Exhibit 10.19c
 
SECOND AMENDMENT TO
 
LEASE AGREEMENT FOR A GAMMA KNIFE UNIT
 
(PERFEXION UPGRADE)
 
This SECOND AMENDMENT TO LEASE AGREEMENT FOR A GAMMA KNIFE UNIT (this “Second
Amendment”) is dated effective as of May 15, 2009 (the “Effective Date”)  and is
entered into by and between Yale-New Haven Hospital, Inc. a/k/a Yale-New Haven
Hospital, a Connecticut corporation (“YNHH”) and GK Financing, LLC, a California
limited liability company (“GKF”).

Recitals:

A.           On April 10, 1997 GKF and Yale-New Haven Ambulatory Services
Corporation, a Connecticut corporation (“ASC”), entered into a Lease Agreement
For A Gamma Knife Unit, which was amended pursuant to (i) a certain Addendum
dated as of October 25, 2005 (the “Addendum”); and (ii) a certain Assignment,
Assumption And Amendment of Lease Agreement For A Gamma Knife Unit dated
effective as of June 30, 2006 (the “First Amendment”).  The original Lease
Agreement, as amended by the Addendum and the First Amendment, is referred to
herein as the “Lease.”
 
B.            Pursuant to the First Amendment, ASC transferred and assigned its
interest in the Lease to its affiliate, YNHH, and YNHH assumed all of ASC’s
rights and obligations thereunder.
 
C.           YNHH and GKF desire to further amend the Lease to provide for the
replacement and upgrade of the existing Leksell Gamma Knife, Model 4C (the
“Model 4C”) that is currently being leased by GKF to YNHH pursuant to the Lease,
with a Leksell Gamma Knife Perfexion unit (such Perfexion unit leased hereunder
is referred to as the “Perfexion”), which will be installed at the new Yale-New
Haven Cancer Center to be known as The Smilow Cancer Hospital, located at Park
Street and South Frontage Road (the “New Site”) contemporaneously with the
de-installation of the Model 4C.
 
Agreement:

NOW, THEREFORE, in consideration of the mutual covenants 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 Lease.
 
2. Upgrade of the Model 4C to the Perfexion.
 
a. Subject to the terms and conditions set forth herein, GKF shall acquire and
hold title to, and install the Perfexion with new cobalt-60 source, at the New
Site (the “Perfexion Upgrade”).  GKF shall use its commercially reasonable
efforts to perform the Perfexion Upgrade either during the fourth quarter of
2009 or the first quarter of 2010, subject to availability of the Perfexion from
the equipment manufacturer, issuance of all regulatory approvals, permits and/or
waivers, and completion of construction of the New Site.  The parties
acknowledge that YNHH may not be able to perform procedures for several weeks
during the Perfexion Upgrade and the deinstallation of the Model 4C.
 
b. Subject to Section 2.c below, YNHH shall be solely responsible for the
construction and preparation of the New Site, which construction and preparation
shall be performed by YNHH in the
 
 
 
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same manner as was performed with respect to the original Site.  Prior to the
Perfexion Upgrade, YNHH shall enter into a mutually acceptable LGK Agreement
with Elekta for the Perfexion.
 
c. GKF shall be responsible for installation costs related to the Perfexion
Upgrade, consisting primarily of rigging costs.
 
d. GKF shall be solely responsible for maintenance and service, personal
property taxes, and the cost of insurance coverage for the Perfexion to the same
extent and at the same levels as required under the Lease, provided that YNHH
shall have no obligation to pay for such costs.
 
e. In connection with the Perfexion Upgrade, YNHH, at YNHH’s sole cost and
expense, shall provide GKF with YNHH personnel (including YNHH physicists) and
services upon reasonable request and as reasonably required by GKF, among other
things, to oversee, supervise and assist with construction and compliance with
local, state and federal regulatory requirements and with nuclear regulatory
compliance issues and the calibration of the Perfexion.
 
f. Notwithstanding the foregoing, the Perfexion Upgrade shall be performed by
GKF only after all necessary and appropriate licenses, permits, approvals,
waivers, consents and authorizations, including, without limitation, the CON or
its waiver, and the proper handling of the cobalt-60 (collectively, the
“Permits”), have been obtained by YNHH at YNHH’s sole cost and expense.  The
timing and procedure for the Perfexion Upgrade shall be as mutually agreed upon
between the parties.
 
3. De-Installation of the Model 4C.  Promptly following the Perfexion Upgrade,
GKF shall de-install, remove and retain all ownership rights and title to the
existing Model 4C.  Notwithstanding anything to the contrary set forth in the
Lease or herein, neither YNHH nor any of its affiliates shall have any ownership
interest in the Model 4C, and YNHH on behalf of itself and its affiliates hereby
waives any ownership interest (or option to purchase any ownership interest) in
the Model 4C.  With respect to the Deposit * previously deposited with GKF
pursuant to Section 6.c of the Addendum, YNHH hereby grants, assigns and
transfers unto GKF all of YNHH’s right, title and interest in and to the Deposit
for the purpose of reducing the Per Procedure Payments to be paid to GKF by YNHH
following the Perfexion Upgrade pursuant to this Second Amendment.
 
4. Extension of Lease Term.  In consideration of the Perfexion Upgrade, the Term
is hereby extended to the date that is seven (7) years following the First
Perfexion Procedure Date (as hereinafter defined); provided that the Term may be
further extended as set forth in Section 7(a) below.
 
5. Compensation.
 
a. The parties acknowledge that the compensation payable to GKF for the
Perfexion as set forth in this Second Amendment has been negotiated by the
parties at arm’s length based upon reasonable and jointly derived assumptions
regarding the capacity for clinical services available from the Perfexion,
YNHH’s capabilities in providing high quality radiation oncology services,
market dynamics, GKF’s risk in providing the Equipment, and the provision to GKF
of a reasonable rate of return on its investment in support of the
Equipment.  Based thereon, the Parties believe that the Per Procedure Payments
and Additional Payments, if any, represent fair market value for the use of the
Perfexion, the de-installation and removal of the Model 4C, the Perfexion
Upgrade, marketing support, maintenance and service, personal property taxes,
cost of insurance coverage for the Perfexion, and the other additional services
and costs to be provided or paid for by GKF pursuant to this Second Amendment,
and the transfer of the Deposit to GKF.  YNHH undertakes no obligation to
perform any minimum number of procedures on the Equipment, and the use of the
Equipment for the performance of procedures is wholly based upon the independent
judgment of physicians who order such procedures to meet the medical needs of
their patients.
 
 
 
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b. Commencing from the first procedure performed using the Perfexion at the New
Site (the “First Perfexion Procedure Date”) and continuing through the duration
of the Term (as extended hereby), YNHH shall pay to GKF on a monthly basis, the
applicable “Per Procedure Payments” (as set forth on Exhibit “A” attached
hereto) multiplied by each and every procedure performed during the subject
month using the Perfexion, irrespective of (i) whether the procedure is
performed by YNHH, ASC, or their respective representatives or “Affiliates” (as
defined in the First Amendment), or any other person or entity; or (ii) the
actual amounts billed or collected, if any, pertaining to such procedures.  As
used herein, a “procedure” shall mean any treatment of a patient, whether
performed on an inpatient or outpatient basis, 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.
 
c. The Per Procedure Payments shall be payable within thirty (30) days after the
conclusion of each calendar month in which the applicable procedures were
performed.  Throughout the Term and thereafter until final settlement of all
amounts owed to either party under the Lease, each party shall have the right at
reasonable times and upon reasonable advance notice to inspect, audit and copy
the other party’s books and records which relate to scheduling and billing of,
and reimbursement for, Gamma Knife procedures, the Per Procedure Payments and
Additional Payments, and the service, insurance and property tax expenses
associated with the Perfexion.
 
d. In addition to the Per Procedure Payments, YNHH shall continue to remain
obligated to pay GKF any Additional Payments that may become due from and after
the Perfexion Upgrade, which Additional Payments shall be calculated and paid as
set forth in the First Amendment, except that:
 
(i) The incremental Additional Payment of * (as set forth in the First
Amendment) for each procedure performed using the Additional Unit(s) shall be
replaced with the applicable Per Procedure Payment then being paid by YNHH under
this Second Amendment.  For example, if the Per Procedure Payment then being
paid by YNHH is *, then, the incremental Additional Payment shall be equal to *
multiplied by each procedure performed using the Additional Unit(s) during the
corresponding Contract Year (or Shortfall Contract Year, if applicable), up to
an aggregate of * procedures (prorated if the subject Contract Year is less than
365 days) combined between procedures performed using the Perfexion and
procedures performed using the Additional Unit(s), irrespective of (1) whether
such procedures are performed by YNHH, its representatives or Affiliates (as
defined in the First Amendment), or any other person or entity; or (2) the
actual amounts billed or collected, if any, pertaining to any such procedures;
and
 
(ii) “Contract Year” shall mean each successive twelve (12) month period
commencing from the First Perfexion Procedure Date.
 
e. Notwithstanding the foregoing, the compensation payable to GKF pertaining to
procedures performed prior to the First Perfexion Procedure Date shall continue
to be calculated and paid by YNHH in accordance with the First Amendment.
 
6. Marketing Support. The parties obligations with respect to marketing the
Perfexion shall continue in the same manner and with the same amounts as set
forth in Section 2.d of the First Amendment.
 
7. Cobalt Reload.  Notwithstanding anything to the contrary contained in the
Lease, YNHH shall be solely responsible for all costs related to any future
reloading (but not the initial loading)  of the Cobalt-60 source for the
Perfexion.  However, if GKF and YNHH mutually agree that GKF will be solely
responsible for the costs of such Cobalt-60 reloading, then, (a) the Term (as
extended by this Second Amendment) shall be further extended for an additional
three (3) years, plus the period of time during which the Perfexion is not in
use due to the Cobalt-60 reloading; and (b) the Per Procedure Payment during
years eight (8), nine (9) and ten (10) of the Term (as extended by this Second
 
 
 
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Amendment) shall be at a rate to be mutually negotiated between the parties,
provided that if the parties cannot reach agreement as to such rates, then, (i)
YNHH (and not GKF) shall be solely responsible for all costs related to any such
future reloading, and (ii) the Term (as extended by this Second Amendment) shall
not be further extended.
 
8. Purchase Option Upon Expiration.
 
a. Upon the expiration of the Term (as extended hereby), YNHH shall have the
option to purchase GKF’s ownership interest in the Perfexion (the “Purchase
Option”) for a purchase price of * (the “Option Purchase Price”).  The Option
Purchase Price shall be paid in full in cash to GKF upon the expiration of the
Term of the Lease (as extended), upon which GKF shall transfer, convey and
assign to YNHH, free and clear of all encumbrances, all of GKF’s right, title
and interest in and to the Perfexion, on an “as is, where is” basis with all
faults, and without representation or warranty (other than as to clear
title).  If the Purchase Option is exercised, upon the expiration or termination
of the Lease (as extended), it is understood that GKF shall have no obligation
with respect to the removal, relocation, reinstallation and/or repair of the
Perfexion, except as to any obligations to insure and/or repair the Equipment
that arose under the Lease prior to such expiration or termination.
 
b. On or before the date that is twelve (12) months prior to the expiration of
the Term of the Lease (as extended), GKF will provide YNHH with written notice
of such expiration (the “Twelve Month Notice”).  The Purchase Option may be
exercised by YNHH by giving GKF written notice of such exercise (the “Exercise
Notice”), which Exercise Notice shall be received by GKF not more than sixty
(60) days following YNHH’s receipt of the Twelve Month Notice.  The Twelve Month
Notice and the Exercise Notice may be delivered by hand or sent by certified
mail, return receipt requested to YNHH or GKF, as the case may be, at their
respective addresses set forth below:
 
If to GKF:
 
GK Financing, LLC
Four Embarcadero Center, Suite 3700
San Francisco, CA  94111
Attn:           Mr. Craig K. Tagawa,
                    Chief Executive Officer.
If to YNHH:
 
Yale-New Haven Hospital, Inc.
20 York Street MSC 2006
New Haven CT 06504
_______________________
Attn:           John Skelly
 

 
5. Other provisions.
 
a. Upon request by GKF and at GKF’s reasonable expense, YNHH shall execute and
deliver a commercially reasonable form of consent to sublease, to be attached as
Exhibit “B” hereto, if such a document is reasonably requested by the third
party financing company which holds a security interest in the Perfexion.
 
b. In each of Section 20(e) (Events of Default by Yale and Remedies) and Section
21(e) (Events of Default by GKF and Remedies) of the Lease, the words, “under
any present or future statute, law or regulation,” shall be deleted and replaced
with the words, “under any then-current statute, law or regulation.”
 
c. GKF, at its cost and expense, shall cover the tuition costs for up to ten
(10) Perfexion training slots for physicians and physicists who will be using
the Perfexion.  Travel and entertainment associated with training shall not be
the responsibility of GKF.
 
 
 
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d. YNHH and GKF each, on its own behalf, represents and warrants to the other
that neither it nor any of its respective owners has ever been (a) convicted of
a criminal offense related to health care and/or related to the provision of
services paid for by Medicare, Medicaid or another federal health care program;
(b) excluded or debarred from participation in any federal health care program,
including Medicare and Medicaid; or (c) otherwise sanctioned by the federal
government in connection with health care and/or the provision of services paid
for by Medicare, Medicaid or another federal health care program, including
being listed on the General Services Administration’s Excluded Party Listing
System.  YNHH and GKF shall each notify the other party immediately in the event
that the representation contained in the preceding sentence is or becomes untrue
at any time during the Term (as extended).  The parties shall use best efforts
to preserve to the greatest extent possible their economic arrangement
represented by the Lease and this Second Amendment (as the same may be further
amended, the “Amended Lease”) such that patient access to Gamma Knife treatments
will be maintained in the event either party is excluded from Medicare, Medicaid
and/or any other Federal health care programs (an “Exclusion”).  In furtherance
of the foregoing and notwithstanding anything in the Amended Lease to the
contrary, in order to achieve the foregoing objective with minimal disruption,
prior to the effective date of any Exclusion and during the pendency of any
investigation, audit or proceeding with respect to either YNHH or GKF which
could result in an Exclusion of either party, both parties shall diligently work
together in good faith to implement the following, as applicable, which will
become effective upon the effective date of the Exclusion:
 
(i) If GKF is the subject of the Exclusion, then, GKF’s interests under the
Amended Lease may be assigned to a non-excluded assignee with an equal or
greater credit or financial condition as that of GKF, which assignee shall be
approved by YNHH (whose approval shall not be unreasonably withheld or
delayed).  Without limiting GKF’s selection of an assignee, it is acknowledged
that either American Shared Hospital Services or Elekta Instruments, Inc. shall
be an acceptable assignee provided that the applicable assignee is not then
subject to an Exclusion.  Upon the expiration or termination of the Exclusion,
the Amended Lease may be assigned back to GKF, and GKF shall provide YNHH with a
copy of GKF’s notice of reinstatement, as applicable.
 
(ii) If YNHH is the subject of the Exclusion, then, the parties shall negotiate
in good faith an increase to the Per Procedure Payments to offset the lost
revenues to GKF resulting from the Exclusion.
 
10. Governing Law.  This Second Amendment shall be governed by and construed
under the laws of the State of Connecticut, without reference to its principles
of conflicts of law.
 
11. Counterparts.  This Second Amendment may be executed in separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which counterparts shall together constitute the same instrument.
 
12. Captions.  The captions and paragraph headings used herein are for
convenience only and shall not be used in construing or interpreting this Second
Amendment.
 
13. Full Force and Effect.  Except as amended by this Second Amendment, all of
the terms and provisions of the Lease shall remain unchanged and in full force
and effect and, together with this Second Amendment, represent the entire
agreement of the parties with respect to the Equipment and its use by
YNHH.  Unless the context requires otherwise, with respect to the Perfexion, all
references in the Lease to (i) the “Equipment” shall be deemed to mean the
Perfexion; (ii) “Installation” shall be deemed to refer to the Perfexion
Upgrade; (iii) the “LGK Agreement” shall be deemed to refer to the new LGK
Agreement to be executed by YNHH relating to the Perfexion; (iv) the “Site”
shall be deemed to refer to the New Site; (v) the “Term” shall be deemed to
refer to the Term, as extended pursuant to this Second
 
 
 
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Amendment.  To the extent any of the terms of the Lease conflict with the terms
of this Second Amendment, the terms and provisions of this Second Amendment
shall prevail and control.  Where not different or in conflict with the terms
and provisions of this Second Amendment, all applicable terms and provisions set
forth in the Lease are incorporated within this Second Amendment as is if set
forth herein and shall apply with equal force and effect to the
Perfexion.  Nothing set forth in this Second Amendment shall relieve either
party from any or all of its obligations under the Lease with respect to the
Model 4C, including, without limitation, the obligation to pay Lease Payments,
Additional Payments, and the service, insurance and property tax expenses
associated with the Model 4C.
 
IN WITNESS WHEREOF, the undersigned have executed this Second Amendment as of
the day first written above.

YALE-NEW HAVEN HOSPITAL, INC.
 
 
By: /s/ John Skelly
 
Its:   VP, Finance
 
Dated:  5/15/09
 
GK FINANCING, LLC
 
 
By: Ernest A. Bates, M.D.
 
Its:   CEO, ASHS
 
Dated:  5/28/09
 

 
 
 
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Exhibit “A”

PER PROCEDURE PAYMENTS

Cumulative Procedures Performed Using the Perfexion
Per Procedure Payment
*
*
*
*
*
*

Notwithstanding anything to the contrary set forth herein, (a) for purposes of
determining the applicable Per Procedure Payment, the number of procedures
performed using the Perfexion shall be counted and cumulated from and after the
First Perfexion Procedure Date through the expiration of the Term (as extended
hereby); (b) procedures previously performed using prior models of the Equipment
(including the Model 4C) shall not be counted towards the cumulative total; and
(c) there shall be no retroactive adjustment of the Per Procedure Payment
irrespective of whether the number of procedures performed reaches a lower Per
Procedure Payment level.  For example, if the cumulative number of procedures
totals *, then, the Per Procedure Payment for the first * procedures would
remain at * per procedure while the Per Procedure Payment for the next *
procedures (i.e., for procedures * through *) would be * per procedure.  There
are no minimum volume requirements.
 
 
 
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Exhibit “B”

CONSENT TO SUBLEASE
 
 
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