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EXHIBIT 10.23
EQUIPMENT LEASE AGREEMENT
THIS EQUIPMENT LEASE AGREEMENT ("Agreement") is made and entered into on
October 29, 1998, by and between GK FINANCING, LLC, a California limited
liability company ("GKF"), and the BOARD OF TRUSTEES OF THE UNIVERSITY OF
ARKANSAS ON BEHALF OF THE UNIVERSITY OF ARKANSAS FOR MEDICAL SCIENCES
("Hospital"), with reference to the following facts:
R E C I T A L S
A. GKF owns a Leksell Stereotactic Gamma Knife Unit (the "Equipment")
which it acquired from by Elekta Instruments, Inc., a Georgia corporation
("Elekta"), pursuant to that certain Agreement dated ____________, together with
the Exhibits attached thereto between GKF and Elekta (collectively, the
"Purchase Agreement").
B. Hospital wishes to lease the Equipment from GKF, and GKF is willing
to lease the Equipment to Hospital, 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 all hardware and software
related thereto.
2. LGK Agreement. Simultaneously with the execution of this Agreement,
Hospital and Elekta shall enter into that certain LGK Agreement (the "LGK
Agreement"), a copy of which is attached hereto as Exhibit 1. Hospital shall
perform, satisfy and fulfill all of its obligations arising under the LGK
Agreement when and as required thereunder. 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 of the Agreement. The initial term of this Agreement (the
"Term") shall commence as of the date hereof and, unless earlier terminated or
extended in accordance with the provisions of this Agreement, shall continue for
a period of fifteen
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(15) years following the date of the performance of the first clinical Gamma
Knife procedure (the "First Procedure Date") at the Site. Hospital's obligation
to make the payments to GKF for the Equipment described in Section 8 below shall
commence as of the First Procedure Date.
4. Certificate of Need; 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 of this Agreement. 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 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.
5. Delivery of Equipment; Site.
5.1 GKF shall coordinate with Elekta and Hospital to have the
Equipment delivered to Hospital at 0000 X. Xxxxxxx, Xxxxxx Xxxx, Xxxxxxxx 00000
(the "Site") on or prior to the delivery date agreed upon by Hospital and Elekta
in the LGK Agreement. GKF makes no representations or warranties concerning
delivery of the Equipment to the Site or the actual date thereof.
5.2 Subject to Section 6 below, 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 B to the LGK Agreement) (collectively the "Site Planning
Criteria"). The location of the Site shall be subject to the prior approval of
GKF.
6. Site Preparation and Installation of Equipment.
6.1 GKF, at its cost and expense, shall prepare all plans and
specifications required to prepare, construct and improve the Site for the
installation, use and operation of the Equipment during the Term. The plans and
specifications (i) shall be approved by Hospital, which approval shall not be
unreasonably withheld or delayed; (ii) shall comply in all respects with the
Site Planning Criteria; and (iii) to the extent required by applicable law,
shall be submitted to the State of Arkansas Health Department and the State of
Arkansas Building Services Office for their review. GKF, 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 prepare, construct and improve the Site as provided above.
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6.2 GKF, at its cost and expense, 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,
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, GKF, 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. GKF shall be responsible for the shipment, storage, placement and
removal of all Cobalt and depleted Cobalt, provided that, if Hospital elects to
purchase the Equipment pursuant to Section 19.2 below, Hospital shall be solely
responsible for such duties following its election. Any depleted Cobalt supply
shall be properly disposed of by GKF at such time as GKF shall deem necessary,
in GKF's sole and absolute judgment.
6.3 In addition to construction and improvement of the Site, GKF,
at its cost and expense, shall be responsible for the installation of the
Equipment at the Site, including the positioning of the Equipment on its
foundation at the Site in compliance with the Site Planning Criteria.
6.4 During the Term, GKF, at its cost and expense, shall maintain
the Site in a good working order, condition and repair, reasonable wear and tear
excepted.
7. Marketing Support. GKF shall coordinate its Gamma Knife marketing
plan with Hospital, which marketing plan shall be subject to the approval of
Hospital.
8. Lease Payments.
8.1 In consideration and as compensation to GKF for (i) the lease
of the Equipment by GKF to Hospital pursuant to this Agreement; (ii) the
preparation by GKF of all plans and specifications required to prepare,
construct and improve the Site for the installation, use and operation of the
Equipment; (iii) the preparation, construction and improvement of the Site as
necessary for the installation, use and operation of the Equipment; (iv) the
installation by GKF of the Equipment at the Site; and (v) the maintenance by GKF
of the Site in a good working order, condition and repair, Hospital shall pay to
GKF on a monthly basis an amount (the "Lease Payments") equal to (a) the *. As
used herein:
(1) *
(2) *
(3) *
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On each anniversary date of this Agreement, the parties shall meet to review *,
and any adjustments thereto must be mutually agreed upon by the parties in
writing. Upon request by GKF, Hospital shall promptly furnish GKF with written
documentation substantiating such *. As used herein, a "Gamma Knife procedure"
shall mean a single patient treatment session that may include one or more
isocenters during that session. If no Gamma Knife procedures are performed by
Hospital or any other person utilizing the Equipment, no Lease Payments shall be
owing by Hospital to GKF.
8.2 Payment by Hospital to GKF of the Lease Payments shall be
made within ten (10) days following receipt by Hospital of the reimbursement for
the technical component of such Gamma Knife procedure from payor sources. To
facilitate Hospital's billing and collection for Gamma Knife procedures
performed, within two (2) business days after any Gamma Knife procedure is
performed, GKF shall cause the administrative support individual referenced in
Section 11.3 below to provide Hospital with written confirmation of the names of
the patients treated. Hospital shall submit claims for reimbursement to the
appropriate payors for each Gamma Knife procedure within ______ (___) days after
the patient receiving the treatment is discharged. All or any portion of any
Lease Payment which is not paid in full within sixty (60) days after its due
date shall bear interest at the annual rate of five percent (5%) in excess of
the Federal Reserve Discount Rate then in effect as published in the Wall Street
Journal or similar publication (or the maximum monthly interest rate permitted
to be charged by law between an unrelated, commercial borrower and lender, if
less) until the unpaid Lease Payment, together with all accrued interest thereon
is paid in full. If GKF shall at any time accept a Lease Payment from Hospital
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 20 hereof.
8.3 Within thirty (30) days after the close of each month,
Hospital shall provide GKF with a written report indicating the status of
xxxxxxxx and collections for each Gamma Knife procedure performed during that
month, including, without limitation, the amount of the claim submitted and the
amount received for each such procedure. Upon request by GKF, Hospital shall
furnish to GKF information regarding reimbursement rates from any or all payor
sources for Gamma Knife procedures (applicable to procedures performed either on
an inpatient or outpatient basis). If such reimbursement rates should change at
any time or from time to time after the date hereof, in each instance, Hospital
shall provide written notice thereof to GKF within five (5) days of Hospital
receiving notice thereof.
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 the
regular and ordinary course of Hospital's business operations and only within
the capacity of the
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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.
9.2 This 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 Lease 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 GKF'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, and
(c) give GKF immediate written notice of any matter described in clause (b).
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 therapists and physicists.
10.2 Direct, supervise and administer the diagnosis, treatment
and care of all patients who receive Gamma Knife procedures.
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10.3 In consultation with GKF, provide reasonable and customary
marketing support in terms of administrative and physician support for the Gamma
Knife service to be operated by the Hospital.
10.4 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.
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 Furnish an individual who shall be located at the Site and
who shall provide administrative and marketing support services at the Site.
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, (b)
subject to Hospital's compliance with its obligations under the LGK Agreement
and under Sections 4, 5, 9, 10, 12, and 16 hereunder, cause the equipment to be
in compliance with all applicable state and federal regulations, and (c)
maintain in full force and effect a Service Agreement with Elekta and any other
service or other agreements required to fulfill GKF's obligation to repair and
maintain the Equipment under this Section 12. A copy of the Service Agreement
with Elekta (the "Service Agreement") is attached as Exhibit F to the LGK
Agreement (attached hereto as Exhibit 1). A schedule of the maintenance to the
Equipment to be performed under the Service Agreement shall be delivered by GKF
to Hospital. 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.
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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 Hospital shall be liable for any damage to or destruction of
the Equipment caused by the misuse, improper use, or other intentional and
wrongful or negligent acts or omissions of Hospital's officers, employees,
agents, contractors and physicians. 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; provided that, if GKF's charges and costs for
such service or repair are not paid in full by Hospital within sixty (60) days
after GKF's request therefor, in addition to such charges and costs, Hospital
shall pay interest thereon to GKF until paid in full at the annual rate of five
percent (5%) in excess of the Federal Reserve Discount Rate then in effect, as
published in the Wall Street Journal or similar publication (or the maximum
monthly interest rate permitted to be charged by law between an unrelated,
commercial borrower and lender, if less) and costs incurred by GKF in collecting
such amount from Hospital (other than attorneys' fees). 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. GKF shall determine, within thirty (30) days after it is
given written notice of such damage or destruction, whether the Equipment can be
repaired. Subject to Section 12.3 above, in the event GKF determines that the
Equipment cannot be repaired, at the election of GKF in GKF's sole and absolute
discretion, (a) GKF, at its cost and expense, may 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) in
such event, this Agreement shall continue in full force and effect as though
such damage or destruction had not occurred. If GKF elects not to replace the
Equipment, GKF shall provide written notice of such election to Hospital, and
this Agreement shall terminate on the date that is ninety (90) days following
the date of such notice. 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.
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13. [Intentionally omitted.]
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 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 and Hospital shall execute such documentation as the Lender shall
reasonably require in furtherance of this Section 14.
15. Equipment Operational Costs. Except as otherwise expressly provided
in this Agreement, 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. GKF shall be
responsible for all costs and expenses for all utilities required for the
operation and use of the Equipment. Between Hospital and GKF, Hospital shall be
fully liable for all negligent, intentional or wrongful acts or omissions of
such physicians, professional, technical and support personnel.
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. All other taxes, assessments, licenses or other charges
imposed, levied or assessed on the Equipment during the Term shall be paid by
Hospital before the same shall become delinquent, whether such taxes are
assessed or would ordinarily be assessed against GKF or Hospital; provided,
however, Hospital shall not be required to pay any federal, state or local
income, franchise, corporation or excise taxes imposed upon GKF's net income
realized from the lease of the Equipment. In case of a failure by Hospital to
pay any taxes, assessments, licenses or other charges when and as required under
this Section, GKF may (in GKF's sole and absolute discretion) pay all or any
part of such taxes, in which event the amount paid by GKF shall be immediately
payable by Hospital to GKF upon written request; provided that, if GKF is not
repaid in full by Hospital within sixty (60) days after GKF's request therefor,
in addition to the repayment of the amounts paid by GKF, Hospital shall pay
interest thereon to GKF until paid in full at the annual rate of five percent
(5%) in excess of the Federal Reserve Discount Rate then in effect, as published
in the Wall Street Journal or similar publication (or the maximum monthly
interest rate permitted to be charged by law between an unrelated, commercial
borrower
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and lender, if less) and costs incurred by GKF in collecting such amount from
Hospital (other than attorneys' fees).
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. GKF shall not be liable for any direct, indirect and consequential
losses or damages suffered by Hospital or by any other person, and Hospital
expressly waives any right to hold GKF liable hereunder for, any claims, demands
and liabilities arising out of or in connection with the design, manufacture,
possession or operation of the Equipment, including injury to persons or
property resulting from the failure of, defective or faulty design, operation,
condition, suitability or use of the Equipment, or with the accuracy,
completeness or suitability of the Site Planning Criteria, including GKF's good
faith compliance therewith. All warranty or other similar claims with respect to
the Equipment or the Site Planning Criteria 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. 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. Termination for Economic Justification.
18.1 If, following the initial eighteen (18) months after the
First Procedure Date and following each subsequent 12 month period thereafter
during the Term, based upon the utilization of the Equipment and other factors
considered relevant by GKF in the exercise of its discretion, within a
reasonable period of time after GKF's written request, Hospital does not provide
GKF with a reasonable economic justification to continue this Agreement and the
provision of Gamma Knife services at the Hospital, then and in that event, GKF
shall have the option to terminate this Agreement by giving a
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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.
18.2 Notwithstanding the provisions of Section 18.1, if at any
time during the term of this Agreement, Hospital is suspended or terminated from
participation in the Medicare program, GKF shall have the option to terminate
this Agreement immediately by giving written notice thereof to Hospital.
18.3 As a result of any termination of this Agreement pursuant to
this Section 18, GKF may enter upon the Site and remove the Equipment and any
improvements made by GKF to the Site without liability of any kind or nature for
so doing or GKF may demand that Hospital remove and return the Equipment and
such improvements to GKF, all at GKF's sole cost and expense. Notwithstanding
the foregoing, Hospital may elect in its sole discretion to purchase GKF's Site
improvements by giving GKF notice of Hospital's election within five (5) days
following the receipt by Hospital of GKF's written notice of termination. The
purchase price (the "TI Purchase Price") for such Site improvements shall be
equal to the actual cost of such improvements incurred by GKF which are then
unamortized as of the effective date of such termination. Amortization shall be
straight-line over a period of fifteen (15) years corresponding with the Term of
this Agreement. As an example, if GKF elected to terminate this Agreement
pursuant to Section 18.1 on the date which is five years after the First
Procedure Date, then the TI Purchase Price on such termination would be 10/15s
of the actual cost of the Site improvements. The costs of such improvements
shall be evidenced by invoices and other documentation, and shall include any
financing charges or costs. Within five (5) days following GKF's receipt of
Hospital's election to purchase the Site improvements, GKF shall inform Hospital
of the amount of the TI Purchase Price as determined in accordance with this
Section 18.3, and shall provide Hospital upon request with supporting
documentation therefor. Payment of the TI Purchase Price shall be made by
Hospital to GKF within five (5) days following GKF's determination of the TI
Purchase Price.
19. Options to Extend Agreement. As of the end of the Term, Hospital
shall have the option either to:
19.1 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;
19.2 Purchase the Equipment from GKF for cash (or other
immediately available federal funds) at its then fair market value (based upon
the "in use" value of the Equipment); or
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19.3 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 19.1 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.
20. Events of Default by Hospital and Remedies.
20.1 The occurrence of any one of the following shall constitute
an event of default under this Agreement (an "Event of Default"):
20.1.1 Hospital fails to pay any Lease Payment when due
pursuant to Paragraph 8 above and such failure continues for a period of thirty
(30) days after written notice thereof is given by GKF or its assignee to
Hospital; however, if Hospital cures the payment default within the applicable
thirty (30) day period, such default shall not constitute an Event of Default.
20.1.2 Hospital attempts to remove, sell, transfer,
encumber, assign, sublet or part with possession of the Equipment or any items
thereof, except as expressly permitted herein.
20.1.3 Hospital fails to observe or perform any of its
covenants, duties or obligations arising under this Agreement or the LGK
Agreement and such failure continues for a period of thirty (30) days after
written notice thereof by GKF to Hospital; however, if Hospital cures the
default within the applicable thirty (30) day period or if the default
reasonably requires more than thirty (30) days to cure, Hospital commences to
cure the default during the initial thirty (30) day period and Hospital
diligently completes the cure as soon as reasonably possible following the end
of the thirty (30) day period, such default shall not constitute an Event of
Default.
20.1.4 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 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
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petition filed against it in any such proceeding, consents to or acquiesces in
the appointment of a trustee, receiver, or liquidator of it or of all or any
substantial part of its assets or properties, or it or its shareholders shall
take any action looking to its dissolution or liquidation
20.1.5 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.
20.2 Upon the occurrence of an Event of Default with respect to
Hospital, GKF may at its option do any or all of the following:
20.2.1 By 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 and any
improvements made by GKF to the Site without liability of any kind or nature for
so doing or GKF may demand that Hospital remove and return the Equipment and
such improvements to GKF, all at Hospital's sole cost and expense.
20.2.2 Recover damages from Hospital as may be awarded by
a court of competent jurisdiction for the loss of the bargain represented by
this Agreement. For purposes of determining such damages, the parties agree that
the following methodology shall be used: (a) the amount of such damages shall be
equal to the present value of the unpaid estimated future Lease Payments to be
made by Hospital to GKF through the end of the Term discounted at the rate of
nine percent (9%); and (b) the unpaid estimated future Lease Payments shall be
based on the historical trend of payments made by Hospital to GKF hereunder
taking into account known factors which could impact the historical trend
through the end of the Term. Hospital and GKF acknowledge that the methodology
set forth in this Section 20.2.2 constitutes a reasonable method to calculate
GKF's damages resulting from an Event of Default under the circumstances
existing as of the date of this Agreement. GKF shall use reasonable commercial
efforts to mitigate its damages by attempting to sell or lease the Equipment;
provided that (i) GKF shall not be obligated to give preference to the sale or
lease of the Equipment over the sale, lease or other disposition of similar
equipment or improvements owned or leased by GKF, (ii) GKF shall have no
obligation to sell or lease any improvements made by GKF to the Site, and (iii)
GKF's inability in good faith to mitigate damages shall not limit or otherwise
affect the foregoing methodology for determining damages as set forth in this
Section.
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20.2.3 Sell, dispose of, hold, use or lease the Equipment
or any improvements made by GKF to the Site, 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 or improvements over the
sale, lease or other disposition of similar Equipment or improvements owned or
leased by GKF). Notwithstanding the foregoing, Hospital may elect in its sole
discretion to purchase GKF's Site improvements by giving GKF notice of
Hospital's election within five (5) days following the receipt by Hospital of
GKF's written notice of termination. The purchase price for such Site
improvements shall be equal to the TI Purchase Price (as defined and calculated
in accordance with Section 18.3 above). Within five (5) days following GKF's
receipt of Hospital's election to purchase the Site improvements, GKF shall
inform Hospital of the amount of the TI Purchase Price and shall provide
Hospital upon request with supporting documentation therefor. Payment of the TI
Purchase Price shall be made by Hospital to GKF within five (5) days following
GKF's determination of the TI Purchase Price. The TI Purchase Price shall be in
addition to any other damages, rights or remedies which GKF may be entitled to
as a result of such termination.
20.2.4 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 or improvements, to enforce the terms hereof or
to recover damages for the breach hereof or to cancel this Agreement as to the
Equipment.
In addition to the foregoing remedies, Hospital shall be liable to GKF for all
costs and expenses incurred by GKF as a result of the Event of Default or the
exercise of GKF's remedies (other than attorneys' fees).
20.3 Upon termination of this Agreement or the exercise of any
other rights or remedies under this Agreement or available under applicable law
following an Event of Default, Hospital shall, without further request or
demand, pay to GKF all Lease Payments and other sums owing under this Agreement.
Hospital shall in any event remain fully liable for all damages as may be
provided by law and for all costs and expenses incurred by GKF on account of
such default, including but not limited to, all court costs. 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.
21. Events of Default by GKF and Remedies.
21.1 The occurrence of any one of the following shall constitute
an Event of Default hereunder:
21.1.1 GKF shall fail to observe or perform any of its
covenants, duties or obligations arising under this Agreement and such failure
shall continue for a
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period of thirty (30) days after written notice thereof is given by Hospital to
GKF; however, if GKF cures the default within the applicable thirty (30) day
period or if the default reasonably requires more than thirty (30) days to cure,
GKF commences to cure the default during the initial thirty (30) day period and
GKF diligently completes the cure as soon as reasonably possible following the
end of the thirty (30) day period, such default shall not constitute an Event of
Default.
21.1.2 GKF ceases doing business as a going concern, makes
an assignment for the benefit of creditors, admits in writing its inability to
pay its debts as they become due, files a voluntary petition in bankruptcy, is
adjudicated a bankrupt or an insolvent, files a petition seeking for itself any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar arrangement under any present or future statute, law or regulation or
files an answer admitting the material allegations of a petition filed against
it in any such proceeding, consents to or acquiesces in the appointment of a
trustee, receiver, or liquidator of it or of all or any substantial part of its
assets or properties, or it or its shareholders shall take any action looking to
its dissolution or liquidation.
21.1.3 Within sixty (60) days after the commencement of
any proceedings against GKF seeking reorganization, arrangement, readjustment,
liquidation, dissolution or similar relief under any present or future statute,
law or regulation, such proceedings shall not have been dismissed, or if within
thirty (30) days after the appointment without GKF's consent or acquiescence of
any trustee, receiver or liquidator of it or of all or any substantial part of
its assets and properties, such appointment shall not be vacated.
21.2 Upon the occurrence of an Event of Default involving GKF,
Hospital may at its option do any or all of the following:
21.2.1 By written notice to GKF, immediately terminate
this Agreement as to the Equipment and, in such event, GKF shall remove the
Equipment, the Cobalt and any improvements made by GKF to the Site, 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, the Cobalt and such improvements with all due care and store the same
at GKF's sole cost and expense.
21.2.2 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.
21.3 GKF shall in any event remain fully liable for reasonable
damages as provided by law and for all costs and expenses incurred by GKF on
account of such default, including but not limited to, all court costs (other
than attorneys' fees). However, GKF shall not in any manner be or become liable
to Hospital for any consequential or incidental damages that may be suffered by
Hospital which arise out of or result from the
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Event of Default. The rights and remedies afforded Hospital under this Agreement
shall be deemed cumulative to include the purchase option contained in section
18.3 and not exclusive and shall be in addition to any other rights or remedies
to Hospital provided by law or in equity.
21.4 Notwithstanding the occurrence of an Event of Default with
respect to GKF (including any claim which would otherwise be in the nature of a
set-off), Hospital shall fully perform and pay its obligations hereunder
(including payment of all Lease Payments) without set-off or defense of any
kind. Upon termination of this Agreement or the exercise of any other rights or
remedies under this Agreement or applicable law following an Event of Default,
Hospital shall, without further request or demand, pay to GKF all Lease Payments
and other sums owing under this Agreement when and as due.
22. Removal of Equipment. Upon expiration of the Term, GKF, at its cost
and expense, shall remove the Equipment from the Site not more than ninety (90)
days following the last day of the Term; provided that all of GKF's right, title
and interest in and to the improvements made by GKF to the Site pursuant to
Section 6 above shall thereupon transfer to Hospital.
23. Insurance.
23.1 During 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 shall be for an amount not less than the replacement cost of the
Equipment. The all risk property and casualty insurance policy maintained by GKF
shall be evidenced by a certificate of insurance or other reasonable
documentation which shall be delivered by GKF to Hospital upon request following
the commencement of this Agreement and as of each annual renewal of such policy
during the Term.
23.2 During the Term, Hospital shall, at its cost and expense,
purchase and maintain in effect professional liability insurance covering the
use or operation of the Equipment by Hospital's physicians. The professional
liability insurance policies shall provide coverage in amounts not less than One
Million Dollars ($1,000,000.00) per occurrence and Three Million Dollars
($3,000,000.00) annual aggregate. 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.
23.3 During the construction of the Site and prior to the First
Procedure Date, GKF, at its cost and expense, shall purchase and maintain a
general liability insurance policy which conforms with the coverage amounts and
other requirements
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described in Section 23.2 above and which names Hospital as an additional
insured party. The policy to be maintained by GKF hereunder shall be evidenced
by a certificate of insurance or other reasonable documentation which shall be
delivered by GKF to Hospital prior to the commencement of any construction at
the Site.
23.4 During the Term, Hospital shall purchase and maintain all
workers compensation insurance to the maximum extent required by applicable law.
24. [Intentionally omitted.]
25. Miscellaneous.
25.1 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns. Except as provided under Section 14, neither party shall assign this
Agreement nor any of its respective rights hereunder and Hospital shall not
sublease the Equipment without the prior written consent of the other party,
which consent shall not be unreasonably withheld. An assignment or sublease
shall not relieve the assigning party or sublessor of any liability for
performance of this Agreement during the remainder of the Term. Any purported
assignment or sublease made without the other party's prior written consent
shall be null, void and of no force or effect.
25.2 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.
25.3 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.
25.4 Attorney's Fees and Costs. In the event of any action,
arbitration or other proceedings between or among the parties hereto with
respect to this Agreement, each party shall pay for their own attorneys' fees
and related costs and expenses, irrespective of which party is deemed to be the
prevailing party.
25.5 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
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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 all of the parties hereto.
25.6 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.
25.7 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.
25.8 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.
25.9 Governing Law. This Agreement shall be interpreted and
enforced in accordance with the internal laws, and not the law of conflicts, of
the State of Arkansas applicable to agreements made and to be performed in that
State.
25.10 Exhibits. All exhibits attached hereto and referred to in
this Agreement are hereby incorporated by reference herein as though fully set
forth at length.
25.11 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.
25.12 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.
25.13 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
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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.
25.14 Notices. All notices, requests, demands or 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 next business day air
courier service (e.g., Federal Express or other similar service) (in which case
such notice shall be deemed given on the business day following deposit with the
air courier service), or (c) by United States mail, first class, postage
prepaid, registered or certified, return receipt requested (in which case such
notice shall be deemed given on the third (3rd) day following the date of
mailing), and properly addressed as follows:
To GKF: Xxxxx X. Xxxxxx
Chief Executive Officer
GK Financing, LLC
Four Xxxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
To Hospital: University of Arkansas Hospital
0000 X. Xxxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Attn: Chief Executive Officer
A party to this Agreement may change his, her or its address for purposes of
this Section by giving written notice to the other parties in the manner
specified herein.
25.15 Special Provisions Respecting Medicare and Medicaid
Patients
25.15.1 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.
25.15.2 For the purpose of compliance with Section
1861(v)(1)(I) of the Social Security Act, as amended, and any regulations
promulgated pursuant thereto, both parties agree to comply with the following
statutory requirements (a) Until the expiration of four (4) years after the
termination of this Agreement, both parties shall make available, upon written
request to the Secretary of Health and Human Services or, upon request, to the
Comptroller General of the United States, or any of their
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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.
25.16 Force Majeure. Failure to perform by either party will be
excused in the event of any delay or inability to perform its duties under this
Agreement directly or indirectly caused by conditions beyond its reasonable
control, including, without limitation, fires, floods, earthquakes, snow, ice,
disasters, acts of God, accidents, riots, wars, operation of law, strikes,
governmental action or regulations, shortages of labor, fuel, power, materials,
manufacturer delays or transportation problems. 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.
25.17 Independent Contractor Status. With respect to the
performance of the duties and obligations arising under this Agreement, nothing
in this Agreement is intended nor shall be construed to create a partnership, an
employer/employee relationship, a joint venture relationship, or a lease or
landlord/tenant relationship between GKF and Hospital.
[SIGNATURES CONTINUED ON NEXT PAGE]
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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,
a California limited liability company
By: /s/ Xxxxx Xxxxxx
------------------------------------
Xxxxx Xxxxxx,
Chief Executive Officer
"HOSPITAL" BOARD OF TRUSTEES OF THE
UNIVERSITY OF ARKANSAS ON BEHALF
OF THE UNIVERSITY OF ARKANSAS
FOR MEDICAL SCIENCES
By: /s/ Xxxxx X. Xxxx
------------------------------------
Name: Xxxxx X. Xxxx
Title: Chancellor
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EXHIBIT 8.1
HOSPITAL'S *
Registered nurse *
Recovery room *
Hospital daily charge *
Hospital, including ventilator daily charge *
MRI procedure *
CT procedure *
Angiography procedure *
Physicist *
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