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EXHIBIT 10.18
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.
LEASE AGREEMENT FOR A GAMMA KNIFE UNIT
THIS LEASE AGREEMENT FOR A GAMMA KNIFE UNIT dated as of October 29, 1996,
(hereinafter, referred to as the "Agreement") is entered into between GK
Financing, LLC, a California Limited Liability Company, (hereinafter referred to
as "GKF"), and METHODIST HEALTHCARE SYSTEM OF SAN ANTONIO, LTD. dba SOUTHWEST
TEXAS METHODIST HOSPITAL, a Texas corporation, (hereinafter referred to as
"Hospital").
RECITALS
WHEREAS, Hospital wants to lease a Leksell Stereotactic Gamma Unit
distributed by Elekta Instruments, Inc., (hereinafter referred to as the
"Equipment") and desires from GKF certain marketing and administrative support
related to utilization of said equipment, and
WHEREAS, GKF is willing to lease the Equipment which GKF has acquired from
Elekta Instruments, Inc., a Georgia corporation (hereinafter referred to as
"Elekta"), to Hospital, pursuant to the terms and conditions of this Agreement
and is willing to provide to Hospital its marketing and administrative
capabilities; and
NOW, therefore, in consideration of the foregoing premises and the
promises contained herein, the parties hereto hereby agree as follows:
1. Execution of LGK Agreement by and between Hospital and Elekta. GKF
hereby leases the Equipment to the Hospital on the terms and conditions
hereinafter set forth. Hospital agrees that simultaneously with the execution of
this Agreement it shall execute that certain LGK Agreement with Elekta,
(hereinafter referred to as the "LGK Agreement"), a copy of which is attached
hereto as Exhibit A and incorporated herein by this reference. Hospital agrees
to fulfill all of its obligations under the LGK Agreement and acknowledges that
GKF is a third party beneficiary of the LGK Agreement.
2. Delivery of the Equipment and Site preparation. GKF shall arrange to
have the Equipment delivered to Hospital, at ___________________ (the "Site") in
coordination with Elekta. The Equipment shall be the latest Gamma Knife
technology available at the date of this Agreement, including all hardware and
software options. GKF shall exert its best
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faith efforts to expedite the delivery of the Equipment to a site mutually
agreeable to GKF and Hospital in accordance with the terms and conditions of
the Purchase Agreement for the Equipment by and between GKF and Elekta.
Notwithstanding the preceding sentence, it is understood and agreed that GKF
has made no representations and warranties to Hospital concerning actual
delivery dates or schedules for the Equipment at the Site. GKF shall coordinate
with Hospital the estimated delivery date of equipment.
Hospital shall provide a safe, convenient and properly prepared Site, at
its own expense, in accordance with all of the Equipment manufacturer's
(Elekta's) guidelines, specifications, technical instruments and Site Planning
Criteria (which Site Planning Criteria are attached hereto as Exhibit B and
incorporated herein by this reference), which criteria shall include Elekta's
estimated delivery schedule when and as received by GKF, on Hospital controlled
property for the proper performance of Gamma Knife procedures. Site location
shall be acceptable to GKF. Hospital shall prepare at its sole cost and expense
the requisite site plans and specifications and shall submit them to Elekta and
GKF for approval before implementation of such plans. Hospital shall apply for,
in a timely manner and use its best efforts to obtain as soon as reasonably
possible thereafter a User License from the Nuclear Regulatory Commission and/or
appropriate state agency authorizing it to take possession of the Cobalt Supply
and shall obtain such other licenses, permits, approvals, consents and
authorizations, which may be required by local governmental or other regulatory
agencies for the Site, its preparation, the charging of the Equipment with its
Cobalt Supply, the conduct of Acceptance tests, and the use of the Equipment as
more fully set forth in Article 2.1 of the LGK Agreement.
3. Gamma Knife Service Term. GKF agrees to provide to Hospital, and
Hospital agrees to accept and utilize from GKF, the Equipment pursuant to the
terms of this Agreement for a term (the "Gamma Knife Service Term") commencing
on the day (the "Commencement Day") that the first procedure using the
Equipment is performed on a patient of the Hospital for which payment is due
GKF from the Hospital pursuant to the provisions of Section 6 of this
Agreement, and ending on that date which is ten (10) years thereafter, unless
terminated earlier in accordance with the terms of this Agreement. Hospital
shall be liable to GKF for the payments referred to in Paragraph 6 below as
applicable, upon the Commencement Date.
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4. Cost of Site Preparation: Costs of Installation. Hospital's
obligations shall include preparation of plans and specifications for the
construction and preparation of the Site in such form as will result in the
Site, when constructed in accordance with such plans and specifications, being
in full compliance with Elekta's Site Planning Criteria. Hospital shall at its
own expense and risk, prepare, construct and make ready the Site as necessary,
for the installation of the Equipment, including, but not limited to, providing
any temporary and/or permanent shielding for the charging of the equipment and
its use, selecting and preparing a proper foundation for the Equipment and for
such shielding and walls, as well as proper alignment of the Site and wiring.
Hospital shall be responsible for the positioning of the Equipment on its
foundation at the Site in compliance with Elekta's Site Planning criteria
(attached as Exhibit B).
Hospital shall also at its own expense select, purchase and install all
radiation monitoring equipment and devices, safety circuits and radiation
warning signs needed for the Equipment at the Site, according to all applicable
federal, state and local laws and regulations.
Hospital warrants that the Site will be prepared in compliance with the Site
Planning Criteria.
Hospital shall be liable to GKF for any damage to the Equipment caused by
(a) defects in construction of the Site or defects in the positioning of the
Equipment at the Site; (b) defects arising out of materials or parts provided,
modified or designed by Hospital with respect to the Site; or (c) negligent or
intentional acts of omission or commission by Hospital or any of its officers,
agents, physicians, and employees in connection with the Site preparation; or
(d) operation of the Equipment at the Site.
Hospital warrants that it shall utilize its reasonable efforts to fulfill on
an timely basis its obligations under this Paragraph 4. Hospital further
warrants that it shall on a regular basis keep GKF informed of Hospital's
progress in fulfilling its obligations pursuant to this Paragraph 4. Should
Hospital not have all Site preparations completed by the delivery date (which
delivery date the parties shall negotiate in good faith and document) plus a
sixty (60) day grace period such that the Site is acceptable for positioning and
installation of the Equipment, Hospital shall reimburse GKF at an interest rate
of Bank of America's prime rate plus 2% on GKF's Equipment cost until the site
is prepared to allow positioning.
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and installation of the Equipment. Should the Equipment not be delivered by the
delivery date plus a sixty (60) day grace period, other than by reasons of
force majeure (see Section 27(c)) or Hospital's failure to complete Site
preparations necessary for the positioning and installation of the Equipment,
GKF shall reimburse Hospital at an interest rate of bank of America's prime
rate plus two percent (2%) on Hospital's costs in constructing and finishing
out the Site until the Equipment is delivered.
5. Marketing Support. GKF will assist and provide financial marketing
support to Hospital of at least $250,000 during the first five (5) years of
this project, subject to approval by Hospital.
6. Per Procedure Payments. *
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*
If no procedures are performed utilizing the Equipment, no charges shall be
incurred by the Hospital.
A procedure shall be defined as a single patient treatment session that may
include one or more isocenters during that session. Hospital shall be billed on
the fifteenth (15th) and the last day of each month for the actual number of
procedures performed during the first and second half of the month,
respectively. Hospital shall pay the procedures invoiced within thirty (30)
days after being invoiced. Interest shall accrue at the rate of 1-1/2% per
month on all invoices remaining unpaid after 45 days.
Billing statements, as provided above, will set forth two components of the
charges. The equipment-related component will equal sixty-eight (68%) percent
of the total fee per procedure and the administrative component will equal
thirty-two (32%) percent of the total fee per procedure.
7. Use of the Equipment. The Equipment may be used at Hospital only at
the Site identified and shall not be removed therefrom. Hospital shall not use
nor permit the Equipment to be used by any personnel who are not properly
trained or in any manner nor for any purpose for which Elekta or GKF has
notified the Hospital the Equipment is not designed or reasonably suitable.
Hospital shall not permit any liens, whether voluntary or involuntary, to attach
to the Equipment, without the prior written consent of GKF.
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8. Additional Covenants of Hospital. In addition to the other covenants
made by Hospital, Hospital shall at its own cost and expense:
(a) Provide properly trained professional, technical and support
personnel and supplies required for the proper performance of medical
procedures utilizing the Equipment. Hospital will have on staff a minimum of
two (2) Gamma Knife trained teams of neurosurgeons, radiation therapists and
physicists. Parties acknowledge that physicians, radiation therapists and
physicists are not employees of the Hospital and are independent contractors.
(b) Notwithstanding any requirements to the contrary or the absence of any
requirements in the bylaws, rules and regulations of Hospital's medical staff,
Hospital shall cause all neurosurgeons, radiation therapists and physicists that
may use the Equipment as contemplated in this Agreement to obtain and maintain,
at no expense to GKF, throughout the Gamma Knife Service Term, a policy or
policies of insurance insuring their respective risks of professional medical
liability incurred in connection with providing professional services utilizing
the Equipment as contemplated in this Agreement, in amounts for each such person
which shall be not less than $500,000 per incident and $1,000,000 in the annual
aggregate. Upon expiration of the Gamma Knife Service Term or its earlier
termination in accordance with the terms of this Agreement, if occurrence
coverage has not been carried, Hospital shall cause, at no cost to GKF,
professional liability tail coverage to be obtained and maintained with respect
to each such person with the same limits as in effect on the last day of the
term of this Agreement, such tail coverage policy or policies to cover such
person's risks of professional medical liability arising during the Gamma Knife
Service Term. Also, upon the expiration or termination of any such policy prior
to the expiration of the Gamma Knife Service Term or its earlier termination,
Hospital shall cause, at no cost to GKF, a substitute policy or tail coverage to
be obtained and maintained with the same limits as in effect on the date of
expiration or termination, such substitute policy or tail coverage to cover any
such person's risk of professional medical liability arising during the Gamma
Knife Service Term. Prior to the commencement of the Gamma Knife Service Term or
before a neurosurgeon, radiation therapists or physicist first uses the
Equipment, and annually, thereafter (i.e., upon policy renewal), Hospital shall
provide GKF (or cause neurosurgeons, radiation therapists and physicists to
provide GKF) with certificates of insurance or other written evidence with
respect to each such policy. Hospital shall also cause all such neurosurgeons,
radiation therapists and physicists to provide GKF with written notice of any
change to such coverage throughout the Gamma Knife Service Term.
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(c) Fully comply with all of its obligations under the LGK Agreement.
(d) Indemnify GKF as herein provided:
(i) Hospital shall fully indemnify, hold harmless and/or reimburse GKF
(and its members and their respective officers, directors, agents, employees and
affiliates) for any loss, liability, damage, penalty, action, claim, cost or
expense (including reasonable attorneys' fees)(hereinafter collectively referred
to as "damages") which GKF may suffer or incur which are solely caused by
Hospital's Site preparation and the Equipment's positioning, if the Site
preparation or the Equipment's positioning was not done in compliance with
Elekta's Site Planning Criteria. Except as relates to Site plans, specifications
and positioning plans reviewed and approved by GKF and/or Elekta, or
construction of other Site preparation done in compliance with Elekta's Site
Planning Criteria, Hospital shall be liable for any damages to the Equipment
caused by (a) defects in construction of the Site or defects in positioning of
the Equipment at the Site; (b) defects arising out of materials or parts
provided, modified or designed by Hospital with respect to the Site; (c)
negligent or intentional acts of omission or commission by Hospital or any of
its officers, agents or employees in connection with the Site preparation; or
(d) negligent operation of the Equipment at the Site. However, 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 for liability for damages to the Equipment caused by the
failure to comply with applicable federal, state or local laws or regulations,
including building codes, or those portions of the Site Planning Criteria
relating to the load bearing capacity of the floor of the treatment room and to
radiation protection.
(ii) Hospital shall fully indemnify, hold harmless and/or reimburse
(including reasonable attorneys' fees) GKF (and its members and their respective
officers, directors, agents, employees and affiliates), on a prompt basis for
any and all damages to the Equipment (including any violation by Hospital, its
agents, officers, employees, successors and assigns or by any physician-users of
the Equipment, of the Services Agreement described in Section 15 hereof) to the
extent such damages are caused by the negligent or wrongful acts or omissions of
Hospital, its agents, officers, employees, successor or assigns or by any
physician-users of the Equipment. In the event the Equipment is destroyed or
rendered unusable, this indemnification shall extend up to the full replacement
value of the Equipment at the time of its destruction less salvage value, if
any.
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(iii) Hospital shall fully indemnify, hold harmless and/or reimburse
GKF (and its members and their respective officers, directors, agents, employees
and affiliates) for any damages which GKF may suffer or incur as a result of
Hospital's breach or alleged breach of this Lease Agreement.
(iv) Hospital shall fully indemnify, hold harmless and/or reimburse
GKF (and its members and their respective officers, directors, agents, employees
and affiliates) for any damages, claims, judgments and liabilities by or to
third parties (plus litigation costs incurred and reasonable attorneys fees)
which GKF may suffer or incur resulting from injury to or death of any person or
physical loss or damage to property arising out of the negligent operation or
negligent medical use of the Equipment by or for the Hospital (but which is not
attributable to defective materials, workmanship or manufacture of the
Equipment), the defective maintenance of the Equipment by or for the Hospital
(but only to the extent not performed by or on behalf of Elekta), the failure of
the Site to comply with the Site Planning Criteria, or the training referred to
in Section 3.2 of the LGK Agreement. It is agreed that non-employee
physician/users of the Equipment are independent of the Hospital and are not
acting by or for the Hospital.
(e) Provide reasonable and customary marketing materials (i.e.
brochures, announcements, etc.) and marketing support from an administrative and
clinical (i.e. seminars by neurosurgeons and radiation therapists to referring
physicians, etc.) standpoint for this clinical service.
(f) Keep and maintain the Equipment and Site fully protected,
secure and free from unauthorized access or use by any person.
9. Additional Covenants, Representations and Warranties of GKF. In
addition to the other covenants, representations and warranties, made by GKF in
this Agreement:
(a) GKF represents and warrants that GKF has full power and
authority to enter into this Agreement, and that this Agreement does not and
will not violate any agreement, contract or instrument binding upon GKF.
(b) GKF represents and warrants to Hospital that, upon delivery of
the Equipment to the Hospital GKF shall use its reasonable commercial efforts to
require that Elekta meets its contractual obligations to GKF and in putting the
Equipment, as required by the LGK Purchase Agreement into good, safe and
serviceable condition and fit for its
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intended use in accordance with the manufacturer's specifications, guidelines
and field modification instructions.
(c) GKF represents and warrants that throughout the term of this
Agreement, Hospital shall enjoy the use of the Equipment, free of the rights of
any other persons except for those rights reserved by GKF or the right of
access granted to Elekta under the LGK Agreement or under the LGK Purchase
Agreement with GKF.
(d) During the entire term of this Agreement and subsequent extension
thereof, GKF shall maintain in full force and effect: (i) the Service
Agreement referenced in Paragraph 15 hereof. GKF represents and warrants that
during the entire term of this agreement and any subsequent extensions thereof,
that it will fully pursue any and all remedies it may have against Elekta under
the Service Agreement to insure that the Equipment will be in conformity with
Elekta's warranties so that it is free from defects in design, materials, and
workmanship which result in noncompliance with the specifications and/or
Elekta's warranties to GKF. In no event, however, shall the warranty
obligations of GKF to Hospital with respect to the Equipment be greater or more
extensive than Elekta's warranty obligations to GKF with respect to the
Equipment. Hospital and GKF acknowledge that Exhibit D of that certain LGK
Purchase Agreement, dated as of October 11, 1995, by and between Elekta and GKF
(the "LGK Purchase Agreement") sets forth the warranties with respect to the
Equipment granted by Elekta to GKF, which warranties are identical in form and
content to the warranties provided by Elekta to Hospital in Exhibit D of the
LGK Agreement. Hospital is an intended third-party beneficiary of the
warranties granted by Elekta to GKF in Exhibit D of the LGK Purchase Agreement
and Hospital shall be entitled to enforce the obligations of Elekta thereunder
directly.
10. Ownership/Title. It is expressly understood that Hospital shall
acquire no right, title or interest in or to the Equipment, other than the
leasehold interests conveyed hereunder, including, the right to the possession
and use of the same in accordance with the terms of this Agreement, except as
outlined under Paragraph 17. Hospital shall have no interest in the Equipment
other than the rights acquired as a lessee hereunder and the Equipment shall
remain the property of GKF regardless of the manner in which it may be
installed or attached at the Site. Hospital shall, at GKF's request, affix to
the Equipment tags, decals, or plates furnished by GKF, indicating GKF's
ownership of the Equipment.
GKF may at its sole discretion finance the Equipment. Financing may be in
the form of an installment loan or a financing lease or other commercially
available debt instrument.
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Should GKF finance the Equipment through an installment loan, GKF shall be
required to provide the Equipment as collateral against the loan. Should GKF
finance the Equipment through a financing lease title shall vest with the lessor
until GKF exercises its buy-out option. In addition, should GKF finance the
equipment, said Agreement may be used as collateral against the loan. Hospital's
right to possess and use the Equipment hereunder shall be subject to the
interest of GKF's financing entities, if any. GKF shall instruct any such
financing entities to notify (the "Default Notice") GKF and Hospital in writing
within ten (10) business days after any payment defaults by GKF to any financing
entity with respect to the Equipment at the Site (each, a "Payment default"). If
GKF has not provided Hospital with reasonably satisfactory evidence that it has
cured any such Payment Default within twenty (20) business days after Hospital's
receipt of the Default Notice, Hospital shall have the right to cure any such
Payment Default by paying to any such financing entity, as appropriate, the
amount of the Payment Default and providing GKF with reasonably satisfactory
written evidence of any such payment. Any amounts paid by Hospital to any such
financing entity pursuant to the provisions of this Section 10 shall be offset
against amount due GKF from the Hospital pursuant to Paragraph 6 of this
Agreement. Except as otherwise specifically provided in this Paragraph 10,
Hospital shall have no rights of set off against amounts due GKF from the
Hospital pursuant to this agreement or otherwise.
11. Cost of Use of the Equipment. Except as is otherwise provided
herein, Hospital shall bear the entire cost of using the Equipment during the
Term of this Agreement. This shall include, but not be limited to, providing
trained professionals, technical and support personnel and supplies to properly
operate the Equipment.
12. Taxes. GKF shall pay any personal property and sales and use taxes
levied against the Equipment and any other taxes or governmental fees or
assessments, however denoted, whether of the federal government, any state
government or any local government, levied or based on this Agreement or the
use of the Equipment except for taxes, if any, assessed on the basis of net
income, gross income or gross receipts of Hospital.
13. Maintenance and Inspections. GKF agrees to exercise due and proper
care in the maintenance of the Equipment and to keep the Equipment in a good
state of repair, reasonable wear and tear excepted.
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GKF (and Elekta) shall have the right of access to the Equipment for the
purpose of inspecting same at all reasonable times and upon reasonable notice
and with a minimum of interference to Hospital's operations. In the event the
Equipment is improperly used by Hospital or its employees, agents, officers,
physicians, or any other non-GKF or non-Elekta individual GKF may service or
repair the same as needed and such expense shall be paid by Hospital, unless
the repair is covered by the Service Agreement described in Paragraph 15 hereof.
Any work so performed by or in the service or maintenance of the
Equipment as a result of Hospital's failure or neglect to do so shall not
deprive GKF of any of its rights, remedies or actions against Hospital for
damages caused by such failure or neglect.
14. Equipment Modifications/Additions/Upgrades. The parties agree that
the necessity and financial responsibility for future modifications/additions/
upgrades to the Equipment, including the reloading of the Cobalt-60 source,
shall be discussed and mutually agreed to by GKF and Hospital.
15. Service Agreement. GKF warrants that it shall simultaneously with
the execution of this Agreement enter into a Service Agreement with Elekta.
Service Agreement shall be at GKF's sole expense.
16. Intentionally omitted
17. Options
(a) Hospital shall have the option, exercisable as set forth below, to:
(i) Renegotiate this Agreement on terms mutually agreeable to GKF
for a specified renewal term taking into account the first ten (10) years of
activity of the Equipment at the Site. Pursuant to Paragraph 17(a)(ii), if
terms and conditions of Agreement extension are not executed by both parties by
the end of the 114th month, this Agreement shall terminate. Both parties shall
negotiate in good faith on the terms and conditions of an extension of this
Agreement.
(ii) Terminate this Agreement. If Hospital fails to renew the
Equipment Term at the end of the initial term. GKF shall, at its sole expense
remove the Gamma Knife
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within a reasonable period of time after the expiration of the ten (10) year
initial Term. Hospital shall cooperate in good faith in such removal.
(iii) *
(iv) *
Hospital shall exercise one (1) of the four (4) options referred to
above, by mailing an irrevocable written notice thereof to GKF at Xxxx
Xxxxxxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxxxxxxx, Xxxxxxxxxx, 00000, by registered
mail, postmarked on or before the end of the ninth (9th) year of the ten (10)
year initial Equipment Term of this Agreement. Any such notice shall be
sufficient if it states in substance that Hospital elects to exercise its option
and states which of the four (4) options referred to above Hospital is
exercising.
18. No Warrants by GKF. Hospital warrants that as of the Commencement
Date, it shall have (a) thoroughly inspected the Equipment; (b) determined for
itself that all items of the Equipment are of a 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 stated purposes. GKF SUPPLIES
THE EQUIPMENT "AS IS" AND NOT BEING THE
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MANUFACTURER OF THE EQUIPMENT OR THE MANUFACTURER'S AGENT, MAKES NO WARRANTY OR
REPRESENTATION, EITHER EXPRESSED OR IMPLIED, AS TO THE EQUIPMENT'S
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, DESIGN, CONDITION,
DURABILITY, CAPACITY, MATERIAL OR WORKMANSHIP OR AS TO PATENT INFRINGEMENT OR
THE LIKE, it being agreed that all such risks as between GKF and Hospital, shall
be borne by Hospital. Hospital agrees to look solely to the manufacturer
(Elekta) or to suppliers of the Equipment (and its software) for any and all
warranty claims. GKF will use reasonable commercial efforts to enforce any and
all warranties made by Elekta on behalf of Hospital during the ten (10) year
initial Equipment Term and any extensions hereof. Hospital agrees that GKF shall
not be responsible for the delivery, installation, or operation of the Equipment
or for any delay or inadequacy of any or all of the foregoing. GKF shall not be
responsible for any direct or indirect consequential loss or damage resulting
from the installation, operation or use of the Equipment or otherwise. Hospital
expressly waives any right or claim to hold GKF liable hereunder for any claims,
demands and liabilities arising out of or in connection with the design,
manufacture, possession or operation of the Equipment.
19. Events of Default and Remedies. The occurrence of any one of the
following shall constitute an Event of Default hereunder:
(a) Hospital fails to pay any installment of semi-monthly procedure
payments when due when such default continues for a period of thirty (30) days
after notice thereof from GKF or its assignee is given to Hospital.
(b) Hospital attempts to remove, sell, transfer, encumber, sublet or
part with possession of the Equipment or any items thereof, except as expressly
permitted herein;
(c) Hospital shall fail to observe or perform any of the other
obligations required to be observed or performed by Hospital hereunder and such
failure shall continue for twenty (20) days after written notice thereof to
Hospital by GKF, unless Hospital has cured or is attempting to cure such
failure during such period. So long as Hospital is diligently attempting to
cure its failure to observe or perform any of its obligations, in good faith,
such failure shall not constitute an Event of Default hereunder, unless such
failure results in material damage or loss to GKF.
(d) Hospital ceases doing business as a going concern, makes an
assignment for the benefit of creditors, admits in writing its inability to pay
its debts as they
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become due, files a voluntary petition in bankruptcy, is adjudicated a bankrupt
or an insolvent, files a petition seeking for itself any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
arrangement under any present or future statute, law or regulation or files an
answer admitting the material allegations of a petition filed against it in any
such proceeding, consents to or acquiesces in the appointment of a trustee,
receiver, or liquidator of it or of all or any substantial part of its assets or
properties, or it or its shareholders or directors shall take any action looking
to its dissolution or liquidation.
(e) Within sixty (60) days after the commencement of any proceedings
against Hospital seeking reorganization, arrangement, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, such proceedings shall not have been dismissed, or if within thirty
(30) days after the appointment without Hospital's consent or acquiescence of
any trustee, receiver or liquidator of it or of all or any substantial part of
its assets and properties, such appointment shall not be vacated.
Upon the occurrence of an Event of Default, GKF may at its option do
any or all of the following: (i) by notice to Hospital, terminate this Agreement
as to the Equipment in default, wherever situated, and for such purposes, enter
upon the Site without liability for so doing or GKF may cause Hospital and
Hospital hereby agrees to return the Equipment to GKF at Hospital's sole cost
and expense; (ii) recover from, as liquidated damages for the loss of the
bargain and not as a penalty, an amount equal to the present value of the unpaid
estimated future lease payments by Hospital to GKF through the end of the
Equipment Term discounted at the rate of nine percent (9%), which payment shall
become immediately due and payable. Unpaid estimated future lease payments shall
be based on the prior 12 months lease payments and incorporating an annual five
(5%) percent increase; (iii) sell, dispose of, hold, use or lease the Equipment
in default, as GKF in its sole discretion may determine (and GKF shall not be
obligated to give preference to the sale, lease or other disposition of the
Equipment over the sale, lease or other disposition of similar Equipment owned
or leased by GKF). In any event, Hospital shall, without further demand, pay to
GKF an amount equal to all sums due and payable for all periods up to and
including the date on which GKF had declared this Agreement to be in default.
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In the event that Hospital shall have paid to GKF the liquidated damages
referred to in (ii) above, GKF hereby agrees to pay to Hospital promptly after
receipt thereof, all rentals or proceeds received from the reletting or sale of
the Equipment during the balance of the ten (10) year initial Equipment Term
(after deduction of all expenses incurred by GKF (including costs of unloading,
shipping, installing, and reloading the Equipment); said amount never to exceed
the amount of the liquidated damages paid by Hospital). Hospital agrees that GKF
shall have no obligation to sell the Equipment. Hospital shall in any event
remain fully liable for reasonable damages as provided by law for all costs and
expenses incurred by GKF on account of such default, including but not limited
to, all court costs and reasonable attorneys' fees. Hospital hereby agrees that,
in any event, it shall be liable for any deficiency after any sale, lease or
other disposition of the Equipment by GKF. The rights afforded GKF hereunder
shall not be deemed to be exclusive, but shall be in addition to any other
rights or remedies provided by law.
20. INSURANCE.
(a) During the ten (10) year initial Equipment Term of this
Agreement (and any successive terms) GKF shall, at its own cost and expense,
keep in effect an all risk and hazard insurance policy covering the Equipment.
The all risk and hazard insurance policy shall be for an amount not less than
the replacement cost of the Equipment. Hospital shall be named as an additional
insured under the all risk and hazard insurance policy maintained by GKF to the
extend to its leasehold interest. Evidence of such insurance coverage shall be
furnished by GKF to Hospital upon written request. During the ten (10) year
initial Equipment Term of this Agreement, Hospital shall, at its own cost and
expense keep in effect public liability and professional liability insurance
policies concerning the possession and operation of the Equipment by Hospital.
Said policies shall be in the amounts of not less than $1,000,000 per occurrence
and $5,000,000 in aggregate per year. GKF and its members, successors and
assigns, shall be named as additional insureds under the liability and
professional liability policies maintained by Hospital. Evidence of such
insurance coverages shall be furnished by Hospital to GKF upon written request,
by no later than the Commencement Date.
(b) If the Equipment is rendered unusable as a result of any
physical damage to, or destruction of the Equipment, Hospital shall give to GKF
immediate notice. GKF shall determine, within thirty (30) days after the date of
occurrence of such damage or destruction, whether the Equipment can be repaired.
In the event GKF determines that the Equipment cannot be repaired, GKF at its
sole cost and expense shall promptly
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Xxxxxxxxx Xxxxx Methodist Hospital
October 29, 1996
replace the Equipment. This Agreement shall continue in full force and effect as
though such damage or destruction had not occurred. In the event GKF determines
that the Equipment can be repaired, GKF shall cause the Equipment to be promptly
repaired.
21. Notices. Any notices required under this Agreement shall be sent in
writing and shall be deemed to have been duly given if delivered by hand or
mailed by certified or registered mail to the following addresses:
To GKF: Xxxxx X. Xxxxxx, C.E.O.
Four Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
To Hospital: Xxxxx X. Xxxxxxx, Xx., CEO
Southwest Texas Methodist Hospital
0000 Xxxxx Xxxx Xxxxx
Xxx Xxxxxxx, XX 00000
Or to such other addresses as either party may specify for the reception of
notice from time to time in writing to the other party. Any such notice shall be
effective only when actually received by the party to whom addressed.
22. Integration/Supersedure. This Agreement together with all exhibits and
addenda attached hereto contains the full and entire Agreement between the
parties hereto, and no oral or written understanding is of any force or effect
whatsoever unless expressly contained in a writing executed subsequent to the
date of this Agreement.
23. Waivers. To the extent that GKF fails or chooses not to pursue any of
its remedies under this Agreement or pursuant to applicable law, such shall not
prejudice GKF's rights to pursue any of those remedies at any future time and
shall not constitute a waiver of GKF's rights. To the extent that Hospital fails
or chooses not to pursue any of its remedies under this Agreement or pursuant to
applicable law, such shall not prejudice Hospital's rights to pursue any of
those remedies at any future time and shall not constitute a waiver of
Hospital's rights.
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Xxxxxxxxx Xxxxx Methodist Hospital
October 29, 1996
24. Assignments. This Agreement is binding upon and shall inure to the
benefit of the permitted successors or assigns of the respective parties hereto,
except that Hospital may not assign its rights or obligations under this
Agreement without the express written consent of GKF (which consent shall not be
unreasonably withheld). Hospital shall not assign or sublease the Equipment or
its rights hereunder without the prior written consent of GKF; which consent
shall not be unreasonably withheld. No permitted assignment or sublease shall
relieve Hospital of any of its obligations hereunder. For purposes of this
Section 24, a reorganization, recapitalization, merger, or other business
combination or restructuring of Hospital shall not be considered an assignment
of this Agreement, so long as Methodist Healthcare System of San Antonio, Ltd.,
retains at least a fifty percent (50%) direct or indirect ownership interest in
the Hospital.
25. Amendments. This Agreement shall not be amended or altered in any
manner unless such amendment or alteration is in a writing signed by both
parties.
26. Record-Keeping Requirements. To the extent required by the
regulations promulgated by the Health Care Financing Administration pursuant to
Section 952 of the Omnibus Reconciliation Act of 1980, GKF shall:
(a) Until the expiration of four (4) years following the furnishing of
services pursuant to this Agreement, GKF agrees to make available upon written
request of the Secretary of Health and Human Services or the U.S. Comptroller
General or any of their duly authorized representatives, this Agreement, any
books, documents and records necessary to verify the nature and extent of costs
incurred by Hospital by reason of the activities of GKF under this Agreement;
and
(b) If GKF elects to delegate any of its duties under this Agreement
(which have a cost of value of Ten Thousands Dollars ($10,000.00) or more over a
twelve (12) month period) to a related organization, only through a
subcontractor which provides that, until the expiration of four (4) years
following the furnishing of services under such subcontract, the related
organization shall make available, on request of the Secretary of Health and
Human Services or the U.S. Comptroller General or any of their authorized
representatives, the subcontract, and books, documents and records of the nature
and extent of costs incurred by Hospital by reason of activities of such related
organization under such subcontract. No delegation by GKF of its duties
hereunder shall relieve GKF from liability hereunder.
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Xxxxxxxxx Xxxxx Methodist Hospital
October 29, 1996
27. Miscellaneous Provisions.
(a) The invalidity or unenforceability of any portion or provision
of this Agreement shall not effect the validity or enforceability of any other
portion, nor shall either party's implied or express consent to the breach or
waiver of any provision of this Agreement constitute a waiver of such provision
as to any subsequent breach.
(b) In the event of any claim or controversy arising hereunder, the
prevailing party in such claim or controversy shall be entitled to a reasonable
attorneys' fee in addition to whatever other relief said party would be
otherwise entitled.
(c) Force Majeure. Failure to perform any obligation hereunder
(except for the payment of money) by either party will be excused in the event
of any delay or inability to perform its duties under this Agreement directly
or indirectly caused by conditions beyond its reasonable control including
without limitation, fires, floods, earthquakes, snow, ice, disasters, Acts of
God, accidents, riots, wars, operation of law, strikes, governmental action or
regulations, shortages of labor, fuel, power, materials, manufacturer delays or
transportation problems.
(d) Governing Law. The Agreement will be governed by Texas Law.
(e) Dispute Resolution. Should a dispute arise out of this contract,
the parties to the dispute shall first attempt to resolve it through direct
discussions in the spirit of mutual cooperation. If the parties' attempts to
resolve their disagreements through negotiation fail, the dispute shall be
mediated by a mutually acceptable third-party to be chosen by the disputing
parties within thirty (30) days after written notice by one of them demanding
mediation. The disputing parties shall share the cost of the mediation equally.
By mutual agreement the parties may postpone mediation until each has completed
some specified but limited discovery about the dispute. By mutual agreement the
parties may use a nonbinding form of dispute resolution other than mediation.
Any nonbinding dispute resolution process conducted under the terms of this
section shall be confidential within the meaning of Tex. Civ. Prac. and Rem.
Code sec. 154.053 and 154.073. In the event that neither a negotiated or
mediated resolution is obtained within the time periods provided by this
section, the parties may pursue any available legal or equitable remedy.
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Xxxxxxxxx Xxxxx Methodist Hospital
October 29, 1996
IN WITNESS WHEREOF, the parties have signed this Agreement on the day and
year first above written.
SOUTHWEST TEXAS GK FINANCING, LLC
METHODIST HOSPITAL
By: /s/ XXXXX X. XXXXXXX, XX. By: /s/ XXXXX X. XXXXXX
----------------------------- -----------------------------
Xxxxx X. Xxxxxxx, Xx. Xxxxx X. Xxxxxx
Chief Executive Officer Chief Executive Officer
20
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.
ADDENDUM TO
LEASE AGREEMENT FOR A GAMMA KNIFE UNIT
1. GKF shall participate jointly with Hospital in the design,
development and construction solicitation required in connection with the
preparation of the Site for the Equipment. In this regard:
(a) GKF and Hospital have identified and approved Xxxxx, Xxxxxxxxx
and Associates as the architectural firm to be engaged by Hospital to develop
the design, layout, and plans and specifications for the Site. GKF shall assist
Hospital with, and the Hospital shall regularly consult with GKF with regard
to, the design or layout of the Site and all matters related to the preparation
of the plans and specifications.
(b) GKF also shall participate with Hospital in the identification
and review of possible construction, engineering and/or design firms (general
contractors and/or any subcontractors) to be engaged by Hospital to construct
the Site. GKF shall have the right to interview all construction, engineering
and/or design firms proposed by Hospital or GKF for the project. All bids to
perform the construction, engineering and/or design work for the Site shall be
submitted to GKF for review prior to Hospital's selection thereof. The
construction, engineering and/or design firm(s) finally selected by Hospital to
perform the work and its bid shall be subject to the written approval of GKF,
which approval shall not be unreasonably withheld, conditioned or delayed.
2. As soon as reasonably possible after Hospital enters into the
principal contracts for the design, preparation and construction of the Site
(i.e., design/layout, architectural engineering and general construction),
Hospital shall determine in writing the aggregate costs and expenses previously
incurred and shall estimate the aggregate costs and expenses to be subsequently
incurred by Hospital to design, plan, prepare, construct and complete the Site
for the Equipment (the "Site Preparation Costs") based upon the amounts
reflected in said contracts. A copy of the written determination shall be
delivered by Hospital to GKF. If the aggregated Site Preparation Costs set
forth in the written determination are Nine Hundred Fifty Thousand
($950,000.00) or less, Hospital shall be responsible for the payment of all
Site Preparation Costs. If the aggregate Site Preparation Costs set forth in
the written determination are more than Nine Hundred Fifty Thousand Dollars
($950,000.00), GKF shall reimburse Hospital in the manner set forth in Section
3 below for the amount of Site Preparation Costs set forth in the written
documentation in excess of Nine Hundred Fifty Thousand Dollars ($950,000.00)
(the "Excess Site Preparation Amount").
3. If GKF is required to reimburse Hospital the Excess Site Preparation
Costs:
(a) Concurrent with the payment of any invoices or periodic
installments for Site Preparation Costs, Hospital shall deliver to GKF a copy
of all invoices or statements, a copy of all evidences of payment (e.g.,
copies of checks), an accounting of the aggregated Site
1
21
Preparation Costs, and a comparison of the estimated Site Preparation Costs (as
set forth in the written determination) to the actual Site Preparation Costs
paid by Hospital. The inadvertent failure of Hospital to provide the foregoing
documentation will not affect Hospital's right to reimbursement hereunder, so
long as such documentation is provided to GKF promptly upon request by GKF. When
the aggregate Site Preparation Costs paid by Hospital, exceed Nine Hundred Fifty
Thousand Dollars ($950,000.00), Hospital shall itemize and request in writing
that GKF reimburse Hospital for such excess Costs. GKF shall reimburse the
Hospital for the excess costs up to the Excess Site Preparation Amount not more
than (3) days after the written request for reimbursement and other items
described herein are delivered by Hospital to GKF.
(b) Modifications or additions to the Site Preparation Costs,
including change orders, shall be subject to written approval of GKF, which
approval shall not be unreasonably withheld, conditioned or delayed.
(c) Hospital shall regularly report to GKF on the status of the
preparation and construction of the Site. Upon reasonable advance request by
GKF, GKF shall have the right to visit and inspect the Site to review the
progress of construction.
4. Except as otherwise set forth in the Addendum, all of the provisions
of the Lease Agreement remain in full force and effect.
GK Financing, LLC, Methodist Healthcare System of San
a California limited Antonio, LTD, dba Southwest Texas
liability company Methodist Hospital, a Texas Corporation
By: /s/ XXXXX X. XXXXXX By: /s/ XXXXX X. XXXXXXX, XX.
---------------------------------- ----------------------------------
Xxxxx X. Xxxxxx Xxxxx X. Xxxxxxx, Xx.
Chief Executive Officer Chief Executive Officer
Dated: October 31, 1996 Dated: October 31, 1996
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