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Exhibit 10.30
LEASE AGREEMENT FOR A GAMMA KNIFE UNIT
THIS AGREEMENT FOR A GAMMA KNIFE UNIT (hereinafter referred to as the
"Agreement"), dated December 11, 1996, is entered into between GK FINANCING,
LLC, a California Limited Liability Company (hereinafter referred to as "GKF"),
and THE COMMUNITY HOSPITAL GROUP, INC., DBA JFK MEDICAL CENTER, a New Jersey
corporation (hereinafter referred to as "JFK").
R E C I T A L S
WHEREAS, JFK wants to lease a Leksell Stereotactic Gamma Unit, Model
23004, Type B, manufactured by Elekta Instruments, Inc. (hereinafter referred to
as the "Equipment");
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 JFK pursuant to the terms and conditions of this Agreement.
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 JFK and Elekta. JFK 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 1 and incorporated
herein by this reference. JFK agrees to fulfill all of its obligations under the
LGK Agreement and acknowledges that GKF is a third party beneficiary of the LGK
Agreement. JFK shall fully indemnify and hold harmless GKF in the event that GKF
suffers any loss, damage, claim or expense (including reasonable attorneys'
fees) solely as a result of JFK's breach of the LGK Agreement. Subject to the
consent of Elekta, GKF hereby sublicenses the LGK Software (as said term is
defined in the LGK Agreement) to JFK.
2. Certificate of Need (CON). It is understood that JFK requires a CON
to install and operate the Equipment. JFK will work diligently toward receipt of
a CON for the Equipment and the provision of services related thereto. This
Agreement shall become null and void in the event JFK does not receive a CON for
the Equipment and the provision of services related thereto after using its best
efforts to do so.
3. Delivery of the Equipment and Site Preparation. GKF shall arrange in
coordination with Elekta to have the Equipment delivered to JFK at 65 James
Street, Edison, New Jersey (the "Site") on a date specified in a separate
written agreement of the parties. GKF shall exert its best efforts to expedite
the delivery of the Equipment in accordance with the terms and conditions of the
Purchase Agreement for the Equipment by and between GKF and Elekta, a copy of
which is attached hereto as Exhibit 2. Unless otherwise agreed upon in writing
by GKF
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and JFK, the Equipment to be delivered to JFK on the delivery date shall be the
Leksell Gamma Knife unit, Model 23004, Type B, described in the LGK Agreement.
Notwithstanding the foregoing, it is understood and agreed that GKF has made no
representations and warranties to JFK concerning actual delivery date or
schedule for the Equipment at the Site.
JFK shall provide a safe and properly prepared Site, at its own expense,
in accordance with all of Elekta's technical instruments (if any), written
specifications (if any) and Site Planning Criteria (which Site Planning Criteria
are attached as Exhibit B to the LGK Agreement (Exhibit 1 attached hereto) and
incorporated herein by this reference). Any written specifications not attached
as an exhibit to this Agreement shall be delivered to JFK in a timely fashion in
order to permit JFK to take such specifications into account in the planning for
the preparation of the Site. The location of the Site shall be acceptable to
GKF. JFK shall prepare, at its sole cost and expense, the requisite plans and
specifications for the Site and shall submit them to Elekta and GKF for
approval, which approval shall not be unreasonably withheld, conditioned or
delayed. JFK shall obtain, in a timely manner, 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, all as more fully set forth in Article 2.1
of the LGK Agreement.
4. Term of the Agreement. The initial term of this Agreement (the
"Term") shall commence as of the date hereof and, unless earlier terminated in
accordance with the provisions of this Agreement or extended pursuant to
Paragraphs 15 or 18 below, shall continue for a period of ten (10) years
following the date of the performance of the first clinical Gamma Knife
procedure at the Site (the "First Procedure Date"). JFK shall become liable to
GKF for the payments referred to in Paragraph 7 hereinbelow upon the First
Procedure Date.
5. Costs of Site Preparation; Costs of Installation. JFK'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. JFK 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 the
shielding, properly aligning the Site, and installing all wiring. JFK shall be
financially responsible for the positioning of the Equipment on its foundation
at the Site.
JFK shall, at its own expense and risk, select, purchase, install and
maintain all radiation monitoring equipment and devices, safety circuits and
radiation warning signs required at the Site in connection with the use and
operation of the Equipment, all in accordance with applicable federal, state and
local laws, rules and regulations.
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Upon completion of the Site, JFK shall warrant that the Site will be
safe and suitable for the use of the Equipment. JFK shall fully indemnify and
hold harmless GKF (and its members and their respective officers, directors,
agents, employees and affiliates) for any loss, liability, damage, action,
claim, cost or expense (including reasonable attorneys' fees) which GKF may
suffer or incur which is caused solely by JFK's preparation of the Site and the
positioning of the Equipment not having been done in compliance with Elekta's
Site Planning Criteria.
Except to extent attributable to JFK's compliance with Elekta's Site
Planning Criteria, JFK 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 JFK with respect to the Site; (c) negligent or
intentional acts of omission or commission by JFK or any of its officers, agents
physicians or employees in connection with the Site preparation; or (d)
negligent operation of the Equipment at the Site. However, the review and
approval of Site plans, specifications and/or positioning plans by GKF and/or
Elekta shall not relieve JFK from 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.
JFK warrants that it shall utilize its best efforts to fulfill on an
expeditious basis its obligations under this Paragraph 5. JFK further warrants
that it shall on a regular basis keep GKF informed of JFK's progress in
fulfilling its obligations pursuant to this Paragraph 5. Should JFK not have all
Site preparations completed so that the Site is acceptable for positioning and
installation of the Equipment by the scheduled delivery date specified in a
separate written agreement plus a sixty (60) day grace period (the "late
completion date"), JFK shall reimburse GKF upon written request for GKF's actual
financing costs (which financing costs shall not exceed interest at the prime
interest rate of Citibank, N.A. plus 2%) based upon GKF's cost of the Equipment
for the period between the late completion date and the date that the Site is
completed in order to allow for the positioning and installation of the
Equipment. As of the date of this Agreement, GKF's estimated financing costs
based upon the costs of the Equipment is approximately * per month, which amount
may be subject to increase or decrease based upon subsequent changes in the
prime interest rate.
If the Equipment is not delivered by the scheduled delivery date
specified in a separate written agreement plus a sixty (60) day grace period
(other than by reasons of force majeure as provided in Paragraph 27 below) (the
"late delivery date"), GKF shall reimburse JFK upon written request for JFK's
actual financing costs (which financing costs shall not exceed interest at the
prime interest rate of Citibank, N.A. plus 2%) based upon JFK's direct costs
incurred to prepare and construct the Site for the Equipment for the period
between the late delivery date and the date the Equipment is actually delivered
to the Site.
6. [Intentionally Omitted]
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7. Per Procedure Payments. Except as set forth in this Paragraph 7, JFK
shall pay to GKF a per procedure payment of * for the use of the Equipment. A
procedure shall be defined as a single patient treatment session that may
include one or more isocenters during that session. JFK 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. JFK shall pay the procedures invoiced within forty-five (45) days
after being invoiced by GKF. Interest shall begin to accrue at the rate of
1-1/2% per month on all invoices remaining unpaid after sixty (60) days. JFK
acknowledges that its current Medicare reimbursement rate for DRG 1 is * . If at
any time the Medicare reimbursement rate paid to JFK for DRG 1 shall be less
than * , JFK and GKF shall renegotiate the per procedure payment rate set forth
hereinabove to reflect JFK's reduced Medicare reimbursement rate for DRG 1. As
consideration for GKF's renegotiation of the per procedure payment rate, at that
time, JFK and GKF shall review and adjust the technical fee amounts then being
charged or billed by JFK for all Gamma Knife procedures (i.e., procedures
performed for Medicare patients and non-Medicare patients).
As a means to permit JFK to perform charity care for persons who require
Gamma Knife procedures, who are not covered by Medicare, Medicaid or private
insurance programs (whether indemnity, preferred provider, health maintenance
organization, etc.) and who do not have the means to pay for such procedures
based upon state adopted standards of indigency, GKF shall waive the per
procedure payment described in this Paragraph 7 for * Gamma Knife procedure for
each * Gamma Knife procedures performed under this Agreement by JFK for which a
per procedure payment is made to GKF in the manner described herein. JFK shall
be solely responsible (and GKF shall not in any manner be or become responsible)
to determine (a) whether any person described herein requires a Gamma Knife
procedure, (b) who shall receive a Gamma Knife procedure hereunder if more than
one (1) person described herein requires a Gamma Knife procedure, and (c)
whether any person meets the standards of indigency. JFK shall provide
reasonable written documentation evidencing satisfaction of the conditions set
forth herein to GKF at or prior to the time of payment in order for GKF to waive
the per procedure payment for charity care purposes. Except as set forth herein,
JFK shall pay to GKF the per procedure payment set forth in this Paragraph 7 for
each Gamma Knife procedure regardless of the ability of the patient to pay for
such services or the amount of reimbursement or payment received by JFK for such
procedure.
8. Use of the Equipment. The Equipment may be used by JFK only at the
Site and shall not be removed therefrom. JFK 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 or delayed. No assignment or
sublease shall relieve JFK of any of its obligations hereunder. JFK shall not
use nor permit the Equipment to be used in any manner nor for any purpose for
which, in the opinion of Elekta or GKF, the Equipment is not designed or
reasonably suitable. JFK shall not permit any liens, whether voluntary or
involuntary, to attach to the Equipment, without the prior written consent of
GKF. JFK 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.
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JFK shall, at GKF's request, affix to the Equipment tags, decals, or plates
furnished by GKF, indicating GKF's ownership of the Equipment.
9. Additional Covenants of JFK. In addition to the other covenants made
by JFK, JFK 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.
(b) Protect and hold GKF harmless from and against all medical
and financial responsibility for the diagnosis, treatment and care of JFK's
patients.
(c) Fully comply with all of its obligations under the LGK
Agreement.
(d) Fully indemnify, hold harmless and/or reimburse GKF on a
prompt basis as follows:
(i) From and against any and all damages to the Equipment
(including any damages arising out of or related to violations by JFK, its
agents, officers, physicians, employees, successors and assigns of the Service
Agreement described in Paragraph 16 hereof), together with reasonable attorneys
fees incurred by GKF to establish or enforce its right to indemnity hereunder,
to the extent such damages are caused by the negligent or wrongful acts or
omissions of JFK, its agents, officers, physicians, employees, successors and
assigns. In the event the Equipment is destroyed or rendered unusable, this
indemnification shall extend up to (but not exceed) the full replacement value
of the Equipment at the time of its destruction less salvage value, if any.
(ii) From and against any and all claims, liabilities,
obligations, losses, damages, injuries, penalties, actions, costs and expenses
(including reasonable attorneys' fees) for all events and/or occurrences
described in Article 7.3 of the LGK Agreement to the same extent that JFK agrees
to indemnify Elekta thereunder.
The indemnification obligations of JFK under this Paragraph 9(d) shall exclude
any claims or damages arising out of or related to GKF's breach of its
obligations under the Purchase Agreement, Elekta's breach of its obligations
under the LGK Agreement, or any defects in the Site Planning Criteria.
(e) Provide reasonable and customary marketing materials (i.e.
brochures, announcements, etc.), marketing support, and an administrative and
physician (i.e. seminars by neurosurgeons and radiation therapists to referring
physicians, etc.) commitment to this clinical service. Not less than ninety (90)
days prior to the First Procedure Date and the commencement of each succeeding
twelve (12) month period during the Term, JFK shall submit for approval to GKF a
proposed marketing budget and plan for the clinical service to be supported by
the Equipment for the succeeding twelve (12) month period of the Term. GKF shall
not
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unreasonably withhold, delay or condition its approval of the marketing
budget and plan, and the same shall be deemed approved by GKF unless, within
thirty (30) days after receipt thereof, GKF notifies JFK in writing of its
exceptions thereto. In such event, the parties shall promptly confer to resolve
such exceptions and any other disagreements related to the marketing budget and
plan. Once approved, the marketing budget and plan shall be implemented by JFK
in accordance with its terms. As funds are expended by JFK in accordance with
the marketing budget and plan, JFK shall submit invoices (together with
documentary evidence supporting the invoices) for its expenditures and, promptly
following the receipt of such invoices, GKF shall reimburse JFK for * of the
expenditures up to the limit of * per year.
10. 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 JFK that, upon delivery of the
Equipment to JFK, GKF shall use its best faith efforts to require that Elekta
meets its contractual obligations to GKF and to put the Equipment, as soon as
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.
(c) GKF represents and warrants that throughout the Term of this
Agreement, JFK shall 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 under Elekta's 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 16 hereof; and (ii) any other service or other
agreements required to fulfill GKF's obligations to JFK pursuant to this
Paragraph 10(d). GKF represents and warrants that during the entire Term of this
Agreement and any subsequent extensions thereof 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 JFK with respect to the Equipment be
greater or more extensive than Elekta's warranty obligations to GKF with respect
to the Equipment.
(e) GKF shall fully indemnify and hold harmless JFK in the event
that JFK suffers any loss, damage, claim or expense (including reasonable
attorneys' fees) solely as a result of GKF's breach of the Purchase Agreement or
GKF's failure to enforce the Service
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Agreement (but only to the extent that the primary obligation to enforce the
Service Agreement is not assigned by GKF to JFK pursuant to Paragraph 16 below).
11. Ownership/Title. It is expressly understood that JFK shall acquire
no right, title or interest in or to the Equipment, other than the right to the
possession and use of the same in accordance with the terms of this Agreement.
GKF may at its sole discretion finance the Equipment. Financing may be
in the form of an installment loan, a capitalized lease or other commercially
available debt or financing instrument. 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
capitalized lease, title shall vest with the lessor until GKF exercises its
buy-out option. 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. JFK's interest under this Agreement shall be subject to the interests
of the Lender.
GKF and JFK acknowledge that GKF has not finalized the principal terms
and conditions of its financing agreement, lease or loan (collectively a
"financing agreement") with the Lender in connection with the Equipment subject
to this Agreement. GKF shall notify JFK when it receives a firm written
commitment from the Lender setting forth the principal terms and conditions of
the financing agreement for the Equipment subject to this Agreement. If the firm
written commitment received from the Lender contains a cross-default provision
as one of the principal terms and conditions of the financing agreement (a) GKF
shall so notify JFK as a part of the written notice given to JFK in accordance
with the preceding sentence, and (b) during the thirty (30) day period after
such written notice is given to JFK, JFK shall have the right to terminate this
Agreement by giving a written notice of termination to GKF. If JFK exercises its
right of termination, this Agreement shall terminate as of the end of such
thirty (30) day period, all parties shall thereafter be excused from the
performance of any obligations or duties hereunder, and neither GKF or JFK shall
have any recourse (whether legal, equitable or otherwise) against the other for
any claims in any manner arising out of or related to such termination. If JFK
does not exercise its right of termination during such thirty (30) day period,
this Agreement shall continue in full force and effect in accordance with the
provisions hereof.
GKF shall instruct the Lender to notify JFK within ten (10) days of any
payment defaults by GKF under the financing agreement for the Equipment
installed at the Site (a "Payment Default"). In the event of a Payment Default,
if GKF has not provided reasonably satisfactory evidence to JFK that it has
cured the Payment Default within twenty (20) days after JFK's receipt of the
default notice from the Lender, JFK may, in its sole discretion, cure the
default on behalf of GKF by payment of the amounts due directly to the Lender
and, in such event, JFK may offset subsequent payments owing to GKF pursuant to
Paragraph 7 above (i.e., the per procedure payments) against the amount paid by
JFK to the Lender until JFK is reimbursed in full. Once it is reimbursed in
full, JFK shall again make all payments to GKF when and as required pursuant to
Paragraph 7. above.
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12. Cost of Use of the Equipment. Except as is otherwise provided
herein, JFK 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. JFK shall be fully responsible and liable for all acts and/or
omissions of such professional, technical and support personnel.
13. Taxes. GKF shall pay any personal property 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 those taxes, if any, pertaining to the gross income or gross receipts of
JFK.
14. Maintenance and Inspections. Subject to the assignment of its rights
under the Service Agreement to JFK pursuant to Paragraph 16 below and the
responsibilities of Elekta thereunder, 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. A maintenance schedule for
the Equipment is attached hereto as Exhibit 3. JFK shall be liable to GKF for
all damage to the Equipment caused by the misuse, negligence, improper use or
other intentional or negligent acts or omissions of JFK's employees, officers,
agents, and physicians. JFK 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 that is not covered by the Service Agreement described in Paragraph 16
below.
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 JFK's operations. In the event the
Equipment is improperly used by JFK or its employees, agents, officers, and
physicians, GKF may service or repair the same as needed and such expense shall
be paid by JFK, unless the repair is covered by the Service Agreement described
in Paragraph 16 hereof.
Any work so performed by or in the service or maintenance of the
Equipment as a result of JFK's failure or neglect to do so shall not deprive GKF
of any of its rights, remedies or actions against JFK for damages caused by such
failure or neglect.
15. Equipment Modifications/Additions/Upgrades. The necessity and
financial responsibility for modifications, additions or upgrades to the
Equipment, including the reloading of the Cobalt-60 source, shall be mutually
agreed upon by GKF and JFK. In the event GKF and JFK agree to reload the
Cobalt-60 source (i.e., in approximately the eighth (8th) year of the Term), GKF
shall pay the costs associated therewith and, notwithstanding any provisions to
the contrary herein, the initial Term shall be extended for an additional * .
16. Service Agreement. GKF warrants that, simultaneously with the
execution of this Agreement, it shall enter into a Service Agreement with Elekta
(the "Service Agreement"), a copy of which is attached as Exhibit F to the LGK
Agreement (attached hereto as Exhibit 1) and
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incorporated herein by this reference. Following the execution thereof and
subject to the consent of Elekta, GKF shall assign to JFK in writing all of its
rights arising under the Service Agreement, including the right to enforce the
provisions thereof directly against Elekta. By virtue of said assignment, GKF
shall be relieved of all responsibility and shall not in any manner be or become
liable for the performance of the Service Agreement by Elekta or any other
person. Notwithstanding the assignment, GKF shall continue to use its best
efforts to cause Elekta to perform its obligations under the Service Agreement
in a timely manner.
17. Termination. If, after the initial twenty-four (24) month following
the First Procedure Date and each subsequent twelve (12) month period
thereafter, as soon as reasonably possible following a written request therefor,
JFK has not provided GKF with a reasonable economic justification for GKF to
continue to provide the Equipment pursuant to this Agreement (which reasonable
economic justification may include, but not be limited to, JFK's utilization of
the Equipment, GKF's acquisition costs, financing costs, and service and
maintenance costs for the Equipment, and a reasonable return on GKF's
investment), GKF shall have the option to terminate this Agreement by giving a
written notice of termination to JFK not less than ninety (90) days prior to the
termination date designated in GKF's written notice. If JFK objects to GKF's
notice of termination, JFK shall give written notice of its objections to GKF
not less than sixty (60) days prior to GKF's designated termination date. In
such event, the parties shall confer to attempt to resolve JFK's objections. If
the parties cannot resolve the objections, the matter shall be submitted to
arbitration in the manner described in Paragraph 29(d) below. Notwithstanding
the foregoing, in the event that GKF elects to terminate this Agreement in the
manner provided herein, JFK shall have the option to purchase the Equipment from
GKF on the termination date on the same terms as described in Paragraph
18(a)(ii) below by giving written notice to GKF of the exercise of its option
not less than thirty (30) days prior to the designated termination date. The
purchase price for the Equipment shall be payable by JFK to GKF in cash on the
designated termination date.
18. Options to Extend Agreement.
(a) JFK shall have the option at the end of the initial Term to:
(i) Renegotiate this Agreement for a specified renewal
term taking into account the use (e.g., number of procedures, etc.) of the
Equipment at the Site during the initial Term.
(ii) Purchase the Equipment from GKF for cash (or other
immediately available funds) at its then * , but excluding any value
attributable to the Site, as determined by a qualified independent appraiser or
appraisal company agreed upon by GKF and JFK. The qualified independent
appraiser or appraisal company (or its principals or employees) shall be a
member of a nationally recognized appraisal society or association of business
appraisers and have at least five (5) years experience in the appraisal of Gamma
Knife equipment and other similar high technology medical equipment. If GKF and
JFK are unable to agree upon the
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selection of an independent appraiser, each shall name two (2) qualified
independent appraisers (i.e., a total four (4) named appraisers), the name of
each designated independent appraiser shall be written in black ink on a blank
sheet of white paper (i.e., one name on each sheet of paper), each sheet of
paper shall be placed in an identical blank white envelope and sealed (i.e.,
four (4) separate envelopes) and the then serving Chief Executive Officer of JFK
shall randomly pick one of the envelopes in the presence of a representative of
GKF. The name of the independent appraiser in the envelope picked by the Chief
Executive Officer shall serve for purposes hereof.
(iii) Terminate this Agreement. If JFK terminates this
Agreement at the end of the initial term, GKF shall remove the Equipment from
the Site not more than ninety (90) days after the expiration of the initial
Term.
JFK shall exercise one (1) of the three (3) options referred to above, by
mailing an irrevocable written notice thereof to GKF at the address provided
pursuant to Paragraph 23 below by registered mail, postmarked 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 JFK elects to exercise its option and
states which of the three (3) options referred to above JFK is exercising.
19. No Warranties by GKF. JFK warrants that as of the First
Procedure 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 JFK's stated purposes. GKF
SUPPLIES THE EQUIPMENT "AS IS". 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, 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 JFK, shall be borne by JFK. JFK agrees to look
solely to the Elekta or to the other suppliers of the Equipment (and its
software) for any and all warranty claims. To the extent Elekta makes any
warranties with respect to the Equipment for the benefit of GKF which are not
also made for the benefit of, or are not directly enforceable by, JFK under the
LGK Agreement, GKF shall assign to JFK in writing all of its rights arising
under said warranties, including the right to enforce the provisions thereof
directly against Elekta. Assignment of GKF's warranty rights shall be subject to
the consent of Elekta. By virtue of said assignment, GKF shall be relieved of
all responsibility and shall not in any manner be or become liable for the
performance of the warranties by Elekta or any other person. Notwithstanding the
assignment, GKF shall continue to use its best efforts to cause Elekta to
perform its warranty obligations in a timely manner. 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 suffered or
incurred by JFK resulting from the installation, operation or use of the
Equipment or otherwise. JFK expressly waives any right to hold GKF
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liable hereunder for any claims, demands and liabilities arising out of or in
connection with the design, manufacture, possession or operation of the
Equipment.
20. Events of Default by JFK and Remedies. The occurrence of any one of
the following shall constitute an Event of Default hereunder:
(a) JFK fails to pay any installment of semi-monthly procedure
payments when due pursuant to Paragraph 7. above and such default continues for
a period of thirty (30) days after written notice thereof from GKF or its
assignee is given to JFK;
(b) JFK attempts to remove, sell, transfer, encumber, sublet or
part with possession of the Equipment or any items thereof, except as expressly
permitted herein;
(c) JFK shall fail to observe or perform any other material
obligations required to be observed or performed by JFK hereunder and such
failure shall continue uncured for thirty (30) days after written notice thereof
to JFK by GKF; however, if a breach or failure reasonably requires more than
thirty (30) days to cure, then an Event of Default shall not occur if JFK
commenced to cure the breach or failure during the initial thirty (30) day
period and diligently pursues the cure to completion as soon as reasonably
possible following the end of the initial thirty (30) day period;
(d) JFK 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; or
(e) Within sixty (60) days after the commencement of any
proceedings against JFK 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 JFK'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 JFK, terminate this Agreement as to the
Equipment, wherever situated, and for such purposes, enter upon the Site without
liability for so doing or GKF may cause JFK and JFK hereby agrees to return the
Equipment to GKF at JFK's sole cost and expense; (ii) recover from JFK 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 to be
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made by JFK to GKF through the end of the Term discounted at the rate of nine
percent (9%), which payment shall become immediately due and payable and which
unpaid estimated future lease payments shall be based on the prior twelve (12)
months lease payments with an annual five (5%) percent increase; or (iii) sell,
dispose of, hold, use or lease the Equipment, 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 then owned or leased by GKF). In any event, JFK shall,
without further demand, pay to GKF an amount equal to all sums due and payable
under Paragraph 7 above for all periods up to and including the date on which
GKF had declared this Agreement to be in default.
In the event that GKF elects to terminate this Agreement in the manner
provided herein because of an Event of Default, JFK shall have the option to
purchase the Equipment from GKF on the termination date by giving written notice
to GKF of the exercise of the option not more than thirty (30) days after the
date of the occurrence of the Event of Default. In the event JFK exercises the
option during the applicable period, the purchase price to be paid by JFK to GKF
for the Equipment shall be an amount equal to the * of the Equipment determined
in the same manner as described in Paragraph 18(a)(ii) above as if the purchase
occurred on the expiration of the Term * . The purchase price for the Equipment
shall be payable by JFK to GKF in cash not more than thirty (30) days following
the exercise of the option. The payment of the purchase price by JFK to GKF
under this paragraph shall be in addition to, and not supplant or replace, any
damages or other amounts for which JFK may be liable to GKF under this Agreement
as a result of the Event of Default, including, without limitation, the damages
described in subpart (ii) of the preceding paragraph.
In the event JFK shall have paid to GKF the liquidated damages amount
referred to in subpart (ii) of the second preceding paragraph, GKF shall pay to
JFK promptly after receipt thereof, all rentals or proceeds received from the
reletting or sale of the Equipment during the balance of the initial Term (after
deduction of all expenses incurred by GKF, said amount never to exceed the
amount of the liquidated damages paid by JFK); however, GKF shall not be
required to pay to JFK any amount received by GKF as a result of the exercise of
the option to purchase pursuant to the immediately preceding paragraph. GKF
shall use its reasonable efforts to sell or relet the Equipment; however, GKF
shall have no obligation to sell or relet the Equipment. JFK 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 and reasonable attorneys' fees. JFK 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.
21. Events of Default by GKF and Remedies. The occurrence of any one of
the following shall constitute an Event of Default hereunder:
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(a) GKF shall fail to observe or perform any of its material
obligations required to be observed or performed by GKF hereunder and such
failure shall continue uncured for thirty (30) days after written notice thereof
by JFK to GKF; however, if a breach or failure reasonably requires more than
thirty (30) days to cure, then an Event of Default shall not occur if GKF
commenced to cure the breach or failure during the initial thirty (30) day
period and diligently pursues the cure to completion as soon as reasonably
possible following the end of the initial thirty (30) day period;
(b) Lender declares GKF in default under any financing agreements
entered into by GKF to finance the acquisition of the Equipment (subject to the
lapse of all applicable cure periods without the remedy of the default by GKF);
(c) 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; or
(d) 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.
Upon the occurrence of an Event of Default, JFK may at its option do any or all
of the following: (i) by notice to GKF, terminate this Agreement as to the
Equipment and, in such event, GKF shall remove the Equipment at GKF's sole cost
and expense or, in the absence of removal by GKF within a reasonable period of
time after a written request therefor, for JFK to remove the Equipment with all
due care and store the Equipment at GKF's sole cost and expense; or (ii) to
recover from GKF such damages as may be realized by JFK from the loss of the
bargain. 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 and reasonable
attorneys' fees. However, GKF shall not in any manner be or become liable to JFK
for any consequential damages arising out of or resulting from the Event of
Default. 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.
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Notwithstanding the foregoing, in the event that GKF elects to terminate
this Agreement in the manner provided herein as a result of an Event of Default,
JFK shall have the option to purchase the Equipment from GKF on the same terms
as described in Paragraph 18(a)(ii) above by giving written notice to GKF of the
exercise of its option not more than thirty (30) days after the date of the
occurrence of the Event of Default. The purchase price for the Equipment shall
be payable by JFK to GKF in cash not more than thirty (30) days following the
exercise of the option.
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22. Insurance.
(a) During the Term of this Agreement (and any renewal 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. JFK shall be named as an additional insured party on the all risk and
hazard insurance policy to the extent of its interest in the Equipment arising
under this Agreement. The all risk and hazard insurance policy maintained by GKF
shall be evidenced by a certificate of insurance or other reasonable
documentation which shall be delivered by GKF to JFK upon request following the
commencement of this Agreement and as of each annual renewal of such policy
during the Term.
(b) During the Term of this Agreement, JFK shall, at its own cost
and expense, keep in effect public liability and professional liability
insurance policies concerning the operation of the Equipment by JFK. Said
policies shall be in the amounts of not less than $1,000,000 per occurrence and
$5,000,000 annual aggregate. GKF shall be named as additional insured party on
the insurance policies to be maintained hereunder by JFK. The policies to be
maintained by JFK hereunder shall be evidenced by a certificate of insurance or
other reasonable documentation which shall be delivered by JFK to GKF no later
than the First Procedure Date and as of each annual renewal of such policies
during the Term. As an alternative to providing the insurance policies described
herein, JFK may protect against the risks covered by public liability and
professional liability insurance policies through a reasonably funded
self-insurance program. In the event JFK elects to provide the coverage
described herein through a self-insurance program, upon the commencement of the
Term and as of each commencement of each twelve (12) month period thereafter,
JFK shall provide written documentation to GKF evidencing (a) the establishment
and existence of the self-insurance program, (b) the reasonable funding of the
self-insurance program based upon the risks described herein and the other risks
intended to be covered by the program, and (c) GKF's rights as a party entitled
to protection from the self-insurance program for the risks described herein.
(c) If the Equipment is rendered unusable as a result of any
physical damage to, or destruction of, the Equipment, JFK shall give to GKF
immediate notice thereof. 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 replace the Equipment as soon as
reasonably possible based upon the availability of replacement equipment from
Elekta and within the limits of Elekta's manufacturing capabilities. The
replacement equipment shall be the same or a similar model (based upon the
models for the Gamma Knife units then manufactured by Elekta) as the Equipment
subject to this Agreement. 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 repaired as soon as reasonably possible thereafter.
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23. 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: Mr. Craig K. Tagawa
Chief Executive Officer
GK Financing, LLC
Four Embarcadero Center, Suite 3620
San Francisco, CA 94111
To JFK: Mr. Scott Gebhard
Senior Vice President
JFK Health Systems
65 James Street
Edison, NJ 08818-3059
With copies to: Sean Patrick Murphy, Esq.
Vice President and General Counsel
JFK Health Systems
80 James Street
Edison, NJ 08818-3059
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Mr. Ray Fredericks
Senior Vice President & Chief Financial Officer
JFK Health Systems
80 James Street
Edison, NJ 08818-3059
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.
24. Integration. This Agreement and all Exhibits attached hereto contain
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.
25. Waivers. To the extent that a party fails or chooses not to pursue
any of its remedies under this Agreement or pursuant to applicable law, such
failure or decision not to act shall not prejudice such party's rights to pursue
any of those remedies at any future time and shall not constitute a waiver of
its rights.
26. 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 neither party may assign its rights or obligations under this
Agreement without the express written consent of the other (which consent shall
not be unreasonably withheld).
27. 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.
28. 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 JFK 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 or value of Ten Thousand Dollars ($10,000.00) or
more over a twelve (12) month period) to a related organization, GKF may do so
only through a subcontractor which is consented to by JFK, it being understood
that, inasmuch as JFK is entering into this Agreement in reliance on GKF's
reputation and expertise, that JFK shall be the sole judge of the reputation and
expertise of the proposed delegee, and only through a subcontractor which
provides that,
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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 JFK 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.
29. Miscellaneous Provisions.
(a) Validity. 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) Attorneys Fees. 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. The prevailing party shall be determined
by the arbitrators pursuant to an arbitration conducted in accordance with
Paragraph 29(d) below.
(c) 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 commence performance of their respective obligations under
this Agreement.
(d) Arbitration. Any controversy or claim between the parties
arising out of or relating to this Agreement shall be submitted to arbitration
in accordance with the then current Commercial Arbitration Rules of the American
Arbitration Association, with the arbitration to be conducted in Washington,
D.C. The award of the arbitrators shall be final and binding upon the parties
hereto. Judgement upon the award issued by the arbitrators may be entered in any
court of competent jurisdiction.
(e) Confidentiality. GKF and JFK shall keep the terms and
conditions of this Agreement strictly confidential and neither party shall
(except as required by applicable law, regulation or legal process, and only
after compliance with the remainder of this paragraph), without the prior
written consent of the other party, (i) disclose any of the terms and conditions
of this Agreement in any manner whatsoever, and (b) will not use any of the
terms and conditions of this Agreement in any manner whatsoever other than in
connection with the performance of their respective obligations hereunder. In
the event that either GKF or JFK is, or
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any of its representatives are, requested pursuant to, or required by,
applicable law, regulation or legal process to disclose any of the terms and
conditions of this Agreement, such party shall notify the other party promptly
so that it may seek a protective order or other appropriate remedy or, in its
discretion, waive compliance with the terms of this paragraph. In the event that
no protective order or other remedy is obtained, or a party waives compliance
with the terms of this paragraph, the party will furnish only that portion of
the terms and conditions of this Agreement which it is advised by counsel is
legally required and will exercise all reasonable efforts to obtain reliable
assurance that confidential treatment will be accorded such terms and
conditions.
[SIGNATURE PAGE AND EXHIBITS FOLLOW]
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IN WITNESS HEREOF, the parties have caused this Agreement to be signed
as of the day and year first above written.
The Community Hospital Group, Inc. GK Financing, LLC,
dba JFK Medical Center, a California limited liability
a New Jersey corporation company
By: /s/ John P. Mcgee /s/J. Scott Gebhardt By: /s/ Craig K. Tagawa
--------------------------------------- -------------------
John P. Mcgee, President and CEO Craig K. Tagawa, CEO
J. Scott Gebhardt, Senior VP-Operations
[Print Name and Title] [Print Name and Title]
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EXHIBIT 1
LGK AGREEMENT
21
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EXHIBIT 2
PURCHASE AGREEMENT
22
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EXHIBIT 3
MAINTENANCE SCHEDULE
23
