**Exhibit 10.45**
**EQUIPMENT LEASE AGREEMENT**
     **THIS EQUIPMENT LEASE AGREEMENT**(“Agreement”) is made and entered into onMay 28, 2003, by and between **GK FINANCING, LLC,**a California limited liabilitycompany (“GKF”), and Lehigh Valley Hospital (“Hospital”), a not for profitPennsylvania corporation, with reference to the following facts:
**R E C I T A L S**
     WHEREAS, Hospital wants to lease a Leksell Stereotactic Gamma Unit, modelC with Automatic Positioning System, manufactured by Elekta Instruments, Inc.,as specified in Exhibit A of the LGK Agreement (hereinafter referred to as the“Equipment”); and
     WHEREAS, GKF is willing to lease the Equipment which GKF has acquired fromElekta Instruments, Inc., a Georgia corporation (hereinafter referred to as“Elekta”), 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 andagreements set forth herein, and for such other good and valuableconsideration, the receipt and sufficiency of which are hereby acknowledged,the parties hereto agree as follows:
     1.  Lease.  Subject to and in accordance with the covenants and conditionsset forth in this Agreement, GKF hereby leases to Hospital, and Hospital herebyleases from GKF, the Equipment. The Equipment to be leased to Hospitalpursuant to this Agreement shall include the Gamma Knife technology asspecified in Exhibit 1, including all hardware and software related thereto.
     2.  LGKAgreement.  Simultaneously with the execution of this Agreement,Hospital and Elekta shall enter into that certain LGK Agreement (the “LGKAgreement”), a copy of which is attached hereto as Exhibit 1. Hospital shallperform, satisfy and fulfill all of its obligations arising under the LGKAgreement when and as required thereunder. Hospital acknowledges that GKF is athird party beneficiary of the LGK Agreement and, in that capacity, GKF shallbe entitled to enforce Hospital’s performance, satisfaction and fulfillment ofits obligations thereunder.
     3.  Termof the Agreement.  The initial term of this Agreement (the “Term”)shall commence as of the date hereof and, unless earlier terminated or extendedin accordance with the provisions of this Agreement, shall continue for aperiod of ten (10) years following the date of the performance of the firstclinical Gamma Knife procedure (the “First Procedure Date”) at the
 

 

Site. Hospital’s obligation to make the rental payments to GKF for theEquipment described in Section 8 below shall commence as of the First ProcedureDate.
     4.  User License.
          4.1  Hospital shall apply for and obtain in a timely manner a User Licensefrom the Nuclear Regulatory Commission and, if necessary, from the applicablestate agency authorizing it to take possession of and maintain the Cobaltsupply required in connection with the use of the Equipment during the term ofthis Agreement. Hospital also shall apply for and obtain in a timely mannerall other licenses, permits, approvals, consents and authorizations which maybe required by state or local governmental or other regulatory agencies for thedevelopment, construction and preparation of the Site, the charging of theEquipment with its Cobalt supply, the conduct of acceptance tests with respectto the Equipment, and the use of the Equipment during the Term, as more fullyset forth in Article 2.2 of the LGK Agreement.
     5.  Delivery of Equipment; Site.
          5.1  GKF shall coordinate with Elekta and Hospital to have the Equipmentdelivered to Hospital at Lehigh Valley Hospital-Muhlenberg (the “Site”) on orprior to the delivery date agreed upon by Hospital, GKF and Elekta in writing.GKF makes no representations or warranties concerning delivery of the Equipmentto the Site or the actual date thereof.
          If the Equipment is not delivered by the scheduled delivery date specifiedin a separate written agreement plus a sixty (60) day grace period (other thanby reasons of force majeure as provided in Paragraph 23.16 below) (the “LateDelivery Date”), GKF shall reimburse Hospital upon written request forHospital’s actual financing costs (which financing costs shall not exceedinterest at the prime interest rate of Bank of America plus 2%) based uponHospital’s cost to install the Equipment (cost is estimated at approximately$500,000) for the period between the Late Delivery Date and the date that theEquipment is delivered to the Site.
          5.2  Hospital, at its cost and expense, shall provide a safe, convenientand properly prepared Site for the Equipment in accordance with Elekta’sguidelines, 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 besubject to the prior approval of GKF.
     6.  Site Preparation and Installation of Equipment.
          6.1  Hospital, at its cost, expense and risk, shall prepare all plans andspecifications required to construct and improve the Site for the installation,use and operation of the Equipment during the Term. The plans andspecifications shall comply in all respects with
 

 

the Site Planning Criteria and with all applicable federal, state andlocal laws, rules and regulations. All plans and specifications prepared by oron behalf of Hospital (and all material changes thereto following approval byGKF and Elekta) shall be subject to the written approval of GKF and Elektaprior to commencement of construction at the Site. Hospital shall provide GKFand Elekta with a reasonable period of time for the review and consideration ofall 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 orauthorizations required by applicable federal, state or local laws, rules orregulations 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 improvethe Site as necessary for the installation, use and operation of the Equipmentduring the Term, including, without limitation, providing all temporary orpermanent shielding required for the charging of the Equipment with the Cobaltsupply and for its subsequent use, selecting and constructing a properfoundation for the Equipment and the temporary or permanent shielding, aligningthe Site for the Equipment, and installing all electrical systems and otherwiring required for the Equipment. In connection with the construction of theSite, Hospital, at its cost and expense, shall select, purchase and install allradiation monitoring equipment, devices, safety circuits and radiation warningsigns required at the Site in connection with the use and operation of theEquipment, 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, atits cost, expense and risk, shall be responsible for the installation of theEquipment at the Site, including the positioning of the Equipment on itsfoundation at the Site in compliance with the Site Planning Criteria.
          6.4  Upon completion of construction, the Site shall (a) comply in allrespects with the Site Planning Criteria and all applicable federal, state andlocal laws, rules and regulations, and (b) be safe and suitable for the ongoinguse and operation of the Equipment during the Term.
          6.5  Hospital shall use its reasonable efforts to satisfy its obligationsunder this Section 6 in a timely manner. Hospital shall keep GKF informed in atimely manner of its progress in the design of the Site, the preparation ofplans and specifications, the construction and improvement of the Site, and thesatisfaction of its other obligations under this Section 6. In all events,Hospital shall complete all construction and improvement of the Site requiredfor the installation, positioning and testing of the Equipment on or prior tothe delivery date described in Section 5.1 above. If the Site is not completeas of the delivery date described in Section 5.1 above plus a sixty (60) daygrace period (other than by reasons of force majeure as provided in Section 23below) (the “late completion date”), Hospital shall reimburse GKF for itsout-of-pocket financing costs incurred with respect the Equipment at the Bankof 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 periodbetween the late completion date and the date that the Site is completed to theextent necessary to allow for the installation, positioning and testing of theEquipment.
          If the Equipment is not delivered by the scheduled delivery date specifiedin a separate written agreement plus a sixty (60) day grace period (other thanby reasons of force majeure as provided in Paragraph 23.16 below) (the “LateDelivery Date”), GKF shall reimburse Hospital upon written request forHospital’s actual financing costs (which financing costs shall not exceedinterest at the prime interest rate of Bank of America plus 2%) based uponHospital’s direct costs incurred to prepare and construct the Site for theEquipment for the period between the Late Delivery Date and the date theEquipment is actually delivered to the Site.
          6.6  During the Term, Hospital, at its cost and expense, shall maintain theSite in a good working order, condition and repair, reasonable wear and tearexcepted.
          6.7  Hospital shall be liable for, and shall indemnify GKF in the mannerdescribed in Section 22 below from and against, all damage to the Equipmentcaused by (a) defects in construction of the Site or in installation orpositioning the Equipment at the Site; (b) defects arising out of materials orparts provided, modified or designed by Hospital for or with respect to theSite; (c) negligent, intentional or wrongful acts or omissions by Hospital orany 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 theSite. Further, neither the review and approval of Site plans, specificationsand/or positioning plans by GKF and/or Elekta, nor the construction of anyother Site preparation, shall relieve Hospital for liability for damages to theEquipment caused by the failure to comply with applicable federal, state orlocal laws or regulations, including building codes, or those portions of theSite Planning Criteria relating to the load bearing capacity of the floor ofthe treatment room and to radiation protection.
     7.  MarketingSupport.  GKF, in coordination with Hospital, shall providemarketing support for the Gamma Knife service to be provided by Hospital. Notless than ninety (90) days prior to the First Procedure Date and thecommencement of each succeeding twelve (12) month period during the Term, GKFand Hospital shall develop a mutually agreed upon marketing budget and plan forthe clinical service to be supported by the Equipment for the succeeding twelve(12) month period of the Term. Once approved, the marketing budget and planshall be implemented by Hospital in accordance with its terms. As funds areexpended by Hospital in accordance with the marketing budget and plan, Hospitalshall submit invoices (together with documentary evidence supporting theinvoices) for its expenditures and, promptly following the receipt of suchinvoices, GKF shall reimburse Hospital for * of the expenditures up to anannual maximum of *. It is acknowledged by the parties that such expenses tobe reimbursed by GKF as provided in this Section 7 have been included in GKF’scalculation of Hospital’s Lease Payments so as to allow GKF to recover such GKFreimbursed expenses during the Term of this Agreement.
 

 

     8.  PerProcedure Payments.  As rent for the lease of the Equipment toHospital pursuant to this Agreement, Hospital shall pay to GKF the sum of *for each Procedure. Hospital shall pay GKF this amount (the “Lease Payment”)for each “Procedure” that is performed by Hospital or its representatives orits employees or affiliated health care entities, irrespective of whether theProcedure is performed on the Equipment or using any other equipment ordevices. It is acknowledged that a physician that is not employed by Hospitalshall not be deemed to be a representative or affiliated health care entity ofHospital. As used herein, a “Procedure” means any treatment that involvesstereotactic, external, single fraction, conformal radiation, commonly calledradiosurgery, that may include one or more isocenters during the patienttreatment session, delivered to any site(s) superior to the foramen magnum.
     Within ten (10) days following the end of each month (or portion thereof)during the term of this Agreement, Hospital shall inform GKF in writing as tothe number of Procedures performed during that month utilizing the Equipmentand any other devices. If no Procedures are performed by Hospital or any otherperson utilizing the Equipment or any other equipment or devices, no LeasePayments shall be owing by Hospital to GKF. GKF shall submit a rent invoice toHospital on the last day of each calendar month (or portion thereof) for theactual number of Procedures performed during the calendar month. Hospitalshall pay the rent invoice within forty five (45) days after submission by GKFto Hospital. All or any portion of a rent invoice which is not paid in fullwithin sixty (60) days after submission shall bear interest at the rate of oneand one-half percent (1.50%) per month (or the maximum monthly interest ratepermitted to be charged by law between an unrelated, commercial borrower andlender, if less) until the unpaid rent invoice together with all accruedinterest thereon is paid in full. If GKF shall at any time accept a rentpayment from Hospital after it shall become due, such acceptance shall notconstitute or be construed as a waiver of any or all of GKF’s rights under thisAgreement, including the rights of GKF set forth in Section 20 hereof.
     In the event the Equipment cannot perform Gamma Knife procedures forfourteen (14) consecutive days due to Equipment malfunction, the Hospital willnot be required to pay Lease Payments for Procedures performed on alternativeEquipment during the period subsequent to the 14th day until the Equipmentmalfunction is repaired by GKF.
     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 radiosurgeryequipment or devices) to verify the number of Procedures that have beenperformed by Hospital, and Hospital shall provide GKF with access to such booksand records; provided that any patient names or identifiers shall not bedisclosed.
     9.  Use of the Equipment.
          9.1  The Equipment shall be used by Hospital only at the Site and shall notbe removed therefrom. Hospital shall use the Equipment only in the regular andordinary course of Hospital’s business operations and only within the capacityof the Equipment as determined by Elekta’s specifications. Hospital shall notuse nor permit the Equipment to be used in any
 

 

manner nor for any purpose which, in the opinion of Elekta or GKF, theEquipment is not designed or reasonably suitable.
          9.2  This is an agreement of lease only. Nothing herein shall be construedas 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 mayhereafter become attached or affixed to real property) and the title theretoshall at all times remain exclusively in GKF.
          9.3  During the Term, upon the request of GKF, Hospital shall promptlyaffix to the Equipment in a prominent place, or as otherwise directed by GKF,labels, plates, insignia, lettering or other markings supplied by GKFindicating GKF’s ownership of the Equipment, and shall keep the same affixedfor the entire Term. Hospital hereby authorizes GKF to cause this Lease or anystatement or other instrument showing the interest of GKF in the Equipment tobe filed or recorded, or refiled or re-recorded, with all governmental agenciesconsidered appropriate by GKF, at GKF’s cost and expense. Hospital also shallpromptly execute and deliver, or cause to be executed and delivered, to GKF anystatement or instrument requested by GKF for the purpose of evidencing GKF’sinterest in the Equipment, including financing statements and waivers withrespect to rights in the Equipment from any owners or mortgagees of any realestate where the Equipment may be located.
          9.4  At Hospital’s cost and expense, Hospital shall (a) protect and defendGKF’s ownership of and title to the Equipment from and against all personsclaiming against or through Hospital, (b) at all times keep the Equipment freefrom any and all liens, encumbrances, attachments, levies, executions, burdens,charges or legal processes imposed against Hospital, (c) give GKF immediatewritten notice of any matter described in clause (b), and (d) in the mannerdescribed in Section 22 below indemnify GKF harmless from and against any loss,cost or expense (including reasonable attorneys’ fees) with respect to any ofthe foregoing.
     10.  Additional Covenants of Hospital. In addition to the other covenantsof Hospital contained in this Agreement, Hospital shall, at its cost andexpense:
          10.1  Provide properly trained professional, technical and supportpersonnel and supplies required for the proper performance of Gamma Knifeprocedures utilizing the Equipment. In this regard, Hospital shall maintain onstaff a minimum of one (1) Gamma Knife trained team comprised of aneurosurgeon, radiation oncologist and physicist. Hospital will use its bestefforts to have two (2) Gamma Knife trained teams during the term of theAgreement. The Gamma Knife shall be available for use by all credentialedneurosurgeons and radiation oncologists.
          10.2  Direct, supervise and administer the diagnosis, treatment and care ofall patients who receive 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 therapists, etc.) forthe Gamma Knife service to be operated by the Hospital.
          10.4  Keep and maintain the Equipment and the Site fully protected, secureand free from unauthorized access or use by any person.
     11.  Additional Covenants of GKF. In addition to the other covenants ofGKF contained in this Agreement, GKF, at its cost and expense, shall:
          11.1  Use its best efforts to require Elekta to meets its contractualobligations to GKF and Hospital upon delivery of the Equipment and put theEquipment, as soon as reasonably possible, into good, safe and serviceablecondition and fit for its intended use in accordance with the manufacturer’sspecifications, guidelines and field modification instructions.
          11.2  Cause Hospital to enjoy the use of the Equipment, free of the rightsof any other persons except for those rights reserved by GKF or granted toElekta under the LGK Agreement or the Purchase Agreement.
     12.  Maintenance of Equipment; Damage or Destruction of Equipment.
          12.1  During the Term and except as otherwise provided in this Agreement,GKF, at its cost and expense, shall (a) maintain the Equipment in goodoperating condition and repair, reasonable wear and tear excepted, and (b)maintain in full force and effect a Service Agreement with Elekta and any otherservice or other agreements required to fulfill GKF’s obligation to repair andmaintain the Equipment under this Section 12. Hospital shall promptly notifyGKF in the event of any damage or destruction to the Equipment or of anyrequired maintenance or repairs to the Equipment, regardless of whether suchrepairs or maintenance are covered or not covered by the Service Agreement.GKF shall pursue all remedies available to it under the Service Agreement andunder any warranties made by Elekta with respect to the Equipment so that theEquipment will be free from defects in design, materials and workmanship andwill conform to Elekta’s technical specifications concerning the Equipment.
          12.2  GKF and Elekta shall have the right to access the Equipment for thepurpose of inspection and the performance of repairs at all reasonable times,upon reasonable advance notice and with a minimum of interference ordisruptions to Hospital’s regular business operations.
          12.3  Hospital shall be liable for, and in the manner described in Section22 below shall indemnify GKF from and against, any damage to or destruction ofthe Equipment caused by the misuse, improper use, or other intentional andwrongful or negligent acts or omissions of Hospital’s officers, employees,agents, contractors and physicians. In the event the Equipment is damaged as aresult 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 theService Agreement or any warranties or insurance, GKF may service or repair theEquipment as needed and the cost thereof shall be paid by Hospital to GKFimmediately upon written request together with interest thereon at the rate ofone and one-half percent (1.50%) per month (or the maximum monthly interestrate permitted to be charged by law between an unrelated, commercial borrowerand lender, if less) and reasonable attorneys’ fees and costs incurred by GKFin collecting such amount from Hospital. Any work so performed by GKF shallnot deprive GKF of any of its rights, remedies or actions against Hospital forsuch damages.
          12.4  If the Equipment is rendered unusable as a result of any physicaldamage to or destruction of the Equipment, Hospital shall give GKF writtennotice thereof. GKF shall determine, within thirty (30) days after it is givenwritten notice of such damage or destruction, whether the Equipment can berepaired. In the event GKF determines that the Equipment cannot be repaired(a) GKF, at its cost and expense, shall replace the Equipment as soon asreasonably possible taking into account the availability of replacementequipment from Elekta, Elekta’s other then existing orders for equipment, andthe then existing limitations on Elekta’s manufacturing capabilities, and (b)this Agreement shall continue in full force and effect as though such damage ordestruction had not occurred. In the event GKF determines that the Equipmentcan be repaired, GKF shall cause the Equipment to be repaired as soon asreasonably possible thereafter. Hospital shall fully cooperate with GKF toeffect the replacement of the Equipment or the repair of the Equipment(including, without limitation, providing full access to the Site) followingthe damage or destruction thereof.
     13.  Alterations and Upgrades to Equipment.
          13.1  Hospital shall not make any modifications, alterations or additionsto the Equipment (other than normal operating accessories or controls) withoutthe prior written consent of GKF. Hospital shall not, and shall not permit anyperson other than representatives of Elekta or any other person authorized byGKF to, effect any inspection, adjustment, preventative or remedialmaintenance, or repair to the Equipment without the prior written consent ofGKF. All modifications, alterations, additions, accessories or operatingcontrols incorporated in or affixed to the Equipment (herein collectivelycalled “additions” and included in the definition of “Equipment”) shall becomethe 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 theCobalt-60 source, shall be mutually agreed upon by GKF and Hospital. In theevent GKF and Hospital agree to reload the Cobalt-60 source (i.e., inapproximately the seventh (7th) year of the Term), and GKF pays certain costsassociated therewith, notwithstanding any provisions to the contrary herein,the initial Term shall be automatically extended for a period of two (2) years.It is the intent of the parties that GKF shall be responsible for Equipmentrelated costs and expenses and that Hospital shall be responsible for Siterelated costs and expenses for modifications, additions or upgrades to the
 

 

Equipment, including the reloading of the Cobalt-60 source that aremutually agreed upon by GKF and Hospital.
     14.  Financing of Equipment by GKF. GKF, in its sole discretion, mayfinance the Equipment. Financing may be in the form of an installment loan, acapitalized lease or other commercially available debt or financing instrument.If GKF finances the Equipment through an installment loan, GKF shall berequired to provide the Equipment as collateral for the loan. If GKF financesthe Equipment through a capitalized lease, title shall vest with the lessoruntil such time as GKF exercises its buy-out option under the lease, if any.If required by the lender, lessor or other financing entity (the “Lender”), GKFmay assign its interest under this Agreement as security for the financing.Hospital interest under this Agreement shall be subject to the interests of theLender.
     15.  Equipment Operational Costs. Except as otherwise expressly providedin this Agreement, Hospital shall be responsible and liable for all costs andexpenses incurred, directly or indirectly, in connection with the operation anduse of the Equipment during the Term, including, without limitation, the costsand expenses required to provide trained physicians, professionals, andtechnical and support personnel, supplies and other items required to properlyoperate the Equipment and perform Gamma Knife procedures. Between Hospital andGKF, Hospital shall be fully liable for, and in the manner described in Section22 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.
     16.  Taxes. GKF shall pay all sales or use taxes imposed or assessed inconnection with the purchase of the Equipment and all personal property taxesimposed, levied or assessed on the ownership and possession of the Equipmentduring the Term. All other taxes, assessments, licenses or other chargesimposed, levied or assessed on the Equipment during the Term shall be paid byHospital before the same shall become delinquent, whether such taxes areassessed or would ordinarily be assessed against GKF or Hospital; provided,however, Hospital shall not be required to pay any federal, state or localincome, franchise, corporation or excise taxes imposed upon GKF’s net incomerealized from the lease of the Equipment. In case of a failure by Hospital topay any taxes, assessments, licenses or other charges when and as requiredunder this Section, GKF may pay all or any part of such taxes, in which eventthe amount paid by GKF shall be immediately payable by Hospital to GKF uponwritten request together with interest thereon at the rate of at the rate ofone and one-half percent (1.50%) per month (or the maximum monthly interestrate permitted to be charged by law between an unrelated, commercial borrowerand lender, if less) and reasonable attorneys’ fees and costs incurred by GKFin collecting such amount from Hospital.
     17.  No Warranties by GKF. Hospital warrants that as of the FirstProcedure Date, it shall have (a) thoroughly inspected the Equipment, (b)determined that the Equipment is consistent with the size, design, capacity andmanufacture selected by it, and (c) satisfied itself that to the best of itsknowledge the Equipment is suitable for Hospital intended purposes and is
 

 

good working order, condition and repair. GKF SUPPLIES THE EQUIPMENTUNDER THIS AGREEMENT IN ITS “AS IS” CONDITION. GKF, NOT BEING THE MANUFACTUREROF THE EQUIPMENT OR THE MANUFACTURER’S AGENT, MAKES NO WARRANTY ORREPRESENTATION, EITHER EXPRESSED OR IMPLIED, AS TO THE EQUIPMENT’SMERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR USE, DESIGN, CONDITION,DURABILITY, CAPACITY, MATERIAL OR WORKMANSHIP OR AS TO PATENT INFRINGEMENT ORTHE LIKE. As between GKF and Hospital, Hospital shall bear all risks withrespect to the foregoing warranties. GKF shall not be liable for any direct,indirect and consequential losses or damages suffered by Hospital or by anyother person, and Hospital expressly waives any right to hold GKF liablehereunder for, any claims, demands and liabilities arising out of or inconnection with the design, manufacture, possession or operation of theEquipment, including injury to persons or property resulting from the failureof, defective or faulty design, operation, condition, suitability or use of theEquipment. All warranty or other similar claims with respect to the Equipmentshall be made by Hospital solely and exclusively against persons other thanGKF, including Elekta or any other manufacturers or suppliers. In this regardand with prior written approval of GKF, Hospital may, in GKF’s name, but atHospital sole cost and expense, enforce all warranties, agreements orrepresentations, 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 theEquipment or for any delay or inadequacy of any or all of the foregoing.
     18.  Termination for Economic Justification. If, following the initialtwenty four (24) months after the First Procedure Date and following eachsubsequent 12 month period thereafter during the Term, based upon theutilization of the Equipment, within a reasonable period of time after GKF’swritten request, Hospital does not provide GKF with a reasonable economicjustification to continue this Agreement and the provision of Gamma Knifeservices at the Hospital, then and in that event, GKF shall have the option toterminate this Agreement by giving a written notice thereof to Hospital notless than ninety (90) days prior to the effective date of the terminationdesignated in GKF’s written notice. Such termination shall take place withoutpenalty to Hospital.
     19.  Options to Extend Agreement. As of the end of the Term, Hospitalshall have the option either to:
          19.1  Extend the Term of this Agreement for a specified period of time andupon 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 bygiving an irrevocable written notice thereof to GKF at least nine (9) monthsprior to the expiration of the initial Term. Any such notice shall besufficient if it states in substance that Hospital elects to exercise itsoption and states which of the three (2) options referred to above Hospital isexercising. If
 

 

Hospital fails to exercise the option granted herein at least nine (9) monthsprior to the expiration of the initial Term, the option shall lapse and thisAgreement shall expire as of the end of the initial Term. Further, if Hospitalexercises the option specified in Section 19.1 above and the parties are unableto mutually agree upon the length of the extension of the Term or any otherterms or conditions applicable to such extension prior to the expiration of theTerm, this Agreement shall expire as of the end of the initial Term.
     20.  Events of Default by Hospital and Remedies.
          20.1  The occurrence of any one of the following shall constitute an eventof default under this Agreement (an “Event of Default”):
               20.1.1  Hospital fails to pay any rent payment when due pursuant toParagraph 8 above and such failure continues for a period of fifteen (15) daysafter written notice thereof is given by GKF or its assignee to Hospital;however, if Hospital cures the rent payment default within the applicablefifteen (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 asexpressly permitted herein.
               20.1.3  Hospital fails to observe or perform any of its covenants, dutiesor obligations arising under this Agreement or the LGK Agreement and suchfailure continues for a period of thirty (30) days after written notice thereofby GKF to Hospital; however, if Hospital cures the default within theapplicable thirty (30) day period or if the default reasonably requires morethan thirty (30) days to cure, Hospital commences to cure the default duringthe initial thirty (30) day period and Hospital diligently completes the cureas 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 anassignment for the benefit of creditors, admits in writing its inability to payits debts as they become due, files a voluntary petition in bankruptcy, isadjudicated a bankrupt or an insolvent, files a petition seeking for itself anyreorganization, arrangement, composition, readjustment, liquidation,dissolution or similar arrangement under any present or future statute, law orregulation or files an answer admitting the material allegations of a petitionfiled against it in any such proceeding, consents to or acquiesces in theappointment of a trustee, receiver, or liquidator of it or of all or anysubstantial part of its assets or properties, or it or its shareholders shalltake any action looking to its dissolution or liquidation.
               20.1.5  Within sixty (60) days after the commencement of any proceedingsagainst 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 appointmentwithout Hospital consent or acquiescence of any trustee, receiver or liquidatorof it or of all or any substantial part of its assets and properties, suchappointment shall not be vacated.
               20.1.6  Hospital is suspended or terminated from participation in theMedicare program.
          20.2  Upon the occurrence of an Event of Default with respect to Hospitalas defined in Sections 20.1.1, 20.1.2 and 20.1.3, GKF may at its option do anyor all of the actions described in Section 20.2.1, 20.2.2, 20.2.3, 20.2.4 and20.2.5. Upon the occurrence of an Event of Default with respect to theHospital as defined in Sections 20.1.4, 20.1.5 and 20.1.6, GKF may at itsoption exercise any or all of the actions described in Sections 20.2.1, 20.2.3,20.2.4 and 20.2.5.
               20.2.1  By written notice to Hospital, immediately terminate this Agreementas to the Equipment, wherever situated. As a result of the termination, atHospital’s sole cost and expense, GKF may enter upon the Site and remove theEquipment or GKF may demand that Hospital remove and return the Equipment toGKF. Other than for GKF’s negligence or willful misconduct, GKF shall have noliability of any kind or nature in connection with any such removal orrestoration.
               20.2.2  Recover from Hospital as liquidated damages for the loss of thebargain represented by this Agreement and not as a penalty an amount equal tothe present value of the unpaid estimated future rent payments to be made byHospital to GKF through the end of the Term discounted at the rate of ninepercent (9%), which liquidated damages shall become immediately due andpayable. The unpaid estimated future lease payments shall be based on theprior twelve (12) months rent payments made by Hospital to GKF hereunder withan annual five (5%) percent increase thereof through the end of the Term.Hospital and GKF acknowledge that the liquidated damages formula set forth inthis Section 20.2.2 constitutes a reasonable method to calculate GKF’s damagesresulting from an Event of Default arising under Section 20.1.1, 20.1.2 and20.1.3 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 itssole and absolute discretion may determine (and GKF shall not be obligated togive preference to the sale, lease or other disposition of the Equipment overthe sale, lease or other disposition of similar Equipment owned or leased byGKF).
               20.2.4  Exercise any other right or remedy which may be available to GKFunder the Uniform Commercial Code or any other applicable law or proceed byappropriate court action, without affecting GKF’s title or right to possessionof the Equipment, to enforce the terms hereof or to recover damages for thebreach hereof or to cancel this Agreement as to the Equipment.
 

 

               20.2.5  In addition to the foregoing remedies, Hospital shall be liable toGKF for all reasonable attorneys fees, costs and expenses incurred by GKF as aresult of the Event of Default or the exercise of GKF’s remedies.
          20.3  Upon termination of this Agreement or the exercise of any otherrights or remedies under this Agreement or available under applicable lawfollowing an Event of Default, Hospital shall, without further request ordemand, 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 inSection 20.2.2 above to GKF, GKF shall pay to Hospital within thirty (30) daysafter receipt thereof all rentals or proceeds received from the reletting orsale of the Equipment during the balance of the initial Term (after deductionof all costs and expenses, including reasonable attorneys fees and costs,incurred by GKF as a result of the Event of Default), said amount never toexceed the amount of the liquidated damages paid by Hospital. However,Hospital acknowledges that GKF shall have no obligation to sell the Equipment.Hospital shall in any event remain fully liable for all damages as may beprovided by law and for all costs and expenses incurred by GKF on account ofsuch default, including but not limited to, all court costs and reasonableattorneys’ fees. The rights and remedies afforded GKF under this Agreementshall be deemed cumulative and not exclusive, and shall be in addition to anyother rights or remedies to GKF provided by law or in equity.
     21.  Insurance.
          21.1  During the Term, GKF shall, at its cost and expense, purchase andmaintain in effect an all risk property and casualty insurance policy coveringthe Equipment. The all risk property and casualty insurance policy shall befor an amount not less than the replacement cost of the Equipment. Hospitalshall be named as an additional insured party on the all risk property andcasualty insurance policy to the extent of its interest in the Equipmentarising under this Agreement. The all risk property and casualty insurancepolicy maintained by GKF shall be evidenced by a certificate of insurance orother reasonable documentation which shall be delivered by GKF to Hospital uponrequest following the commencement of this Agreement and as of each annualrenewal of such policy during the Term.
          21.2  During the Term, Hospital shall, at its cost and expense, purchaseand maintain in effect general liability and professional liability insurancepolicies covering the Site (together with all premises where the Site islocated) and the use or operation of the Equipment by Hospital or its officers,directors, agents, employees, contractors or physicians. The general liabilityinsurance policy shall provide coverage in amounts not less than One MillionDollars ($1,000,000.00) per occurrence and Five Million Dollars ($5,000,000.00)annual aggregate. GKF shall be a certificate holder for general liabilityinsurance. Professional liability insurance shall be as required byPennsylvania Law Act 111 as amended by Act 135. Currently the limits are$500,000 per occurrence and $2,500,000 in the aggregate for institutionalliability which covers those employees such as nurses, physicists, etc. and thephysician individual limits are $500,000 per occurrence and $1,500,000 in theaggregate. In addition, coverage is provided by
 

 

the MCARE Fund with limits for each of these provides in the amount of$500,000 per occurrence and $2,100,000 in the aggregate. Evidence of currentinsurance is required by the Medical Staff Bylaws. The policies to bemaintained by Hospital hereunder shall be evidenced by a certificate ofinsurance or other reasonable documentation which shall be delivered byHospital to GKF no later than the First Procedure Date and as of each annualrenewal of such policies during the Term.
          21.3  During the construction of the Site and prior to the First ProcedureDate, Hospital, at its cost and expense, shall purchase and maintain a generalliability insurance policy which conforms with the coverage amounts and otherrequirements described in Section 21.2 above and which names GKF as anadditional insured party. The policy to be maintained by Hospital hereundershall be evidenced by a certificate of insurance or other reasonabledocumentation which shall be delivered by Hospital to GKF prior to thecommencement of any construction at the Site.
          21.4  During the Term, Hospital shall purchase and maintain all workerscompensation insurance to the maximum extent required by applicable law.
     22.  Indemnification.
          22.1  Hospital shall indemnify, defend, protect and hold GKF and itsmembers, managers, officers, employees, agents and contractors (collectively“GKF”) harmless from and against all losses, claims, damages, liabilities,assessments, deficiencies, actions, proceedings, orders, judgments, liens,costs and other expenses (including reasonable attorney’s fees) of any natureor kind whatsoever asserted against or incurred by GKF (collectively “Damages”)which in any manner arise out of or relate to (a) the failure by Hospital tofully perform, observe or satisfy its covenants, duties or obligationscontained in this Agreement or in the LGK Agreement; (b) the use and operationof the Equipment resulting from the negligence or willful misconduct ofHospital and its employees, contractors, agents, or representatives and oraffiliates during the Term; (c) the design, construction and preparation of theSite 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 ofthe Equipment; (e) Damages to the Equipment (including any Damages arising outof or related to violations by Hospital, its agents, officers, physicians,employees or contractors of the Service Agreement) caused by the negligent orwrongful acts or omissions of Hospital, its agents, officers, physicians,employees or contractors (in the event the Equipment is destroyed or renderedunusable, subject to Section 22.6 below, this indemnity shall extend up to (butnot exceed) the full replacement value of the Equipment at the time of itsdestruction less salvage value, if any); (f) the events or occurrencesdescribed in Article 7.3 of the LGK Agreement to the same extent that Hospitalagrees to indemnify Elekta thereunder; and (g) any other matters for whichHospital has specifically agreed to indemnify GKF pursuant to this Agreement.
 

 

          22.2  Upon the occurrence of an event for which GKF is entitled toindemnification under this Agreement, GKF shall give written notice thereof toHospital setting forth the type and amount of Damages. If the indemnityrelates to a Third Party Claim (as defined in Section 22.3 below), the mattershall be subject to Section 22.3 below. If the indemnity relates to anyDamages other than a Third Party Claim, not more than thirty (30) days afterGKF’s written notice is given, Hospital either shall acknowledge in writing toGKF its obligation to indemnify hereunder and pay the Damages in full to GKF ordispute its obligation to indemnify in a written notice delivered to GKF. IfHospital disputes the obligation to indemnify, the parties shall meet andnegotiate in good faith to mutually resolve the disagreement regardingindemnification.
          22.3  GKF shall give written notice to Hospital as soon as reasonablypossible after it has knowledge of any third party claim or legal proceedings(“Third Party Claim”) for which GKF is entitled to indemnification under thisSection 22. Hospital shall (a) immediately assume, at its sole cost andexpense, the defense of the Third Party Claim with legal counsel approved byGKF (which approval will not be unreasonably withheld, delayed or conditioned),and (b) as soon as reasonably possible after GKF’s written notice is given toHospital, acknowledge in writing to GKF its obligation to indemnify GKF inaccordance with the terms of this Agreement. If Hospital fails to assume thedefense of a Third Party Claim or fails to timely acknowledge in writing itsobligation to indemnify GKF, GKF may assume the defense of the Third PartyClaim in the manner described in Section 22.4 below. GKF shall cooperate withHospital in the defense of any Third Party Claim. Any settlement or compromiseof a Third Party Claim to which GKF is a party shall be subject to the expresswritten approval of GKF, which approval shall not be unreasonably withheld,delayed or conditioned as long as an unconditional term of the settlement orcompromise is the full and absolute release of GKF from all Damages arising outof the Third Party Claim. GKF, at its own cost and expense, may participate onits own behalf with legal counsel of its own selection in the defense of anyThird Party Claim which may have a material impact on GKF.
          22.4  If Hospital fails to promptly assume the defense of any Third PartyClaim, GKF may assume the defense of the Third Party Claim with legal counselselected by GKF, all at Hospital cost and expense. The defense of an action byGKF under this Section 22.4 shall not impair, limit or otherwise restrictHospital indemnification obligations arising under this Section 22 or GKF’sright to enforce such obligations.
          22.5  The indemnity obligations under this Section 22 shall survive thetermination of this Lease with respect to events occurring during or relatingto the Term.
          22.6  The indemnification obligations set forth in this Agreement areintended to supplement, and not supersede, supplant or replace, any coveragefor Damages which may be available under any insurance policies that may bemaintained by GKF or Hospital. In the event any Damages may be covered byinsurance policies, the parties shall exercise good faith and use their bestefforts to obtain the benefits of and apply the available insurance coverage to the
 

 

Damages subject to indemnification under this Agreement. In the eventthat an insurer provides coverage under an insurance policy on the basis of a“reservation of rights”, the indemnification obligations under this Agreementshall apply to all Damages which are finally determined as not being coveredunder the insurance policy.
     23.  Miscellaneous.
          23.1  Binding Effect. This Agreement shall be binding upon and inure tothe benefit of the parties hereto and their respective successors and assigns.Hospital shall not assign this Agreement or any of its rights hereunder orsublease the Equipment without the prior written consent of GKF, which consentshall not be unreasonably withheld. An assignment or sublease shall notrelieve Hospital of any liability for performance of this Agreement during theremainder of the Term. Any purported assignment or sublease made without GKF’sprior written consent shall be null, void and of no force or effect.
          23.2  Agreement to Perform Necessary Acts. Each party agrees to performany further acts and execute and deliver any further documents which may bereasonably necessary or otherwise reasonably required to carry out theprovisions of this Agreement.
          23.3  Validity. If for any reason any clause or provision of thisAgreement, or the application of any such clause or provision in a particularcontext or to a particular situation, circumstance or person, should be heldunenforceable, invalid or in violation of law by any court or other tribunal ofcompetent jurisdiction, then the application of such clause or provision incontexts or to situations, circumstances or persons other than that in or towhich it is held unenforceable, invalid or in violation of law shall not beaffected thereby, and the remaining clauses and provisions hereof shallnevertheless remain in full force and effect.
          23.4  Attorney’s Fees and Costs. In the event of any action, arbitrationor other proceedings between or among the parties hereto with respect to thisAgreement, the non-prevailing party or parties to such action, arbitration orproceedings shall pay to the prevailing party or parties all costs andexpenses, including reasonable attorneys’ fees, incurred in the defense orprosecution thereof by the prevailing party or parties. The party which is a“prevailing party” shall be determined by the arbitrator(s) or judge(s) hearingthe matter and shall be the party who is entitled to recover his, her or itscosts of suit, whether or not the matter proceeds to a final judgment, decreeor determination. A party not entitled to recover his, her or its costs ofsuit shall not recover attorneys’ fees. If a prevailing party or parties shallrecover a decision, decree or judgment in any action, arbitration orproceeding, the costs and expenses awarded to such party may be included in andas part of such decision, decree or judgment.
          23.5  Entire Agreement; Amendment. This Agreement together with theExhibits attached hereto constitutes the full and complete agreement andunderstanding between the parties hereto concerning the subject matter hereofand shall supersede any and all prior written and oral agreements with regardto such subject matter. This Agreement may be modified or amended only by awritten instrument executed by all of the parties hereto.
 

 

          23.6  Number and Gender. Words in the singular shall include the plural,and words in a particular gender shall include either or both additionalgenders, when the context in which such words are used indicates that such isthe intent.
          23.7  Effect of Headings. The titles or headings of the various paragraphshereof are intended solely for convenience or reference and are not intendedand shall not be deemed to modify, explain or place any construction upon anyof the provisions of this Agreement.
          23.8  Counterparts. This Agreement may be executed in one or morecounterparts by the parties hereto. All counterparts shall be construedtogether and shall constitute one agreement.
          23.9  Governing Law. This Agreement shall be interpreted and enforced inaccordance with the internal laws, and not the law of conflicts, of the Stateof Pennsylvania applicable to agreements made and to be performed in thatState.
          23.10  Exhibits. All exhibits attached hereto and referred to in thisAgreement are hereby incorporated by reference herein as though fully set forthat length.
          23.11  Ambiguities. The general rule that ambiguities are to be construedagainst the drafter shall not apply to this Agreement. In the event that anyprovision of this Agreement is found to be ambiguous, each party shall have anopportunity to present evidence as to the actual intent of the parties withrespect to such ambiguous provision.
          23.12  Representations. Each of the parties hereto represents (a) that norepresentation or promise not expressly contained in this Agreement has beenmade by any other party hereto or by any of its agents, employees,representatives or attorneys; (b) that this Agreement is not being entered intoon the basis of, or in reliance on, any promise or representation, expressed orimplied, other than such as are set forth expressly in this Agreement; (c) thatit has been represented by counsel of its own choice in this matter or hasaffirmatively elected not to be represented by counsel; (d) it is dulyorganized, validly existing and in good standing under the laws of thejurisdiction of its organization, (e) it has full power and authority toexecute, deliver and perform this Agreement, and (f) the execution, deliveryand performance of this Agreement has been duly authorized by all necessarycorporate or other similar action.
          23.13 Non-Waiver. No failure or delay by a party to insist upon thestrict performance of any term, condition, covenant or agreement of thisAgreement, or to exercise any right, power or remedy hereunder or under law orconsequent upon a breach hereof or thereof shall constitute a waiver of anysuch term, condition, covenant, agreement, right, power or remedy or of anysuch breach or preclude such party from exercising any such right, power orremedy at any later time or times.
 

 

          23.14  Notices. All notices, requests, demands or other communicationsrequired or permitted to be given under this Agreement shall be in writing andshall be delivered to the party to whom notice is to be given either (a) bypersonal delivery (in which case such notice shall be deemed to have been dulygiven on the date of delivery), (b) by next business day air courier service(e.g., Federal Express or other similar service) (in which case such noticeshall be deemed given on the business day following deposit with the aircourier service), or (c) by United States mail, first class, postage prepaid,registered or certified, return receipt requested (in which case such noticeshall be deemed given on the third (3rd) day following the date of mailing),and properly addressed as follows:   To GKF: Craig K. Tagawa Chief Executive Officer GK Financing, LLC Four Embarcadero Center, Suite 3700 San Francisco, CA 94111  To Hospital: Teri Guidi Lehigh Valley Hospital Vice President Cancer Services 1200 South Cedar Crest Blvd. Allentown, PA 18103
A party to this Agreement may change his, her or its address for purposes ofthis Section by giving written notice to the other parties in the mannerspecified herein.
          23.15  Special Provisions Respecting Medicare and Medicaid Patients
               23.15.1  Hospital and GKF shall generate such records and make suchdisclosures as may be required, from time to time, by the Medicare, Medicaidand other third party payment programs with respect to this Agreement in orderto meet all requirements for participation and payment associated with suchprograms, including but not limited to the matters covered by Section1861(v)(1)(I) of the Social Security Act.
               23.15.2  For the purpose of compliance with Section 1861(v)(1)(I) of theSocial Security Act, as amended, and any regulations promulgated pursuantthereto, both parties agree to comply with the following statutory requirements(a) Until the expiration of four (4) years after the termination of thisAgreement, both parties shall make available, upon written request to theSecretary of Health and Human Services or, upon request, to the ComptrollerGeneral of the United States, or any of their duly authorized representatives,the contract, and books, documents and records of such party that are necessaryto certify the nature and extent of such costs, and (b) if either party carriesout any of the duties of the contract through a subcontract with a value orcost of $10,000 or more over a twelve month period, with a relatedorganization, such subcontract shall contain a clause to the effect that untilthe expiration of four
 

 

(4) years after the furnishing of such services pursuant to suchsubcontract, the related organization shall make available, upon writtenrequest to the Secretary, or upon request to the Comptroller General, or any oftheir duly authorized representatives the subcontract, and books, documents andrecords of such organization that are necessary to verify the nature and extentof such costs.
          23.16  Force Majeure. Failure to perform by either party will be excusedin the event of any delay or inability to perform its duties under thisAgreement directly or indirectly caused by conditions beyond its reasonablecontrol, including, without limitation, fires, floods, earthquakes, snow, ice,disasters, acts of God, accidents, riots, wars, operation of law, strikes,governmental action or regulations, shortages of labor, fuel, power, materials,manufacturer delays or transportation problems. Notwithstanding the foregoing,all parties shall make good faith efforts to perform under this Agreement inthe event of any such circumstance. Further, once such an event is resolved,the parties shall again perform their respective obligations under thisAgreement.
 

 

     **IN WITNESS WHEREOF**, the parties hereto have caused this Agreement to beexecuted 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”** **Lehigh Valley Hospital,** a not for profit Pennsylvania corporation         By:                     /s/ Teri U. Guidi    Teri U. Guidi,    Vice President, Cancer Services       By:                     /s/ Louis L. Liebhaber    Louis L. Liebhaber,    Chief Operating Officer