SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One) | ||
[X] |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
|
For the quarterly period ended September 30, 2002 or | ||
[ ] |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _______________ to _______________.
Commission file number 1-8789
American Shared Hospital Services
(Exact name of registrant as specified in its charter)
California
(State or other jurisdiction of
Incorporation or organization)
94-2918118
(IRS Employer
Identification No.)
Four
Embarcadero Center, Suite 3700,
San Francisco, California
(Address of Principal Executive Offices)
94111
(Zip Code)
Registrants telephone number, including area code: (415) 788-5300
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
As of October 31, 2002 there are outstanding 3,783,203 shares of the Registrants common stock.
PART 1 FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN SHARED HOSPITAL SERVICES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(audited)
Sept. 30, 2002
Dec. 31, 2001
$
10,457,000
$
11,580,000
50,000
50,000
3,171,000
2,369,000
550,000
789,000
14,228,000
14,788,000
37,239,000
31,278,000
391,000
234,000
2,064,000
3,202,000
39,694,000
34,714,000
(9,942,000
)
(7,360,000
)
29,752,000
27,354,000
559,000
243,000
$
44,539,000
$
42,385,000
(unaudited)
(audited)
Sept. 30, 2002
Dec. 31, 2001
$
251,000
$
412,000
194,000
176,000
123,000
215,000
305,000
329,000
5,265,000
4,305,000
6,138,000
5,437,000
21,782,000
21,615,000
881,000
383,000
1,386,000
1,165,000
9,173,000
9,240,000
3,312,000
3,154,000
1,867,000
1,391,000
14,352,000
13,785,000
$
44,539,000
$
42,385,000
See accompanying notes
2
AMERICAN SHARED HOSPITAL SERVICES
Three Months ended Sept. 30,
Nine Months ended Sept. 30,
2002
2001
2002
2001
$
3,563,000
$
3,050,000
$
10,024,000
$
8,729,000
141,000
90,000
324,000
257,000
911,000
788,000
2,539,000
2,160,000
290,000
188,000
1,011,000
727,000
1,342,000
1,066,000
3,874,000
3,144,000
899,000
798,000
2,560,000
2,379,000
626,000
652,000
1,825,000
1,875,000
2,867,000
2,516,000
8,259,000
7,398,000
696,000
534,000
1,765,000
1,331,000
41,000
100,000
138,000
388,000
(264,000
)
(208,000
)
(659,000
)
(566,000
)
473,000
426,000
1,244,000
1,153,000
(190,000
)
(170,000
)
(330,000
)
(294,000
)
$
283,000
$
256,000
$
914,000
$
859,000
$
0.08
$
0.07
$
0.25
$
0.24
$
0.06
$
0.05
$
0.18
$
0.17
See accompanying notes
3
AMERICAN SHARED HOSPITAL SERVICES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months ended Sept. 30,
2002
2001
$
914,000
$
859,000
2,611,000
2,212,000
330,000
294,000
(802,000
)
(239,000
)
222,000
(5,000
)
(259,000
)
(10,000
)
3,016,000
3,111,000
(627,000
)
(694,000
)
221,000
14,000
(406,000
)
(680,000
)
(438,000
)
(361,000
)
68,000
15,000
0
(74,000
)
(135,000
)
(521,000
)
(3,228,000
)
(2,362,000
)
(3,733,000
)
(3,303,000
)
(1,123,000
)
(872,000
)
11,580,000
12,421,000
$
10,457,000
$
11,549,000
$
1,808,000
$
1,815,000
$
85,000
$
23,000
See accompanying notes
4
AMERICAN SHARED HOSPITAL SERVICES
Note 1. Basis of Presentation
In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly American Shared Hospital Services consolidated financial position as of September 30, 2002 and the results of its operations for the three and nine month periods ended September 30, 2002 and 2001, which results are not necessarily indicative of results on an annualized basis. Consolidated balance sheet amounts as of December 31, 2001 have been derived from audited financial statements.
These financial statements include the accounts of American Shared Hospital Services (the Company) and its wholly-owned subsidiaries: American Shared Radiosurgery Services; OR21, Inc. (OR21); MMRI, Inc.; MedLeader.com, Inc. (MedLeader); and the Companys majority-owned subsidiary, GK Financing, LLC (GK Financing).
The Company through its majority-owned subsidiary, GK Financing, provided Gamma Knife units to fourteen medical centers as of September 30, 2002 in Arkansas, California, Connecticut, Florida, Illinois, Massachusetts, Mississippi, Nevada, New Jersey, New York, Ohio, Texas and Wisconsin.
All significant intercompany accounts and transactions have been eliminated in consolidation.
Note 2. Per Share Amounts
Per share information has been computed based on the weighted average number of common shares and dilutive common share equivalents outstanding. For the three and nine months ended September 30, 2002 basic earnings per share was computed using 3,769,000 and 3,681,000 common shares, and diluted earnings per share was computed using 5,082,000 and 5,059,000 common shares and equivalents, respectively. For the three and nine months ended September 30, 2001 basic earnings per share was computed using 3,549,000 and 3,581,000 common shares, and diluted earnings per share was computed using 5,126,000 and 5,148,000 common shares and equivalents, respectively.
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Medical services revenues increased $513,000 and $1,295,000 for the three and nine month periods ended September 30, 2002 from $3,050,000 and $8,729,000 for the three and nine month periods ended September 30, 2001. The revenue increase in third quarter 2002 compared to third quarter 2001 reflects increased revenue at Gamma Knife centers in operation for longer
5
than one year and the increase in revenue from two additional Gamma Knife units. For the nine months ended September 30, 2002, the increase is due to two new Gamma Knife units that started during 2002, the full nine month inclusion of two Gamma Knife units that started in 2001, and a three percent (3%) increase in revenue at Gamma Knife centers in operation more than one year. The Company had 14 Gamma Knife units in operation at September 30, 2002 compared to 12 at September 30, 2001. Twelve (12) of the Companys customers are under fee-per-use contracts, and two customers are under revenue sharing agreements (retail). For retail units, the Company receives all or a percentage of the reimbursement (exclusive of physician fees) received by the customer, and is responsible for all or a percentage of the operating expenses of the Gamma Knife.
The number of Gamma Knife procedures increased by 21% and 17% to 470 and 1,274 for the three and nine month periods ended September 30, 2002 from 390 and 1,093 for the three and nine month periods ended September 30, 2001, respectively. These increases were due to the addition of two new Gamma Knife units during 2002 (one each in the second and third quarter), two new Gamma Knife units during second quarter 2001, and an increase in procedures performed at units in operation for more than one year of 10% and 6% for the three and nine month periods, respectively.
Total costs of operations increased $276,000 and $730,000 for the three and nine month periods ended September 30, 2002 from $1,066,000 and $3,144,000 for the three and nine month periods ended September 30, 2001. Maintenance and supplies increased $51,000 and $67,000 for the three and nine month periods ended September 30, 2002 compared to the same periods in the prior year due to additional Gamma Knife units that started contract maintenance after the expiration of each units warranty period. There were eleven Gamma Knife units covered under contract maintenance as of September 30, 2002 compared to nine as of September 30, 2001. Depreciation and amortization increased $123,000 and $379,000 for the three and nine month periods ended September 30, 2002 compared to the same periods in the prior year due to the addition of one new Gamma Knife unit in each of the second and third quarters of 2002, the upgrade of one unit to a Model C in first quarter 2002, and the full nine month inclusion of two new Gamma Knife units that started in second quarter 2001. Other operating costs increased $102,000 and $284,000 for the three and nine month periods ended September 30, 2002 compared to the same periods in the prior year, respectively. These increases were primarily due to higher marketing and insurance costs, and were partially offset by a $70,000 use tax credit recorded during third quarter 2002.
Selling and administrative costs increased $101,000 and $181,000 for the three and nine month periods ended September 30, 2002 from $798,000 and $2,379,000 for the three and nine month periods ended September 30, 2001. For both the three and nine month periods this increase is primarily due to increased payroll related costs, rent expense and legal fees. For the nine month period, selling and administrative cost increases were partially offset by reduced costs ($102,000) in 2002 associated with the Companys subsidiaries, OR21 and Medleader.
Interest expense decreased $26,000 and $50,000 for the three and nine month periods ended September 30, 2002 from $652,000 and $1,875,000 for the three and nine month periods ended September 30, 2001. This is primarily due to lower interest expense on the debt relating
6
to the more mature Gamma Knife units. The mature units have lower interest expense because interest expense decreases as the outstanding balance of each loan in reduced. This reduction offset the additional interest expense on the financing of the two new Gamma Knife units during 2002.
Interest and other income decreased $59,000 and $250,000 for the three and nine month periods ended September 30, 2002 from $100,000 and $388,000 for the three and nine month periods ended September 30, 2001 primarily due to lower interest rates on invested cash balances.
Minority interest increased $56,000 and $93,000 for the three and nine month periods ended September 30, 2002 from $208,000 and $566,000 for the three and nine month periods ended September 30, 2001 due to increased profitability of GK Financing. Minority interest represents the 19% interest of GK Financing owned by a third party.
The Company recorded a 40% income tax provision in both third quarter 2002 ($190,000) and third quarter 2001 ($170,000). For the nine months ended September 2002, the Company recorded a 40% income tax provision that was partially offset by an income tax benefit of $168,000 which resulted from the exercise of options to purchase 260,000 common shares during the first and second quarter. The income tax benefits are the result of compensation expense that was recognized when these options for common shares were granted in 1995. For the nine months ended September 2001, the Company did not begin recording a 40% income tax provision until second quarter 2001 due to net operating loss carryforwards available for tax purposes.
The Company had net income of $283,000 ($0.08 per basic share) and $914,000 ($0.25 per basic share) for the three and nine month periods ended September 30, 2002 compared to net income of $256,000 ($0.07 per basic share) and $859,000 ($0.24 per basic share) in the same periods in the prior year. The increase for both the three and nine month periods ended September 30, 2002 is primarily the result of a 17% and 15% increase in revenue over the same periods in the prior year respectively. The increases in net income due to revenue growth were partially offset by a reduction in interest and other income of $59,000 and $250,000 for the three and nine month periods. For the nine month period there was also a decrease in costs associated with MedLeader and OR21, primarily because the Company has delayed further activity in MedLeader at this time.
Liquidity and Capital Resources
The Company had cash and cash equivalents of $10,457,000 at September 30, 2002 compared to $11,580,000 at December 31, 2001. The Companys cash position decreased by $1,123,000, primarily due to purchases of property and equipment of $627,000 (including deposits of $475,000 on future Gamma Knife purchases), payment of annual dividends of $0.12 per share ($438,000) to shareholders of record on March 15, 2002, a reduction in accounts payable and other accrued liabilities of $259,000, and increased principal payments on long term debt relating to the Gamma Knife units.
7
The Company as of September 30, 2002 had shareholders equity of $14,352,000, working capital of $8,090,000 and total assets of approximately $44,539,000.
The Company has scheduled interest and principal payments under its debt obligations of approximately $7,787,000 during the next 12 months. The Company believes that its cash flow from operations and cash resources is adequate to meet its scheduled debt obligations during the next 12 months.
The Company is investing its cash in an institutionally priced money market fund pending use in the Companys operations. The investment objective of the money market fund is to maintain a stable net asset value, in order to maximize yield while preserving principal value.
Item 4. Controls and Procedures
(a) Evaluation of disclosure controls and procedures. Our chief executive officer and our chief financial officer, after evaluating the effectiveness of the Companys disclosure controls and procedures (as defined in Exchange Act Rules 13a-14(c) and 15d-14(c)) as of a date (the Evaluation Date) within 90 days of the filing date of this quarterly report, have concluded that as of the Evaluation Date, our disclosure controls and procedures were adequate and designed to ensure that material information relating to us and our consolidated subsidiaries would be made known to them by others within those entities.
(b) Changes in internal controls. There were no significant changes in our internal controls or in other factors that could significantly affect our internal controls subsequent to the Evaluation Date.
8
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Securities Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) |
Exhibits
The following exhibit is filed herewith: |
Exhibit Number | Description | |
10.40 | Lease Agreement for a Gamma Knife Unit dated as of September 13, 2001 between GK Financing, LLC and Mercy Medical Center. (Confidential material appearing in this document has been omitted and filed separately with the Securities and Exchange Commission in accordance with Rule 24b-2, promulgated under the Securities and Exchange Act of 1934, as amended. Omitted information has been replaced with asterisks.) | |
10.41 | Addendum Number One to Contract with GKF and Mercy Medical Center, dated September 13, 2001 between GK Financing, LLC and Mercy Medical Center. (Confidential material appearing in this document has been omitted and filed separately with the Securities and Exchange Commission in accordance with Rule 24b-2, promulgated under the Securities and Exchange Act of 1934, as amended. Omitted information has been replaced with asterisks.) |
9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
AMERICAN SHARED HOSPITAL SERVICES
Registrant
Date: | November 14, 2002 | /s/ Ernest A. Bates | ||
|
||||
Ernest A. Bates, M.D.
Chairman of the Board and Chief Executive Officer |
||||
Date: | November 14, 2002 | /s/ Craig K. Tagawa | ||
|
||||
Craig K. Tagawa
Senior Vice President Chief Operating and Financial Officer |
10
CERTIFICATION
I, Craig K. Tagawa, certify that:
1. I have reviewed this quarterly report on Form 10-Q of American Shared
Hospital Services;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrants ability to record, process,
summarize and report financial data and have identified for the registrants
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and
11
6. The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
October 31, 2002
12
Table of Contents
/s/ Craig K. Tagawa
Craig K. Tagawa
Chief Financial Officer
Table of Contents
CERTIFICATION
I, Ernest A. Bates, M.D., certify that:
1. I have reviewed this quarterly report on Form 10-Q of American Shared
Hospital Services;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrants ability to record, process,
summarize and report financial data and have identified for the registrants
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and
13
6. The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
October 31, 2002
Table of Contents
/s/ Ernest A.
Bates, M.D.
Ernest A. Bates, M.D.
Chief Executive Officer
14
EXHIBIT 10.40
THIS EQUIPMENT LEASE AGREEMENT ("Agreement") is made and entered into on September 13, 2001, by and between GK FINANCING, LLC, a California limited liability company ("GKF"), and Mercy Medical Center a non-profit New York corporation ("Hospital"), with reference to the following facts:
R E C I T A L S
WHEREAS, Hospital wants to lease a Leksell Stereotactic Gamma Unit, model C without Automatic Positioning System, manufactured by Elekta Instruments, Inc., a Georgia corporation ("Elekta"); and
WHEREAS, GKF has acquired the Equipment from Elekta, and GKF is willing to lease the Equipment to Hospital pursuant to the terms and conditions of 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:
Section 8 below shall commence as of the First Procedure Date, all other obligations, duties and covenants of GKF and Hospital shall commence as of the date hereof.
4.1 GKF acknowledges that Hospital will require a certificate of need ("CON") issued by the applicable state health planning agency in order to install and operate the Equipment at the Site. As soon as reasonably possible following the date of this Agreement, Hospital shall apply for and use its best efforts to obtain in a timely manner a CON for the installation and use of the Equipment at the Site. In the event Hospital's application for a CON is denied, this Agreement shall automatically terminate and all parties shall be released from the further performance of any obligations or duties arising under this Agreement.
4.2 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 development, construction and preparation of the Site, 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 2.2 of the LGK Agreement.
5.1 GKF shall coordinate with Elekta and Hospital to have the Equipment delivered to Hospital at ___________________ (the "Site") on or prior to the delivery date agreed upon by Hospital and GKF, GKF will notify Hospital in writing of the delivery date provided to them by Elekta. GKF makes no representations or warranties concerning delivery of the Equipment to the Site or the actual date thereof. If, at Hospital's request, the Equipment is delivered FOB to a location other than the Site, Hospital agrees to be responsible for any and all costs incurred in transporting the Equipment to Hospital, including but not limited to insurance, rigging, delivery.
5.2 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.
6.1 Hospital, at its cost, expense and risk, shall prepare all plans and specifications required to construct and improve the Site for the installation, use and operation of the Equipment during the Term. The plans and specifications shall comply in all respects with the Site Planning Criteria and with all applicable federal, state and local laws, rules and regulations. All plans and specifications prepared by or on behalf of Hospital (and all material changes thereto following approval by GKF and Elekta) shall be subject to the written approval of GKF and Elekta prior to commencement of construction at the Site. Hospital shall provide GKF and Elekta with a reasonable period of time for the review and consideration of all plans and specifications following the submission thereof for approval. Following approval of the plans and specifications by GKF and Elekta, Hospital, 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 construct and improve the Site for the installation, use and operation of the Equipment.
6.2 Based upon the plans and specifications approved by GKF and Elekta, Hospital, at its cost, expense and risk, 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, Hospital, 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, all in accordance with applicable federal, state and local laws, rules, regulations or custom.
6.3 In addition to construction and improvement of the Site, Hospital, at its cost, expense and risk, 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. Elekta provides set up of Equipment once installed.
6.4 Upon completion of construction, the Site shall (a) comply in all respects with the Site Planning Criteria and all applicable federal, state and local laws, rules and regulations, and (b) be safe and suitable for the ongoing use and operation of the Equipment during the Term.
6.5 Hospital shall use its best efforts to satisfy its obligations under this Section 6 in a timely manner. Hospital shall keep GKF informed on a regular basis of its progress in the design of the Site, the preparation of plans and specifications, the construction and improvement of the Site, and the satisfaction of its other obligations under this Section 6. In all events, Hospital shall complete all construction and improvement of the Site required for the installation, positioning and testing of the Equipment on or prior to the delivery date described in Section 5.1 above. If the Site is not complete as of the delivery date described in Section 5.1
above plus a sixty (60) day grace period (other than by reasons of force majeure as provided in Section 23 below) (the "late completion date"), Hospital shall reimburse GKF for its out-of-pocket financing costs incurred with respect the Equipment at the Bank of America prime interest rate (which rate is sometimes referred to by the Bank as its "reference rate") 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 to the extent necessary to allow for the installation, positioning and testing of the Equipment.
6.6 During the Term, Hospital, at its cost and expense, shall maintain the Site in a good working order, condition and repair, reasonable wear and tear excepted.
6.7 Hospital shall be liable for, and shall indemnify GKF in the manner described in Section 22 below from and against, all damage to the Equipment caused by (a) defects in construction of the Site or in installation or positioning the Equipment at the Site; (b) defects arising out of materials or parts provided, modified or designed by Hospital for or with respect to the Site; (c) negligent, intentional or wrongful acts or omissions by Hospital or any of its officers, directors, agents, contractors (or their subcontractors), or employees in connection with the construction and preparation of the Site; and (d) negligent or intentional and wrongful operation of the Equipment at the Site. Further, neither the review and approval of Site plans, specifications and/or positioning plans by GKF and/or Elekta, nor the construction of any other Site preparation, shall relieve Hospital for liability for damages to the Equipment caused by the failure to comply with applicable federal, state or local laws or regulations, including building codes, or those portions of the Site Planning Criteria relating to the load bearing capacity of the floor of the treatment room and to radiation protection.
used herein, a "Procedure" means any treatment that involves stereotactic, external, single fraction, conformal radiation, commonly called radiosurgery, that may include one or more isocenters during the patient treatment session, delivered to any site(s) superior to the foramen magnum.
GKF shall submit a rent invoice to Hospital on the fifteenth (15th) and the
last day of each calendar month (or portion thereof) for the actual number of
Gamma Knife procedures performed during the first and second half of the
calendar month, respectively. Hospital shall pay the rent invoice within thirty
(30) days after submission by GKF to Hospital. All or any portion of a rent
invoice which is not paid in full within forty-five (45) days after submission
shall bear interest at the rate of one and one-half percent (1.50%) per month
(or the maximum monthly interest rate permitted to be charged by law between an
unrelated, commercial borrower and lender, if less) until the unpaid rent
invoice together with all accrued interest thereon is paid in full. If GKF shall
at any time accept a rent 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.
Within ten (10) days after Hospital's receipt of written request by GKF, GKF shall have the right to audit Hospital's books and records (including, without limitation, the books and records pertaining to any other radiosurgery equipment or devices) to verify the number of Procedures that have been performed by Hospital, and Hospital shall provide GKF with access to such books and records; PROVIDED that any patient names or identifiers shall not be disclosed.
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 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 Hospital'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, (c) give GKF immediate written notice of any matter described in clause (b), and (d) in the manner described in Section 22 below indemnify GKF harmless from and against any loss, cost or expense (including reasonable attorneys' fees) with respect to any of the foregoing.
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 oncologists and physicists. The Gamma Knife shall be available for use by all credentialed neurosurgeons and radiation oncologists, subject to Hospital's medical staff bylaws and Board of Trustees approval.
10.2 Direct, supervise and administer all Hospital services in connection with the provision of Gamma Knife procedures.
10.3 Provide reasonable and customary marketing materials (i.e. brochures, announcements, etc.) together with administrative and physician support (e.g., seminars for physicians by neurosurgeons and radiation oncologists, etc.) 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.
11.1 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.
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, and (b) 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. 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 that are known to Hospital, 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.
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, and in the manner described in
Section 22 below shall indemnify GKF from and against, 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 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 within
thirty (30) days following GKF's written request therefore. If such costs are
not paid in full when due, Hospital shall pay GKF interest on such unpaid costs
which interest shall accrue from the due date of such costs until paid in full
at the rate of one and one-half percent (1.50%) per month (or the maximum
monthly interest rate permitted to be charged by law between an unrelated,
commercial borrower and lender, if less) plus reasonable attorneys' fees and
costs incurred by GKF in collecting such amount from Hospital. 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. In the event GKF determines that the Equipment cannot be repaired (a) GKF, at its cost and expense, shall 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) 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. 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.
13.1 Hospital shall not make any modifications, alterations or additions to the Equipment (other than normal operating accessories or controls) without the prior written consent of GKF. Hospital shall not, and shall not permit any person other than representatives of Elekta or any other person authorized by GKF to, effect any inspection, adjustment, preventative or remedial maintenance, or repair to the Equipment without the prior written consent of GKF. All modifications, alterations, additions, accessories or operating controls incorporated in or affixed to the Equipment (herein collectively called "additions" and included in the definition of "Equipment") shall become the property of the GKF upon termination of this Agreement.
13.2 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 Hospital. In the event GKF and
Hospital agree to reload the Cobalt-60 source (i.e., in approximately the eighth
(8th) year of the Term), and GKF pays the costs associated therewith,
notwithstanding any provisions to the contrary herein, the initial Term shall be
automatically extended for a negotiated period of time.
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. Between Hospital and GKF, Hospital shall be fully liable for, and in the manner described in Section 22 below shall indemnify and hold GKF harmless from and against, all negligent, intentional or wrongful acts or omissions of such physicians, professional, technical and support personnel.
Hospital 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.
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;
19.2 Terminate this Agreement as of the expiration of the Term.
Hospital shall exercise one (1) of the two (2) options referred to above by giving an irrevocable written notice thereof to GKF at least nine (9) months prior to the expiration of the Term. Any such notice shall be sufficient if it states in substance that Hospital elects to exercise its option and states which of the two (2) 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 Term.
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 rent payment when due pursuant to Paragraph 8 above and such failure continues for a period of fifteen (15) days after written notice thereof is given by GKF or its assignee to Hospital; however, if Hospital cures the rent payment default within the applicable fifteen (15) 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 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 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.
20.1.6 Hospital is suspended or terminated from participation in the Medicare program.
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 without liability of any kind or nature for so doing or GKF may demand that Hospital remove and return the Equipment to GKF, all at Hospital sole cost and expense.
20.2.2 Recover from Hospital as liquidated damages for the loss of the bargain represented by this Agreement and not as a penalty an amount equal to the present value
of the unpaid estimated future rent payments to be made by Hospital to GKF through the end of the Term discounted at the rate of nine percent (9%), which liquidated damages shall become immediately due and payable. The unpaid estimated future lease payments shall be based on the prior twelve (12) months rent payments made by Hospital to GKF hereunder with an annual five (5%) percent increase thereof through the end of the Term. Hospital and GKF acknowledge that the liquidated damages formula 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.
20.2.3 Sell, dispose of, hold, use or lease the Equipment, 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 over the sale, lease or other disposition of similar Equipment owned or leased by GKF).
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, to enforce the terms hereof or to recover damages for the breach hereof or to cancel this Agreement as to the Equipment.
20.2.5 In addition to the foregoing remedies, Hospital shall be liable to GKF for all reasonable attorneys fees, costs and expenses incurred by GKF as a result of the Event of Default or the exercise of GKF's remedies.
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 rent payments and other sums owing under this Agreement.
In the event that Hospital shall pay the liquidated damages referred to in
Section 20.2.2 above to GKF, GKF shall pay to Hospital promptly after receipt
thereof all rentals or proceeds received from the reletting or sale of the
Equipment during the balance of the initial Term (after deduction of all costs
and expenses, including reasonable attorneys fees and costs, incurred by GKF as
a result of the Event of Default), said amount never to exceed the amount of the
liquidated damages paid by Hospital. However, Hospital acknowledges that GKF
shall have no obligation to sell the Equipment. GKF will use good faith efforts
to release or resell Equipment. 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 and reasonable attorneys' fees. 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.
The terms and provisions of this Section shall survive the expiration or earlier
termination of this Agreement.
21.1 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. Hospital shall be named as an additional insured party on the all risk property and casualty insurance policy to the extent of its interest in the Equipment arising under this Agreement. 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.
21.2 During the Term, Hospital shall, at its cost and expense, purchase and maintain in effect general liability and professional liability insurance policies covering the Site (together with all premises where the Site is located) and the use or operation of the Equipment by Hospital or its officers, directors, agents, employees, contractors or physicians. The general liability and professional liability insurance policies shall provide coverage in amounts not less than One Million Dollars ($1,000,000.00) per occurrence and Five Million Dollars ($5,000,000.00) annual aggregate. GKF shall be named as additional insured party on the general liability and professional liability insurance policies to be maintained hereunder by Hospital. 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.
21.3 During the construction of the Site and prior to the First Procedure Date, Hospital, at its cost and expense, shall purchase and maintain a general liability insurance policy which conforms with the coverage amounts and other requirements described in Section 21.2 above and which names GKF as an additional insured party. The policy 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 prior to the commencement of any construction at the Site.
21.4 During the Term, Hospital shall purchase and maintain all workers compensation insurance to the maximum extent required by applicable law.
or satisfy its covenants, duties or obligations contained in this Agreement or
in the LGK Agreement; (b) the use and operation of the Equipment during the
Term; (c) the design, construction and preparation of the Site by Hospital or
the maintenance of the Site during the Term by Hospital; (d) Damages to the
Equipment from the defective, faulty or improper design, construction or
preparation of the Site or the installation and positioning of the Equipment;
(e) Damages to the Equipment (including any Damages arising out of or related to
violations by Hospital, its agents, officers, physicians, employees) caused by
the negligent or wrongful acts or omissions of Hospital, its agents, officers,
physicians, employees or contractors (in the event the Equipment is destroyed or
rendered unusable, the indemnity 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); (f) the events or occurrences described in Article 7.3 of the
LGK Agreement to the same extent that Hospital agrees to indemnify Elekta
thereunder.
22.3 Upon the occurrence of an event for which any of the GKF
Indemnified Parties or the Hospital Indemnified Parties (as applicable, an
"indemnified party") are entitled to indemnification under this Agreement, the
applicable indemnified party shall give written notice thereof to Hospital or
GKF (as applicable, the "indemnifying party") setting forth the type and amount
of Damages. If the indemnity relates to a Third Party Claim (as defined in
Section 22.4 below), the matter shall be subject to Section 22.4 below. If the
indemnity relates to any Damages other than a Third Party Claim, not more than
thirty (30) days after the indemnified party's written notice is given, the
applicable indemnifying party either shall acknowledge in writing to the
applicable indemnified party its obligation to indemnify hereunder and pay the
Damages in full to such indemnified party or dispute its obligation to indemnify
in a written notice delivered to such indemnified party. If the indemnifying
party disputes the obligation to indemnify, the parties shall meet and negotiate
in good faith to mutually resolve the disagreement regarding indemnification. If
the parties are unable to resolve the disagreement within forty-five (45) days
after the indemnified party's written notice is given, the indemnified party may
seek its legal and equitable remedies to enforce the indemnified party's
indemnification obligations hereunder.
22.4 The indemnified party shall give written notice to the indemnifying party as soon as reasonably possible after it has knowledge of any third party claim or legal proceedings ("Third Party Claim") for which the indemnified party is entitled to indemnification under this Section 22. The indemnifying party shall (a) immediately assume, at its sole cost and expense, the defense of the Third Party Claim with legal counsel approved by the indemnified party (which approval will not be unreasonably withheld, delayed or conditioned), and (b) as
soon as reasonably possible after the indemnified party's written notice is given to the indemnifying party, acknowledge in writing to the indemnified party its obligation to indemnify the indemnified party in accordance with the terms of this Agreement. If the indemnifying party fails to assume the defense of a Third Party Claim or fails to timely acknowledge in writing its obligation to indemnify the indemnified party, the indemnified party may assume the defense of the Third Party Claim in the manner described in Section 22.5 below. The indemnified party shall cooperate with the indemnifying party in the defense of any Third Party Claim. Any settlement or compromise of a Third Party Claim to which the indemnified party is a party shall be subject to the express written approval of the indemnified party, which approval shall not be unreasonably withheld, delayed or conditioned as long as an unconditional term of the settlement or compromise is the full and absolute release of the indemnified party from all Damages arising out of the Third Party Claim. The indemnified party, at its own cost and expense, may participate on its own behalf with legal counsel of its own selection in the defense of any Third Party Claim which may have a material impact on the indemnified party.
22.5 If the indemnifying party fails to promptly assume the defense of
any Third Party Claim, the indemnified party may assume the defense of the Third
Party Claim with legal counsel selected by the indemnified party, all at the
indemnifying party's cost and expense. The defense of an action by the
indemnified party under this Section 22.5 shall not impair, limit or otherwise
restrict the indemnifying party's indemnification obligations arising under this
Section 22 or GKF's right to enforce such obligations.
22.6 The indemnity obligations under this Section 22 shall survive the termination of this Lease with respect to events occurring during or relating to the Term.
22.7 The indemnification obligations set forth in this Agreement are intended to supplement, and not supersede, supplant or replace, any coverage for Damages which may be available under any insurance policies that may be maintained by the indemnified party. In the event any Damages may be covered by insurance policies, the parties shall exercise good faith and use their best efforts to obtain the benefits of and apply the available insurance coverage to the Damages subject to indemnification under this Agreement. In the event that an insurer provides coverage under an insurance policy on the basis of a "reservation of rights", the indemnification obligations under this Agreement shall apply to all Damages which are finally determined as not being covered under the insurance policy.
of the Term. Any purported assignment or sublease made without GKF's prior written consent shall be null, void and of no force or effect.
To GKF: Craig K. Tagawa Chief Executive Officer GK Financing, LLC Two Embarcadero Center, Suite 2370 San Francisco, CA 94111 To Hospital: Vincent DiRubbio Mercy Medical Center President and CEO 1000 N. Village Ave. Rockville Centre, N.Y. 11570 |
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.
23.15.1 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.
23.15.2 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 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.
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.
24. Notwithstanding any other provision in this contract, the facility remains responsible for ensuring that any service provided pursuant to this contract complies with all pertinent provisions of Federal, State and local statues, rules and regulations.
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/ Craig K. Tagawa --------------------- Craig K. Tagawa Chief Executive Officer "HOSPITAL" MERCY MEDICAL CENTER, a not-for-profit corporation By: /s/ Vincent DiRubbio --------------------- Vincent DiRubbio President/CEO |
Section 8.
The following bold type shall be substituted for the first sentence.
EXHIBIT 10.41
AMENDMENT NUMBER ONE TO EQUIPMENT LEASE AGREEMENT BETWEEN
MERCY MEDICAL CENTER AND GK FINANCING, LLC
This AMENDMENT NUMBER ONE TO EQUIPMENT LEASE AGREEMENT (the "Amendment") is dated effective as of September 13, 2001, by and between GK FINANCING, LLC, a California limited liability company ("GKF"), and MERCY MEDICAL CENTER, a non-profit New York corporation ("Hospital"), with reference to the following facts:
R E C I T A L S
A. Reference is made to a certain Equipment Lease Agreement dated September 13, 2001 (as amended, the "Agreement"), between GKF and Hospital.
B. GKF and Hospital desire to amend the Agreement as provided below.
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 other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Defined Terms. Unless otherwise defined herein, the capitalized terms used herein shall have the same meanings set forth in the Agreement.
2. Equipment Relocation. Should Hospital request to relocate the Equipment from the location which the Equipment is first operational, to a different location at the Site ("Different Location") or a new site ("New Site") and GKF approves in advance in writing of Equipment relocation, Hospital at its sole cost and expense shall be responsible for and assume all risks in connection with said relocation of the Equipment. Said relocation costs and expenses shall include, but not be limited to preparation of all plans and specifications and construction and improvement of the Different Location or New Site in accordance with Section 6 of the Agreement, removal and transportation of the Equipment from the Site the Equipment is first operational to the Different Location or New Site, unloading and reloading of the Cobalt-60 sources, if necessary, installation and positioning of the Equipment at the Different Location or New Site and repair of the original location to it's original condition, or that which is acceptable to the Hospital. During the period the Equipment is being relocated and until the first clinical Gamma Knife Procedure is performed at the Different Location or New Site, Hospital shall at its sole cost and expense, maintain or obtain in effect an all risk property and casualty insurance policy covering the Equipment. The all risk property and casualty insurance policy shall be named as an additional insured party on the all risk property and casualty insurance policy to the extent of its interest in the Equipment. The all risk property and casualty insurance policy
maintained by Hospital shall be evidenced by a certificate of insurance or other reasonable documentation which shall be delivered by Hospital to GKF prior to the relocation of the Equipment.
3. Relocation Effect on Term of Agreement. In the event Equipment is relocated during the Term of this Agreement, the Term of this Agreement shall be automatically extended by the period of time the Equipment is unavailable to perform Gamma Knife Procedures due to such Equipment relocation.
Full Force and Effect. Except as amended by this Amendment, all of the terms and provisions of the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment effective as of the date first written above.
"GKF" GK FINANCING, LLC,
a California limited liability company
By: /s/ Craig K. Tagawa ------------------------------- Craig K. Tagawa Chief Executive Officer |
"HOSPITAL" MERCY MEDICAL CENTER,
a non-profit New York corporation
By: /s/ Vincent DiRubbio ------------------------------- Vincent DiRubbio President/CEO |