SECOND AMENDMENT TO LEASE AGREEMENT FOR A GAMMA KNIFE UNIT (PERFEXION UPGRADE)
Exhibit
10.19c
SECOND AMENDMENT
TO
(PERFEXION
UPGRADE)
This
SECOND AMENDMENT TO LEASE AGREEMENT FOR A GAMMA KNIFE UNIT (this “Second
Amendment”) is dated effective as of May 15, 2009 (the “Effective
Date”) and is entered into by and between Yale-New Haven Hospital, Inc. a/k/a
Yale-New Haven Hospital, a Connecticut corporation (“YNHH”) and GK Financing, LLC, a
California limited liability company (“GKF”).
Recitals:
A. On
April 10, 1997 GKF and Yale-New Haven Ambulatory Services Corporation, a
Connecticut corporation (“ASC”), entered into a Lease Agreement For A Gamma
Knife Unit, which was amended pursuant to (i) a certain Addendum dated as of
October 25, 2005 (the “Addendum”); and (ii) a certain Assignment, Assumption And
Amendment of Lease Agreement For A Gamma Knife Unit dated effective as of June
30, 2006 (the “First Amendment”). The original Lease Agreement, as
amended by the Addendum and the First Amendment, is referred to herein as the
“Lease.”
B.
Pursuant to the First Amendment, ASC transferred and assigned its interest in
the Lease to its affiliate, YNHH, and YNHH assumed all of ASC’s rights and
obligations thereunder.
C. YNHH
and GKF desire to further amend the Lease to provide for the replacement and
upgrade of the existing Leksell Gamma Knife, Model 4C (the “Model 4C”) that is
currently being leased by GKF to YNHH 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 new Yale-New Haven Cancer
Center to be known as The Xxxxxx Cancer Hospital, located at Park Street and
South Frontage Road (the “New Site”) contemporaneously with the de-installation
of the Model 4C.
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 4C 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 New Site (the
“Perfexion Upgrade”). GKF shall use its commercially reasonable
efforts to perform the Perfexion Upgrade either during the fourth quarter of
2009 or the first quarter of 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 New Site. The parties
acknowledge that YNHH may not be able to perform procedures for several weeks
during the Perfexion Upgrade and the deinstallation of the Model
4C.
b. Subject
to Section 2.c below, YNHH shall be solely responsible for the construction and
preparation of the New Site, which construction and preparation shall be
performed by YNHH in the
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same
manner as was performed with respect to the original Site. Prior to
the Perfexion Upgrade, YNHH shall enter into a mutually acceptable LGK Agreement
with Elekta for the Perfexion.
c. GKF shall
be responsible for installation costs related to the Perfexion Upgrade,
consisting primarily of rigging costs.
d. 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, provided that YNHH shall have no
obligation to pay for such costs.
e. In
connection with the Perfexion Upgrade, YNHH, at YNHH’s sole cost and expense,
shall provide GKF with YNHH personnel (including YNHH 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.
f. Notwithstanding
the foregoing, the Perfexion Upgrade shall be performed by GKF only after all
necessary and appropriate licenses, permits, approvals, waivers, consents and
authorizations, including, without limitation, the CON or its waiver, and the
proper handling of the cobalt-60 (collectively, the “Permits”), have been
obtained by YNHH at YNHH’s sole cost and expense. The timing and
procedure for the Perfexion Upgrade shall be as mutually agreed upon between the
parties.
3. De-Installation
of the Model 4C. Promptly
following the Perfexion Upgrade, GKF shall de-install, remove and retain all
ownership rights and title to the existing Model 4C. Notwithstanding
anything to the contrary set forth in the Lease or herein, neither YNHH nor any
of its affiliates shall have any ownership interest in the Model 4C, and YNHH on
behalf of itself and its affiliates hereby waives any ownership interest (or
option to purchase any ownership interest) in the Model 4C. With
respect to the Deposit * previously deposited with GKF pursuant to Section 6.c
of the Addendum, YNHH hereby grants, assigns and transfers unto GKF all of
YNHH’s right, title and interest in and to the Deposit for the purpose of
reducing the Per Procedure Payments to be paid to GKF by YNHH following the
Perfexion Upgrade pursuant to this Second Amendment.
4. Extension
of Lease Term. In consideration of the Perfexion Upgrade, the
Term is hereby extended to the date that is seven (7) years following the First Perfexion Procedure
Date (as hereinafter defined); provided that the
Term may be further extended as set forth in Section 7(a) 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, YNHH’s capabilities in providing high quality radiation oncology
services, market dynamics, GKF’s risk in providing the Equipment, and the
provision to GKF of a reasonable rate of return on its investment in support of
the Equipment. Based thereon, the Parties believe that the Per
Procedure Payments and Additional Payments, if any, represent fair market value
for the use of the Perfexion, the de-installation and removal of the Model 4C,
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 the transfer of the Deposit to GKF. YNHH
undertakes no obligation to perform any minimum number of procedures on the
Equipment, and the use of the Equipment 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.
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b. Commencing from the first procedure performed using the
Perfexion at the New Site (the “First Perfexion Procedure Date”) and continuing
through the duration of the Term (as extended hereby), YNHH shall pay to GKF on
a monthly basis, the applicable “Per Procedure Payments” (as set forth on
Exhibit “A” attached hereto) multiplied by each and every procedure performed
during the subject month using the Perfexion, irrespective of (i) whether the
procedure is performed by YNHH, ASC, or their respective representatives or
“Affiliates” (as defined in the First Amendment), or any other person or entity;
or (ii) the actual amounts billed or collected, if any, pertaining to such
procedures. As used herein, a “procedure” shall mean any treatment of
a patient, whether performed on an inpatient or outpatient basis, 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. The Per Procedure Payments shall be payable within
thirty (30) days after the conclusion of each calendar month in which the
applicable procedures were performed. Throughout the Term 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, Gamma Knife
procedures, the Per Procedure Payments and Additional Payments, and the service,
insurance and property tax expenses associated with the
Perfexion.
d. In addition to the Per Procedure Payments, YNHH shall
continue to remain obligated to pay GKF any Additional Payments that may become
due from and after the Perfexion Upgrade, which Additional Payments shall be
calculated and paid as set forth in the First Amendment, except
that:
(i) The incremental Additional Payment of * (as set forth in
the First Amendment) for each procedure performed using the Additional Unit(s)
shall be replaced with the applicable Per Procedure Payment then being paid by
YNHH under this Second Amendment. For example, if the Per Procedure
Payment then being paid by YNHH is *, then, the incremental Additional Payment
shall be equal to * multiplied by each procedure performed using the Additional
Unit(s) during the corresponding Contract Year (or Shortfall Contract Year, if
applicable), up to an aggregate of * procedures (prorated if the subject
Contract Year is less than 365 days) combined between procedures performed using
the Perfexion and procedures performed using the Additional Unit(s),
irrespective of (1) whether such procedures are performed by YNHH, its
representatives or Affiliates (as defined in the First Amendment), or any other
person or entity; or (2) the actual amounts billed or collected, if any,
pertaining to any such procedures; and
(ii) “Contract Year” shall mean each successive twelve (12)
month period commencing from the First Perfexion Procedure
Date.
e. 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 YNHH 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 2.d of the First
Amendment.
7. Cobalt
Reload. Notwithstanding anything
to the contrary contained in the Lease, YNHH shall be solely responsible
for all costs related to any future reloading (but not the initial
loading) of the Cobalt-60 source for the
Perfexion. However, if GKF and YNHH mutually agree that GKF will be
solely responsible for the costs of such Cobalt-60 reloading, then, (a) the Term
(as extended by this Second Amendment) shall be further extended for an
additional three (3) years, plus the period of time during which the Perfexion
is not in use due to the Cobalt-60 reloading; and (b) the Per Procedure Payment
during years eight (8), nine (9) and ten (10) of the Term (as extended by this
Second
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Amendment)
shall be at a rate to be mutually negotiated between the parties, provided that if the parties cannot reach
agreement as to such rates, then, (i) YNHH (and
not GKF) shall be solely responsible for all costs related to any such
future reloading, and (ii) the Term (as extended by this Second Amendment) shall
not be further extended.
8. Purchase
Option Upon Expiration.
a. Upon the expiration of the Term (as extended hereby),
YNHH shall have the option to purchase GKF’s ownership interest in the Perfexion
(the “Purchase Option”) for a purchase price of * (the “Option Purchase
Price”). The Option Purchase Price shall be paid in full in cash to
GKF upon the expiration of the Term of the Lease (as extended), upon which GKF
shall transfer, convey and assign to YNHH, free and clear of all encumbrances,
all of GKF’s right, title and interest in and to the Perfexion, on an “as is,
where is” basis with all faults, and without representation or warranty (other
than as to clear title). If the Purchase Option is exercised, upon
the expiration or termination of the Lease (as extended), it is understood that
GKF shall have no obligation with respect to the removal, relocation,
reinstallation and/or repair of the Perfexion, except as to any obligations to
insure and/or repair the Equipment that arose under the Lease prior to such
expiration or termination.
b. On or before the date that is twelve (12) months prior
to the expiration of the Term of the Lease (as extended), GKF will provide YNHH
with written notice of such expiration (the “Twelve Month
Notice”). The Purchase Option may be exercised by YNHH by giving GKF
written notice of such exercise (the “Exercise Notice”), which Exercise Notice
shall be received by GKF not more than sixty (60) days following YNHH’s receipt
of the Twelve Month Notice. The Twelve Month Notice and the Exercise
Notice may be delivered by hand or sent by certified mail, return receipt
requested to YNHH or GKF, as the case may be, at their respective addresses set
forth below:
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If to
GKF:
GK Financing, LLC
Xxxx Xxxxxxxxxxx Xxxxxx, Xxxxx
0000
Xxx Xxxxxxxxx,
XX 00000
Attn: Xx. Xxxxx X. Xxxxxx,
Chief Executive Officer.
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If to
YNHH:
Yale-New
Haven Hospital, Inc.
00 Xxxx Xxxxxx XXX 2006
Xxx Xxxxx XX 00000
_______________________
Attn: Xxxx
Xxxxxx
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5. Other
provisions.
a. Upon request by GKF and at GKF’s reasonable expense,
YNHH shall execute and deliver a commercially reasonable form of consent to
sublease, to be attached as Exhibit “B” hereto, if such a document is reasonably
requested by the third party financing company which holds a security interest
in the Perfexion.
b. In each of Section 20(e) (Events of Default by Yale and
Remedies) and Section 21(e) (Events of Default by GKF and Remedies) of the
Lease, the words, “under any present or future statute, law or regulation,”
shall be deleted and replaced with the words, “under any then-current statute,
law or regulation.”
c. GKF, at its cost and expense, shall cover the tuition
costs for up to ten (10) Perfexion training slots for physicians and physicists
who will be using the Perfexion. Travel and entertainment associated
with training shall not be the responsibility of GKF.
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d. YNHH and GKF each, on its own behalf, represents and
warrants to the other that neither it nor any of its respective owners has ever
been (a) convicted of a criminal offense related to health care and/or related
to the provision of services paid for by Medicare, Medicaid or another federal
health care program; (b) excluded or debarred from participation in any federal
health care program, including Medicare and Medicaid; or (c) otherwise
sanctioned by the federal government in connection with health care and/or the
provision of services paid for by Medicare, Medicaid or another federal health
care program, including being listed on the General Services Administration’s
Excluded Party Listing System. YNHH and GKF shall each notify the
other party immediately in the event that the representation contained in the
preceding sentence is or becomes untrue at any time during the Term (as
extended). The parties shall use best efforts to preserve to
the greatest extent possible their economic arrangement represented by the
Lease and this Second Amendment (as the same may be further amended, the
“Amended Lease”) such that patient access to Gamma Knife treatments will be
maintained in the event either party is excluded
from Medicare, Medicaid and/or any other Federal health care programs (an
“Exclusion”). In furtherance of the foregoing and notwithstanding
anything in the Amended Lease to the contrary, in order to achieve the foregoing
objective with minimal disruption, prior to the effective date of any Exclusion
and during the pendency of any investigation, audit or proceeding with respect
to either YNHH or GKF which could result in an Exclusion of either party, both
parties shall diligently work together in good faith to implement the following,
as applicable, which will become effective upon the effective date of the
Exclusion:
(i) If GKF is
the subject of the Exclusion, then, GKF’s interests under the Amended Lease may
be assigned to a non-excluded assignee with an equal or greater credit or
financial condition as that of GKF, which assignee shall be approved by YNHH
(whose approval shall not be unreasonably withheld or
delayed). Without limiting GKF’s selection of an assignee, it is
acknowledged that either American Shared Hospital Services or Elekta
Instruments, Inc. shall be an acceptable assignee provided that the applicable
assignee is not then subject to an Exclusion. Upon the expiration or
termination of the Exclusion, the Amended Lease may be assigned back to GKF, and
GKF shall provide YNHH with a copy of GKF’s notice of reinstatement, as
applicable.
(ii) If YNHH
is the subject of the Exclusion, then, the parties shall negotiate in good faith
an increase to the Per Procedure Payments to offset the lost revenues to GKF
resulting from the Exclusion.
10. Governing
Law. This Second Amendment shall be governed by and construed
under the laws of the State of Connecticut, without reference to its principles
of conflicts of law.
11. Counterparts. This
Second Amendment 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.
12. Captions. The
captions and paragraph headings used herein are for convenience only and shall
not be used in construing or interpreting this Second Amendment.
13. 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 Equipment and its use by
YNHH. 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 YNHH relating to the Perfexion; (iv) the “Site”
shall be deemed to refer to the New Site; (v) the “Term” shall be deemed to
refer to the Term, as extended pursuant to this Second
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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 4C, including, without limitation, the obligation to pay Lease
Payments, Additional Payments, and the service, insurance and property tax
expenses associated with the Model 4C.
IN WITNESS WHEREOF, the undersigned
have executed this Second Amendment as of the day first written
above.
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YALE-NEW
HAVEN HOSPITAL, INC.
By:
/s/ Xxxx
Xxxxxx
Its: VP,
Finance
Dated: 5/15/09
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GK
FINANCING, LLC
By:
Xxxxxx X. Xxxxx,
M.D.
Its: CEO,
ASHS
Dated: 5/28/09
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Exhibit
“A”
PER PROCEDURE
PAYMENTS
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Cumulative
Procedures Performed Using the Perfexion
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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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*
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*
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Notwithstanding
anything to the contrary set forth herein, (a) for purposes of determining the
applicable Per Procedure Payment, the number of procedures performed using the
Perfexion shall be counted and cumulated from and after the First Perfexion
Procedure Date through the expiration of the Term (as extended hereby); (b)
procedures previously performed using prior models of the Equipment (including
the Model 4C) shall not be counted towards the cumulative total; and (c) there
shall be no retroactive adjustment of the Per Procedure Payment irrespective of
whether the number of procedures performed reaches a lower Per Procedure Payment
level. For example, if the cumulative number of procedures totals *,
then, the Per Procedure Payment for the first * procedures would remain at * per
procedure while the Per Procedure Payment for the next * procedures (i.e., for procedures
* through *) would be * per procedure. There are no minimum volume
requirements.
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Exhibit
“B”
CONSENT TO
SUBLEASE
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