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Sectors: Health Products and Services
Effective Date: December 31, 1996
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EXHIBIT 10.9


STOCK REDEMPTION AGREEMENT


THIS STOCK REDEMPTION AGREEMENT, dated as of December 31, 1996, by and between OPTION CARE CAMILLA, INC (the "Company"), OPTION CARE ENTERPRISES, INC., a California corporation ("OCE"), and OPTION CARE, INC., a California corporation ("OCI").


WITNESSETH:


WHEREAS, OCE owns Eight Hundred (800) shares and OCI owns Fifty (50) shares of the common stock of Option Care Camilla, Inc., a Georgia corporation (collectively, the "Subject Shares");


WHEREAS, the Company deems it to be in its best interest to redeem all of the Subject Shares from OCE and OCI on the terms and conditions set forth below; and


WHEREAS, OCE and OCI desire the Company to redeem the Subject Shares.


NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, it is hereby agreed between the Company and OCE and OCI as follows:


1. Redemption. The Company hereby agrees to redeem all, but not less
----------- than all, of the Subject Shares from OCE and OCI on the terms and subject to the conditions contained herein, and OCE and OCI agree to such redemption.


2. Consideration. In consideration of the redemption of the Subject
-------------- Shares from OCE and OCI, the Company shall enter into a Franchise Agreement with OCI. This Franchise Agreement shall be in the form of attached Exhibit B (the "Franchise Agreement") and the Company shall deliver to OCI all royalties, as determined pursuant to the Franchise Agreement, over the course of the Franchise Agreement (the "Royalty Stream"), which Royalty Stream is estimated to total at least One Million One Hundred Thousand Dollars ($1,100,000).


3. Payment and Delivery.
---------------------


(a) This redemption shall take place by facsimile with subsequent exchange of stock powers transferring the subject shares to the Company and executed originals on or before December 31, 1996 (the "Closing Date"). The Company shall evidence its redemption of the Subject Shares by delivering to OCE and OCI on the Closing Date a fully executed copy of this Stock Redemption Agreement and the Franchise Agreement.


(b) On the Closing Date, OCE and OCI shall deliver to the Company or the Company's representative stock certificates representing the Subject Shares along with stock powers executed in blank directing transfer of the Subject Shares on the books of Option Care Camilla, Inc. to the Company.


4. Representations of OCE. OCE and OCI represent and warrant to the
----------------------- Company as follows:


(a) Authority. OCE and OCI each has full power and authority, without the
--------- consent or approval of any court, agency or other third party, to enter into this Agreement and to perform its obligations hereunder.


(b) Title to the Shares. OCE and OCI each now has, and on the Closing
------------------- Date will have, valid and marketable title to its Subject Shares, free and clear of any claims, liens, encumbrances or other restrictions on sale or transfer.


(c) No Default or Violation. The execution, delivery and performance of
------------------------ this Agreement by OCE and OCI will not result in a breach of or constitute a default under or a violation of any agreement, judgment, decree, order or other instrument to which either is a party or by which either is bound.


5. Representations of the Company. The Company represents and warrants
------------------------------ to OCE and OCI as follows:


(a) Authority. The Company has full power and authority to enter
--------- into this Agreement and to perform its obligations hereunder.


(b) No Default or Violation. The execution, delivery and performance
----------------------- of this Agreement by the Company will not result in a breach of or constitute a default under or a violation of any agreement, judgment, decree, order or other instrument to which it is a party or by which it is bound.


6. Liabilities. OCE and OCI shall be responsible for and shall timely
----------- pay all liabilities identified on the December 31, 1996 balance sheet of Option Care Camilla, Inc. and for all other accrued and contingent liabilities of the Company as of and including December 31, 1996, provided that such liabilities were incurred for use by Option Care Camilla, Inc. in the ordinary course of business in quantities normal and customary for the business. OCE and OCI shall be liable for and shall timely pay all federal, state, local, sales and income taxes of OCC for 1996 and all previous years from November 15, 1991 forward, including interest, penalty, etc. and shall indemnify and hold harmless the Company therefrom.


7. OCE's and OCI Indemnity. OCE and OCI agree to jointly and severally
----------------------- indemnify and hold the Company and its officers, employees, directors, shareholders, affiliates, successors and assigns harmless from and against any and all losses, liabilities, costs, obligations, damages, deficiencies and expenses (including reasonable attorneys' fees and related costs) of whatsoever kind, description or nature which may be sustained, incurred or suffered by it or them as a result of or relating to:


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(a) a breach by OCE or OCI of any representation, warranty, covenant or agreement made by OCE or OCI in this Agreement;


(b) the operation of the business of Option Care Camilla, Inc. (the "Business") by OCE, the filing, reporting or failure to file or report by OCE or the Business of any information or documents with third party payors relating to the Business or OCE on or before the Closing Date;


(c) any failure of OCE or OCI to timely pay or otherwise discharge or satisfy any of their liabilities retained under Section 6 hereof; and


(d) any other liabilities, obligations or claim of or with respect to the Business involving or arising from any act, omission or occurrence during any period prior to the Closing Date, including the conduct of the Business.


8. Miscellaneous.
-------------


(a) Expenses. Each of the parties hereto shall bear its own expenses in
-------- connection with this Agreement and the transactions contemplated herein, including fees and expenses of its attorneys.


(b) Entire Agreement; No Oral Change. This Agreement embodies the entire
-------------------------------- agreement and understanding between OCI, OCE and the Company and supersedes any and all prior agreements and understandings relating to the subject matter hereof and may not be changed orally but only by an agreement in writing signed by both parties.


(c) Benefits. All the terms and provisions of this Agreement shall be
-------- binding upon and inure to the benefit of the parties and their respective successors and assigns.


(d) Survival of Representations and Warranties. All representations and
------------------------------------------ warranties made herein shall survive the Closing Date.


(e) Assignment. None of the parties shall assign this Agreement or any
---------- rights or obligations hereunder without the prior written consent of the other parties.


(f) Controlling Law. This Agreement shall be construed and enforced in
--------------- accordance with the laws of the State of Illinois.


(g) Counterparts. This Agreement may be executed in any number of
------------ counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.


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IN WITNESS WHEREOF, the parties have caused their duly authorized representatives to execute this Agreement on one or more counterparts hereof, of which shall be read and construed as but one and the same document, as of the date first written above.


OPTION CARE CAMILLA, INC.,


By: /s/ Harris Morgan
--------------------------------


Name: Harris Morgan
------------------------------


Its: President
-------------------------------


OPTION CARE ENTERPRISES, INC.,
a California corporation


By: /s/ Cathy Bellehumeur
--------------------------------


Name: Cathy Bellehumeur
------------------------------


Its: Secretary
-------------------------------


By: /s/ Cathy Bellehumeur
--------------------------------


Name: Cathy Bellehumeur
------------------------------


Its: Vice President
-------------------------------


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STOCK POWER AND ASSIGNMENT


FOR VALUE RECEIVED, Option Care Enterprises, Inc. does hereby sell, assign and transfer unto Option Care Camilla, Inc. 800 shares of common stock of
-------- Option Care Camilla, Inc., and does hereby irrevocably constitute and appoint the Secretary of such corporation as its attorney to transfer said stock on the books of the within-named corporation with full power of substitution in the premises.


Dated as of: December 31 , 1996
-----------


OPTION CARE ENTERPRISES, INC.,
a California corporation


By: /s/ Cathy Bellehumeur
-------------------------------


Name: Cathy Bellehumeur
-----------------------------


Its: Secretary
------------------------------


OPTION CARE, INC.,
a California corporation


By: /s/ Cathy Bellehumeur
-------------------------------


Name: Cathy Bellehumeur
-----------------------------


Its: Vice President
------------------------------


In the presence of:


/s/ Gale Holtz - ----------------------------------


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OPTION CARE, INC.
FRANCHISE AGREEMENT


This Franchise Agreement ("Agreement") between Option Care, Inc., a California corporation, with its principal place of business at Bannockburn, Illinois ("Franchisor") and Option Care Camilla, Inc., a Georgia corporation, ("Franchise Owner"), is made and entered into effective the date signed by Franchisor on the signature page hereof (the "Effective Date").


RECITALS


A. Franchisor has developed and owns a proprietary business method and concept (the "System") relating to the operation of an outpatient health care business that compounds pharmaceuticals, dispenses and administers pharmaceuticals and physician prescribed biologicals, nutrients, medications and solutions via parenteral and enteral routes in the home and in, subacute, extended care, and other outpatient settings, furnishes clinical, pharmaceutical and nursing services necessary to the provision of such therapies, sells related products and supplies and sells or leases related equipment. For purposes of this Agreement, "parenteral" shall mean any administration route other than by way of the intestines (e.g., without limitation, inhalation, transdermal and intravenous).


B. The therapies under the System (the "Therapies") are set forth in the Confidential Franchise Operations Manual (the "Manual") and include "Core Therapies" and "Permitted Therapies", both as defined in the Manual.


C. The distinguishing characteristics of the System are set forth in the Manual, which contains, without limitation, policies and procedures for the Therapies; uniform standards, specifications and procedures for operation of the business under the System, including the nature and manner of products and services offered; procedures for quality improvement; training requirements; group purchasing availability; and management, operational, and marketing methods, techniques, materials, assistance and programs.


D. Pursuant to a license from Franchisor, each of Franchisor's franchise owners does business under the name and mark "Option Care," and such other names and marks as Franchisor may designate for use by each franchise owner under the System (collectively, the "Proprietary Marks").


E. Franchise Owner wishes to obtain a franchise in order to operate a business utilizing the System and the Proprietary Marks, as well as to receive the Manual, the training and other assistance provided by Franchisor in connection with the System pursuant to this Agreement.


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F. The business to be conducted by Franchise Owner pursuant to and under the license granted by this Agreement is sometimes referred to herein as the "Franchised Business".


G. Franchise Owner understands and acknowledges the importance of Franchisor's high and uniform standards of quality and service and the necessity of operating the Franchised Business in conformity with Franchisor's standards and specifications, including the Manual.


H. Franchise Owner acknowledges that it has received a copy of this Agreement, and the related exhibits and agreements, at least five (5) business days prior to the date on which this Agreement was executed by Franchise Owner. Franchise Owner further acknowledges that it has received the disclosure document required by the Trade Regulation Rule of the Federal Trade Commission, entitled "Offering Circular for Prospective Franchise Owners," at least ten (10) business days prior to the date on which this Agreement was executed.


NOW, THEREFORE, Franchisor and Franchise Owner, in consideration of the undertakings and commitments of each party to the other party set forth herein and the recitals set forth above, which are incorporated into and made a part of this Agreement, mutually agree as follows:


1. GRANT


1.1 Grant of Franchise. Franchisor hereby grants to Franchise Owner, on
------------------- the terms and conditions contained in this Agreement, the right and franchise, and Franchise Owner undertakes the obligation, to operate the Franchised Business and to use solely in connection with the Franchised Business the System and the Proprietary Marks.


1.2 Deliveries on Grant. Contemporaneous with Franchise Owner delivering
------------------- this executed Agreement to Franchisor, it shall also deliver to Franchisor the following:


(a) A check in the amount specified in Section 5.1 hereof;


(b) A copy of the fronts and backs of its issued stock certificates, the backs of which shall contain the following legend: "The transfer of this stock is subject to the terms and conditions of a Franchise Agreement with Option Care, Inc. dated _____________________, 1996";


(c) An executed "Site Selection Addendum; and


(d) A fully executed "Guarantee".


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2. TERRITORY


2.1 Territory Defined. Franchisor hereby grants to Franchise Owner the
----------------- right to operate the Franchised Business during the term of this Agreement within the defined area (the "Territory") described on attached Exhibit A, which Exhibit is incorporated herein by reference thereto. Franchise Owner acknowledges and agrees that this Agreement affords it no right, title or interest in or to additional franchises or any right to acquire additional franchises or territory, nor does it obligate Franchisor in any way to grant or sell any additional franchises or territory to Franchise Owner.


2.2 Patient Freedom of Choice. Notwithstanding the grant of the Territory,
------------------------- Franchise Owner acknowledges and agrees that (i) patients residing within the Territory are entitled to the freedom to choose their health care provider and may seek health care services of the type provided by Franchise Owner from others, including another franchise owner of Franchisor; and (ii) health care referral sources may refer patients residing within the Territory to health care providers of their choosing, including to another franchise owner of Franchisor.


2.3 Marketing Efforts in Territory. Franchise Owner agrees to devote its
------------------------------ best efforts to serving patients that reside within the Territory. Except as otherwise permitted herein or as approved in advance and in writing by Franchisor, Franchise Owner's marketing and promotional activities shall be directed only toward obtaining patients who reside within the Territory. Franchise Owner acknowledges and agrees that Franchisor, as part of its business strategy, may advertise or market on behalf of the System in the Territory and may maintain itself, or through its affiliates, a presence in the Territory for the purpose of providing a managed care program offering services of the type provided by the Franchised Business. Franchise Owner agrees to abide by Franchisor's then current policies on marketing outside of the Territory, and on cooperating with neighboring Option Care franchisees, as the same may be set forth from time to time in the Manual.


2.4 Presence in Territory. Franchise Owner shall maintain such manner and
--------------------- degree of presence in the Territory as from time to time required by the Manual. Such presence requires Franchise Owner to maintain an I.V. pharmacy within the Territory unless Franchise Owner has the prior written approval of Franchisor to utilize the I.V. pharmacy services of another Option Care Franchise and utilize such services on the basis approved by Franchisor. Even if Franchise Owner is not required to itself maintain an I.V. pharmacy in the Territory, it must maintain a physical presence in the Territory consistent with Franchisor's requirements therefor as then set forth in the current Manual. The initial pharmacy and/or office site must be selected by Franchise Owner and disclosed to Franchisor at the time of filing the application for a franchise, but not later than sixty (60) days after execution of the Franchise Agreement. A location shall be selected by Franchise Owner in accordance with the then-current Site Selection Addendum. The Franchise Owner's presence within the Territory shall at all times comply with Franchisor's reasonable standards and conditions and any relocations of a physical pharmacy or office or change in the manner or degree of presence must be approved in advance in writing by Franchisor. Franchise Owner shall not relocate any part of


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the Franchised Business without the prior written consent of Franchisor. Franchise Owner agrees that disapproval of a location will not be unreasonable if the proposed location does not meet Franchisor's reasonable standards, including spacing between franchised offices.


2.5 Servicing Unowned Territory. Franchise Owner acknowledges that while
--------------------------- it is granted the right hereunder only to the Territory, Franchise Owner may provide goods and services to patients in unowned areas until such time as those areas are granted by Franchisor to a party. Franchise Owner acknowledges and agrees that it is obligated to pay royalties to Franchisor, in accordance with Section 5 hereof, on all Gross Receipts (as hereafter defined), whether from patients residing within or outside the Territory. Franchise Owner further acknowledges and agrees that neither the ability to service nor the grant of our permission to service patients residing outside the Territory affords it any right, title or interest in or to such area whatsoever (including any right to acquire such area or any right of first refusal as to such area).


3. TERM ; RENEWAL; CONSEQUENCES OF EXPIRATION (NON-RENEWAL)


3.1 Term. Unless sooner terminated as hereinafter provided, this Agreement
---- shall expire twenty (20) years from the Effective Date of this Agreement. If this Agreement reaches the end of its term and is not renewed, it will be said to have "expired" and the "consequences of expiration" set forth at Section 3.3, below, shall apply.


3.2 Renewal. If Franchise Owner, in Franchisor's sole interpretation,
------- meets all of the requirements described in this Section 3.2, then Franchise Owner shall have the right to extend the right to operate the Franchised Business for one (1) consecutive additional period of ten (10) years. To exercise the right to extend, Franchise Owner shall send to Franchisor, at least one six (6) months, but not more than twelve (12) months, prior to the expiration date of this Agreement a written notice of intention to extend. At the time of the notice and at the time of the execution of the renewal franchise agreement, Franchise Owner must satisfy the following conditions:


3.2.1 Franchise Owner shall not be in default of any provision of this Agreement and shall have substantially complied with all the terms and conditions of this Agreement, as amended, throughout its term;


3.2.2 Franchise Owner shall have satisfied all of its monetary obligations to Franchisor and Franchisor's affiliates and shall have met those obligations in a timely manner throughout the term of this Agreement;


3.2.3 Franchise Owner shall execute Franchisor's then-current form of renewal franchise agreement for the renewal term, which franchise agreement may have terms different from the terms of this Agreement, and such other ancillary agreements as Franchisor may require for the Franchised Business. The Territory described in this Agreement shall remain the same;


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3.2.4 Franchise Owner shall pay, in lieu of an initial fee, a renewal fee not to exceed the conversion fee that would then be charged a conversion candidate for this Territory;


3.2.5 Franchise Owner shall execute a general release, in a form prescribed by Franchisor, of any and all claims against Franchisor and Franchisor's affiliates, and their respective shareholders, partners, directors, officers, employees and agents, in this capacity and in their individual capacities, to the fullest extent permitted by law; and


3.2.6 Franchise Owner shall comply with Franchisor's then-current qualification and training requirements.


3.3 Consequences of Expiration. If either Franchise Owner or Franchisor
-------------------------- elects not to renew this Agreement, then, upon expiration of its term, all rights granted Franchisor Owner by this Agreement shall terminate, and Franchise Owner shall immediately:


3.3.1 Cease to operate the Franchised Business and not, directly or indirectly, represent itself as a franchise owner of Franchisor;


3.3.2 Permanently cease to use, in any manner whatsoever, any Confidential Information associated with the System, as well as the Proprietary Marks and all signs, equipment, marketing materials, stationery, forms and other items which display the Proprietary Marks;


3.3.3 Pay all liquidated or ascertainable sums owing from Franchise Owner to Franchisor, without set-off or other reduction on account of unliquidated claims, including, without limitation, any fees accruing after the expiration of the term on Gross Receipts attributable to accounts receivable from goods or services furnished during the term of this Agreement;


3.3.4 Deliver to Franchisor via U.P.S. or comparable carrier, via first class service, the Manual, all patient file lists and business records (other than prescriptions, patient records, tax returns and bank statements), files and brochures, and any and all other materials relating to the operation of the Franchised Business, all of which are acknowledged to be Franchisor's property, and shall retain no copy or record of any of the foregoing, except Franchise Owner's copy of this Agreement and any other agreements with Franchisor or any affiliate, copies of any correspondence between the parties, and any copies of other documents which Franchise Owner reasonably needs for compliance with any provision of law; and


3.3.5 Comply with the applicable covenants contained in Section 9 of this Agreement, which covenants shall survive the expiration of this Agreement.


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4. DUTIES OF FRANCHISOR


4.1 Provide the Manual. Franchisor shall provide to Franchise Owner one
------------------ copy of the Manual for Franchise Owner's use during the term of this Agreement. Franchisor shall also provide Franchise Owner with updates to the Manual. The Manual, updates and all copies thereof shall be promptly returned to Franchisor upon expiration or termination of this Agreement, unless this Agreement is ren
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