CHARTER FRANCHISE SERVICES, LLC
FRANCHISE AGREEMENT
TABLE OF CONTENTS
PAGE
1. GRANT OF FRANCHISE................................................... 2
1.1. Grant.............................................. 2
1.2. Modifications; Amendments to Charter System........ 2
1.3. New Products....................................... 3
1.4. Territory Exclusive................................ 3
1.5. Outpatient Providers............................... 3
1.6. Reservation of Rights.............................. 3
2. TERM................................................................. 4
3. OPERATING ASSISTANCE................................................. 4
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............................... 5
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
LICENSED MARKS................................................................ 8
5.1. Ownership.......................................... 8
5.2. Authorized Use..................................... 8
5.3. Infringement....................................... 9
5.4. Operation Under Licensed Marks..................... 9
5.5. Modification/Replacement of Licensed Marks......... 9
6. STANDARDS OF OPERATION...............................................10
6.1. Compliance with System.............................10
6.2. Compliance With Law................................10
6.3. Joint Commission on Accreditation of Health Care
Organizations (JCAHO)..............................10
6.4. Maintenance of Standards...........................10
6.5. Operation in Conformity with Prescribed Methods,
Standards and Specifications.......................11
6.6. Printed Materials; Marketing.......................11
6.7. Ownership Identification...........................11
6.8. Patient Relations..................................11
6.9. Right to Inspect...................................11
6.10. Variation of Standards.............................11
6.11. Accounting Equipment and Software..................12
6.12. Discoveries and Ideas..............................12
7. CONFIDENTIAL OPERATING MANUAL........................................12
7.1. Compliance with Confidential Operating Manual......12
7.2. Revisions..........................................12
8. ADVERTISING AND MARKETING............................................12
8.1. Local Advertising..................................12
8.2. Approval of Advertising............................13
8.3. Participation in Cooperative Advertising and/or
Marketing Programs................................ 13
8.4. Operation of Call Center.......................... 13
8.5. Subordination and Alternative Performance of
Obligations....................................... 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 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...........................16
10.5. Confidential Agreements with Certain Employees.....16
10.6. Severability.......................................16
11. TRANSFER AND ASSIGNMENT..............................................17
11.1. Assignment by Franchisor...........................17
11.2. Assignment by Franchise Owner......................17
11.3. Conditions of Any Approval.........................17
11.4. Consent Not a Waiver..................................18
11.5. Parties Bound and Benefitted.......................19
12. DEFAULT AND TERMINATION..............................................19
12.1. Franchisor's Right to Terminate....................19
12.2. Franchise Owner's Right to Terminate...............20
13. POST TERM OBLIGATIONS................................................20
13.1. Cease Operations...................................20
13.2. Pay All Sums Outstanding...........................21
13.3. Return Confidential Operating Manual...............21
13.4. Cease Use of System................................21
14. INSURANCE ...........................................................21
14.1. Maintenance of Insurance...........................21
14.2. Notices of Claims..................................21
14.3. Notices of Other Claims/Events.....................21
15. TAXES, PERMITS AND INDEBTEDNESS......................................22
15.1. Payment............................................22
15.2. Compliance with all Laws and Regulations...........22
15.3. Full Responsibility................................22
16. INDEMNIFICATION AND INDEPENDENT CONTRACTOR...........................22
16.1. Indemnification and Hold Harmless..................22
16.2. Independent Contractor.............................22
17. WRITTEN APPROVALS, WAIVERS, FORMS OF AGREEMENT
AND AMENDMENT........................................................23
17.1. Prior Approvals....................................23
17.2. No Waiver..........................................23
17.3. Form of Agreements.................................23
17.4. Written Amendments.................................23
18. ENFORCEMENT..........................................................24
18.1. Inspections........................................24
18.2. Injunctive Relief..................................24
18.3. Costs and Expenses.................................24
18.4. No Right to Offset.................................24
19. ENTIRE AGREEMENT.....................................................24
20. NOTICES..............................................................25
21. GOVERNING LAW AND DISPUTE RESOLUTION.................................25
21.1. Governing Law......................................25
21.2. Arbitration........................................25
22. SEVERABILITY, CONSTRUCTION...........................................26
22.1. Severability.......................................26
22.2. Regulatory Reports.................................26
22.3. Counterparts.......................................27
22.4. Table of Contents, Headings and Captions...........27
23. MANAGEMENT CONTRACTS/JOINT VENTURES/CONSULTING
AGREEMENTS...........................................................27
24. MANAGED CARE AGREEMENTS/PREFERRED PROVIDER STATUS....................27
25. ACKNOWLEDGMENTS......................................................28
FRANCHISE AGREEMENT
THIS FRANCHISE AGREEMENT (the "Agreement or the "Franchise Agreement")
is entered into effective June 17, 1997 (the "Effective Date") by and between
MAGELLAN HEALTH SERVICES, INC., a Delaware corporation ("Magellan"), and its
wholly-owned subsidiary, CHARTER FRANCHISE SERVICES, LLC, a Delaware limited
liability company (together, "Franchisor"), and CHARTER BEHAVIORAL HEALTH SYSTEM
OF CENTRAL GEORGIA, LLC ("Franchise Owner").
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 existing computer software
owned by Franchisor or, subject to the terms of the respective license
agreement, licensed to Franchisor, and, immediately prior to the date hereof,
utilized by the business which is the subject of this Agreement, existing
treatment protocols, existing treatment, financial, legal and other programs and
procedures, existing quality standards, existing quality assessment methods,
existing 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,
department, division or other organizational subdivision, 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 facilities in
the Territory, including outpatient facilities; such behavioral healthcare to
include inpatient hospitalization, partial hospitalization programs, outpatient
therapy, intensive outpatient therapy, ambulatory detoxification, behavioral
modification programs and related services. 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.
B. Franchise Owner 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.
C. Franchise Owner is a subsidiary corporation of Charter Behavioral
Health Systems, LLC ("OpCo") or is otherwise affiliated with OpCo. OpCo and
Franchisor have entered into a Master Franchise Agreement dated as of the date
hereof (the "Master Franchise Agreement") pursuant to which, among other
matters, Franchisor has agreed to grant franchises to certain subsidiaries and
affiliates of OpCo; a copy of the Master Franchise Agreement is attached hereto
as Exhibit 2. This Franchise Agreement is one of the franchise agreements
granted under and pursuant to the Master Franchise Agreement.
D. Immediately prior hereto Franchisor operated, through a wholly-owned
subsidiary, the business which is the subject of this agreement. Substantially
simultaneously herewith, Franchisor is transferring to Franchise Owner's parent,
OpCo, certain of the business and assets (including personnel) heretofore
utilized by Franchisor to provide services and support to the business which is
the subject of this Agreement (the business and assets (including personnel)
retained by Franchisor heretofore utilized by Franchisor to provide service and
support to the business which is the subject of this Agreement are herein
referred to as the "Retained Servicing Business" and the business and assets
(including personnel) transferred by Franchisor to OpCo heretofore utilized by
Franchisor to provide service and support to the business which is the subject
of this Agreement are herein referred to as the "Transferred Servicing
Business").
1. GRANT OF FRANCHISE
1.1. Grant. Subject to all of the terms and conditions herein,
Franchisor grants to Franchise Owner the right and franchise to use the Charter
System in the operation of the Franchised Business at any present or future
facilities located in the geographic area described in Exhibit 3 to this
Agreement (the "Territory"). 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: Charter Behavioral Health System of
Central Georgia, LLC. Subject to all of the terms and conditions herein,
Franchisor hereby also grants to Franchise Owner the right and license to
utilize the Charter System in connection with the management and administration
of the businesses of the any presently existing Joint Ventures, Managed
Businesses and all New Arrangements in the Hospital/RTC Based Behavioral
Healthcare Business pursuant to Article 23.
1.2. Modifications; Amendments to Charter System. Franchisor reserves
the right from time to time to amend, modify, delete (subject to Article 3) 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 trade names 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 shall
have the right without additional consideration (other than such as results from
increases in Gross Revenues) to
utilize the amendments, modifications and enhancements; and Franchise Owner, at
its expense, will fully comply with all such amendments, modifications,
deletions and enhancements reasonably designated as applicable to then existing
franchise owners similarly situated. Franchisor shall not be obligated to make
improvements or develop new software for use of Franchise Owner, but to the
extent that Franchisor does so Franchise Owner shall have the right and license
to use such new or improved software without additional consideration (other
than such as results from increases in Gross Revenues).
1.3. New Products. Until such time as Franchise Owner ceases to be an
OpCo Franchisee (as defined in the Master Franchise Agreement), and subject to
Franchise Owner complying with such reasonable terms and conditions as
Franchisor shall provide, Franchise Owner shall have the right and option to
utilize in the Territory in connection with its Franchised Business new products
and new concepts developed by Franchisor for the delivery of behavioral
healthcare and Behavioral Modification Programs and Related Services ("New
Products"), provided the Franchise Owner will not have such right or option with
respect to any such New Products (i) which deal with the delivery of behavioral
healthcare incidental to the treatment of a non-behavioral illness or condition,
(ii) where the behavioral illness (e.g., alcohol or substance abuse) is not the
primary diagnosis (e.g., behavioral healthcare treatment for depression
following a diagnosis for cancer (cancer being the primary diagnosis); weight
loss behavioral healthcare treatment following a heart attack (heart disease
being the primary diagnosis)), or (iii) that are used by Franchisor or its
subsidiaries (and not offered to third parties pursuant to any franchise or
similar arrangement) in connection with its business operations. To the extent
that Franchise Owner does not have the right to a New Product pursuant to the
terms of this Section, 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.
Franchise Owner shall have the right to utilize a New Product without paying to
Franchisor any additional fees (other than such as results from increases in
Gross Revenues).
1.4. Territory Exclusive. Franchisor agrees that during the term of
this Agreement, it will not, except as otherwise provided in this Article 1,
establish or maintain, or franchise any other person or firm to establish or
maintain, a facility located within the Territory that (i) uses the Charter
System, (ii) engages, directly or indirectly, in the Hospital/RTC Based
Healthcare Business, or (iii) subject to Section 1.3 above, provides Behavioral
Modification Programs and Related Services.
1.5. Outpatient Providers. Franchisor may not, without the written
consent of Franchise Owner in each instance, establish or maintain a business,
or 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
at a facility within the Territory that (i) uses the Charter System, (ii)
engages, directly or indirectly,
in the Hospital/RTC Based Behavioral Healthcare Business, or (iii) subject to
Section 1.3 above, provides Behavioral Modification Programs and Related
Services.
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
This Agreement, unless sooner terminated pursuant to Article 12 hereof,
shall extend from the Effective Date until the date of expiration or termination
of the Master Franchise Agreement.
3. OPERATING ASSISTANCE
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 shall provide Franchise Owner with the following ongoing
assistance:
(a) Advertising and marketing assistance including
consultation, access to media buying programs and access to broadcast
and other advertising pieces and materials produced by Franchisor from
time to time for franchise owners.
(b) Risk management services, including risk
financing planning, loss control and claims management.
(c) Outcomes monitoring.
(d) Access to Managed Care Agreements (as
hereinafter defined).
(e) 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.
Franchisor shall maintain reasonable expertise and provide a
minimum level and quality of assistance within the scope of the Retained
Servicing Business, in accordance with commercially reasonable standards
substantially similar to the level and quality of such assistance provided to
the business which is the subject of this Agreement immediately prior to the
date hereof by the Retained Servicing Business. Nothing contained herein shall
require Franchisor to maintain expertise or provide assistance within the scope
of the Transferred Servicing Business.
4. FEES
4.1. Franchise Fee. There is no initial franchise fee for the initial
term or any renewal term.
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) Eight Hundred Sixty-Nine Thousand Dollars ($869,000) plus
(i) an amount calculated by multiplying Eight Hundred Sixty-Nine
Thousand Dollars ($869,000) 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, and (ii) New Arrangement Management Fees
(as defined in Article 23); or
(b) Eight Hundred Sixty-Nine Thousand Dollars ($869,000) plus
(i) 3% of Gross Revenues above Ten Million Seven Hundred Twenty-Nine
Thousand Dollars ($10,729,000) and less than Twelve Million Eight
Hundred Seventy-Five Thousand Dollars ($12,875,000) during said
Contract Year, (ii) 5% of Gross Revenues above Twelve Million Eight
Hundred Seventy-Five Thousand Dollars ($12,875,000) during said
Contract Year, and (iii) New Arrangement Management Fees.
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.
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 Franchise Owner.
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) for any joint venture ("Joint Venture"), subject
to Article 23, or Managed Business (as defined below), the gross
revenues ("Business Gross Revenues") of all the businesses which are
the subject of Joint Ventures (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 unless New Arrangement
Management Fees are paid pursuant to Article 23 with respect to a
Managed 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
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.
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.
4.11. Subordination and Alternative Performance of Obligations.
Franchisor's right to receive the payments required to be made by Franchise
Owner pursuant to this Article 4 is subject to that certain Subordination
Agreement dated as of the date hereof by and among Franchisor, Crescent Real
Estate Equities Limited Partnership ("Crescent") and OpCo (the "Subordination
Agreement"). Franchise Owner shall pay all amounts required to be paid by
Franchise Owner pursuant to this Article 4 to OpCo, rather than to Franchisor,
until the earliest of (i) the date on which OpCo ceases to have voting control
of Franchise Owner through stock ownership, or (ii) the date of the termination
or expiration of the Master Franchise Agreement, or (iii) the date OpCo shall:
(i) become insolvent; or (ii) be unable, or admit in writing its inability to
pay its debts as they mature; or (iii) make a general assignment for the benefit
of creditors or to an agent authorized to liquidate any substantial amount of
its property; or (iv) become the subject of an "order for relief" within the
meaning of the United States Bankruptcy Code; or (v) become the subject of a
creditor's petition for liquidation, reorganization or to effect a plan or other
arrangement with creditors; or (vi) apply to a court for the appointment of a
custodian or receiver for any of its assets; or (vii) have a custodian or
receiver appointed for any of its assets (with or without its consent); or
(viii) otherwise become the subject of any insolvency proceedings or propose or
enter into any formal or informal composition or arrangement with its creditors.
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
"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. If Franchisor does not take action to halt any
Unauthorized Third Party Use, Franchise Owner at its expense may take action as
it deems appropriate to halt such Unauthorized Third Party Use.
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. Compliance with System. Franchise Owner agrees in connection with
the Franchised Business to utilize and comply with all treatment protocols,
treatment, financial, legal and other programs and procedures, quality
standards, quality assessment methods, performance improvement and monitoring
programs and other matters which now or hereafter comprise the 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).
6.2. 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.
6.3. 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 as required by law
or reasonably specified by Franchisor. All costs of obtaining and maintaining
accreditation(s) shall be borne and paid by Franchise Owner.
6.4. 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.
6.5. 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.
6.6. Printed Materials; Marketing. Franchise Owner shall use only
business stationery, business cards, marketing materials, advertising materials,
printed materials or forms which have 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.
6.7. 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.
6.8. 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.
6.9. 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.
6.10. 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.
6.11. 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.
6.12. 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 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. 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 reasonably 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.
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 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.
8.5. Subordination and Alternative Performance of Obligations.
Franchise Owner shall make all payments required to be made by Franchise Owner
pursuant to this Article 8 to OpCo, rather than to Franchisor, until the earlier
of (i) the date on which OpCo ceases to have voting control of Franchise Owner
through stock ownership, or (ii) the date of the termination or expiration of
the Master Franchise Agreement, or (iii) in the event OpCo shall: (i) become
insolvent; or (ii) be unable, or admit in writing its inability to pay its debts
as they mature; or (iii) make a general assignment for the benefit of creditors
or to an agent authorized to liquidate any substantial amount of its property;
or (iv) become the subject of an "order for relief" within the meaning of the
United States Bankruptcy Code; or (v) become the subject of a creditor's
petition for liquidation, reorganization or to effect a plan or other
arrangement with creditors; or (vi) apply to a court for the appointment of a
custodian or receiver for any of its assets; or (vii) have a custodian or
receiver appointed for any of its assets (with or without its consent); or
(viii) otherwise become the subject of any insolvency proceedings or propose or
enter into any formal or informal composition or arrangement with its creditors.
9. STATEMENTS, RECORDS AND FEE PAYMENTS
9.1. Maintenance of Records; Audit Rights. Franchise Owner shall, in a
manner reasonably 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. In connection with any such
examination or audit, Franchisor shall not be entitled to any adjustment to the
extent that Gross Revenues have been computed in accordance with Section 4.10
and in accordance with generally accepted accounting principles consistently
applied. 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 present fairly in all material respects such matters.
Franchise Owner shall also submit to Franchisor no later 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 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 unaudited statement of income and retained earnings of Franchise
Owner for such fiscal year and an unaudited 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 Franchise Owner as true and
correct. If audited statements are prepared by or for Franchise Owner for any
fiscal year, such shall be provided to Franchisor in lieu of the unaudited
statements required pursuant to this Section 9.5. Such financial statements
shall be accompanied by a certificate certifying Franchise Owner's Gross
Revenues for the prior year.
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 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.
10.2. 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 or the
thirty-second anniversary of the date 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 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. Consistent with
Franchisor's existing practices with respect to employee non-disclosure
agreements, Franchise Owner agrees to maintain and cause new employees of
Franchise Owner to execute employee non-disclosure agreements in the form
employed by Franchisor as of the date hereof (or such other form as reasonably
requested by Franchisor), with its managers, 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.
10.7. Waiver of Surety Defenses by Franchisor and Nature of
Obligations. The obligations of Franchisor under this Agreement are joint and
several and include any and all debts, obligations, whether of payment or
performance, and liabilities arising out of or relating to this Agreement,
whether such debts, obligations and liabilities are heretofore, now, or
hereafter made, incurred, or created, whether such debts, obligations and
liabilities are voluntary or involuntary, liquidated or unliquidated, secured or
unsecured, and including but not limited to contingent debts, obligations and
liabilities, and whether or not any or all such debts, obligations and
liabilities are or become unenforceable against either Franchisor as a result of
the operation of bankruptcy or insolvency laws.
With respect to any debt, liability or obligation with respect
to which one Franchisor is deemed to be a surety or guarantor of the other
Franchisor, such Franchisor deemed to be a surety or guarantor hereby
unconditionally and irrevocably waives (a) (i) any right to require that any
action be brought against the other Franchisor without regard to whether the
other Franchisor, or both, were directly responsible for any breach of this
Agreement; (ii) presentment, notice of dishonor, protest, diligence, demand for
payment, performance or enforcement, and all notices of any kind, including
without limitation: notice of acceptance hereof, notice of the creation of any
obligations of Franchisor hereunder (except as otherwise expressly required in
this Agreement), notice of nonpayment, nonperformance or other default, and
notice of any action taken to collect upon any of the obligations of Franchisor
hereunder or enforce any of the provisions hereof against Franchisor; and (iii)
any claim for contribution from any other person, including the other
Franchisor; and (b) except to the extent that Franchise Owner would not have had
the benefit of such protections had the Franchisor not been deemed to be a
surety or guarantor (i) any failure of Franchise Owner to take any steps to
preserve its rights hereunder; (ii) any setoffs against Franchise Owner which
would otherwise impair Franchise Owner's rights against
either Franchisor hereunder; and (iii) any requirement to mitigate damages. Each
Franchisor also expressly waives the provisions of Sections 49-25 and 49-26 of
the Code of Virginia.
11. TRANSFER AND ASSIGNMENT
11.1. Assignment by Franchisor. This Agreement and all rights and
duties hereunder may not be assigned or transferred by Franchisor except (i)
with the prior written consent of Franchise Owner and Crescent, in its capacity
as lessor under the Facilities Lease (as defined in Section 1.21 of the Master
Franchise Agreement), which consent shall not be unreasonably withheld,
conditioned or delayed, or (ii) to an entity which simultaneously therewith
acquires all or substantially all of Franchisor's business and assets.
Franchisor may grant a security interest in Franchisor's rights and interest in
(but not its obligations under) this Agreement to any of Franchisor's lenders by
means of an assignment for collateral purposes.
11.2. Assignment by Franchise Owner.. This Agreement and any rights and
duties hereunder may not be assigned or transferred by Franchise Owner except
(i) with the prior written consent of Franchisor, which consent shall not be
unreasonably withheld, conditioned or delayed, to any entity which
simultaneously therewith acquires all or substantially all of Franchise Owner's
business and assets (including the assignment of Franchise Owners's rights and
obligations as lessee under the lease with Crescent), or (ii) if the Facilities
Lease is terminated prior to the end of the Initial Term or any Extended term as
a result of an Event of Default under the Facilities Lease, and if Crescent
exercises its election under the Facilities Lease to assume all (but not less
than all) of the Obligations of Franchise Owner under this Agreement and all
other agreements specified in the Facilities Lease from the date of such
assumption, to Crescent or its designee. A transaction or transactions pursuant
to which OpCo no longer has voting control of Franchise Owner through stock
ownership shall be deemed an assignment or transfer 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 reasonable
terms and conditions;
(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 satisfied
in all material respects;
(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 satisfied in all material respects;
(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, unless
the proposed transferee would be or is an OpCo Franchisee;
(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.
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 in (a) and (f)
below, but shall specifically not include the failure to pay Franchisor any
amount due to Franchisor under and pursuant to Articles 4 or 8 hereof, which
Franchisor agrees will not be an event of default giving rise to a right to
terminate this Agreement. Upon the occurrence of any such 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 there is any violation of any transfer and
assignment provision contained in Article 11 of this Agreement;
(c) 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 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;
(d) If Franchise Owner, other than in an immaterial
respect, violates, any covenant of confidentiality or non-disclosure
contained in Article 10 of this Agreement;
(e) 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;
(f) 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. Franchise Owner may not
terminate this Agreement prior to the expiration of its term (whether because of
Franchisor's breach, material or otherwise) except with the prior written
consent of Franchisor.
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
subject to the Subordination Agreement.
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. 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.
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, except those
directly arising from Franchisor's willful misconduct or fraud. Franchisor
agrees to protect, defend, indemnify and hold Franchise Owner, 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 arising
out of or connected with the operation of the Franchised Business arising
directly from Franchisor's willful misconduct or fraud.
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 reasonably 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.
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, subject, however, to those provisions
of this Agreement which require Franchisor to act toward its Franchise Owners on
a reasonably nondiscriminatory basis.
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 or in accordance with Section 3.10 of the Subordination 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 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 INCLUDING THE EXHIBITS REFERRED TO HEREIN AND THE
TRANSACTION DOCUMENTS (AS DEFINED IN THE MASTER FRANCHISE AGREEMENT) CONTAIN THE
ENTIRE AGREEMENT OF THE PARTIES. NO OTHER AGREEMENTS, WRITTEN OR ORAL, SHALL BE
DEEMED TO EXIST, AND ALL PRIOR AGREEMENTS AND UNDERSTANDINGS ARE SUPERSEDED
HEREBY. THERE ARE NO CONDITIONS TO THIS AGREEMENT WHICH ARE NOT EXPRESSED HEREIN
OR IN THE TRANSACTION DOCUMENTS. NO OFFICER, EMPLOYEE OR AGENT OF FRANCHISOR HAS
ANY AUTHORITY TO MAKE ANY REPRESENTATION OR PROMISE NOT CONTAINED IN THIS
AGREEMENT OR IN THE TRANSACTION DOCUMENTS, 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.
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 Delaware
applicable to contacts among residents of Delaware which are to be performed
entirely within Delaware, 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 Delaware as is provided by law; and
the parties consent to the jurisdiction of said court or courts located in the
State of Delaware 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 Wilmington, Delaware, 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 Delaware, 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 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 new 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. In each instance of a Joint
Venture in which Franchisor shall have provided such written consent, Franchisor
and Franchise Owner, prior thereto, shall have agreed with respect to the Joint
Venture (i) to the payment to Franchisor, in addition to all other amounts
payable pursuant to this Agreement, of a percentage of Franchise Owner's gross
receipts from such New Arrangement agreeable to Franchise Owner and Franchisor
or (ii) to the inclusion in Gross Revenues of the Business Gross Revenues of any
such Joint Venture. For each Managed Business that is the subject of a New
Arrangement, Franchise Owner shall pay to Franchisor (i) with respect to any
such services provided to Managed Businesses within the Territory, 15% of (a)
the total fees received by Franchise Owner, less (b) Franchise Owner's direct
costs (not including overhead) of providing such services, or (ii) unless
otherwise agreed by Franchisee or Franchise Owner, with respect to any such
services provided to Managed Businesses outside the Territory, 30% of (a) the
total fees received by Franchise Owner, less (b) Franchise Owner's direct costs
(not including overhead) of providing such services (the amounts received by
Franchisor pursuant to (i) or (ii) above are herein referred to as "New
Arrangement Management Fees").
24. MANAGED CARE AGREEMENTS/PREFERRED PROVIDER STATUS
The parties agree that during the continuance of this Agreement, all
existing and future Managed Care Agreements, as defined below, shall be held in
the name of Franchisor or a subsidiary of Franchisor. Franchise Owner agrees
during the continuance of this Agreement that neither it nor any subsidiary or
affiliate will enter into any Managed Care Agreements. For the purposes of this
Agreement, "Managed Care Agreements" means any and all contracts, agreements,
letters of agreement, memoranda of understanding, or any like written or oral
agreement (hereinafter referred to as "Managed Care Agreement"), with any
insurer, managed care company or any other third-party payor (hereinafter
collectively referred to as "Payor") which is obligated to pay for behavioral
health care benefits for any person pursuant to a Payor benefit contract with
such person, and under which such Managed Care Agreements such behavioral health
services are provided for a negotiated reimbursement rate. The parties agree
that for the purposes of this Agreement, Managed Care Agreements shall not
include any
agreement for the provision of behavioral health care services solely with a
county or a local employee assistance program with services provided solely by
Franchise Owner.
The parties acknowledge that Franchisor or a subsidiary of Franchisor
shall subcontract with OpCo to provide staffing to service and negotiate such
Managed Care Agreements; provided, however, that Franchisor shall retain the
right to determine which, if any, Managed Care Agreement shall be entered into
in Franchisor's name. Franchisor shall use commercially reasonable best efforts,
subject to applicable law, to cause Franchise Owner to have "preferred provider"
status in connection with Franchisor's managed behavioral healthcare business on
a basis substantially consistent with existing covenants, terms and conditions,
unless the customer directs otherwise.
25. ACKNOWLEDGMENTS
25.1. 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.
25.2. 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.
25.3. 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.
25.4. 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.
25.5. 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.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement under seal on the date first written above.
MAGELLAN HEALTH SERVICES, INC.
By: ________________________________
Title: _______________________
CHARTER FRANCHISE SERVICES, LLC
By: ________________________________
Title: _______________________
CHARTER BEHAVIORAL HEALTH
SYSTEM OF CENTRAL GEORGIA,
LLC
By: ________________________________
Title: _______________________