions, if the Franchise
Owner gives the Franchisor any notice of an alleged breach or violation
that gives rise to the termination of this Franchise Agreement by the
Franchise Owner or of any laws that give rise to the termination of this
Franchise Agreement by the Franchise Owner, then the Franchisor shall have
the absolute right to immediately commence legal action against the
21
Franchise Owner to enjoin and prevent the termination of this Franchise
Agreement by the Franchise Owner without giving the Franchise Owner any
notice and without regard to any waiting period that may be contained in
this Franchise Agreement. If the Franchisor commences such legal action
against the Franchise Owner, then the Franchise Owner will not have the
right to terminate this franchise Agreement unless and until a court of
competent jurisdiction has ruled on the merits that the Franchisor has
breached this Franchise Agreement in the manner alleged by the Franchise
Owner, and then only if the Franchisor fails to correct he breach or
violation determined by the court within thirty (30) days after a final
judgment has been entered against the Franchisor and all time for appeals
by the Franchisor has expired. If the Franchisor commences any legal action
against the Franchise Owner as contemplated by this provision, which shall
include legal actions for injunctive relief against the Franchise Owner to
enjoin the termination of this Franchise Agreement, then the Franchisor
shall not be required to post any bonds or security whatever in such legal
action.
13. POST TERM OBLIGATIONS
Upon the expiration or termination of this Agreement, Franchise Owner shall
immediately:
13.1. Cease Operations. Cease to be a franchisee of Franchisor under this
Agreement and cease to operate the former Franchised Business under the Charter
System. Franchise Owner shall not thereafter, directly or indirectly, represent
to the public that the former Franchised Business is or was operated or in any
way connected with the Charter System 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 the Franchised Business operated;
13.2. Pay All Sums Outstanding. Pay all sums owing to Franchisor. Upon
termination for any default by Franchise Owner, such sums shall include actual
and consequential damages, costs and expenses (including reasonable attorneys
fees incurred by Franchisor as a result of the default).
13.3. 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 Franchise Owner.
(Franchisor shall not provide any such to any third parties without the written
consent of Franchisor in each instance.) Franchise Owner shall retain no copy or
record of any of the foregoing; provided Franchise Owner may retain its copy of
this Agreement, any correspondence between the parties, and any other document
which Franchise Owner reasonably needs for compliance with any applicable
provision of law.
13.4. Transfer of Certain Interests. Take such action as may be required by
Franchisor to transfer and assign to Franchisor or its designee or to disconnect
and forward all telephone numbers, white and yellow page telephone references
and advertisements, and all trade and similar
22
name registrations and business licenses, and to cancel any interest which
Franchise Owner may have in the same.
13.5. Cease Use of System. Cease to use in advertising, or in any manner
whatsoever, any methods, procedures, protocols, programs, procedures or
techniques associated with the Charter System in which Franchisor has a
proprietary right, title or interest; cease to use the Licensed Marks and any
other marks and indicia of operation associated with the Charter System and
remove all trade dress, physical characteristics, color combinations and other
indications of operation under the Charter System from any premises from or at
which the Franchised Business operated. Without limiting the generality of the
foregoing, Franchise Owner agrees that in the event of any termination or
expiration of this Agreement, it will remove all signage bearing the Licensed
Marks, and, upon Franchisor's request, deliver the facia for such signs to
Franchisor, and will remove any items which are characteristic of the Charter
System "trade dress" from any premises from or at which the Franchised Business
operated. Franchise Owner agrees that Franchisor or a designated agent may enter
upon any premises from or at which the Franchised Business operated at any time
in a reasonable manner to make such changes at Franchise Owner's sole risk and
expense and without liability for trespass.
14. INSURANCE
14.1. Maintenance of Insurance. Throughout the term of this Agreement,
Franchise Owner shall maintain in effect at all times a policy or policies of
insurance, designating Franchisor as an additional insured at Franchise Owner's
sole cost and expense as described on Exhibit 4 hereto.
14.2. Notices of Claims. Franchise Owner shall promptly notify Franchisor
of any and all claims against Franchise Owner and/or Franchisor under said
policies of insurance and shall deliver to Franchisor certificates evidencing
that the insurance required by Section 14.1 is in full force and effect within
thirty (30) days after signing this Agreement and each year thereafter. Such
insurance certificates shall contain a statement that the insurance shall not be
canceled without thirty (30) days' prior written notice to Franchise Owner and
to Franchisor.
14.3. Notices of Other Claims/Events. Franchise Owner shall provide to
Franchisor notice of any and all demands, claims, suits, actions, causes of
action, proceedings and assessments (together "Claims") brought, made or
threatened in writing against Franchise Owner, and of the occurrence of any
events which might result in such a Claim, in each case within five (5) business
days after Franchise Owner becomes aware thereof, and will provide to Franchisor
information concerning such Claims or events as Franchisor may from time to time
reasonably request.
23
15. TAXES, PERMITS AND INDEBTEDNESS
15.1. Payment. Franchise Owner shall promptly pay when due any and all
federal, state and local taxes, including without limitation 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 Franchise Owner in the operation of the
Franchised Business.
15.2. Compliance with all Laws and Regulations. Franchise Owner shall
comply with all federal, state and local laws, rules and regulations and timely
obtain any and all permits, certificates and licenses for the full and proper
conduct of the Franchised Business.
15.3. Full Responsibility. Franchise Owner hereby expressly covenants and
agrees to accept full and sole responsibility for any and all debts and
obligations incurred in the operation of the Franchised Business.
16. INDEMNIFICATION AND INDEPENDENT CONTRACTOR
16.1. Indemnification and Hold Harmless. Franchise Owner agrees to protect,
defend, indemnify, and hold Franchisor, and its respective directors, officers,
agents, attorneys and shareholders, jointly and severally, 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 the Franchised Business.
16.2. Independent Contractor. In all dealings with third parties including,
without limitation, employees, suppliers and patients, Franchise Owner shall
disclose in an appropriate manner acceptable to Franchisor that it is an
independent entity licensed by Franchisor. Nothing in this Agreement is intended
by the parties hereto to create a fiduciary relationship between them nor to
constitute either party an agent, legal representative, subsidiary, joint
venturer, partner, employee or servant of the other for any purpose whatsoever.
It is understood and agreed that Franchise Owner is an independent contractor
and is in no way authorized to make any contract, warranty or representation or
to create any obligation on behalf of Franchisor.
17. WRITTEN APPROVALS, WAIVERS, FORMS OF AGREEMENT AND AMENDMENT
17.1. Prior Approvals. Whenever this Agreement requires Franchisor's prior
approval, Franchise Owner 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.
24
17.2. 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 Franchise Owner, 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
Franchise Owner of any term, covenant or condition of this Agreement.
17.3. Form of Agreements. No warranty or representation is made by
Franchisor that all Charter System franchise agreements heretofore or hereafter
issued by Franchisor do or will contain terms substantially similar to those
contained in this Agreement. Further, Franchise Owner recognizes and agrees that
Franchisor may, in its reasonable business judgment, due to local business
conditions or otherwise, waive or modify comparable provisions of other
franchise agreements heretofore or hereafter granted to other Charter System
franchise owners in a non-uniform manner.
17.4. 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 Franchise Owner except by mutual written agreement. If
an amendment of this Agreement is executed at Franchise Owner's request, any
legal fees or costs of preparation in connection therewith shall, at the option
of Franchisor, be paid by Franchise Owner.
18. ENFORCEMENT
18.1. Inspections. In order to ensure compliance with this Agreement and to
enable Franchisor to carry out its obligation under this Agreement, Franchise
Owner 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 from or at which the Franchised Business is conducted and all records
thereof, including, but not limited to, records relating to Franchise Owner's
patients, suppliers, employees and agents. Franchise Owner shall cooperate fully
with Franchisor and its designated agents requesting such access.
18.2. Injunctive Relief. Franchisor or its designee shall be entitled to
obtain, without bond, declaratory judgments, temporary and permanent
injunctions, and orders of specific performance, in order to enforce the
provisions of this Agreement relating to Franchise Owner's use of the Licensed
Marks, the obligations of Franchise Owner upon termination or expiration of this
Agreement, and assignment of this Agreement and/or ownership interests in
Franchise Owner or to prohibit any act or omission by Franchise Owner or its
employees which constitutes a violation of any applicable law or regulation,
which is dishonest or misleading to prospective or current customers of
businesses operated under the Charter System, which constitutes a danger
25
to other franchise owners, employees, patients or the public, or which may
impair the goodwill associated with the Licensed Marks.
18.3. Costs and Expenses. If Franchisor secures any declaratory judgment,
injunction or order of specific performance pursuant to this Article 18, or
otherwise, if any provision of this Agreement is enforced at any time by
Franchisor or if any amounts due from Franchise Owner to Franchisor are, at any
time, collected by or through an attorney at law or collection agency, Franchise
Owner shall be liable to Franchisor for all costs and expenses of enforcement
and collection including, but not limited to, court costs and reasonable
attorneys' fees.
18.4. No Right to Offset. Franchise Owner 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. Franchise Owner shall not have the
right to "offset" any liquidated or unliquidated amounts, damages or other funds
allegedly due to the Franchise Owner from the Franchisor against any monthly
payment, fee or any other fees or payments due to the Franchisor under this
Agreement or otherwise.
19. ENTIRE AGREEMENT
THIS AGREEMENT AND THE SCHEDULES ATTACHED HERETO AND MADE A PART HEREOF
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. NO OFFICER, EMPLOYEE OR AGENT OF FRANCHISOR HAS ANY AUTHORITY
TO MAKE ANY REPRESENTATION OR PROMISE NOT CONTAINED IN THIS AGREEMENT, AND
FRANCHISE OWNER AGREES THAT IT HAS EXECUTED THIS AGREEMENT WITHOUT RELIANCE UPON
ANY SUCH REPRESENTATION OR PROMISE. THIS AGREEMENT SHALL NOT BE BINDING UPON
FRANCHISOR UNTIL EXECUTED BY AN AUTHORIZED OFFICER THEREOF.
20. NOTICES
Any notice required to be given hereunder shall be in writing and shall be
either mailed by certified mail, return receipt requested or delivered by a
recognized courier service, receipt acknowledged. Notices to Franchise Owner
shall be addressed to it at the address listed in Article 1 of this Agreement.
Notices to Franchisor shall be addressed to it at the address listed in Article
1 of this Agreement. Attention: President. Any notice complying with the
provisions hereof shall be deemed to be given three (3) days after mailing, or
on the date of receipt, whichever is earlier. Each party shall have the right to
designate any other address for such notices by giving notice thereof in the
foregoing manner, and in such event all notices to be mailed after receipt of
such notice shall be sent to such other address.
26
21. GOVERNING LAW AND DISPUTE RESOLUTION
21.1. Governing Law. This Agreement shall be interpreted, construed,
applied and enforced in accordance with the laws of the State of Georgia
applicable to contacts among residents of Georgia which are to be performed
entirely within Georgia, regardless of (i) where this Agreement is executed or
delivered; or (ii) where any payment or other performance required to be made;
or (iii) where any breach of any provision of this Agreement occurs, or any
cause of action otherwise accrues; or (iv) where any action or other proceeding
is instituted or pending; or (v) the nationality, citizenship, domicile,
principal place of business or jurisdiction of organization or domestication of
any party; or (vi) whether the laws of the forum jurisdiction otherwise would
apply the laws of a jurisdiction other than the State of Delaware; or (vii) any
combination of the foregoing.
Subject to Section 21.2 below, to the maximum extent permitted by
applicable law, 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 Georgia as is provided by law; and
the parties consent to the jurisdiction of said court or courts located in the
State of Georgia and to service of process by registered mail, return receipt
requested, or by any other manner provided by law.
21.2. Arbitration Litigation. (a) Any dispute, controversy or claim arising
out of or relating to this Agreement or any contract or agreement entered into
pursuant hereto or the performance by the parties of its or their terms shall be
settled by binding arbitration held in Atlanta, Georgia, in accordance with the
Commercial Arbitration Rules of the American Arbitration Association then in
effect. Judgment upon the award rendered by the arbitrator(s) may be entered in
any court having in personam and subject matter jurisdiction. The parties hereby
submit to the in personam jurisdiction of the federal and state courts in
Georgia, for the purpose of confirming any such award and entering judgment
thereon; and
(b) Notwithstanding the foregoing, Franchisor may, in its discretion,
apply to a court of competent jurisdiction for equitable relief from any
violation or threatened violation of the covenants of Franchise Owner in
this Agreement, including but not limited to, as provided in Section 18.2.
Franchise Owner acknowledges that its violation or threatened violation of
the provisions of Article 10 would cause irreparable injury and, in
addition to any other remedies to which Franchisor may be entitled, that
Franchisor shall be entitled to injunctive relief.
22. SEVERABILITY, CONSTRUCTION AND OTHER MATTERS
22.1. 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
27
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 this 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. Franchise Owner 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
Franchise Owner, or any portion hereof, without Franchise Owner's consent,
effective immediately upon receipt by Franchise Owner of written notice thereof,
and Franchise Owner agrees that it will comply forthwith with any covenant as so
modified, which shall be fully enforceable.
22.2. 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.
22.3. 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.
22.4. 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.
23. MANAGEMENT CONTRACTS/JOINT VENTURES/CONSULTING AGREEMENTS
Franchise Owner agrees during the continuance of this Agreement that it
will not enter into any management agreements, joint ventures or consulting or
other agreements relating to a Hospital/RTC Based Behavioral Healthcare Business
("New Arrangements") except (i) in the event a Franchise Agreement is entered
into by Franchisor with respect to such business, or (ii) with the written
consent of Franchisor in each instance, and in each such instance they shall be
28
included in Gross Revenues, the Business Gross Revenues of any such joint
venture or managed business.
24. ACKNOWLEDGMENTS
24.1. FRANCHISE OWNER ACKNOWLEDGES THAT FRANCHISOR OR ITS AGENT HAS
PROVIDED FRANCHISE OWNER WITH A FRANCHISE OFFERING CIRCULAR NOT LATER THAN THE
EARLIER OF THE FIRST PERSONAL MEETING HELD TO DISCUSS THE SALE OF A FRANCHISE,
TEN (10) BUSINESS DAYS BEFORE THE EXECUTION OF THIS AGREEMENT, OR TEN (10)
BUSINESS DAYS BEFORE ANY PAYMENT OF ANY CONSIDERATION. FRANCHISE OWNER FURTHER
ACKNOWLEDGES THAT FRANCHISE OWNER HAS READ SUCH FRANCHISE OFFERING CIRCULAR AND
UNDERSTANDS ITS CONTENTS.
24.2. FRANCHISE OWNER ACKNOWLEDGES THAT FRANCHISOR HAS PROVIDED FRANCHISE
OWNER WITH A COPY OF THIS AGREEMENT AND ALL RELATED DOCUMENTS, FULLY COMPLETED,
AT LEAST FIVE (5) BUSINESS DAYS PRIOR TO FRANCHISE OWNER'S EXECUTION HEREOF.
24.3. FRANCHISE OWNER IS 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 DEVELOPERS AND FRANCHISE OWNERS MAY DIFFER MATERIALLY IN
CERTAIN CIRCUMSTANCES.
24.4. FRANCHISE OWNER ACKNOWLEDGES THAT THIS INSTRUMENT AND THE TRANSACTION
DOCUMENTS CONSTITUTE THE ENTIRE AGREEMENT OF THE PARTIES. EXCEPT AS SET FORTH IN
THE TRANSACTION DOCUMENTS, THIS AGREEMENT TERMINATES AND SUPERSEDES ANY PRIOR
AGREEMENT BETWEEN THE PARTIES CONCERNING THE SAME SUBJECT MATTER.
24.5. FRANCHISE OWNER ACKNOWLEDGES 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 FRANCHISE OWNER.
29
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
under seal on the date first written above.
FRANCHISOR:
--------------------------------------
By:___________________________________
Title: _______________________________
(Affix Corporate Seal)
FRANCHISE OWNER:
By:___________________________________
Title:________________________________
(Affix Corporate Seal)
30