Equipment Lease Agreement

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 4301 W. Markham, Little Rock, Arkansas 72205 (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 billings 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, w ...