SECOND AMENDMENT TO LEASE AGREEMENT FOR A GAMMA KNIFE UNIT (PERFEXION UPGRADE)
Exhibit
10.18b
Confidential
material appearing in this document has been omitted and filed separately with
the Securities and Exchange Commission in accordance with Rule 24b-2,
promulgated under the Securities and Exchange Act of 1934, as
amended. Omitted information has been replaced with
asterisks.
SECOND AMENDMENT
TO
(PERFEXION
UPGRADE)
This
SECOND AMENDMENT TO LEASE AGREEMENT FOR A GAMMA KNIFE UNIT (this “Second
Amendment”) is dated effective as of December 23, 2009 (the “Effective
Date”) and is entered into by and between GK FINANCING, LLC, a California limited
liability company (“GKF”), or its wholly owned subsidiary whose obligation under
this agreement shall be guaranteed by GKF, and METHODIST HEALTHCARE SYSTEM OF
SAN ANTONIO, LTD., d/b/a Southwest Texas Methodist Hospital, a Texas corporation
("Hospital").
Recitals:
A. On
October 29, 1996, GKF and Hospital entered into a certain Lease Agreement For A
Gamma Knife Unit (as amended, the “Lease”), which was amended pursuant to a
certain Addendum dated October 31, 1996, Addendum Two dated October 16, 1997,
and an Amendment To Lease Agreement For A Gamma Knife Unit dated effective
December 13, 2003 (the “First Amendment”).
B. Hospital
and GKF desire to further amend the Lease to provide for the replacement and
upgrade of the existing Leksell Gamma Knife, Model B (the “Model B”) that is
currently being leased by GKF to Hospital pursuant to the Lease, with a Leksell
Gamma Knife Perfexion unit (such Perfexion unit leased hereunder is referred to
as the “Perfexion”), which will be installed at the existing Site at which the
Model B is currently installed, and contemporaneously with the de-installation
of the Model B.
Agreement:
NOW, THEREFORE, in
consideration of the mutual covenants and agreements set forth herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
1. Defined
Terms. Unless otherwise defined herein, the capitalized terms
used herein shall have the same meanings set forth in the Lease.
2. Upgrade
of the Model B to the Perfexion.
a. Subject
to the terms and conditions set forth herein, GKF shall acquire and hold title
to, and install the Perfexion with new cobalt-60 source, at the Site (the
“Perfexion Upgrade”). GKF shall use its commercially reasonable
efforts to perform the Perfexion Upgrade on or around April 2010, subject to
availability of the Perfexion from the equipment manufacturer, issuance of all
regulatory approvals, permits and/or waivers, and completion of construction of
the Site. The parties acknowledge that Hospital may not be able to
perform procedures for several weeks during the Perfexion Upgrade and the
deinstallation of the Model B. Prior to the Perfexion Upgrade,
Hospital shall enter into a mutually acceptable LGK Agreement with Elekta for
the Perfexion.
Exhibit
10.18b
b. GKF
shall be solely responsible for the construction and preparation of the Site in
connection with the Perfexion Upgrade and the rigging and installation of the
Perfexion.
c. GKF
shall be solely responsible for maintenance and service, personal property
taxes, and the cost of insurance coverage for the Perfexion to the same extent
and at the same levels as required under the Lease.
d. In
connection with the Perfexion Upgrade, Hospital, at Hospital’s sole cost and
expense, shall provide GKF with Hospital personnel (including Hospital
physicists) and services upon reasonable request and as reasonably required by
GKF, among other things, to oversee, supervise and assist with construction and
compliance with local, state and federal regulatory requirements and with
nuclear regulatory compliance issues and the calibration of the
Perfexion.
e. Notwithstanding
the foregoing, the Perfexion Upgrade shall be performed by GKF only after all
necessary and appropriate licenses, permits, approvals, waivers, consents and
authorizations, and the proper handling of the cobalt-60 (collectively, the
“Permits”), have been obtained by Hospital at Hospital’s sole cost and
expense. The timing and procedure for the Perfexion Upgrade shall be
as mutually agreed upon between the parties.
f. In
consideration for the Perfexion Upgrade, Hospital shall pay to GKF the sum of *,
which shall be paid in full by Hospital to GKF upon shipment of the Perfexion to
the Site. It is acknowledged by the parties that the foregoing
payment by Hospital as set forth in this Section has been factored by GKF into
the calculation of Hospital’s Per Procedure Payments.
g. Upon
request by GKF and at GKF’s reasonable expense, Hospital shall execute and
deliver a commercially reasonable form of consent to sublease if such a document
is reasonably requested by the third party financing company which holds a
security interest in the Perfexion.
h. In
order to facilitate Hospital’s earlier use of Elekta’s software that allows 3T
and 1.5T planning scans to be merged, GKF shall use its commercially reasonable
efforts to cause Elekta to issue the necessary software licenses to allow the
use of such software with the Model B (prior to the Perfexion Upgrade) in
addition to its use with the Perfexion.
i.
GKF agrees to provide Hospital the option to retain its existing
headframes, fiducial boxes, pin sets and table adapters from the Model B for use
on the Perfexion. In the event that Hospital exercises this option,
GKF also agrees that it shall, at its sole cost and expense, refurbish such
existing headframes, fiducial boxes, and table adapters (but not the existing
pin sets) for use on the Perfexion. It is acknowledged that the
Perfexion will come with two (2) new headframes, one (1) new fiducial box, new
pin sets and one (1) new table adapter.
j.
GKF, at its cost and expense, shall cover the Perfexion training tuition
costs for those physicians and physicists who will be using the
Perfexion. Such training shall be on-site at Hospital during a
one-week period to be coordinated between Hospital and Elekta. Any
travel and entertainment associated with training shall not be the
responsibility of GKF.
3. De-Installation
of the Model B; No Ownership Interests. Promptly
following the Perfexion Upgrade, GKF shall de-install, remove and retain all
ownership rights and title to the existing Model B. Notwithstanding
anything to the contrary set forth in the Lease or herein, Hospital shall have
no ownership interest (or option to purchase any ownership interest) in the
Model B and/or the Perfexion, and Hospital hereby waives any ownership interest
(or option to purchase any ownership interest) in the Model B and/or the
Perfexion.
Exhibit
10.18b
4. Extension
of Lease Term. In consideration of GKF’s agreement to perform
the Perfexion Upgrade, the Term is hereby extended to the date that is ten (10)
years following the First Perfexion Procedure Date
(as hereinafter defined); provided that (a) if
the Perfexion is delivered to the Site prior to April 7, 2010 (i.e., the former
expiration date of the Lease), then, in order to offset the effect of the
earlier delivery of the Perfexion, the Term will be automatically extended
further by the number of days between such Perfexion delivery date and April 7,
2010; and (b) the Term may be further extended as set forth in Section 7
below.
5. Compensation.
a. The parties acknowledge that the compensation payable to
GKF for the Perfexion as set forth in this Second Amendment has been negotiated
by the parties at arm’s length based upon reasonable and jointly derived
assumptions regarding the capacity for clinical services available from the
Perfexion, Hospital’s capabilities in providing high quality radiation oncology
services, market dynamics, GKF’s risk in providing the Perfexion, and the
provision to GKF of a reasonable rate of return on its investment in support of
the Perfexion. Based thereon, the Parties believe that the Per
Procedure Payments represent fair market value for the use of the Perfexion, the
de-installation and removal of the Model B, the Perfexion Upgrade, marketing
support, maintenance and service, personal property taxes, cost of insurance
coverage for the Perfexion, and the other additional services and costs to be
provided or paid for by GKF pursuant to this Second Amendment, and taking into
account the Hospital’s payment pursuant to Section 2.f
above. Hospital undertakes no obligation to perform any minimum
number of procedures on the Perfexion, and the use of the Perfexion for the
performance of procedures is wholly based upon the independent judgment of
physicians who order such procedures to meet the medical needs of their
patients.
b. Commencing from the first procedure performed using the
Perfexion at the Site (the “First Perfexion Procedure Date”) and continuing
through the duration of the Term (as extended hereby), Hospital shall pay to GKF
on a monthly basis, the applicable payments for each and every “Procedure” (as
defined below) as set forth in Exhibit “A” attached hereto (“Per Procedure
Payments”). For the avoidance of doubt, Per Procedure Payments shall
be due and owing to GKF for each and every Procedure that is performed by
Hospital, its representatives, affiliates, joint ventures and/or partnerships,
on an inpatient or outpatient basis, and/or “under arrangement,” and
irrespective of (i) whether the Procedure is performed on the Perfexion or using
any other equipment or devices, or (ii) the actual amounts billed or collected,
if any, pertaining to such Procedures. The parties acknowledge that the Per
Procedure Payments represent fair market value for the use of the Perfexion as
described herein. As used herein, "Procedure" means any treatment
that involves stereotactic, external, single fraction, conformal radiation,
commonly called radiosurgery, that may include one or more isocenters during the
patient treatment session, delivered to any site(s) superior to the foramen
magnum.
c. On or before the fifteenth (15) day and the last day of
each month (or portion thereof) during the Term of the Lease (as extended
hereby), Hospital shall inform GKF in writing as to the number of Procedures
performed during that month utilizing the Perfexion (and, if applicable, any
other equipment or devices). If no Procedures are performed utilizing
the Perfexion or any other equipment or devices, no Per Procedure Payments shall
be owing by Hospital to GKF.
d. GKF shall submit an invoice for Per Procedure Payments
to Hospital on the fifteenth (15th) and the last day of each calendar month (or
portion thereof) for the actual number of Procedures performed utilizing the
Perfexion and any other equipment or devices during the first and second half of
the calendar month, respectively. Hospital shall pay the invoice
within thirty (30) days after submission by GKF to Hospital. All or
any portion of an invoice which is not paid in full within forty-five (45) days
after submission shall bear interest at the rate of one and one-half percent
(1.50%) per month (or the maximum monthly interest rate permitted to be charged
by law between an unrelated, commercial borrower and lender, if less) until the
unpaid invoice together with all accrued interest thereon is paid in
full.
Exhibit
10.18b
e. Throughout the Term (as extended hereby) and thereafter
until final settlement of all amounts owed to either party under the Lease, each
party shall have the right at reasonable times and upon reasonable advance
notice to inspect, audit and copy the other party’s books and records which
relate to scheduling and billing of, and reimbursement for, Procedures performed
(utilizing the Perfexion and/or any other equipment or devices) and the Per
Procedure Payments.
f. Notwithstanding the foregoing, the compensation payable
to GKF pertaining to procedures performed prior to the First Perfexion Procedure
Date shall continue to be calculated and paid by Hospital in accordance with the
First Amendment.
6. Marketing
Support. The parties obligations with
respect to marketing the Perfexion shall continue in the same manner and with
the same amounts as set forth in Section 6 of the First
Amendment.
7. Cobalt
Reload. If GKF and
Hospital mutually agree to reload the Cobalt-60 source (i.e., after six (6)
years have elapsed following the First Perfexion Procedure Date), then, (a) GKF
will be solely responsible for the costs of such Cobalt-60 reloading; and (b)
the Term (as extended by this Second Amendment) shall be further extended for an
additional two (2) years, plus the period of time during which the Perfexion is
not in use due to the Cobalt-60 reloading.
8. Termination
for Economic Justification. Notwithstanding anything to the
contrary contained in the Lease or herein, if, at any time after the initial
twelve (12) months following the First Perfexion
Procedure Date, based upon the utilization of the Perfexion and other
factors considered relevant by GKF in the exercise of its reasonable discretion, within a
reasonable period of time after GKF’s written request, Hospital does not provide
GKF with a reasonable economic justification to continue the Lease and the
utilization of the Perfexion at the Hospital, then and in that event, but
without waiving any or all of GKF’s rights or remedies under the Lease, GKF
shall have the option to terminate the Lease by giving a written notice thereof
to Hospital not less than ninety (90) days prior to the effective date of the
termination designated in GKF’s written notice. Without limiting the
generality of the foregoing, for purposes of this Section, “reasonable economic
justification to continue the Lease” shall not be deemed to exist (and GKF shall
have the option to terminate the Lease) if, during the twelve (12) month period
immediately preceding the issuance of GKF’s written notice of termination, the
“Net Cash Flow” is negative. As used herein, “Net Cash Flow” shall
mean, for the applicable period, (a) the aggregate Per Procedure Payments
actually received by GKF during such period, minus (b) the sum of
the aggregate (i) debt service on the Perfexion, (ii) maintenance expenses, and
(iii) Perfexion-related personal property taxes and insurance during such
period.
9. Supplier
and Owner of Perfexion. The
parties hereto agree that, notwithstanding anything to the contrary set forth
herein, the Lease and this Second Amendment is and shall be treated and
interpreted as a "finance lease," as such term is defined in Article 2A of the
Uniform Commercial Code and Section 2A.103(a)(7) of the Business and Commerce
Code (Vernon's Texas Statutes and Codes), that GKF shall be treated as a finance
lessor who is entitled to the benefits and releases from liability accorded to a
finance lessor under Article 2A of the Uniform Commercial Code and Section
2A.103(a)(7) of the Business and Commerce Code (Vernon's Texas Statutes and
Codes). In furtherance of the foregoing, Hospital acknowledges that,
before signing this Second Amendment, GKF has informed Hospital in writing (a)
that Elekta is the entity supplying the Perfexion to GKF, (b) that Hospital is
entitled (under Section 2A of the Uniform Commercial Code and Section
2A.103(a)(7) of the Business and Commerce Code (Vernon's Texas Statutes and
Codes)) to the promises and warranties, including those of any third party,
provided to GKF by Elekta which is the entity supplying the goods in connection
with or as part of the contract by which GKF acquired the Perfexion or the right
to possession and use of the Perfexion, and (c) that Hospital may communicate
with Elekta and receive an accurate and complete statement of those promises and
warranties, including any disclaimers and limitations of them or of
remedies. Hospital also acknowledges that Hospital has selected
Elekta to supply the Perfexion and has directed GKF to acquire the Perfexion or
the right to possession and use of the Perfexion from
Elekta.
Exhibit
10.18b
10. Miscellaneous. This
Second Amendment (a) shall be governed by and construed under the laws of the
State of Texas, without reference to its principles of conflicts of law; and (b)
may be executed in separate counterparts, each of which when so executed and
delivered shall be an original, but all of which counterparts shall together
constitute the same instrument. The captions and paragraph headings
used herein are for convenience only and shall not be used in construing or
interpreting this Second Amendment. This Second Amendment 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.
11. Full
Force and Effect. Except as amended by this Second Amendment,
all of the terms and provisions of the Lease shall remain unchanged and in full
force and effect and, together with this Second Amendment, represent the entire
agreement of the parties with respect to the Perfexion and its use by
Hospital. Unless the context requires otherwise, with respect to the
Perfexion, all references in the Lease to (i) the “Equipment” shall be deemed to
mean the Perfexion; (ii) “Installation” shall be deemed to refer to the
Perfexion Upgrade; (iii) the “LGK Agreement” shall be deemed to refer to the new
LGK Agreement to be executed by Hospital relating to the Perfexion; (iv) the
“Site” shall be deemed to refer to the Site; (v) the “Term” shall be deemed to
refer to the Term, as extended pursuant to this Second Amendment. To
the extent any of the terms of the Lease conflict with the terms of this Second
Amendment, the terms and provisions of this Second Amendment shall prevail and
control. Where not different or in conflict with the terms and
provisions of this Second Amendment, all applicable terms and provisions set
forth in the Lease are incorporated within this Second Amendment as is if set
forth herein and shall apply with equal force and effect to the
Perfexion. Nothing set forth in this Second Amendment shall relieve
either party from any or all of its obligations under the Lease with respect to
the Model B, including, without limitation, the obligation to pay per procedure
payments and the service, insurance and property tax expenses associated with
the Model B.
IN WITNESS WHEREOF, the undersigned
have executed this Second Amendment as of the day first written
above.
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GKF:
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Hospital:
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GK
FINANCING, LLC
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METHODIST
HEALTHCARE SYSTEM OF SAN
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ANTONIO,
LTD., d/b/a Southwest Texas
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By:
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/s/
Xxxxxx X. Xxxxx, M.D.
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Methodist
Hospital
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Xxxxxx
X. Xxxxx, M.D.
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Policy
Committee Member
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By:
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/s/
Xxxxxxx X. Xxxxxx
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Dated:
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1/25/10
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Name:
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Xxxxxxx
X. Xxxxxx
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Title:
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Chief
Operating Officer
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Dated:
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12/22,
2009
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Exhibit
10.18b
Exhibit
“A”
PER PROCEDURE
PAYMENTS
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Annual Paid Procedures Performed
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Per Procedure Payment
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*
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*
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*
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*
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Notwithstanding
anything to the contrary set forth herein, for purposes of determining the Per
Procedure Payments, (a) the number of annual Procedures performed on the
Perfexion or using any other equipment or devices shall be reset to zero (0) at
the commencement of each anniversary of the First Procedure Date; (b) any
patient treatment provided on a fractionated basis shall count as one (1)
Procedure; (c) charity cases shall not be counted towards the annual Procedures
performed; and (d) there shall be no retroactive adjustment of the Per Procedure
Payments irrespective of whether the number of Procedures performed reaches a
lower Per Procedure Payment level. For example, if during an annual
measuring period, the number of annual Procedures totals *, then, the Per
Procedure Payments for the first * Procedures would remain at * per Procedure
while the Per Procedure Payments for the next * procedures (i.e., for Procedures
* through *) would be * per Procedure. There are no minimum volume
requirements.
