1
Exhibit 10.22
LEASE AGREEMENT FOR A GAMMA KNIFE UNIT
THIS LEASE AGREEMENT FOR A GAMMA KNIFE UNIT (the "Agreement") is entered
into as of October 5, 1998, between GK FINANCING, LLC, a California limited
liability company (hereinafter referred to as "GKF"), and NEW ENGLAND MEDICAL
CENTER HOSPITALS, INC., a Massachusetts corporation (hereinafter referred to as
"Medical Center").
R E C I T A L S
WHEREAS, Medical Center wants to lease from GKF a Leksell Gamma Knife
manufactured by Elekta Instruments, Inc., (hereinafter referred to as the
"Equipment", Specifications of which are attached as Exhibit A to the LGK
Agreement, which is defined in Paragraph 2 below); and
WHEREAS, GKF is willing to lease the Equipment, which GKF has acquired
from Elekta Instruments, Inc., a Georgia corporation (hereinafter referred to as
"Elekta"), to Medical Center, pursuant to the terms and conditions of this
Agreement.
AGREEMENT
NOW, therefore, in consideration of the foregoing premises and the
promises contained herein, the parties hereto hereby agree as follows:
1. Lease. Subject to and in accordance with the covenants and conditions
set forth in this Agreement, GKF hereby leases to Medical Center, and Medical
Center hereby leases from GKF, the Equipment. The Equipment to be leased to
Medical Center pursuant to this Agreement shall include the latest approved
Gamma Knife technology available as of the date of this Agreement, including all
hardware and software related thereto as listed in the Specifications.
2. Execution of LGK Agreement by and between Medical Center and Elekta.
Medical Center agrees that simultaneously with the execution of this Agreement
it shall execute that certain LGK Agreement with Elekta, (hereinafter referred
to as the "LGK Agreement"), a copy of which is attached hereto as Exhibit 1 and
incorporated herein by this reference. Medical Center agrees to fulfill all of
its obligations under the LGK Agreement and acknowledges that GKF is a third
party beneficiary of the LGK Agreement. Medical Center shall indemnify and hold
harmless GKF in the event that GKF suffers any loss, damage, claim or expense
(including reasonable attorneys' fees) solely as a result of Medical Center's
breach of the LGK Agreement.
Page 1
2
3. Delivery of the Equipment. GKF shall use its best efforts to cause
Elekta to deliver the Equipment and the Cobalt Supply (as defined in the LGK
Agreement), at GKF or Elekta's expense, to the Site (as defined in Exhibit B to
the LGK Agreement) or to such other location in the Boston area as Medical
Center may specify in advance, between December 15, 1998 and January 15, 1999,
or, if the Determination of Need ("DON") is not received on or before November
21, 1998, Medical Center and Elekta shall renegotiate the delivery to the
earliest possible date (as applicable, the "Delivery Date"); provided that
Elekta shall have no obligation to deliver the Equipment unless Medical Center
shall have completed the development, preparation and construction of the Site
in compliance with Paragraphs 4 and 5 below. Notwithstanding the foregoing, it
is understood and agreed that GKF has made no representations and warranties to
the Medical Center concerning the actual delivery dates or schedules for the
Equipment at Site, and that GKF shall have no obligation to pay any damages to
Medical Center resulting from any late delivery of the Equipment.
4. Design of Site and Receipt of Regulatory Approvals. Medical Center
shall provide, at its own expense, a Site which complies with Elekta's Site
Planning Criteria (which Site Planning Criteria is attached as Exhibit C to the
LGK Agreement). Site location shall be reasonably acceptable to GKF. Medical
Center shall prepare at its sole cost and expense the requisite Site plans and
specifications and shall submit them to Elekta and GKF for approval which
approval shall not be unreasonably withheld or delayed. Medical Center's Site
plans and specifications shall be deemed approved by GKF and Elekta unless,
within thirty (30) days after receipt thereof, GKF or Elekta notifies Medical
Center in writing of its exceptions thereto, in which event the parties shall
promptly confer to resolve such exceptions. Site location shall be deemed
acceptable to GKF unless, within thirty (30) days after receipt of Medical
Center's description of the proposed Site, GKF notifies Medical Center of its
objections thereto, in which event the parties shall promptly confer to resolve
such objections. Medical Center shall obtain, in a timely manner, a User License
from the Nuclear Regulatory Commission and/or appropriate state agency
authorizing it to take possession of the Cobalt Supply and shall obtain such
other licenses, permits, approvals, consents and authorizations, which may be
required by local governmental or other regulatory agencies for the Site, its
preparation, the Charging (as defined in the LGK Agreement) of the Equipment
with its Cobalt Supply, the conduct of Acceptance Tests (as defined in the LGK
Agreement), and the use of the Equipment all as more fully set forth in Article
2.1 of the LGK Agreement.
Medical Center shall work diligently toward receipt by November 21,
1998, of a DON for the Equipment and the provision of services using the
Equipment.
Page 2
3
This Agreement shall become null and void in the event that the Medical
Center does not receive a DON for the Equipment and the provision of the
services related thereto on or before April 1, 1999, after using its best
efforts to do so.
5. Site Preparation and Positioning of Equipment.
5.1 Medical Center shall, at its own expense and risk, prepare,
construct and make ready the Site as necessary for the "Installation" (as
defined in the LGK Agreement) of the Equipment, including, but not limited to,
providing any temporary and/or permanent shielding for the Charging of the
Equipment and its use, selecting and preparing a proper foundation for the
Equipment and for such shielding and walls, as well as proper alignment of the
Site and wiring. Once the Equipment has been delivered pursuant to Xxxxxxxxx 0,
Xxxxxxx Xxxxxx shall, at Medical Center's own expense and risk, position the
Equipment on its foundation at the Site in compliance with the Site Planning
Criteria.
5.2 Medical Center shall also at its own expense select, purchase
and install all radiation monitoring equipment and devices, safety circuits and
radiation warning signs needed for the Equipment at the Site, according to all
applicable federal, state and local laws and regulations.
5.3 Upon completion of the Site, Medical Center shall warrant
that the Site will comply with the Site Planning Criteria and all applicable
federal, state and local laws, rules and regulations.
5.4 Medical Center shall be liable for, and shall indemnify GKF
from and against, all damage to the Equipment caused by (a) defects in
construction of the Site or in positioning the Equipment at the Site; (b)
defects arising out of materials or parts provided, modified or designed by
Medical Center for or with respect to the Site; (c) negligent, intentional or
wrongful acts or omissions by Medical Center or any of its officers, directors,
agents, contractors (or their subcontractors), or employees in connection with
the construction and preparation of the Site; and (d) negligent or intentional
and wrongful operation of the Equipment at the Site. Further, neither the review
and approval of Site plans, specifications and/or positioning plans by GKF
and/or Elekta, nor the construction of any other Site preparation, shall relieve
Medical Center for liability for damages to the Equipment caused by the failure
to comply with applicable federal, state or local laws or regulations, including
building codes, or those portions of the Site Planning Criteria relating to the
load bearing capacity of the floor of the treatment room and to radiation
protection.
5.5 Medical Center warrants that it shall utilize its best
efforts to fulfill on an expeditious basis its obligations under this Paragraph
5. Medical Center further warrants that it shall on a regular basis keep GKF
informed of Medical Center's progress in fulfilling its obligations pursuant to
this Paragraph 5. Should
Page 3
4
Medical Center not have all Site preparations completed by the Delivery Date
specified in Paragraph 3 above plus a sixty (60) day grace period such that the
Site meets the Site Planning Criteria and is ready for positioning and
Installation of the Equipment, Medical Center shall reimburse GKF at an interest
rate of Bank of America's prime rate plus 2% on GKF's financing, maintenance and
storage costs with respect to the Equipment until the Site is prepared to allow
positioning and Installation of the Equipment.
6. Term of the Agreement. The initial term of this Agreement (the
"Term") shall commence as of the date hereof and, unless earlier terminated or
extended in accordance with the provisions of this Agreement, shall continue for
a period of ten (10) years following the date of the performance of the first
clinical Gamma Knife procedure (the "First Procedure Date") at the Site. Medical
Center's obligation to make the rental payments to GKF for the Equipment as
described in Paragraph 7 below shall commence as of the First Procedure Date.
6.1 Installation and Charging of Equipment and Performance of
Acceptance Tests. Within seven (7) days following completion of the positioning
of the Equipment at the Site by Medical Center, GKF shall use its best efforts
to cause Elekta, at Elekta's sole expense and risk, to Install the Equipment,
including the Charging of the Equipment with its Cobalt Supply, in accordance
with the LGK Agreement. Upon completion of Installation of the Equipment, GKF
shall use its best efforts to cause Elekta to perform the Acceptance Tests (as
defined in the LGK Agreement) to the satisfaction of Elekta, GKF and Medical
Center. Notwithstanding the foregoing, it is understood and agreed that GKF has
made no representations and warranties to Medical Center concerning the
Installation or Charging of the Equipment or the performance of the Acceptance
Tests, and that GKF shall have no obligation to pay any damages to Medical
Center resulting therefrom.
7. Per Procedure Payments. Medical Center shall pay to GKF a per
procedure payment as specified in Exhibit 2 for the use of the Equipment. A
"procedure" shall be defined as a single patient treatment session that may
include one or more isocenters during that session. Medical Center shall be
billed on the fifteenth (15th) and the last day of each month for the actual
number of procedures performed during the first and second half of the month,
respectively. Medical Center shall pay for the procedures invoiced within thirty
(30) days after being invoiced. Interest shall begin to accrue at the rate of
1-1/2% per month on all invoices remaining unpaid after 45 days.
(a) If the "Medicare Reimbursement Rate" in effect on any "Reset Date"
is less than the "Medicare Base Rate" by * or more, then, Medical Center may at
its option inform GKF in writing within thirty (30) days after the applicable
Reset Date and shall provide GKF with the information used in calculating such
Medicare Reimbursement Rate.
Page 4
5
(b) Within thirty (30) days after GKF's receipt of such notice and
information from Medical Center, the parties shall meet to renegotiate in good
faith the per procedure payments payable by Medical Center under this Agreement;
provided that either party shall have the right to reject any per procedure rate
proposed by the other party. Each party shall permit the other to inspect such
party's books and records pertaining to the Equipment in order to verify their
respective Operating Income. Notwithstanding the foregoing, Medical Center shall
have no recourse to arbitration as provided in this Section 7 with respect to
any per procedure payment rate proposed by Medical Center which would result in
negative Operating Income to GKF, in which event this Agreement shall remain
unchanged and in full force and effect.
(c) If, within sixty (60) days following GKF's receipt of Medical
Center's notice, the parties are unable to agree in good faith on reduced per
procedure payment rates, which rates would not result in GKF incurring negative
Operating Income, then, GKF and Medical Center shall jointly appoint an
arbitrator who shall have not less than ten (10) years experience in medical
equipment financing and who shall have no prior relationship, attorney/client or
otherwise, with any of the parties. Such arbitrator shall review the information
presented by both parties and shall render a decision within thirty (30) days of
his or her appointment. In rendering a decision, the arbitrator shall be bound
by the following: (i) Any reduced per procedure payment rate determined by the
arbitrator shall not provide Medical Center with estimated Operating Income in
excess of a breakeven level, and (ii) any reduced per procedure payment rate
determined by the arbitrator shall not result in negative Operating Income to
GKF. The arbitrator's decision shall be binding upon the parties and
non-appealable. The fees and expenses of the arbitrator shall be shared equally
between the parties. The foregoing arbitration procedure shall apply only to
disagreements arising from this subsection (c) and not to any other disputes or
disagreements arising from this Agreement.
(d) If the parties mutually agree on a renegotiated per procedure
payment or if a renegotiated per procedure payment is determined by the
arbitrator as set forth above, then such renegotiated per procedure payment
shall become effective on the date of such agreement or determination, and
Exhibit 2 hereto shall be deemed automatically amended as of such date.
(e) As used herein:
(i) The "Medicare Reimbursement Rate" shall mean the sum of the
reimbursement rates to Medical Center under DRG 7 and DRG 8 (or, if no longer in
effect, their respective inpatient rate replacements for Gamma Knife procedures)
in effect as of any Reset Date.
(ii) The "Medicare Base Rate" shall mean the sum of the
reimbursement rates under DRG 7 and DRG 8 in effect as of the date hereof. It is
Page 5
6
acknowledged that, as of the date hereof, the reimbursement rates for DRG 7 and
DRG 8 are $17,462.40 and $9,450.56, respectively.
(iii) The "Reset Date" shall mean the date which is two (2) years
after the Commencement Date and each anniversary date thereafter.
(iv) "Operating Income" with respect to either party shall mean
the revenues generated by such party from the Equipment less such party's
corresponding direct operating expenses related to the Equipment, including,
without limitation, applicable interest and depreciation expenses on the
Equipment and Site improvements, but excluding physician professional fees and
indirect overhead expenses. In determining Operating Income with respect to
Medical Center, (1) the revenues to be used in such determination shall be those
generated by Medical Center related to the performance of procedures using the
Equipment for Gamma Knife services; and (2) subject to the limitations set forth
in this subsection (iv), the direct operating expenses shall be those related to
the performance of procedures using the Equipment, including, without
limitation, Medical Center's actual costs related to the hospital stay,
diagnostic imaging procedures, nursing services (to the extent not covered as
part of the cost of the hospital stay), and physicist compensation.
8. Use of the Equipment. The Equipment may be used by Medical Center
only at the Site and shall not be removed therefrom. Medical Center shall not
assign or sublease the Equipment or its rights hereunder without the prior
written consent of GKF; which consent shall not be unreasonably withheld. No
permitted assignment or sublease shall relieve Medical Center of any of its
obligations hereunder. Medical Center shall not use nor permit the Equipment to
be used in any manner nor for any purpose for which, in the reasonable opinion
of Elekta or GKF based on current medical practice, the Equipment is not
designed or reasonably suitable. Medical Center shall not permit any liens,
whether voluntary or involuntary, to attach to the Equipment, without the prior
written consent of GKF. Medical Center shall have no interest in the Equipment
other than the rights acquired as a lessee hereunder and the Equipment shall
remain the property of GKF regardless of the manner in which it may be installed
or attached at the Site. Medical Center shall, at GKF's request, affix to the
Equipment tags, decals, or plates furnished by GKF, indicating GKF's ownership
of the Equipment.
9. Additional Covenants of Medical Center. In addition to the other
covenants made by Medical Center, Medical Center shall at its own cost and
expense:
9.1 Provide properly trained professional, technical and support
personnel and supplies required for the proper performance of medical procedures
utilizing the Equipment.
Page 6
7
9.2 Assume all medical and financial responsibility for the
overseers' monitoring of all patients' medical condition and treatment.
9.3 Fully comply with all of its obligations under the LGK
Agreement.
9.4 Indemnify GKF as herein provided: (i) Medical Center hereby
agrees to indemnify and/or reimburse (including reasonable attorneys' fees) GKF
on a prompt basis for any and all damage to the Equipment (including, without
limitation, any violations by Medical Center, its agents, officers, physicians,
employees, successors and assigns of the Repair Service Agreement described in
Paragraph 16 below) to the extent such damages are caused by the negligent or
wrongful acts or omissions of Medical Center, its agents, officers, physicians
and employees and are not covered and reimbursed by GKF's insurance. In the
event the Equipment is destroyed or rendered unusable as a result of such
negligent or wrongful acts or omissions, this indemnification shall extend up to
(but not exceed) the full replacement value of the Equipment at the time of its
destruction less salvage value, if any. (ii) Medical Center hereby further
agrees to indemnify and hold GKF, its agents, officers, employees, successors
and assigns, harmless from and against any and all claims, liabilities,
obligations, losses, damages, injuries, penalties, actions, costs and expenses
(including reasonable attorneys' fees) for all events and/or occurrences
described in Article 7.3 of the LGK Agreement to the same extent that Medical
Center agrees to indemnify Elekta thereunder.
9.5 Provide reasonable and customary marketing materials (i.e.
brochures, announcements, etc.) and marketing support from an administrative and
physician (i.e. seminars by neurosurgeons and radiation therapists to referring
physicians, etc.) commitment for this clinical service. Medical Center shall
spend not less than One Hundred Thousand Dollars ($100,000) on marketing and
promotion of the services provided through the Equipment during the first year
of this Agreement, and Fifty Thousand Dollars ($50,000) per year thereafter or
such other amounts as may be mutually agreed upon by the parties.
Notwithstanding the foregoing, Medical Center shall not be obligated to incur
expenditures for marketing or promotion if the events described in Section 7(a)
have occurred, and Medical Center's Operating Income following the renegotiation
process set forth in Section 7 above is negative.
10. Additional Covenants, Representations and Warranties of GKF. In
addition to the other covenants, representations and warranties, made by GKF in
this Agreement:
10.1 GKF represents and warrants that GKF has full power and
authority to enter into this Agreement, and that this Agreement does not and
will not violate any agreement, contract or instrument binding upon GKF.
Page 7
8
10.2 GKF represents and warrants to Medical Center that, upon
delivery of the Equipment to Medical Center, GKF shall use its best faith
efforts to require that Elekta meets its contractual obligations to GKF and puts
the Equipment, as soon as possible, into good, safe and serviceable condition
and fit for its intended use in accordance with the manufacturer's
specifications, guidelines and field modification instructions.
10.3 GKF represents and warrants that throughout the term of this
Agreement, Medical Center shall enjoy the use of the Equipment, free of the
rights of any other persons except for those rights reserved by GKF under this
Agreement or granted to Elekta under the LGK Agreement.
10.4 During the entire term of this Agreement and subsequent
extensions thereof, GKF shall maintain in full force and effect: (i) the Repair
Service Agreement referenced in Paragraph 16 below; and (ii) any other service
or other agreements required to fulfill GKF's obligations to Medical Center
pursuant to this Paragraph 10.4. GKF acknowledges that Medical Center is a
third-party beneficiary of the Repair Service Agreement. GKF shall indemnify and
hold harmless Medical Center in the event Medical Center suffers any loss,
damage, claim or expense (including reasonable attorneys' fees) solely as the
result of GKF's breach of the Repair Service Agreement. GKF represents and
warrants that during the entire term of this Agreement and any subsequent
extensions thereof, that it will fully pursue any and all remedies it may have
against Elekta under the Repair Service Agreement to insure that the Equipment
will be in conformity with Elekta's warranties so that it is free from defects
in design, materials, workmanship or manufacture which result in noncompliance
with the Specifications and/or Elekta's warranties to GKF.
11. Ownership/Title. It is expressly understood that Medical Center
shall acquire no right, title or interest in or to the Equipment, other than the
right to the possession and use of the same in accordance with the terms of this
Agreement.
GKF may at its sole discretion finance the Equipment. Financing may be
in the form of an installment loan or a capitalized lease or other commercially
available debt instrument. Should GKF finance the Equipment through an
installment loan, GKF shall be required to provide the Equipment as collateral
against the loan. Should GKF finance the Equipment through a capitalized lease
title shall vest with the lessor until GKF exercises its buy-out option. In
addition, should GKF finance the Equipment, said agreement may be used as
collateral against the loan. No financing by GKF will relieve GKF of its
obligations to Medical Center or materially change Medical Center's duties or
materially increase the burdens or risks imposed on Medical Center. Prior to the
financing, Medical Center and the entity financing the Equipment shall enter
into a mutually acceptable subordination, attornment and non-disturbance
agreement.
Page 8
9
12. Cost of Use of the Equipment. Except as is otherwise provided
herein, Medical Center shall bear the entire cost of using the Equipment during
the Term of this Agreement. This shall include, but not be limited to, providing
trained professionals, technical and support personnel and supplies to properly
operate the Equipment. Medical Center shall be fully responsible and liable for
all acts and/or omissions of such professional, technical and support personnel.
13. Taxes. GKF shall pay any personal property taxes levied against the
Equipment and any other taxes or governmental fees or assessments, however
denoted, whether of the federal government, any state government or any local
government, levied or based on this Agreement or the use of the Equipment except
for those taxes, if any, pertaining to the gross income or gross receipts of
Medical Center.
14. Maintenance and Inspections. GKF agrees to exercise due and proper
care in the maintenance of the Equipment and to keep the Equipment in a good
state of repair, reasonable wear and tear excepted.
GKF (and Elekta) shall have the right of access to the Equipment for the
purpose of inspecting same at all reasonable times and upon reasonable notice
and with a minimum of interference to Medical Center's operations. In the event
the Equipment is improperly used by Medical Center or its employees, agents,
officers, and physicians, GKF may service or repair the same as needed and such
expense shall be paid by Medical Center, unless the repair is covered by the
Repair Service Agreement.
15. Equipment Modifications/Additions/Upgrades.
15.1 Medical Center may elect in writing to have the Cobalt-60
sources reloaded at any time after the date that is seven (7) years following
the First Procedure Date and prior to the expiration of the initial Term, so
long as the annual number of procedures performed on the Equipment is greater
than * procedures per year for the two years immediately prior to Medical
Center's election. Such reloading shall be done at GKF's expense, provided that
any expenses pertaining to leasehold improvements or refurbishment of the Site
shall be paid for solely by Medical Center.
15.2 If Medical Center elects to reload as set forth above, the
Term shall automatically be extended for an additional four (4) years, plus the
time expended in reloading, which extension shall commence on the expiration of
the initial Term of this Agreement. Unless Medical Center notifies GKF at least
ninety (90) days prior to the expiration of the extended Term that Medical
Center wishes to purchase the Equipment in cash at its fair market value (based
upon the "in use" value of the Equipment) as determined by an appraiser mutually
agreed upon
Page 9
10
between the parties, GKF shall remove the Equipment, at its sole expense, within
ninety (90) days after the expiration of the extended Term.
15.3 If the Term is extended pursuant to Paragraph 15.2 above,
the per procedure rate payable during the extended term shall be as follows:
YEAR ANNUAL PROCEDURES PERFORMED FEE PER PROCEDURE
---- --------------------------- -----------------
11-14 * *
* *
* *
* *
16. Repair Service Agreement. GKF warrants that it shall simultaneously
with the execution of this Agreement enter into a Repair Service Agreement with
Elekta, a copy of which is attached hereto as Exhibit 3 and incorporated herein
by this reference. GKF agrees to fulfill all of its obligations under the Repair
Service Agreement and acknowledges that Medical Center is a third party
beneficiary of the Repair Service Agreement.
17. Termination. If, after the initial twenty-four (24) month period
following the First Procedure Date or any subsequent 12 month period, the sum of
all per-procedure payments made by Medical Center to GKF under this Agreement
during the most recent twelve (12) month period fell short of * , then and in
that event, GKF shall have the option (but not the obligation) of terminating
this Agreement upon the giving of written notice to Medical Center of said
termination not less than one hundred and eighty (180) days prior to GKF's
designated termination date. GKF shall remove the Equipment, at its sole
expense, within ninety (90) days after the designated termination date, unless
Medical Center notifies GKF within ninety (90) days following receipt of GKF's
notice of termination that it wishes to purchase the Equipment in cash at a
price to be mutually agreed upon by the parties. Notwithstanding the foregoing,
such * shall not be used as a basis for determining GKF's breakeven level of
Operating Income pursuant to Section 7 above.
18. Option to Extend Agreement.
18.1 If the Term has not been extended pursuant to Paragraph 15.2
above, Medical Center shall have the option at the end of the ten (10) year
initial Term to:
(i) Renegotiate this Agreement for a five year renewal
term.
(ii) Terminate this Agreement. If Medical Center
terminates this Agreement at the end of the initial Term, Medical Center shall
have the option
Page 10
11
to purchase the Equipment in cash at its fair market value (based upon the "in
use" value of the Equipment) as determined by an appraiser to be mutually agreed
upon between the parties. Medical Center shall exercise such option by giving
written notice to GKF not less than ninety (90) days prior to the expiration of
the initial Term. If Medical Center does not issue such notice, Medical Center
shall be deemed to have elected not to exercise such option, and GKF shall
remove the Equipment, at its sole cost and expense, within ninety (90) days
after the expiration of the ten (10) year initial Term.
Medical Center shall exercise one (1) of the two (2) options referred to above
by mailing an irrevocable written notice thereof to GKF at Xxxx Xxxxxxxxxxx
Xxxxxx, Xxxxx 0000, Xxx Xxxxxxxxx, Xxxxxxxxxx, 00000, by registered mail,
postmarked on or before the end of the ninth (9th) year of the ten (10) year
initial Term of this Agreement. Any such notice shall be sufficient if it states
in substance that Medical Center elects to exercise its option and states which
of the two (2) options referred to above Medical Center is exercising.
19. No Warranties by GKF with Respect to the Equipment. GKF SUPPLIES THE
EQUIPMENT "AS IS" AND NOT BEING THE MANUFACTURER OF THE EQUIPMENT OR THE
MANUFACTURER'S AGENT, MAKES NO WARRANTY OR REPRESENTATION, EITHER EXPRESSED OR
IMPLIED, AS TO THE EQUIPMENT'S MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, DESIGN, CONDITION, DURABILITY, CAPACITY, MATERIAL OR WORKMANSHIP OR AS
TO PATENT INFRINGEMENT OR THE LIKE, it being agreed that all such risks as
between GKF and Medical Center, shall be borne by Medical Center. Medical Center
agrees to look solely to the manufacturer (Elekta) or to suppliers of the
Equipment (and its software) for any and all warranty claims with respect to the
Equipment. Any and all warranties made by Elekta to GKF will be in its good
faith best efforts enforced by GKF on behalf of Medical Center during the ten
(10) year initial Term hereof and any renewal Terms. Medical Center agrees that
GKF shall not be responsible for the delivery, installation, or operation of the
Equipment or for any delay or inadequacy of any or all of the foregoing. GKF
shall not be responsible for any direct or indirect consequential loss or damage
resulting from the installation, operation or use of the Equipment or otherwise.
Medical Center expressly waives any right to hold GKF liable hereunder for any
claims, demands and liabilities arising out of or in connection with the design,
manufacture, possession or operation of the Equipment.
20. Events of Default by Medical Center and Remedies. The occurrence of
any one of the following shall constitute an Event of Default by Medical Center
hereunder:
(a) Medical Center fails to pay any installment of semi-monthly
procedure payments when due when such default continues for a period of thirty
(30) days after notice thereof from GKF or its assignee is given to Medical
Center.
Page 11
12
(b) Medical Center attempts to remove, sell, transfer, encumber,
sublet or part with possession of the Equipment or any items thereof, except as
expressly permitted herein;
(c) Medical Center shall fail to observe or perform any of the
other obligations required to be observed or performed by Medical Center
hereunder and such failure shall continue uncured for sixty (60) days after
written notice thereof to Medical Center by GKF;
(d) Medical Center ceases doing business as a going concern,
makes an assignment for the benefit of creditors, admits in writing its
inability to pay its debts as they become due, files a voluntary petition in
bankruptcy, is adjudicated a bankrupt or an insolvent, files a petition seeking
for itself any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar arrangement under any present or future
statute, law or regulation or files an answer admitting the material allegations
of a petition filed against it in any such proceeding, consents to or acquiesces
in the appointment of a trustee, receiver, or liquidator of it or of all or any
substantial part of its assets or properties, or it or its shareholders shall
take any action looking to its dissolution or liquidation.
(e) Within sixty (60) days after the commencement of any
proceedings against Medical Center seeking reorganization, arrangement,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation, such proceedings shall not have been
dismissed, or if within thirty (30) days after the appointment without Medical
Center's consent or acquiescence of any trustee, receiver or liquidator of it or
of all or any substantial part of its assets and properties, such appointment
shall not be vacated.
Upon the occurrence of an Event of Default by Medical Center, GKF may at its
option do any or all of the following: (i) by written notice to Medical Center,
terminate this Agreement as to the Equipment in default, wherever situated, and
for such purposes, enter upon the Site without liability for so doing or GKF may
cause Medical Center and Medical Center hereby agrees to return the Equipment to
GKF at Medical Center's sole cost and expense; (ii) recover from Medical Center,
as liquidated damages for the loss of the bargain and not as a penalty, an
amount equal to the present value of the unpaid estimated future lease payments
by Medical Center to GKF through the end of the initial Term discounted at the
rate of nine percent (9%), which payment shall become immediately due and
payable. Unpaid estimated future lease payments shall be based on the prior 12
months lease payments with an annual five percent (5%) percent increase; (iii)
sell, dispose of, hold, use or lease the Equipment in default, as GKF in its
sole discretion may determine (and GKF shall not be obligated to give preference
to the sale, lease or other disposition of the Equipment over the sale, lease or
other disposition of similar Equipment owned or leased by GKF). In any event,
Medical Center shall, without
Page 12
13
further demand, pay to GKF an amount equal to all sums due and payable for all
periods up to and including the date on which GKF had declared this Agreement to
be in default.
In the event that Medical Center shall have paid to GKF the liquidated damages
referred to in (ii) above, GKF hereby agrees to pay to Medical Center promptly
after receipt thereof, all rentals or proceeds received from the reletting or
sale of the Equipment during the balance of the ten (10) year initial Term
(after deduction of all expenses incurred by GKF; said amount never to exceed
the amount of the liquidated damages paid by Medical Center). Medical Center
agrees that GKF shall have no obligation to sell the Equipment. Medical Center
shall in any event remain fully liable for reasonable damages as provided by law
for all costs and expenses incurred by GKF on account of such default, including
but not limited to, all court costs and reasonable attorneys' fees. Medical
Center hereby agrees that, in any event, it shall be liable for any deficiency
after any sale, lease or other disposition of the Equipment by GKF. The rights
afforded GKF hereunder shall not be deemed to be exclusive, but shall be in
addition to any other rights or remedies provided by law.
21. Events of Default by GKF and Remedies. The occurrence of any one of
the following shall constitute an Event of Default by GKF hereunder:
(a) GKF shall fail to observe or perform any of the obligations
required to be observed or performed by GKF hereunder and such failure shall
continue uncured for sixty (60) days after written notice thereof to GKF by
Medical Center;
(b) GKF ceases doing business as a going concern, makes an
assignment for the benefit of creditors, admits in writing its inability to pay
its debts as they become due, files a voluntary petition in bankruptcy, is
adjudicated a bankrupt or an insolvent, files a petition seeking for itself any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar arrangement under any present or future statute, law or regulation or
files an answer admitting the material allegations of a petition filed against
it in any such proceeding, consents to or acquiesces in the appointment of a
trustee, receiver, or liquidator of it or of all or any substantial part of its
assets or properties, or it or its shareholders shall take any action looking to
its dissolution or liquidation.
(c) Within sixty (60) days after the commencement of any
proceedings against GKF seeking reorganization, arrangement, readjustment,
liquidation, dissolution or similar relief under any present or future statute,
law or regulation, such proceedings shall not have been dismissed, or if within
thirty (30) days after the appointment without GKF's consent or acquiescence of
any trustee, receiver or liquidator of it or of all or any substantial part of
its assets and properties, such appointment shall not be vacated.
Page 13
14
Upon the occurrence of an Event of Default by GKF, Medical Center may at its
option do any or all of the following: (i) by written notice to GKF, terminate
this Agreement and, in such event, GKF shall remove the Equipment at GKF's sole
cost and expense or, in the absence of removal by GKF within ninety (90) days
after a written request therefor, Medical Center may remove the Equipment with
all due care and store the Equipment at GKF's sole cost and expense, or (ii)
purchase the Equipment in cash at a price to be mutually agreed upon by the
parties.
GKF shall in any event remain fully liable for reasonable damages as provided by
law for all costs and expenses incurred by Medical Center on account of such
default, including but not limited to all court costs and reasonable attorney's
fees. The rights afforded Medical Center hereunder shall not be deemed to be
exclusive, but shall be in addition to any other rights or remedies provided by
law.
22. Insurance.
22.1 During the ten (10) year initial Term of this Agreement (and
any successive terms) GKF shall, at its own cost and expense, keep in effect an
all risk and hazard insurance policy covering the Equipment. The all risk and
hazard insurance policy shall be for an amount not less than the replacement
cost of the Equipment. During the ten (10) year initial Term of this Agreement,
Medical Center shall, at its own cost and expense, keep in effect public
liability and professional liability insurance policies concerning the operation
of the Equipment by Medical Center. Said policies shall be in the amounts of not
less than $1,000,000 per occurrence and $5,000,000 in aggregate per year.
Medical Center and GKF, their successors and assigns, shall be named as
additional insureds and/or loss payees on the insurance policies maintained
hereunder by the other party. Evidence of such insurance coverages shall be
furnished by both parties to the other party upon written request, by no later
than the Delivery Date.
22.2 If the Equipment is rendered unusable as a result of any
physical damage to, or destruction of, the Equipment, Medical Center shall give
to GKF immediate notice. GKF shall determine, within thirty (30) days after the
date of occurrence of such damage or destruction, whether the Equipment can be
repaired. In the event GKF determines that the Equipment cannot be repaired, GKF
at its sole cost and expense shall promptly replace the Equipment subject to
availability. This Agreement shall continue in full force and effect as though
such damage or destruction had not occurred. In the event GKF determines that
the Equipment can be repaired, GKF shall cause the Equipment to be promptly
repaired at its sole expense, subject, however, to Medical Center's obligations
under Section 5.4 above.
Page 14
15
23. Notices. Any notices required under this Agreement shall be sent in
writing and shall be deemed to have been duly given if delivered by hand or
mailed by certified or registered mail to the following addresses:
To GKF: GK Financing, LLC
Xxxxx X. Xxxxxx, C.E.O.
Four Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
To Medical Center: New England Medical Center Hospitals, Inc.
000 Xxxxxxxxxx Xxxxxx
NEMC 428
Xxxxxx, XX 00000
Or to such other addresses as either party may specify for the reception of
notice from time to time in writing to the other party.
24. Integration/Supersedure. This Agreement contains the full and entire
Agreement between the parties hereto, and no oral or written understanding is of
any force or effect whatsoever unless expressly contained in a writing executed
subsequent to the date of this Agreement.
25. Waivers. To the extent that either party fails or chooses not to
pursue any of its remedies under this Agreement or pursuant to applicable law,
such shall not prejudice such party's rights to pursue any of those remedies at
any future time and shall not constitute a waiver of such party's rights.
26. Assignments. This Agreement is binding upon and shall inure to the
benefit of the permitted successors or assigns of the respective parties hereto,
except that neither party may assign its rights or obligations under this
Agreement without the express written consent of the other (which consent shall
not be unreasonably withheld or delayed).
27. Amendments. This Agreement shall not be amended or altered in any
manner unless such amendment or alteration is in a writing signed by both
parties.
28. Record-Keeping Requirements.
28.1 Medical Center and GKF shall generate such records and make
such disclosures as may be required, from time to time, by the Medicare,
Medicaid and other third party payment programs with respect to this Agreement
in order to meet all requirements for participation and payment associated with
such programs, including but not limited to the matters covered by Section
1861(v)(1)(I) of the Social Security Act.
Page 15
16
28.2 For the purpose of compliance with Section 1861(v)(1)(I) of
the Social Security Act, as amended, and any regulations promulgated pursuant
thereto, both parties agree to comply with the following statutory requirements
(a) Until the expiration of four (4) years after the termination of this
Agreement, both parties shall make available, upon written request to the
Secretary of Health and Human Services or, upon request, to the Comptroller
General of the United States, or any of their duly authorized representatives,
the contract, and books, documents and records of such party that are necessary
to certify the nature and extent of such costs, and (b) if either party carries
out any of the duties of the contract through a subcontract with a value or cost
of $10,000 or more over a twelve month period, with a related organization, such
subcontract shall contain a clause to the effect that until the expiration of
four (4) years after the furnishing of such services pursuant to such
subcontract, the related organization shall make available, upon written request
to the Secretary, or upon request to the Comptroller General, or any of their
duly authorized representatives the subcontract, and books, documents and
records of such organization that are necessary to verify the nature and extent
of such costs.
29. Miscellaneous Provisions.
29.1 The invalidity or unenforceability of any portion or
provision of this Agreement shall not effect the validity or enforceability of
any other portion, nor shall either party's implied or express consent to the
breach or waiver of any provision of this Agreement constitute a waiver of such
provision as to any subsequent breach.
29.2 In the event of any claim or controversy arising hereunder,
the prevailing party in such claim or controversy shall be entitled to a
reasonable attorneys' fee in addition to whatever other relief said party would
be otherwise entitled.
29.3 Force Majeure. Failure to perform by either party will be
excused in the event of any delay or inability to perform its duties under this
Agreement directly or indirectly caused by conditions beyond its reasonable
control including without limitation, fires, floods, earthquakes, snow, ice,
disasters, Acts of God, accidents, riots, wars, operation of law, strikes,
governmental action or regulations, shortages of labor, fuel, power, materials,
manufacturer delays or transportation problems.
Page 16
17
IN WITNESS WHEREOF, the parties have signed this Agreement on the day
and year first above written.
NEW ENGLAND MEDICAL CENTER GK FINANCING, LLC
HOSPITALS, INC.
By: /s/ Signature By: /s/ Xxxxx X. Xxxxxx
-------------------------------- --------------------------------
Its: Chief Operating Officer Xxxxx X. Xxxxxx
Chief Executive Officer
Page 17
18
Exhibit 1
LGK AGREEMENT
Page 18
19
Exhibit 2
PER PROCEDURE PAYMENTS
YEAR ANNUAL PROCEDURES PERFORMED FEE PER PROCEDURE
---- --------------------------- -----------------
1-4 * *
* *
* *
* *
5-7 * *
* *
* *
* *
8-10 * *
* *
* *
* *
Page 19
20
Exhibit 3
REPAIR SERVICE AGREEMENT
Page 20
