EXHIBIT 10.42
EQUIPMENT LEASE AGREEMENT
THIS EQUIPMENT LEASE AGREEMENT ("Agreement") is made and entered into
effective as of May 22, 2002, by and between GK FINANCING, LLC, a California
limited liability company ("GKF"), and THE XXXXX XXXXXXX HOSPITAL, a Maryland
not-for-profit corporation ("Hospital"), with reference to the following facts:
R E C I T A L S
A. Hospital owns and operates a duly licensed general acute care
hospital located in Baltimore (the "Medical Center") and wishes to establish a
program within the Medical Center to provide stereotactic radiosurgery
procedures. The program shall be known as The Xxxxx Hospital Gamma Knife Program
(the "Program").
B. GKF owns a Leksell Stereotactic Gamma Knife Unit, Model C (the
"Equipment"), which is needed by Hospital to provide the stereotactic
radiosurgery procedures for the Program.
C. Hospital wishes to lease the Equipment from GKF, and GKF is
willing to lease the Equipment to Hospital to be used at the Medical Center,
upon the terms, covenants, conditions and agreements set forth in this
Agreement.
A G R E E M E N T
NOW, THEREFORE, in consideration of the mutual covenants, conditions
and agreements set forth herein, and for such other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Lease. Subject to and in accordance with the covenants and
conditions set forth in this Agreement, GKF hereby leases to Hospital, and
Hospital hereby leases from GKF, the Equipment. The Equipment to be leased to
Hospital pursuant to this Agreement shall include the latest approved Gamma
Knife technology available as of the date of this Agreement, including the
Hardware and LGK Software, as described in the LGK Agreement (defined below).
2. LGK Agreement. Simultaneously with the execution of this
Agreement, Hospital and Elekta Instruments, Inc., a Georgia corporation
("Elekta"), the manufacturer of the Equipment, shall enter into that certain LGK
Agreement pertaining to, among other things, the preparation of the Site (as
defined below) and the installation, testing and use of the Equipment (the "LGK
Agreement"), a copy of which is attached hereto as Exhibit 1 and incorporated
herein by reference. Hospital acknowledges that GKF is a third party beneficiary
of the LGK Agreement and, in that capacity, GKF shall be entitled to enforce
Hospital's performance, satisfaction and fulfillment of its obligations
thereunder.
3. Term; Buyout.
3.1 Term. The initial term of this Agreement (the "Term")
shall commence on the date on which the first clinical "Gamma Knife Procedure"
(as defined below in this Section) is performed by Hospital utilizing the
Equipment (the "First Procedure Date") and shall continue for a period of ten
(10) years thereafter, unless earlier terminated or extended upon the mutual
written agreement of Hospital and GKF or in accordance with this Agreement.
Hospital's obligation to make the rental payments to GKF for the Equipment shall
be as set forth in Section 8 below. As used herein, a "Gamma Knife Procedure"
shall mean a single patient treatment session that may include one or more
isocenters during that session.
3.2 Hospital's Option to Terminate the Lease and Purchase
the Equipment. On the date (the "Exercise Date") that is * years after the First
Procedure Date, and on each anniversary date thereafter, Hospital shall have the
option (the "Purchase Option") to terminate this Agreement by purchasing all of
GKF's right, title and interest in and to the Equipment at a purchase price
equal to the * (as defined in Section 3.2.3 below).
3.2.1 The Unamortized Asset Basis as of any
Exercise Date is equal to (a) the sum of (i) fifty percent (50%) of the "Total
Project Cost" (as defined in Section 8.6 (f)), plus (ii) * representing the
value of the "Tradename License and Promotion Rights" as set forth in Section
8.6(h) below; divided by (b) ten (10) years (representing the amortization
period); multiplied by (c) the number of years remaining on the Term as of the
Exercise Date. For example, assuming the Exercise Date is the date that is *
years after the First Procedure Date, and assuming further:
"GKF's Equipment Acquisition Cost" *
(as defined in Section 8.6 below)
"Total Site Improvement Cost" *
(as defined in Section 8.6 below)
Total Project Cost *
*
*
Tradename License and Promotion Rights *
*
Amortization period *
Amortization per year *
Number of years remaining on the Term *
Unamortized Asset Basis *
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3.2.2 The "Termination Fee" shall be equal to * if
the Purchase Option is exercised on the date that is * years after the First
Procedure Date, but shall be reduced by * on each succeeding anniversary date
thereafter. The parties agree that the Termination Fee (a) represents liquidated
damages to GKF for the loss of the bargain represented by this Agreement and not
as a penalty; and (b) constitutes a reasonable method to calculate GKF's damages
resulting from a termination of this Agreement pursuant to Hospital's exercise
of the Purchase Option based on the circumstances existing as of the date of
this Agreement. If Hospital desires to exercise the Purchase Option, written
notice thereof shall be given to GKF not less than one hundred eighty (180) days
prior to the applicable Exercise Date.
3.2.3 If the cobalt-60 source has been reloaded by
the parties on or prior to the Exercise Date, in addition to the Unamortized
Asset Basis and the Termination Fee, Hospital shall pay to GKF the unamortized
portion of the cobalt reloading cost paid by GKF, including, without limitation,
those amounts paid from the "Reserve Funds" (as defined in Section 13.2 below)
that were contributed by GKF (the "Unamortized Cobalt Reloading Cost"). For
purposes of calculating the Unamortized Cobalt Reloading Cost, the cobalt shall
be deemed to have a useful life of seven (7) years from the date of reloading.
For example, assuming (a) the Exercise Date is the date that is eight (8) years
after the First Procedure Date; (b) the cobalt was reloaded on the date that was
seven (7) years after the First Procedure Date; and (c) GKF paid $350,000
towards the cost of such cobalt reloading, then, the Unamortized Cobalt
Reloading Cost to be paid to GKF is $300,000 (i.e., $50,000 per year
amortization cost x 6 years remaining useful life).
3.2.4 On the applicable Exercise Date, the
Unamortized Asset Basis, the Termination Fee and the Unamortized Cobalt
Reloading Cost (if any) shall be paid by Hospital to GKF by wire transfer of
immediately available funds. Hospital shall also be solely responsible for the
payment of any and all sales, use, transfer or other applicable taxes assessed
in connection with such purchase. Concurrently with such purchase, GKF shall
transfer all of its right, title and interest in and to the Equipment used in
connection with the Program to Hospital, free of any lien, mortgage or other
encumbrance.
4. User License. Hospital shall apply for and obtain in a timely
manner a User License from the Nuclear Regulatory Commission and, if necessary,
from the applicable state agency authorizing it to take possession of and
maintain the Cobalt supply required in connection with the use of the Equipment
during the Term. Hospital also shall apply for and obtain in a timely manner all
other licenses, permits, approvals, consents and authorizations which may be
required by state or local governmental or other regulatory agencies for the
development, construction and preparation of the Site, the charging of the
Equipment with its Cobalt supply, the conduct of acceptance tests with respect
to the Equipment, and the use of the Equipment during the Term, as more fully
set forth in Article 2.1 of the LGK Agreement. Hospital shall not run, operate
or otherwise use the Equipment, except for the purpose of conducting the
acceptance tests, until the acceptance tests have been successfully completed.
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5. Delivery of Equipment; Site.
5.1 GKF shall coordinate with Elekta and Hospital to have
the Equipment delivered to the Xxxxxxxx Center at the Hospital (the "Site") on
or prior to the delivery date agreed upon by Hospital and Elekta in the LGK
Agreement. Subject to Section 11.1, GKF makes no representations or warranties,
express or implied, concerning delivery of the Equipment to the Site or the
actual date thereof.
5.2 Hospital, at its cost and expense, shall provide a
safe, convenient and properly prepared Site for the Equipment in accordance with
Elekta's guidelines, specifications, technical instructions and site planning
criteria (which site planning criteria are attached as Exhibit C to the LGK
Agreement) (collectively the "Site Planning Criteria"). Hospital represents and
warrants that the Site is suitable for the implementation of the Site Planning
Criteria.
6. Site Preparation and Installation of Equipment.
6.1 Hospital has prepared the plans and specifications
(collectively "Plans") for the Site. The Plans are attached hereto as EXHIBIT 2.
The plans shall comply with all applicable federal, state and local laws, rules
and regulations. The parties acknowledge that GKF and Elekta have reviewed and
approved the Plans and have certified that the Plans are in accordance with the
Site Planning Criteria and the LGK Agreement. Any modifications or alterations
to such Plans shall be subject to the prior written approval of GKF and Elekta.
Hospital, at its cost and expense, shall obtain all permits, certifications,
approvals, or authorizations required by applicable federal, state or local
laws, rules or regulations necessary to construct and improve the Site for the
installation, use and operation of the Equipment.
6.2 Based upon the plans, Hospital, at its cost, expense
and risk, shall prepare, construct and improve the Site as necessary for the
installation, use and operation of the Equipment during the Term, including,
without limitation, providing all temporary or permanent shielding required for
the charging of the Equipment with the Cobalt supply and for its subsequent use,
selecting and constructing a proper foundation for the Equipment and the
temporary or permanent shielding and walls, aligning the Site for the Equipment,
and installing all electrical systems and other wiring required for the
Equipment. In connection with the construction of the Site, Hospital, at its
cost and expense, shall select, purchase and install all radiation monitoring
equipment, devices, safety circuits and radiation warning signs required at the
Site in connection with the use and operation of the Equipment, all in
accordance with applicable federal, state and local laws, rules, regulations or
custom. Notwithstanding anything to the contrary contained herein, 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 Hospital of 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.
6.3 In addition to construction and improvement of the
Site, Hospital, at its cost, expense and risk, shall be responsible for the
installation of the Equipment at the Site which only includes the rigging and
positioning of the Equipment on its foundation at the Site in
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compliance with the Plans. In coordination with Elekta, GKF shall provide
Hospital with technical assistance and advice during such installation.
6.4 Hospital shall cause the Site, upon completion of
construction, to (a) comply with the Plans and all applicable federal, state and
local laws, rules and regulations, and (b) be safe and suitable for the ongoing
use and operation of the Equipment during the Term.
6.5 Hospital shall keep GKF informed on a regular basis
of its progress in the construction and improvement of the Site and the
satisfaction of its other obligations under this Section 6 and the LGK
Agreement. In all events, Hospital shall complete all construction and
improvement of the Site required for the installation, positioning and testing
of the Equipment on or prior to the delivery date described in Section 5.1
above. If the Site is not complete as of the delivery date described in Section
5.1 above plus a ninety (90) day grace period (other than by reasons of force
majeure as provided in Section 24 below) (the "late completion date"), Hospital
shall reimburse GKF for its out-of-pocket financing costs incurred with respect
to the Equipment for the period between the Late Completion Date and the date
that the Site is completed to the extent necessary to allow for the
installation, positioning and testing of the Equipment. As used in this Section,
GKF's out-of-pocket financing costs are equal to the Bank of America prime
interest rate (which rate is sometimes referred to by the Bank as its "reference
rate") plus 2% based upon GKF's cost of the Equipment.
6.6 During the Term, Hospital, at its cost and expense,
shall maintain the Site in a good working order, condition and repair,
reasonable wear and tear excepted.
6.7 GKF shall reimburse Hospital in an amount equal to
"GKF's Portion of the Site Improvement Cost" (as defined in Section 8.6 below)
for costs incurred by Hospital to design, construct and improve the Site, as
necessary, and for the installation, use and operation of the Equipment;
provided that the payment of GKF's Portion of the Site Improvement Cost shall
not limit or otherwise affect Hospital's obligations under this Section 6.
Because the Total Site Improvement Cost cannot be definitively determined until
such construction, installation and use is concluded, payment of GKF's Portion
of the Site Improvement Cost, if any, shall not be made by GKF to Hospital until
delivery of the "Final Cost Accounting," as set forth in Section 8.4 below. It
is acknowledged by the parties that GKF's Portion of the Site Improvement Cost
has been included in GKF's calculation of Hospital's lease payments set forth in
Section 8 below so as to allow GKF to recover GKF's Portion of the Site
Improvement Cost, together with interest thereon, during the Term of this
Agreement. Notwithstanding the foregoing, it is acknowledged that if the Total
Site Improvement Cost is * or less, GKF shall have no obligation to reimburse
Hospital for any costs incurred by Hospital to design, construct and improve the
Site or for the installation, use and operation of the Equipment as contemplated
above in this Section. Furthermore, if the Total Site Improvement Cost is less
than *, Hospital shall pay to GKF an amount equal to one-half of the difference,
payable upon completion of the Final Cost Accounting.
7. Marketing Support.
7.1 GKF, in coordination with Hospital, shall provide
marketing support for the Gamma Knife service to be provided by Hospital.
Specifically, GKF shall help Hospital
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develop marketing materials (i.e. brochures, announcements, etc.) together with
administrative and physician support materials (e.g., seminars for physicians by
neurosurgeons and radiation oncologists, etc.) for the Gamma Knife Procedures of
the Program. All communications to the public regarding the Program shall
identify the Program as either "The Xxxxx Xxxxxxx Hospital Gamma Knife Program"
or "The Xxxxx Xxxxxxx Gamma Knife Center," and may identify the Program as being
affiliated with GKF and Hospital, provided that all such communications are in
accordance with the communications and marketing plan adopted or approved by
Hospital and GKF. Hospital shall use its best efforts to promote the Program and
to encourage the use thereof by the public and medical community.
7.2 During the term of this Agreement and at Hospital's
request, GKF shall use commercially reasonable efforts to obtain Elekta's
approval for the use of the Xxxx "Gamma Knife" in connection with the marketing
and advertising of the Program.
7.3 Hospital hereby grants to GKF a nonexclusive license
and right to use the phrase "an affiliate of Xxxxx Xxxxxxx Hospital" and the
name "The Xxxxx Xxxxxxx Hospital" in the tradenames: "The Xxxxx Xxxxxxx Hospital
Gamma Knife Program" and "The Xxxxx Xxxxxxx Gamma Knife Center" in GKF's
marketing materials, press releases, marketing plan, advertisements, and any
other form of communication in any medium designed to promote GKF and the
Equipment. The exact manner of the use of such name by the Company shall be
subject to Hospital's prior written approval, which shall not be unreasonably
withheld or delayed, and shall be consistent with Hospital's reasonable name
usage guidelines. GKF understands that Elekta owns the tradename "Gamma Knife"
and thus, it must obtain Elekta's consent before using that xxxx as part of the
tradenames mentioned in the first sentence. In addition, GKF shall have the
right to use the Program and the Site as a demonstration site for existing and
potential customers and other representatives of GKF to visit and study
(collectively, the "Tradename License and Promotion Rights"). The number of
participants and the dates of the demonstration will be determined by mutual
agreement of the parties.
8. Lease Payments.
8.1 Amount. As rent for the lease of the Equipment to
hospital pursuant to this Agreement, Hospital shall pay to GKF an amount equal
to fifty percent (50%) of the "Program Net Revenues" remaining after first
deducting "Hospital's Direct Operating Expenses" and "GKF's Direct Operating
Expenses" from such Program Net Revenues. *. Hospital's Direct Operating
Expenses and GKF's Direct Operating Expenses shall be paid to Hospital and GKF,
respectively, from the Program Net Revenues prior to the payment of any rent to
GKF hereunder.
8.2 Calculation of Rent and Direct Operating Expenses.
The amount due to GKF hereunder shall be determined and paid on a monthly basis
throughout the Term and any extensions thereof, and thereafter to the extent any
Program Net Revenues associated with Gamma Knife Procedures during the Term or
any extensions thereof are received subsequent to termination of this Agreement.
Within thirty (30) days after the last day of each calendar month of the Term
and any extensions thereof (and upon the termination or expiration of the Term
or any extensions thereof with respect to a period shorter than a calendar
month), each party shall submit to the other a written statement setting forth
such party's respective Direct Operating Expenses.
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The calculation of Program Net Revenues shall be estimated and
paid using the collection rate for the Gamma Knife Procedure. For the first
calendar year, the parties acknowledge and agree that the Hospital will use * as
the estimated collection rate (for both inpatient and outpatient procedures) to
calculate Program Net Revenues. The collection rates for inpatient and
outpatient procedures will be revised every calendar year to reflect the actual
collection rate for the Gamma Knife procedures for the previous calendar year
("Revised Collection Rate"). Commencing on the first month end that is six (6)
months after the current report of Program Net Revenues to date. Within sixty
(60) days after the close of each calendar year during the term of this
Agreement and any extensions thereof, Hospital shall provide GKF with a
reconciliation of the Program Net Revenues and the Revised Collection Rate
together with appropriate backup documentation. Within ten (10) days following
the delivery of such reconciliation, any shortfall or overpayment of rent
pursuant to this Section shall be adjusted and paid or reimbursed between the
parties, as applicable. Hospital shall also provide GKF with a final
reconciliation within sixty (60) days after the first anniversary date of the
termination or expiration of this Agreement to account for Program Net Revenues
collected subsequent to such termination of expiration. By mutual agreement, the
parties may change the method to determine Program Net Revenues, including the
collection rate
Each party's respective Direct Operating Expenses shall be
determined in good faith in accordance with Generally Accepted Accounting
Principles ("GAAP") consistently applied and with the terms of this Agreement.
8.3 Payment to GKF. The rent payable to GKF pursuant to
Section 8.1 above, together with GKF's Direct Operating Expenses for such month
(or portion thereof) (collectively, the "GKF Monthly Reimbursement"), shall be
due and payable by Hospital sixty (60) days after the last day of each calendar
month of the Term and any extensions thereof (and upon the termination or
expiration of the Term). If GKF shall at any time accept any portion or all of
the GKF Monthly Reimbursement after it shall become due, such acceptance shall
not constitute or be construed as a waiver of any or all of GKF's rights under
this Agreement, including the rights of GKF set forth in Section 19 hereof.
Notwithstanding the foregoing, with respect to any month for which Program Net
Revenues are equal to or less than the sum of each party's respective Direct
Operating Expenses, such Program Net Revenues shall be used to pay the pro rata
portion of Hospital's Direct Operating Expenses and GKF's Direct Operating
Expenses (which portion shall be equal to the proportion that each party's
Direct Operating Expenses bears to the whole). Any shortfall in the
reimbursement of each party's Direct Operating Expenses shall be carried over to
the next month(s) and shall be paid in full from Program Net Revenues prior to
the payment of any rent to GKF.
8.4 Inspection of Records. Throughout the initial Term
and any successive terms, and thereafter until final settlement of all amounts
owed to or claimed by either party under this Agreement, each party, at its own
expense, shall have the right upon request and from time-to-time, to inspect,
audit and copy the other party's books and records which relate to the
accounting for and calculation of Program Net Revenues, Direct Operating
Expenses, GKF's Equipment Acquisition Cost and the Total Site Improvement Cost.
On or before the First Procedure Date, the parties shall execute a statement
setting forth an itemized estimate of GKF's Equipment Acquisition Cost and the
Total Site Improvement Cost. On or before the First
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Procedure Date, the parties shall execute a statement setting forth an itemized
estimate of GKF's Equipment Acquisition Cost and the Total Site Improvement
Cost. A final cost accounting of such costs shall be completed and documented
and delivered by no later than six (6) months after the First Procedure Date
(the "Final Cost Accounting"). In connection with the preparation of such
estimate and the Final Cost Accounting, each party shall provide to the other
documentary proof of expenditure to justify the amounts claimed for such costs.
8.5 Reimbursement for Gamma Knife Procedures. Hospital
shall use its best efforts to renegotiate Hospital's existing managed care
contracts to include coverage for stereotactic radiosurgery services utilizing
the Equipment to be provided through the Program and to include in new contracts
provisions covering such services. Hospital represents and warrants to GKF that
the technical fees for Gamma Knife Procedures to be paid by any payor
(including, without limitation, health maintenance organizations, preferred
provider organizations, Medicaid agencies, and other third party payors) are
regulated and fixed by the State of Maryland. Accordingly, Hospital will have no
authority or ability to negotiate any such fees or reimbursement rates; however,
Hospital shall promptly provide GKF with any information reasonably requested
with respect to such fees and rates. It is understood that certain Gamma Knife
Procedures may be performed on the Equipment for research or charity purposes.
The parties shall mutually agree in advance as to the number of research
procedures that will be performed.
Notwithstanding the foregoing, if the circumstances
should change during the term of this Agreement such that the fees or
reimbursement for Gamma Knife Procedures become subject to negotiation or
agreement, it is agreed between the parties that any negotiated technical fees
for Gamma Knife Procedures performed from time-to-time during the Term of this
Agreement and any extensions thereof shall be an amount which is economically
justifiable based upon each party's Direct Operating Expenses and the Total
Project Cost together with a return thereon. Definitions.
(a) "GKF's Direct Operating Expenses" shall
equal one hundred percent (100%) of GKF's direct costs paid to third
parties, without administrative overhead or markup, incurred in
connection with the following: *.
(b) "GKF's Equipment Acquisition Cost" means
GKF's cost to purchase the Equipment which the parties acknowledge is
*, plus any applicable sales tax, customs and duties.
(c) "GKF's Portion of the Site Improvement Cost"
shall be equal to *.
(d) "Hospital's Direct Operating Expenses" shall
be equal to *.
(e) "Program Net Revenues" means the gross
technical component revenues generated from the treatment of Program
patients by Hospital, less contractual allowances and allowance for bad
debt.
(f) "Total Project Cost" shall be equal to GKF's
Equipment Acquisition Cost plus the Total Site Improvement Cost.
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(g) "Total Site Improvement Cost" means
Hospital's cost to prepare the Site and install the Equipment in
accordance with Section 6 above (without deducting GKF's Portion of the
Site Improvement Cost), plus Hospital's cost to obtain any needed
regulatory approvals for the Program, which costs shall not include any
administrative overhead.
(h) "Tradename License and Promotion Rights" is
defined in Section 7.2 above, which the parties acknowledge to have a
value over the Term of the Agreement equal to *.
9. Use of the Equipment.
9.1 The Equipment shall be used by Hospital only at the
Site and shall not be removed therefrom. Hospital shall use the Equipment only
in connection with the operation of the Program and only within the capacity of
the Equipment as determined by Elekta's specifications. Hospital shall not use
nor permit the Equipment to be used in any manner nor for any purpose, which, in
the opinion of Elekta or GKF, the Equipment is not designed or reasonably
suitable; provided that the foregoing shall not be deemed to affect or limit
medical decisions in connection with the treatment of patients, which decisions
shall be in the sole discretion and judgment of the patient's treating
physician.
9.2 This Agreement is an agreement of lease only. Nothing
herein shall be construed as conveying to Hospital any right, title or interest
in or to the Equipment, except for the express leasehold interest granted to
Hospital for the Term. All Equipment shall remain personal property (even though
said Equipment may hereafter become attached or affixed to real property) and
the title thereto shall at all times remain exclusively in GKF.
9.3 During the Term, upon the request of GKF, Hospital
shall promptly affix to the Equipment in a prominent place, or as otherwise
directed by GKF, labels, plates, insignia, lettering or other markings supplied
by GKF indicating GKF's ownership of the Equipment, and shall keep the same
affixed for the entire Term. Hospital hereby authorizes GKF to cause this
Agreement or any statement or other instrument showing the interest of GKF in
the Equipment to be filed or recorded, or refiled or re-recorded, with all
governmental agencies considered appropriate by GKF, at Hospital's cost and
expense. Hospital also shall promptly execute and deliver, or cause to be
executed and delivered, to GKF any statement or instrument requested by GKF for
the purpose of evidencing GKF's interest in the Equipment, including financing
statements and waivers with respect to rights in the Equipment from any owners
or mortgagees of any real estate where the Equipment may be located.
9.4 At Hospital's cost and expense, Hospital shall: (a)
protect and defend GKF's ownership of and title to the Equipment from and
against all persons claiming against or through Hospital; (b) at all times keep
the Equipment free from any and all liens, encumbrances, attachments, levies,
executions, burdens, charges or legal processes imposed against Hospital; (c)
give GKF immediate written notice of any matter described in clause (b); and (d)
in the manner described in Section 23 below indemnify GKF harmless from and
against any loss, cost or expense (including reasonable attorneys' fees) with
respect to any of the foregoing.
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10. Additional Covenants of Hospital. In addition to the other
covenants of Hospital contained in this Agreement, Hospital shall, at its cost
and expense:
10.1 Provide properly trained professional, technical and
support personnel and supplies required for the proper performance of Gamma
Knife Procedures utilizing the Equipment. In this regard, Hospital shall
maintain on staff a minimum of two (2) Gamma Knife-trained teams comprised of
neurosurgeons, radiation oncologists and physicists. The Equipment shall be
available for use by all credentialed neurosurgeons and radiation oncologists.
Each and every person providing non-physician services to Hospital for the
Program shall be and remain an employee of, or independent contractor to,
Hospital or Hospital's owned, controlled or controlling affiliate.
10.2 Direct, supervise and administer the provision of all
services relating to Gamma Knife Procedures in accordance with all applicable
laws, rules and regulations.
10.3 Maintain the Site and any other equipment in good and
clean condition and repair (excluding repair obligations to the extent required
of GKF hereunder).
10.4 Provide all supplies required for operation of the
Program, including but not limited to, all drugs, radiology film, medical
supplies, bedding, towels, food items, kitchenware, cafeteria utensils, office
supplies, gloves, surgery room supplies, cleaning supplies, dressings, needles,
sutures, personal protective article for medical personnel and clothing for
patients, medical solutions, trays, medications, chemicals, band-aids, fluids,
and any and all other disposable or consumable items used in the operation of
the Program.
10.5 Provide laboratory services for the benefit of the
Program (which may be billed by Hospital directly to the patient).
10.6 To the extent required under any applicable third
party payor arrangement, be responsible for billing and collections for all
services rendered to Hospital patients through the Program.
10.7 Provide reasonable and customary marketing materials
(i.e. brochures, announcements, etc.) together with administrative and physician
support materials (e.g., seminars for physicians by neurosurgeons and radiation
oncologists, etc.) for the Program to be operated by the Hospital.
10.8 Keep and maintain the Equipment and the Site fully
protected, secure and free from unauthorized access or use by any person.
11. Additional Covenants of GKF. In addition to the other
covenants of GKF contained in this Agreement, GKF, at its cost and expense,
shall:
11.1 Use its best efforts to require Elekta to meets its
contractual obligations to GKF and Hospital upon delivery of the Equipment and
put the Equipment, as soon as reasonably 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.
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Notwithstanding the foregoing, if the Equipment is not delivered as of the
delivery date described in Section 5.1 plus a ninety (90) day grace period
("late delivery date") other than due to Hospital's fault hereunder or by reason
of force majeure as provided in Section 24 below, GKF shall reimburse Hospital
for its out-of-pocket financing costs incurred with respect to the preparation
of the Site and/or Program for the period between the Late Delivery Date and the
date that the Equipment is actually delivered. The parties hereby agree that the
Hospital's out-of-pocket financing costs are equal to the Bank of America prime
interest rate (which rate is sometimes referred to by the Bank as its "reference
rate") plus 2% based upon Hospital's cost to prepare the Site and install the
Equipment.
11.2 Cause Hospital to enjoy the use of the Equipment,
free of the rights of any other persons except for those rights reserved by GKF
or granted to Elekta under the LGK Agreement or the Purchase Agreement.
11.3 Advise Hospital in connection with the operational
setup of the Program.
12. Maintenance of Equipment; Damage or Destruction of Equipment.
12.1 During the Term and except as otherwise provided in
this Agreement, GKF, at its cost and expense, shall (a) maintain the Equipment
in good operating condition and repair, reasonable wear and tear excepted, and
(b) maintain in full force and effect a Service Agreement with Elekta and any
other service or other agreements (collectively "Service Agreements") required
to fulfill GKF's obligation to repair and maintain the Equipment under this
Section. Pursuant to the Service Agreement, following the initiation of a
service call by Hospital to GKF or Elekta, GKF shall cause Elekta to provide a
phone response within ten (10) hours and to provide an on-site response within
seventy-two (72) hours, as needed. Hospital shall approve any Service Agreement
entered by GKF to fulfill its obligations under this Section. Moreover, the
Hospital shall be a third-party beneficiary under each Service Agreement and
shall have the right to directly enforce any provisions thereunder. The Service
Agreements shall include the following provisions: (i) if GKF is in default of
any material provision thereunder, the party will promptly notify the Hospital;
(ii) if GKF is in default of any material provision thereunder and fails to cure
within the stated period, the Hospital shall have the option to assume the
Service Agreement under the same terms and conditions; (iii) for so long as the
Service Agreements remain in force, the service provider shall warrant that it
will provide service and maintenance to the extent required so that the
Equipment will conform in accordance with specifications, and so that the
Equipment will be free from defects in materials and workmanship; provided that
the Service Agreement shall not apply to service or maintenance of the
Equipment, or to replacement of its parts, with respect to (1) defects arising
out of materials or parts provided, modified or designed by Hospital, (2)
defects emanating from Hospital's improper use or maintenance, (3) defects
resulting from repairs or service of the Equipment supplied other than by Elekta
or its authorized representative, (4) normal radioactive decay of the Cobalt
supply, and/or (5) defects in positioning in the Site or re-installation at a
different site, unless this new site was approved by GKF and Elekta; (iv) for so
long as the Service Agreements remain in force, the service provider will
warrant that the LGP Software will perform in accordance with the documentation
delivered to GKF; provided that the foregoing warranty shall not apply if the
LGP Software is subjected to unauthorized repair or modification, improper
application improper installation, accidental damage, negligence in use,
improper storage, acts of
11
God, electrical power damage, equipment malfunction, or abnormal operating
conditions; (v) the service provider shall agree to indemnify the Hospital under
the same terms, if applicable, as under Article 6 of the LGK Agreement; and (vi)
all other provisions of the Service Agreements shall be consistent with the
terms of the LGK Agreement and shall not limit any rights granted to the
Hospital therein. Hospital shall promptly notify GKF in the event of any damage
or destruction to the Equipment or of any required maintenance or repairs to the
Equipment, regardless of whether such repairs or maintenance are covered or not
covered by the Service Agreement. GKF shall pursue all remedies available to it
under the Service Agreement and under any warranties made by Elekta with respect
to the Equipment so that the Equipment will be free from defects in design,
materials and workmanship and will conform to Elekta's technical specifications
concerning the Equipment.
12.2 GKF and Elekta shall have the right to access the
Equipment for the purpose of inspection and the performance of repairs at all
reasonable times, upon reasonable advance notice and with a minimum of
interference or disruptions to Hospital's regular business operations.
12.3 In the event the Equipment is damaged as a result of
the misuse, improper use, or other intentional and wrongful or negligent acts or
omissions of Hospital's officers, employees, agents, contractors and physicians,
to the extent such damage is not covered by the Service Agreement or any
warranties or insurance, GKF may service or repair the Equipment as needed and
the cost thereof shall be paid by Hospital to GKF immediately upon written
request. Any work so performed by GKF shall not deprive GKF of any of its
rights, remedies or actions against Hospital for such damages.
12.4 If the Equipment is rendered unusable as a result of
any physical damage to or destruction of the Equipment, Hospital shall give GKF
written notice thereof ("Damage Notice"). GKF shall determine, within thirty
(30) days after the Damage Notice, whether the Equipment can be repaired. In the
event GKF determines that the Equipment cannot be repaired (a) subject to
Section 12.3 above, GKF, at its cost and expense, shall replace the Equipment as
soon as reasonably possible taking into account the availability of replacement
equipment from Elekta, Elekta's other then existing orders for equipment, and
the then existing limitations on Elekta's manufacturing capabilities, and (b)
this Agreement shall continue in full force and effect as though such damage or
destruction had not occurred. GKF shall use best efforts to deliver the
replacement Equipment within ninety (90) days after the Damage Notice, provided
that any failure to do so within such 90-day period shall not result in any
penalties imposed upon GKF or entitle Hospital to terminate this Agreement. In
the event GKF determines that the Equipment can be repaired, GKF shall cause the
Equipment to be repaired as soon as reasonably possible thereafter. Hospital
shall fully cooperate with GKF to effect the replacement of the Equipment or the
repair of the Equipment (including, without limitation, providing full access to
the Site) following the damage or destruction thereof.
12.5 If the Equipment is rendered unusable for any
continuous period of two (2) weeks or more in duration as a result of repairs or
service to the Equipment, GKF shall use reasonable efforts to cause GKF's other
Gamma Knife customers to accommodate Hospital's patients for treatment at such
customers' sites and to credential such patients' attending physician
specialists; provided that GKF shall have no obligation to incur any costs or
expenses in
12
connection with the foregoing, and shall have no liability if such patients are
not so accommodated or such physicians are not so credentialed.
13. Alterations and Upgrades to Equipment.
13.1 Hospital shall not make any modifications,
alterations or additions to the Equipment (other than normal operating
accessories or controls) without the prior written consent of GKF. Hospital
shall not, and shall not permit any person other than representatives of Elekta
or any other person authorized by GKF to, effect any inspection, adjustment,
preventative or remedial maintenance, or repair to the Equipment without the
prior written consent of GKF. All modifications, alterations, additions,
accessories or operating controls incorporated in or affixed to the Equipment
(herein collectively called "additions" and included in the definition of
"Equipment") shall become the property of the GKF upon termination of this
Agreement.
13.2 The necessity and financial responsibility for
modifications, alterations, additions, accessories or operating controls
incorporated in or affixed to the Equipment (herein collectively called
"Additions" and included in the definition of "Equipment"), including without
limitation, the reloading of the Cobalt-60 source and any software upgrades,
shall be mutually agreed upon by GKF and Hospital and shall be paid equally by
each party. At the end of the Term, all Additions shall become the property of
GKF. Notwithstanding the forgoing, for all Additions with the exception of the
Cobalt Reloading, if the agreement terminates due to default by either party or
upon Hospital's exercise of the Purchase Option, the non-defaulting party or
GKF, respectively, shall have the right to receive payment for its share of the
unamortized cost in accordance with GAAP. In order to have adequate funds on
hand to pay for the reloading of the Cobalt-60 source (The "Cobalt Reloading"),
GKF and Hospital shall each reserve Fifty Thousand Dollars ($50,000) per year
until the Cobalt Reloading is completed (the "Reserve Funds"). The Reserve Funds
shall be deposited into an interest bearing trust account (the "Reserve
Account") held jointly in the names of GKF and Hospital and maintained at a
financial institution mutually agreed upon between the parties. Any withdrawals
or disbursements from the Reserve Account shall require the signatures of both
GKF and Hospital. The Reserve Account shall be established, and the initial
payment of Reserve Funds shall be deposited by the parties into the Reserve
Account, within thirty (30) days following the first anniversary of the First
Procedure Date. Additional deposits of Reserve Funds into the Reserve Account
shall be made on each subsequent anniversary date of the initial payment;
provided that such deposits shall cease upon the completion and payment in full
of the first Modifications and neither party shall thereafter be obligated to
contribute any further Reserve Funds. If the cost of the Modifications exceeds
the amount in the Reserve Account, the excess cost shall be paid equally between
GKF and Hospital. Notwithstanding the foregoing, all Reserve Funds in the
Reserve Account shall be distributed equally between the parties, and the
Reserve Account shall be closed, on the earlier to occur of: (a) the expiration
or termination of this Agreement in accordance with terms hereof; (b) the
exercise of the Purchase Option by Hospital in accordance with Section 3.2
above; or (c) the completion and payment in full of the Cobalt Reloading.
14. Financing of Equipment by GKF. GKF, in its sole discretion,
may finance the Equipment. Financing may be in the form of an installment loan,
a capitalized lease or other commercially available debt or financing
instrument. If GKF finances the Equipment through an installment loan, GKF shall
be required to provide the Equipment as collateral for the loan. If
13
GKF finances the Equipment through a capitalized lease, title shall vest with
the lessor until such time as GKF exercises its buy-out option under the lease,
if any. If required by the lender, lessor or other financing entity (the
"Lender"), GKF may assign its interest under this Agreement as security for the
financing. Hospital's interest under this Agreement shall be subject to the
interests of the Lender. Any loan or other financing agreement ("Financing
Agreement") shall include a provision that, if GKF is in default of any material
provision thereunder, the party will promptly notify the Hospital. Moreover, the
Financing Agreements shall provide that, if GKF is in default of any material
provision thereunder and fails to cure within the stated period, the Hospital
shall have the option to assume the Financing Agreement under the same terms and
conditions. If the Hospital exercises the right to assume the Financing
Agreement, this Agreement will terminate and GKF hereby agrees to simultaneously
transfer all of its interest, right and title to the Equipment to the Hospital.
This right shall be in addition to any other remedies available to Hospital
under this Agreement, and subject to any other right or remedy Hospital may have
under applicable law.
15. Equipment Operational Costs. Except as may be reimbursed to
Hospital as its Direct Operating Expense pursuant to Section 8 above, Hospital
shall be responsible and liable for all costs and expenses incurred, directly or
indirectly, in connection with the operation and use of the Equipment during the
Term, including, without limitation, the costs and expenses required to provide
trained physicians, professionals, and technical and support personnel, supplies
and other items required to properly operate the Equipment and perform Gamma
Knife Procedures.
16. Taxes. GKF shall pay all sales or use taxes imposed or
assessed in connection with the purchase of the Equipment and all personal
property taxes imposed, levied or assessed on the ownership and possession of
the Equipment during the Term. Hospital represents that it is a tax-exempt
corporation under Section 501(a) and 501(c)(3) of the Internal Revenue Code of
the United States, as amended, and under applicable laws of the State of
Maryland. The State of Maryland tax-exempt number for Customer is 31-000954. GKF
use its best efforts to take all actions required to cause the Agreement
hereunder to be treated as a tax-exempt transaction; provided that any failure
to do so shall not result in any penalties imposed upon GKF or entitle Hospital
to terminate this Agreement.
17. No Warranties by GKF. Hospital warrants that as of the First
Procedure Date, it shall have: (a) thoroughly inspected the Equipment; (b)
determined that the Equipment is consistent with the size, design, capacity and
manufacture selected by it; and (c) satisfied itself that to the best of its
knowledge the Equipment is suitable for Hospital's intended purposes and is good
working order, condition and repair. GKF SUPPLIES THE EQUIPMENT UNDER THIS
AGREEMENT IN ITS "AS IS" CONDITION. GKF, 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 OR USE, DESIGN, CONDITION, DURABILITY, CAPACITY, MATERIAL
OR WORKMANSHIP OR AS TO PATENT INFRINGEMENT OR THE LIKE. As between GKF and
Hospital, Hospital shall bear all risks with respect to the foregoing
warranties. Hospital expressly waives any right to hold GKF liable hereunder
for, any claims, demands and liabilities arising out of or in connection with
14
the design, manufacture, possession or operation of the Equipment, including
injury to persons or property resulting from the failure of, defective or faulty
design, operation, condition, suitability or use of the Equipment. All warranty
or other similar claims with respect to the Equipment shall be made by Hospital
solely and exclusively against persons other than GKF, including Elekta or any
other manufacturers or suppliers. In this regard and with prior written approval
of GKF, Hospital may, in GKF's name, but at Hospital's sole cost and expense,
enforce all warranties, agreements or representations, if any, which may have
been made by Elekta or manufacturers, suppliers or other third parties regarding
the Equipment to GKF or Hospital. Unless expressly set forth in this Agreement,
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.
18. Options to Extend Agreement. As of the end of the Term,
Hospital shall have the option either to:
18.1 Extend the Term of this Agreement for a specified
period of time and upon such other terms and conditions as may be agreed upon by
GKF and Hospital taking into account the use (e.g., number of Gamma Knife
Procedures, etc.) of the Equipment at the Site during the initial Term and other
factors deemed relevant by the parties;
18.2 Purchase the Equipment from GKF for *; or
18.3 Terminate this Agreement as of the expiration of the
Term.
Hospital shall exercise one (1) of the three (3) options referred to
above by giving an irrevocable written notice thereof to GKF at least nine (9)
months prior to the expiration of the initial Term. Any such notice shall be
sufficient if it states in substance that Hospital elects to exercise its option
and states which of the three (3) options referred to above Hospital is
exercising. If Hospital fails to exercise the option granted herein at least
nine (9) months prior to the expiration of the initial Term, the option shall
lapse and this Agreement shall expire as of the end of the initial Term.
Further, if Hospital exercises the option specified in Section 18.1 above and
the parties are unable to mutually agree upon the length of the extension of the
Term or any other terms or conditions applicable to such extension prior to the
expiration of the Term, this Agreement shall expire as of the end of the initial
Term. Notwithstanding the foregoing, within ten (10) days following the
expiration of the initial Term or any extensions thereof, the Hospital shall
have the right to purchase the Equipment from GKF for * irrespective of whether
prior notice is given to GKF as provided above. If the term of this Agreement is
not extended and Hospital does not purchase the Equipment as provided in this
Section, GKF shall remove the Equipment at its cost and expense, and shall
repair any damage to the premises resulting from such removal to the condition
immediately prior to such removal.
19. Events of Default by Hospital and Remedies.
19.1 The occurrence of any one of the following shall
constitute an event of default under this Agreement (an "Event of Default"):
(a) Hospital fails to pay any rent payment when
due pursuant to
15
Paragraph 6 above and such failure continues for a period of thirty
(30) days after written notice thereof is given by GKF to Hospital;
however, if Hospital cures the rent payment default within the
applicable thirty (30) day period, such default shall not constitute an
Event of Default.
(b) Hospital breaches any material provision of
this Agreement (other than the payment of rent) or violates any of its
representations and warranties contained herein and fails to cure such
breach or violation within thirty (30) calendar days after written
notice of said material breach or violation has been given to Hospital
by GKF; provided that if such breach or violation cannot reasonably be
cured within such 30-day period, no Event of Default shall be deemed to
have occurred if Hospital commences to cure such breach or violation
within such 30-day period and cures such breach or violation within one
hundred twenty (120) days following the expiration of such 30-day
period.
(c) Hospital applies for or consents to the
appointment of a receiver, trustee or liquidator for itself or for all
or a substantial part of its assets; files a voluntary petition in
bankruptcy, or admits in writing its inability to pay its debts as they
become due; makes a general assignment for the benefit of creditors; or
files a petition or an answer seeking reorganization or arrangement
with creditors or takes advantage of any insolvency law.
(d) An order, judgment or decree is entered by a
court of competent jurisdiction, on the application of a creditor,
adjudicating Hospital a bankrupt or insolvent or approving a petition
seeking reorganization of Hospital or appointing a receiver, trustee or
liquidator for Hospital or for all or a substantial part of its assets,
and such order, judgment or decree shall continue unstayed and in
effect for any period of sixty (60) consecutive days.
(e) Hospital is suspended or terminated from
participation in the Medicare program.
(f) The filing of a written notice to wind up
and dissolve Hospital pursuant to the terms and provisions of the
applicable corporations code.
19.2 Upon the occurrence of an Event of Default with
respect to Hospital, GKF may at its sole option do any or all of the following:
(a) Upon written notice to Hospital, immediately
terminate this Agreement as to the Equipment, wherever situated. As a
result of the termination, GKF may enter upon the Site and remove the
Equipment without liability of any kind or nature for so doing or GKF
may demand that Hospital remove and return the Equipment to GKF, all at
Hospital's sole cost and expense.
(b) Upon written notice to Hospital, sell,
dispose of, hold, use or lease the Equipment, as GKF in its sole and
absolute discretion may determine (and GKF shall not be obligated to
give preference to the sale, lease or other disposition of the
Equipment
16
over the sale, lease or other disposition of similar Equipment owned or
leased by GKF). Notwithstanding anything to the contrary contained
elsewhere in this Agreement, GKF will use reasonably commercial efforts
to mitigate any damage resulting from Hospital default and Hospital
liability to GKF shall be reduced by such mitigation.
(c) Exercise any other right or remedy which may
be available to GKF under the Uniform Commercial Code or any other
applicable law or proceed by appropriate court action, without
affecting GKF's title or right to possession of the Equipment, to
enforce the terms hereof or to recover damages for the breach hereof or
to cancel this Agreement as to the Equipment.
(d) In addition to the foregoing remedies,
Hospital shall be liable to GKF for all reasonable attorneys fees,
costs and expenses incurred by GKF as a result of the Event of Default
or the exercise of GKF's remedies.
19.3 Hospital shall in any event remain fully liable for
reasonable damages as provided by law. The rights and remedies afforded GKF
under this Agreement shall be deemed cumulative and not exclusive, and shall be
in addition to any other rights or remedies to GKF provided by law or in equity.
20. Events of Default by GKF and Remedies.
20.1 The occurrence of any one of the following shall
constitute an Event of Default under this Agreement:
(a) GKF breaches any material provision of this
Agreement or violates any of its representations and warranties
contained herein and fails to cure said breach or violation within
thirty (30) calendar days after notice of said material breach or
violation has been given to GKF by Hospital; provided that if such
breach or violation cannot reasonably be cured within such 30-day
period, no Event of Default shall be deemed to have occurred if GKF
commences to cure such breach or violation within such 30-day period
and cures such breach or violation within one hundred twenty (120) days
following the expiration of such 30-day period.
(b) GKF applies for or consents to the
appointment of a receiver, trustee or liquidator for itself or for all
or a substantial part of its assets; files a voluntary petition in
bankruptcy, or admits in writing its inability to pay its debts as they
become due; makes a general assignment for the benefit of creditors; or
files a petition or an answer seeking reorganization or arrangement
with creditors or takes advantage of any insolvency law.
(c) An order, judgment or decree is entered by a
court of competent jurisdiction, on the application of a creditor,
adjudicating GKF a bankrupt or insolvent or approving a petition
seeking reorganization of GKF or appointing a receiver, trustee or
liquidator for GKF or for all or a substantial part of its assets, and
such order, judgment or decree shall continue unstayed and in effect
for any period of sixty (60) consecutive days.
17
(d) The filing of a written notice to wind up
and dissolve GKF pursuant to the terms and provisions of the applicable
corporations code.
20.2 Upon the occurrence of an Event of Default involving
GKF, Hospital may at its sole option do any or all of the following:
(a) Upon written notice to GKF, immediately
terminate this Agreement as to the Equipment 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 a reasonable period of time after a written request
therefor, Hospital may remove the Equipment with all due care and store the
Equipment at GKF's sole cost and expense.
(b) Seek to recover from GKF such loss as may be
realized by Hospital in the ordinary course of events as a result of the Event
of Default.
20.3 GKF shall in any event remain fully liable for
reasonable damages as provided by law and for all costs and expenses incurred by
Hospital on account of such default, including but not limited to, all court
costs and reasonable attorneys' fees. The rights and remedies afforded Hospital
under this Agreement shall be deemed cumulative and not exclusive and shall be
in addition to any other rights or remedies to GKF provided by law or in equity.
21. Removal of Equipment. Upon expiration of the Term, unless
Hospital exercises its rights in Sections 3.2 or 18.2 to purchase the Equipment,
GKF, at its cost and expense, shall remove and decommission the Equipment
(including procedures to dispose the Cobalt) from the Site and repair any damage
to the Site caused by such removal or decommissioning not more than ninety (90)
days following the last day of the Term, in accordance with all applicable laws
and regulations.
22. Insurance.
22.1 From the period commencing on the date of delivery of
the Equipment to the Site and ending on the First Procedure Date, Hospital or
GKF (to be determined by mutual agreement) shall purchase and maintain in effect
an all risk property and casualty insurance policy covering the Equipment. Any
premiums relating to this policy will be considered a portion of that party's
contribution towards the Site Improvement Costs. From and after the First
Procedure Date and continuing throughout the Term, GKF shall, at its cost and
expense, purchase and maintain in effect an all risk property and casualty
insurance policy covering the Equipment. The all risk property and casualty
insurance policy to be purchased by Hospital and/or GKF shall be for an amount
not less than the replacement cost of the Equipment. Each party shall be named
as an additional insured party on the all risk property and casualty insurance
policy to the extent of its interest in the Equipment arising under this
Agreement. The all risk property and casualty insurance policy maintained by
Hospital and/or GKF shall be evidenced by a certificate of insurance or other
reasonable documentation which shall be delivered to the other party no later
than the date of delivery of the Equipment to the Site or the First Procedure
Date, as applicable, and (with respect to the GKF-procured insurance), as of
each annual renewal of such policy during the Term. The certificate of insurance
shall provide that such policy cannot be modified or cancelled without thirty
(30) days' prior written notice being provided to the additional insured
18
party named therein.
22.2 During the Term, Hospital shall, at its cost and
expense, purchase and maintain in effect general liability and professional
liability insurance policies covering the Site (together with all premises where
the Site is located) and the use or operation of the Equipment by Hospital or
its officers, directors, agents, employees, contractors or physicians. The
general liability and professional liability insurance policies shall provide
coverage in amounts not less than One Million Dollars ($1,000,000.00) per
occurrence and Five Million Dollars ($5,000,000.00) annual aggregate. GKF shall
be named as additional insured party on the general liability and professional
liability insurance policies to be maintained hereunder by Hospital. The
policies to be maintained by Hospital hereunder shall be evidenced by a
certificate of insurance or other reasonable documentation which shall be
delivered by Hospital to GKF no later than the First Procedure Date and as of
each annual renewal of such policies during the Term. The certificate of
insurance shall provide that such policy cannot be modified or cancelled without
thirty (30) days' prior written notice being provided to GKF.
22.3 During the construction of the Site and prior to the
First Procedure Date, Hospital, at its cost and expense, shall purchase and
maintain a general liability insurance policy which conforms with the coverage
amounts and other requirements described in Section 22.2 above and which names
GKF as an additional insured party. The policy to be maintained by Hospital
hereunder shall be evidenced by a certificate of insurance or other reasonable
documentation which shall be delivered by Hospital to GKF prior to the
commencement of any construction at the Site. Any premiums or other expenses
relating to this policy will be considered a portion of the Hospital's
contribution towards the Site Improvement Costs.
22.4 During the Term, Hospital shall purchase and maintain
all workers compensation insurance in compliance with applicable law.
23. Indemnification.
23.1 Hospital and GKF each hereby covenants and agrees
that it will defend, indemnify and hold the other party and their respective
officers, directors, members, employees and agents at all times harmless from
and against any loss, damage and expense (including reasonable attorneys' fees
and other costs of defense) caused by or arising out of: (i) any liability or
obligation related to the business of the indemnifying party prior to the date
hereof and the commencement of the Program; (ii) any obligation or liability
arising from services provided under this Agreement or in connection with the
Program by the indemnifying party to the extent any such liability or obligation
directly results from the negligence or intentional misconduct of the
indemnifying party; or (iii) any obligation or liability resulting from a breach
of any provision of this Agreement by the indemnifying party. The obligations of
the parties under this Section survive the expiration or earlier termination of
this Agreement.
23.2 Any party that intends to enforce an indemnity
obligation shall give the indemnifying party notice of any claim as soon as
possible, but the failure to give such notice shall not constitute a waiver or
release of the indemnifying party and shall not affect the rights of the
indemnified party to recover under this indemnity, except to the extent the
indemnified party is materially prejudiced thereby. In connection with any claim
giving rise to indemnity under this
19
Section 23 resulting from or arising out of any claim or legal proceeding by a
person who is not a party to this Agreement, the indemnifying party, at its sole
cost and expense, may, upon written notice to the indemnified party, assume
control of the defense of such claim or legal proceeding, to the extent that the
indemnifying party admits in writing its indemnification liability to the
indemnified party with respect to all material elements thereof. If the
indemnifying party assumes the defense of any such claim or legal proceeding,
the obligations of the indemnifying party hereunder as to such claim or legal
proceeding shall be to take all steps necessary in the defense or settlement
thereof and to hold the indemnified party harmless from and against any losses,
damages, expenses or liability caused by or arising out of any settlement
approved by the indemnifying party and the indemnified party or any judgment in
connection with such claim or legal proceeding. Each indemnified party shall
cooperate with the indemnifying party in the defense of any such action, the
defense of which is assumed by the indemnifying party. Except with the consent
of the indemnified party, which consent may be withheld at the indemnified
party's sole discretion, the indemnifying party shall not consent to any
settlement or the entry of any judgment arising from any such claim or legal
proceeding which, in each case, does not include as an unconditional term
thereof the delivery by the claimant or the plaintiff to the indemnified party
of a release from all liability in respect thereof. If the indemnifying party
does not assume the defense of any claim or litigation, any indemnified party
may defend against such claim or litigation in such manner as it may deem
appropriate, including but not limited to settling such claim or litigation,
after giving notice of the same to the indemnifying party, on such terms as the
indemnified party may deem appropriate. The indemnifying party will, promptly
after any of the same is incurred, reimburse the indemnified party in accordance
with the provisions hereof for all damages, losses, liabilities, costs and
expenses incurred by the indemnified party.
23.3 Except for third parties' indemnification obligations
for the third party claims under Sections 23.1 and 23.2 or for a breach of
Section 24.25 below, in no event will either party be liable to the other party
for:
(1) Punitive, incidental or consequential
damages under this Agreement; provided that
the foregoing limitation on incidental or
consequential damages shall not apply to, or
limit recovery under, any breach of contract
action arising due to a breach of this
Agreement by either party; or
(2) Any other damages arising from this
Agreement in excess of Three Million Dollars
($3,000,000).
24. Miscellaneous.
24.1 Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns. Hospital shall not assign this Agreement or any of its rights
hereunder or sublease the Equipment without the prior written consent of GKF,
which consent shall not be unreasonably withheld. An assignment or sublease
shall not relieve Hospital of any liability for performance of this Agreement
during the remainder of the Term. Any purported assignment or sublease made
without GKF's prior written consent shall be null, void and of no force or
effect.
20
24.2 Agreement to Perform Necessary Acts. Each party
agrees to perform any further acts and execute and deliver any further documents
which may be reasonably necessary or otherwise reasonably required to carry out
the provisions of this Agreement.
24.3 Validity. If for any reason any clause or provision
of this Agreement, or the application of any such clause or provision in a
particular context or to a particular situation, circumstance or person, should
be held unenforceable, invalid or in violation of law by any court or other
tribunal of competent jurisdiction, then the application of such clause or
provision in contexts or to situations, circumstances or persons other than that
in or to which it is held unenforceable, invalid or in violation of law shall
not be affected thereby, and the remaining clauses and provisions hereof shall
nevertheless remain in full force and effect.
24.4 Entire Agreement; Amendment. This Agreement together
with the Exhibits attached hereto constitutes the full and complete agreement
and understanding between the parties hereto concerning the subject matter
hereof and shall supersede any and all prior written and oral agreements with
regard to such subject matter. This Agreement may be modified or amended only by
a written instrument executed by the parties hereto.
24.5 Vendor Disclosure Form. GKF agrees to execute the
Vendor Full Disclosure Statement attached hereto as EXHIBIT 2. The proper
execution and delivery of the Vendor Full Disclosure Statement is a condition
precedent to Hospital's obligation under this Agreement.
24.6 Number and Gender. Words in the singular shall
include the plural, and words in a particular gender shall include either or
both additional genders, when the context in which such words are used indicates
that such is the intent.
24.7 Effect of Headings. The titles or headings of the
various paragraphs hereof are intended solely for convenience or reference and
are not intended and shall not be deemed to modify, explain or place any
construction upon any of the provisions of this Agreement.
24.8 Counterparts. This Agreement may be executed in one
or more counterparts by the parties hereto. All counterparts shall be construed
together and shall constitute one agreement.
24.9 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Maryland (excepting
any conflict of laws provisions which would serve to defeat application of
Maryland substantive law).
24.10 Arbitration. In the event any dispute should arise
between the parties hereto as to the validity, construction, enforceability or
performance of this Agreement or any of its provisions, such dispute shall be
settled by binding arbitration. Said arbitration shall be conducted in Chicago,
Illinois, in accordance with the then-prevailing rules of the American
Arbitration Association. The rules of discovery then pertaining to a Maryland
Court of Law shall apply thereto. The prevailing party shall be determined by
the arbitrator. The designated prevailing party may, but need not, apply to any
court of competent jurisdiction to enter a
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confirming award as to any arbitrator decisions. No appeal may be taken from any
arbitrator decision except on a claim of fraud on the part of arbitrator,
provided that no such appeal shall in any way stay or otherwise delay the effect
of the appealed decision.
(a) Notwithstanding anything in this Section to
the contrary, the parties hereto shall have the right to apply for and
obtain a temporary restraining order or other temporary or permanent
injunctive or equitable relief from a court of competent jurisdiction
in accordance with the standards under applicable Maryland laws in the
event of a material breach of the terms of this Agreement, and the
party seeking such relief has determined in good faith that the
exigencies of the breach require such immediate relief. The seeking of
such relief shall not be construed as a waiver or election against any
of the other terms of this Section.
24.11 Exhibits. All exhibits attached hereto and referred
to in this Agreement are hereby incorporated by reference herein as though fully
set forth at length.
24.12 Ambiguities. The general rule that ambiguities are to
be construed against the drafter shall not apply to this Agreement. In the event
that any provision of this Agreement is found to be ambiguous, each party shall
have an opportunity to present evidence as to the actual intent of the parties
with respect to such ambiguous provision.
24.13 Representations. Each of the parties hereto
represents (a) that no representation or promise not expressly contained in this
Agreement has been made by any other party hereto or by any of its agents,
employees, representatives or attorneys; (b) that this Agreement is not being
entered into on the basis of, or in reliance on, any promise or representation,
expressed or implied, other than such as are set forth expressly in this
Agreement; (c) that it has been represented by counsel of its own choice in this
matter or has affirmatively elected not to be represented by counsel; (d) it is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (e) it has full power and authority to
execute, deliver and perform this Agreement, and (f) the execution, delivery and
performance of this Agreement has been duly authorized by all necessary
corporate or other similar action.
24.14 Non-Waiver. No failure or delay by a party to insist
upon the strict performance of any term, condition, covenant or agreement of
this Agreement, or to exercise any right, power or remedy hereunder or under law
or consequent upon a breach hereof or thereof shall constitute a waiver of any
such term, condition, covenant, agreement, right, power or remedy or of any such
breach or preclude such party from exercising any such right, power or remedy at
any later time or times.
24.15 Notices. All notices, requests, demands and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be delivered to the party to whom notice is to be given
either (a) by personal delivery (in which case such notice shall be deemed to
have been duly given on the date of delivery), (b) by facsimile (in which case
such notice shall be deemed to have been duly given on the date of
transmission), provided that a copy thereof shall be sent concurrently by mail
in accordance with subsection (d) below, (c) by Federal Express or similar next
business day air courier service (in which case such notice shall be deemed
given on the business day following the date of deposit with the air
22
courier service), or (d) by first class United States mail, registered or
certified, postage prepaid (in which case such notice shall be deemed given on
the third (3rd) day following the date of deposit in the mail), and properly
addressed to the party on whom notice is to be delivered at the following
addresses, or any changed address sent to the other parties hereto in accordance
with the notice delivery requirements set forth above:
To the Hospital:
The Xxxxx Xxxxxxx Hospital
Xxxxxxxx Center
Attn: Xxxxx X. Xxxxxxxx
000 X. Xxxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
With a copy to:
The Xxxxx Xxxxxxx Health System Corporation
Attention: General Counsel
000 X. Xxxxx Xxxxxx
400 Xxxxxxxx Administration
Xxxxxxxxx, XX 00000-0000
To GKF:
GK Financing, LLC
Four Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000-0000
Fax No.: (000) 000-0000
Attn: Xxxxx Xxxxxx, Chief Executive Officer
With a copy to:
Tin Xxx Xxx, Esq.
Sheppard, Mullin, Xxxxxxx & Xxxxxxx LLP
000 Xxxxx Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Fax No.: (000) 000-0000
24.16 Special Provisions Respecting Medicare and Medicaid
Patients.
(a) Hospital 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.
(b) For the purpose of compliance with Section
1861(v)(1)(I) of the
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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.
(c) If either party is requested to disclose
books, documents, or records pursuant to any provision of this
Paragraph for an audit, it shall notify the other party of the nature
and scope of such request and each party shall make available, upon
written request of the other party, all such books, documents, or
records required to be disclosed, during such party's regular business
hours.
24.17 Force Majeure. A party shall be excused temporarily
from performing any obligation, other than the payment of money, during such
period of time as the performance is substantially impossible or practically
infeasible as a result of any war, riot, public disturbance, labor strike, act
of God, natural disaster, adverse weather conditions, delays in obtaining any
required regulatory approvals (provided that Hospital has timely filed its
applications for, and pursued the same), fire, explosion, shortage of supplies
beyond the party's reasonable control, or other material and unexpected problem
which was beyond the party's reasonable control. Notwithstanding the foregoing,
all parties shall make good faith efforts to perform under this Agreement in the
event of any such circumstance. Further, once such an event is resolved, the
parties shall again perform their respective obligations under this Agreement.
24.18 Time of Essence. Time is of the essence for the
performance of each obligation under this Agreement.
24.19 Parties. Nothing in this Agreement, whether express
or implied, is intended to confer any rights or remedies on any person other
than the two parties to this Agreement, and their respective successors and
assigns.
24.20 Enforcement. The parties hereto acknowledge that
monetary damages will not be adequate and that the parties will be irreparably
damaged in the event that the covenants and restrictions contained in this
Agreement are breached by any person subject hereto, but are not deemed to be
specifically enforceable. As a result, the parties hereto agree that all of the
terms of this Agreement shall be specifically enforceable by a court of
competent jurisdiction. Such remedy shall be cumulative and shall be in addition
to any other remedy, which may be available, to the party seeking specific
performance.
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24.21 No Reciprocation. The parties hereby acknowledge and
agree that the business relationship between the parties set forth herein
neither requires nor is in any way contingent upon the admission,
recommendation, referral or any other arrangement for the provision of any item
or service offered by any of the parties or any of its affiliates to any other
party, or those of its contractors, partners, employees or agents. In
furtherance of the foregoing, it is agreed that:
(a) Hospital shall take no actions, either overt
or covert, financial or otherwise, to induce its medical staff to use
the services offered by the Program.
(b) On an annual basis, Hospital shall inform
its medical staff of this understanding.
(c) Any physician referrals to the Program will
not be tracked by Hospital, the Company or GKF.
(d) Compensation paid to Hospital medical staff
physicians, whether pursuant to employment or personal services
contracts, will not be related directly or indirectly to the volume or
value of referrals or other business generated by such physicians to or
for the Program. Such compensation will be consistent with fair market
value in arm's-length transactions.
(e) Hospital shall continue to operate and use
its own radiation oncology equipment that are alternatives to the
Equipment.
24.22 Independent Contractors. In the performance of the
work, duties and obligations described hereunder, it is mutually understood and
agreed that each party is at all times acting and performing as an independent
contractor with respect to the other and that no relationship of partnership,
joint venture, landlord/tenant or employment is created by this Agreement.
Neither party, nor any other person performing services on behalf of either
party pursuant to this Agreement, shall have any right or claim against the
other party under this Agreement for social security benefits, workers'
compensation benefits, disability benefits, unemployment insurance benefits,
health benefits, vacation pay, sick leave or any other employee benefits of any
kind.
24.23 Remedies. No remedy or election under this Agreement
shall be deemed exclusive, but shall wherever possible, be cumulative with all
other remedies at law or in equity.
24.24 Affirmative Action. GKF is fully informed of, and
during the performance of this Agreement unless exempt, agrees to be bound by
and certify that is has complied with the affirmative action clauses set forth
at 41 CFR Section 1.1.1310.2, 41 CFR Section 60-1.4, 41 CFR Section 60-741.4 and
41 CFR Section 60-1.8 and 41 CFR Section 60-1.40.
24.25 Confidentiality. Hospital and GKF acknowledge that
during the term of this Agreement, each of them may be given access to certain
proprietary information, trade secrets and other confidential information
(including patient records) ("Confidential Information") belonging to the other
party. In order to protect and preserve the confidentiality of
25
Confidential Information belonging to the other party, Hospital and GKF each
agree that any Confidential Information belonging to the other party will be
held in the strictest confidence; and unless authorized in writing by the other
party or otherwise required by law, neither Hospital nor GKF shall disclose, or
permit to be disclosed, any Confidential Information belonging to the other
party to any person other than Hospital's or GKF's respective permitted
recipients as designated in writing by the other party. Hospital shall have the
right to disclose Confidential Information to Hospital's employees and resident
physicians to the extent necessary for use of the Equipment; provided that the
employees and physicians of Hospital to whom disclosure of any Confidential
Information is made shall be bound to hold this information confidential as set
forth in this Section.
(a) Hospital and GKF shall not use, or permit
any of its respective permitted recipients to use, any Confidential
Information belonging to the other party for any purpose other than in
the performance of Gamma Knife procedures. If Hospital or GKF are
required by law to disclose any Confidential Information (including,
but not limited to, pursuant to interrogatories, depositions, requests
for information, subpoenas, court orders, or other similar processes),
Hospital or GKF, as applicable, shall provide the other party with
prompt written notice of such required disclosure prior to complying
therewith so that the other party may seek an appropriate protective
order if it so desires. In any event, neither Hospital nor GKF shall
not be liable under this Agreement if it is legally required to
disclose Confidential Information after complying with this Section.
All of the provisions of this Section shall survive the expiration or
earlier termination of this Agreement.
(b) The obligations of confidentiality and
restriction of access pursuant to this Section shall not apply to any
Confidential Information that was (i) in the public domain at the time
of such access or subsequently came in to the public domain through no
fault of the person subject to the provisions of this section; (ii)
rightfully known to the person given such access prior to such access
or developed independently by the person given such access; or (iii)
received by the person given such access as a matter of right from a
source other than a person subject to the provisions of this section.
GKF shall advise all employees who may come into contact with patient
records that all patient records shall be treated as confidential so as
to comply with state and federal laws and regulations and applicable
ethical standards regarding the confidentiality of patient records,
including without limitation the federal Health Insurance Portability
and Accountability Act of 1996 and the related regulations ("HIPAA")
regarding the security and confidentiality of information concerning
the health of individuals. GKF shall further advise these employees
that they shall not at any time during or after any work assignment
disclose medical record information to any person whatsoever or permit
any person whatsoever to examine or make copies of any records,
reports, or other documents that in any way related to patients. GKF
acknowledges that the disclosure of medical record information by GKF's
employees will constitute a material breach of GKF's obligations under
this Agreement.
24.26 Compliance with Laws. Hospital and GKF shall at all
times comply with all applicable laws, rules and regulations.
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24.27 Excluded Provider. GKF warrants that neither it nor
any of its representatives, employees or agents are sanctioned or excluded from
any federally funded health care programs as provided in Sections 1128 and 1128A
of the Social Security Act (42 U.S.C. 1320a-7a). GKF further agrees that it will
notify Hospital immediately in the event it, or any of its representatives (if
actually known to GKF), employees, or agents (if actually known to GKF) become
sanctioned or excluded from any federally funded health care programs. Such
notification shall include the grounds for sanction or exclusion and the
duration thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
"GKF" GK FINANCING, LLC
By: /s/ Xxxxx X. Xxxxxx
-------------------
Xxxxx Xxxxxx,
Chief Executive Officer
"HOSPITAL" THE XXXXX XXXXXXX HOSPITAL
By: /s/ Xxxxxx X. Xxxxxxxx
----------------------
Xxxxxx X. Xxxxxxxx, President
By: /s/ Xxxxxxx Xxxxx
-----------------
Xxxxxxx Xxxxx, VP General Services
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