EXHIBIT 10.9

 
EQUIPMENT PURCHASE AGREEMENT

By and between

VIRTUALSCOPICS, LLC

And

UNIVERSITY OF ROCHESTER MEDICAL CENTER
 

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EQUIPMENT PURCHASE AGREEMENT
 
This EQUIPMENT PURCHASE AGREEMENT (“Agreement”) is made as of the 17th day of
December, 2003, by and between VIRTUALSCOPICS, LLC (“VS”) with an office at 350
Linden Oaks, Rochester, New York, 14625 and the UNIVERSITY OF ROCHESTER MEDICAL
CENTER, an unincorporated division of the University of Rochester, an education
corporation formed under the laws of the State of New York (“URMC”) with an
office at 601 Elmwood Avenue, Rochester, New York 14642 (each individually
referred to herein as “Party” and collectively as “Parties”).

RECITALS:

WHEREAS, prior to the execution of this Agreement, VS purchased from General
Electric Medical Systems, Inc. (“GEMS”) a certain General Electric Medical
Systems Signa Twin Speed MRI 1.5T with Excite Platform as specifically
identified on Exhibit A attached hereto (the “Equipment”), used to generate
three dimensional magnetic resonance images; and

WHEREAS, VS holds sole title to the Equipment and is the sole beneficial owner
of the Equipment; and

WHEREAS, VS desires to sell the Equipment to URMC but retain rights to use the
Equipment after the consummation of the sale to URMC; and

WHEREAS, URMC desires to purchase the Equipment from VS and own, maintain and
operate the Equipment at Strong Memorial Hospital (“SMH”) an unincorporated
division of the University of Rochester and an affiliate of URMC; and

THEREFORE, VS agrees to sell the Equipment to URMC and URMC agrees to purchase
the Equipment on the terms and conditions set forth below:

PROVISIONS:

1.    Payment.  URMC agrees that the purchase price for the Equipment shall be
Two Million Three Hundred Thousand Dollars ($2,300,000.00), of which URMC agrees
to pay to VS a cash payment of One Million Two Hundred Fifty Thousand Dollars
($1,250,000.00) (the “Payment”) in three separate installments. The first
installment shall be in the amount of Two Hundred Fifty Thousand Dollars
($250,000.00) and shall be due within ten (10) business days of the date that
this Agreement is executed by the Parties. The second installment shall be in
the amount of Seven Hundred Fifty Thousand Dollars ($750,000.00) and shall be
due (i) within ten (10) business days of the date that the Equipment is
delivered to URMC or (ii) on December 31, 2003, whichever is earlier, provided
that URMC shall not be required to make such payment before the Equipment has
been delivered. The third installment shall be in the amount of Two Hundred
Fifty Thousand Dollars ($250,000.00) and shall be due within ten (10) business
days of the date that URMC accepts the Equipment under Section 3 hereof.
Installments shall be paid in certified funds or by wire transfer. The balance
of the purchase price shall be paid by URMC performing the covenants and
agreements set forth herein including, without limitation, providing VS with its
use rights set forth herein.

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2.    Delivery, Improvements and Installation. URMC agrees that it shall, at its
sole expense, improve an area(s) at 601 Elmwood Avenue, Rochester, New York
(“Business Premises”) that is suitable in all respects for the delivery,
installation and use of the Equipment, including without limitation, electrical
power and outlets, by December 31, 2003. URMC shall provide written notice to VS
of the date that improvements are complete. Within ten (10) business days
thereafter, VS shall cause the equipment to be delivered to URMC. GEMS’ written
assurances that it will provide all transportation, delivery and installation of
the Equipment to the Business Premises at no additional charge to VS or URMC.
Such written assurance is attached hereto as Exhibit B. URMC shall take delivery
of the Equipment at the Business Premises. VS shall transfer its right, if any,
to require GEMS to pay transportation installation or training cost as part of
VS initial purchase of the Equipment. All supplies, including utilities,
consumed or required for operation, maintenance and repair of the Equipment
shall be furnished and paid for by URMC, other than those supplies required by
VS relating to use and operation of the Equipment. VS acknowledges that URMC
will incur considerable expense to make the improvements necessary to take
delivery of the Equipment.

3.    Acceptance. The Equipment shall be subject to inspection and testing by
URMC upon delivery and installation notwithstanding prior payment of
installments by URMC. URMC reserves the right to reject the Equipment if it is
established through inspection and testing that the Equipment does not perform
according to the manufacturer’s published performance specifications, which are
attached hereto as Exhibit C. URMC shall provide VS written notice of rejection
within ten (10) business days of the date the installation of the Equipment is
complete. If the Equipment is rejected due to nonconformity with the
requirements of Exhibit C, VS shall have the right to attempt to cure the
nonconformity, at its cost, by arranging for GEMS to repair or replace the
Equipment so that it does perform according to the manufacturer’s published
performance specifications. If VS is unable to cure the nonconformity within a
commercially reasonable time, not to exceed sixty (60) days from the date of
notice of rejection, it shall, agree to take back the Equipment and refund URMC
the portion of the purchase price paid. Title to the Equipment shall pass from
VS to URMC upon URMC’s acceptance of the Equipment and payment of the third
installment of the Payment.

4.    Use of Equipment.

(a)    URMC agrees that VS, for a period of seven years following the date that
the Equipment is fully installed, operational and accessible to VS (the “Term”),
shall be allowed to use and operate the Equipment as set forth below:

(i)    during the first three (3) years of the Term, VS shall have the exclusive
right to access and use the Equipment for eighteen (18) hours each week from
6:00 a.m. to 12:00 a.m. on Tuesday or such other day of the week as may be
mutually agreed upon in writing by the parties, and

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(ii)    during the next four (4) years immediately succeeding the initial three
(3) years of the Term, VS shall have the exclusive right to access and use the
Equipment for twelve (12) hours each week from 6:00 a.m. to 6:00 p.m. on
Saturdays.

(b)    URMC agrees to allow VS’s employees and permitted contractors access to
and exclusive use of the Equipment and premises where the Equipment is located
during the time periods set forth in subsection (a) of this provision, subject
to the right of URMC and its contractors to access the Equipment to make repairs
or perform maintenance where such activities are not normal and customary
repairs and maintenance but are urgent and time sensitive or time is otherwise
of the essence to make repairs. URMC shall make every commercially reasonable
effort to make repairs and perform maintenance on days other than days VS has
exclusive rights to access and use the Equipment.

(c)    URMC shall provide VS’s employees and permitted contractors the necessary
documentation and security clearance to access the Equipment during the time
periods set forth in subsection (a) of this provision.

(d)    Notwithstanding anything herein to the contrary, URMC shall not be liable
to VS for damages of any kind should the Equipment become unavailable during the
time periods set forth in subsection (a) due to any reason beyond URMC’s
control, including but not limited to (i) Equipment failure which is not the
result of an act or omission of URMC and provided URMC is taking all
commercially reasonable steps to repair the Equipment or (ii) federal, state or
municipal action, statute, ordinance or regulation, strike or other labor
trouble, fire or other act of God.

(e)    Upon execution of this Agreement and until the beginning of the Term, VS
shall have the exclusive right to access and use the “Alternative Equipment” not
less than 7 hours per week during the hours of 7:00 a.m. through 12:00 a.m.
Monday through Saturday, preferably Monday through Friday and as mutually agreed
by URMC and VS. Alternative Equipment means a Magnetic Resonance Imaging unit
sufficient for VS to perform its services located within a 20 mile radius of the
URMC Rochester campus.

(f)    VS shall ensure that all VS patients and research subjects who enter the
premises where the Equipment (or Alternative Equipment, as applicable) is
located, and receive services or participate in research using the Equipment (or
Alternative Equipment), understand that VS is solely providing the
services/conducting the research in question, and that URMC, Strong Memorial
Hospital and their affiliates are not involved in such services or research in
any way.

(g)    During the Term of this Agreement, VS shall maintain commercial general
liability insurance with minimum coverage of $1 million per claim/$2 million
annual aggregate and an excess liability policy with a minimum of $3 million
combined single limit. URMC shall be named as an additional insured on VS’s
liability insurance policies, and certificates of insurance and other evidence
of liability insurance coverage shall provide for thirty (30) days prior written
notification to URMC of the cancellation or termination of said insurance. VS
shall also maintain Workers’ Compensation insurance coverage as required by law.
Written evidence of all insurance coverage will be provided to URMC upon
execution of this Agreement and within five (5) business days of any subsequent
request by URMC.

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5.    Assignment of Warranty; Maintenance and Repairs.  VS shall assign any and
all manufacturer’s warranties associated with the Equipment to URMC upon
acceptance, as herein defined. GEMS’s consent to the same is attached hereto as
Exhibit B. Consent to the Assignment must be documented in writing by a suitable
representative of GEMS. URMC, at its sole expense, shall cause the Equipment to
be maintained and kept in good repair according to the manufacturer’s
specifications for the entire Term, annexed hereto as Exhibit C.

6.    Disclaimer of Warranties. URMC ACKNOWLEDGES THAT VS DOES NOT MANUFACTURE
THE EQUIPMENT NOR DOES VS REPRESENT THE MANUFACTURER OF THE EQUIPMENT. URMC IS
SATISFIED THAT THE EQUIPMENT IS SUITABLE AND FIT FOR URMC’S PURPOSES. VS MAKES
NO WARRANTY EITHER EXPRESS OR IMPLIED, AS TO, WITHOUT LIMITATION, QUALITY,
CONDITION, MERCHANTABILITY, DESIGN, CAPACITY, WORKMANSHIP OR PERFORMANCE OF THE
EQUIPMENT, OR ITS FITNESS FOR ANY PARTICULAR PURPOSE. URMC ACKNOWLEDGES THAT IT
IS NOT RELYING ON VS’S SKILL OR JUDGMENT TO SELECT OR FURNISH GOODS SUITABLE FOR
ANY PARTICULAR PURPOSE AND THAT THERE ARE NO WARRANTIES FROM VS CONTAINED IN
THIS AGREEMENT. VS SHALL NOT BE LIABLE FOR DAMAGES ARISING OUT OF OR IN
CONNECTION WITH THE PERFORMANCE OF THE EQUIPMENT WHEN USED BY URMC OR ITS USE BY
URMC, UNLESS SUCH DAMAGES ARISE FROM THE NEGLIGENCE OR MISCONDUCT OF VS OR ITS
EMPLOYEES OR AGENTS.

7.    Risk of Loss. URMC assumes the entire risk of loss to the Equipment upon
transfer of title and upon taking possession of the Equipment, provided that VS
shall be solely responsible for any loss that results from the negligence or
misconduct of its employees, agents, or other individuals acting at VS’s
direction. URMC shall be solely responsible for any loss that results from the
negligence or misconduct of its employees, agents or other individuals acting at
the direction of URMC before transfer of title. Each party shall advise the
other, in writing, promptly of the circumstances and extent of any damage of
which it becomes aware. If the Equipment is irreparably damaged, lost or stolen,
URMC shall replace it with like equipment approved by VS, which approval shall
not be unreasonably withheld. If the Equipment can be repaired after a loss,
URMC shall promptly effect such repairs as necessary to meet the specifications
required of the Equipment in this Agreement. Such repairs will be made at URMC’s
sole expense unless the loss is the responsibility of VS as set forth in this
Section 7.

8.    Maintenance and Repairs. URMC, at its sole expense, shall cause the
Equipment to be maintained and kept in good repair according to the
manufacturer’s specifications for the entire Term. URMC agrees that during the
first year of the Term it shall, at its sole expense, pay for a Maintenance
Agreement pursuant to which GEMS shall maintain the Equipment, a copy of the
Maintenance Agreement is annexed hereto as Exhibit D. For the balance of the
Term, URMC, at its sole expense, shall maintain the Equipment according to the
strict manufacturer's specifications and guidelines as annexed hereto as Exhibit
C.

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9.    Representations and Warranties of URMC. URMC represents and warrants that
it has full power and authority to execute, deliver and perform its obligations
in accordance with this Agreement; and the execution and delivery of this
Agreement will not violate any agreement governing URMC or to which URMC is a
party.

10.   Taxes and Costs. VS shall pay sales tax on its purchase of the Equipment,
if any, and all taxes due on its use of the Equipment, if any. URMC represents
and warrants that it qualifies as tax-exempt under Section 501(c)(3) of the
Internal Revenue Service Code and is exempt from New York State taxes, and that
it is not required to pay any taxes as a direct result of its purchase of the
Equipment hereunder.

11.   Intellectual Property. VS’s use of the Equipment as described in Section 4
above is a right accorded to it as partial payment by URMC for the Equipment.
Accordingly, URMC acknowledges and agrees that such use shall not be deemed the
use of URMC resources or otherwise give URMC ownership rights in any
Intellectual Property (as defined below) of VS. "Intellectual Property" means
any and all ideas, inventions, formulas, processes, methods, apparatuses,
machines, patents, trademarks, trade names, service marks, copyrightable works,
programs, improvements, discoveries, inventions, creations, trade secrets,
techniques, routines, ideas for formula, original works of authorship, computer
software programs, databases, business concepts, plans, projections and other
similar items that VS has conceived, designed, devised, developed, perfected or
made through VS's use of the Equipment and all know-how related thereto.

12.   General Indemnity. 

(a)    URMC shall defend and indemnify VS against, and shall hold VS harmless
from, any claims made by any person or entity as a result of injuries, damages,
expenses and losses incurred by such a person or entity, including without
limitation such person's or entity's and VS's reasonable legal costs and
attorneys’ fees (hereinafter, "Liabilities"), arising out of or relating to
URMC’s acts, omissions, negligence or intentional misconduct in the performance
or failure to perform pursuant to this Agreement. This provision shall survive
the termination or expiration of this Agreement.

(b)    VS shall defend and indemnify the URMC against, and shall hold URMC
harmless from, any claims made by any person or entity as a result of injuries,
damages, expenses and losses incurred by such a person or entity, including
without limitation such person's or entity's and URMC's reasonable legal costs
and attorney's fees (hereinafter, "Liabilities"), arising out of or relating to
VS's acts, omissions, negligence or intentional misconduct in the performance or
failure to perform pursuant to this Agreement. This provision shall survive the
termination or expiration of this Agreement.

13.   Waiver. Either party's failure to insist on performance of any of the
terms or conditions in this Agreement shall not thereafter waive any other
terms, conditions, or privileges, whether of the same or similar type.

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14.    Assignment. None of VS's rights or obligations under this Agreement may
be delegated or assigned to another person or party without the written consent
of URMC, provided, however, if VS sells all or substantially all of its assets
or ownership interest, the purchaser thereof shall be entitled to assignment of
all of VS’s rights hereunder without URMC’s consent.

15.    Debarment. VS certifies that neither it nor any of its Principals
(officers, directors, owners, partners, key employees, principal investigators,
researchers or management or supervisory personnel) is presently debarred,
suspended, proposed for debarment, declared ineligible or excluded from
participation in this transaction or in any federal grant, benefit, contract or
program (including but not limited to Medicare and Medicaid and Federal Health
Care Programs) by any Federal department or agency. (See Executive Orders 12549
and 12689, 45 CFR part 76, 48 CFR part 9; 42 USC sect. 1320a-7). To the extent
necessary to the assure accuracy of its certification, VS agrees to conduct
searches of the List of Parties Excluded from Federal Procurement and
Nonprocurement Programs maintained by the General Services Administration
(http://epls.arnet.gov/) and the List of Excluded Individuals and Entities
maintained by the Department of Health and Human Services (http://oig.hhs.gov)
prior to making its certification. VS acknowledges that the certification is a
material representation of fact upon which URMC is relying in entering into this
transaction. VS agrees to provide immediate written notice to URMC if it learns
at any time that its certification was erroneous when submitted or if, during
the term of this Agreement, it, or any of its Principals, is debarred,
suspended, proposed for debarment, declared ineligible or excluded from
participation in this transaction or in any federal grant, benefit, contract or
program. If subcontracting is permitted by this Agreement, VS agrees that it
will include this clause, without modification, in all subcontracts and
subprojects, and in all solicitations for subcontract and subproject proposals.
VS agrees that debarment, suspension, proposed debarment or suspension,
ineligibility or exclusion of VS, or any of its Principals or subcontractors
shall constitute cause for immediate termination of the use of the Equipment by
such debarred person.

16.    Applicable law. This Agreement shall be governed by the laws of the State
of New York, and the Parties commit to the jurisdiction and venue of the courts
located in Monroe County, New York, to adjudicate any dispute arising under or
relating to this Agreement.
 
17.    Privacy. In connection with the exercise of their rights under this
Agreement, the Parties acknowledge that Protected Health Information of their
respective patients, as defined in the Health Insurance Portability and
Accountability Act of 1996 and the regulations promulgated thereunder (“HIPAA”),
may be disclosed to the other Party by virtue of their shared use of the
Equipment. Each Party agrees that it will not, and that it will ensure that its
directors, officers and workforce will not, use or disclose such Protected
Health Information for any purpose other than the proper use, maintenance and
repair of the Equipment. The Parties shall use appropriate safeguards to prevent
use or disclosure of Protected Health Information other than as permitted or
required in this Agreement.
 
The Parties agree to fully cooperate with each other should further action be
necessary to assure compliance with HIPAA. Each representative or member of the
workforce of VS who will access the Equipment during the Term shall execute a
Confidentiality Agreement in the form attached hereto as Exhibit E prior to such
access.

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18.    Integration. This agreement, together with its Exhibits, constitutes the
entire contract of sale and purchase of the Equipment identified herein. No
modification hereof shall be of any force or effect unless in writing and signed
by the Party claimed to be bound thereby, and no modification shall be effected
by the acknowledgment or acceptance of purchase order forms stipulating
different conditions.

19.    No Liens. URMC shall not create or permit any lien or other encumbrance
of any kind on the Equipment.

20.    Enforceability.  This Agreement shall be binding on URMC’s successors and
assigns and shall be enforceable by VS’s successors and assigns.

21.    Notices. All notices hereunder shall be in writing and shall be deemed to
have been delivered on the day of mailing if sent by registered or certified
mail, postage prepaid and return receipt requested to the addresses set forth at
the beginning of this Agreement.

22.    Cumulative Nature and Non-Exclusive Exercise of Rights and Remedies. All
rights and remedies of the Parties pursuant to this Agreement shall be
cumulative, and no such right or remedy shall be exclusive of any other such
right or remedy. No single or partial exercise by a Party of any right or remedy
pursuant to this Agreement or otherwise shall preclude any other or further
exercise thereof, or any exercise of any other such right or remedy, by such
Party.

23.    Court Costs; Attorneys' Fees. In the event of litigation to enforce the
terms and conditions of this Agreement, the losing Party agrees to pay the
prevailing Party's costs and expenses incurred including, without limitation,
reasonable attorneys' fees.
 
UNIVERSITY OF ROCHESTER
MEDICAL CENTER
    VIRTUALSCOPICS, LLC                     By: /s/ C McCallister Evarts, MD  
By: /s/ Mikael Totterman   

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Title: Sr. VP & Vice Provost for Health Affairs And CEO Strong Health Center  
Title: Chief Operating Officer

 
 
LIST OF EXHIBITS

Exhibit A  - Description of Equipment
Exhibit B -  GEMS’ Agreement to Provide Delivery and Installation, and Consent
to Transfer of Warranty
Exhibit C - Manufacturer's Specifications
Exhibit D - Maintenance Agreement
Exhibit E - Form of Confidentiality Agreement

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EXHIBIT A

Description of Equipment

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EXHIBIT B

Manufacturer’s Specifications

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EXHIBIT C

GEMS’ Consent to Assignment of Warranty

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EXHIBIT D

Maintenance Agreement

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EXHIBIT E

Form of Confidentiality Agreement

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