Document:

exv10w3a

 

EXHIBIT 10.3(a)

OILGEAR VARIABLE COMPENSATION PROGRAM

For Corporate Officers and Key Employees

1) PURPOSE

     The Plan is intended to provide variable compensation for corporate officers and other key
employees of the Company based on the profitability of the Company and the Company’s return on
equity. In particular, the plan has been designed to respond to increasing market pressures to
provide competitive compensation packages to officers and key employees.

2) ELIGIBILITY

     Participation shall be limited to corporate officers and selected key employees. The number of
units assigned to each corporate officer will be established by the Compensation Committee of the
Board of Directors at the beginning of each year and will be determined by an evaluation of each
individual’s responsibility, ability, experience, past performance and other factors. In a similar
manner, the number of units assigned to selected key employees will be established by corporate
management.

3) INCENTIVE BONUS CALCULATION

     a) Participants in the Oilgear Variable Compensation Program for corporate officers and key
employees will receive incentive payments which will not exceed 40% of the total compensation of
all the participants. In the event that the total payout calculated as below shall exceed this
amount, then each participant’s bonus shall be reduced pro rata.

     b) No incentive payment shall be made unless the Corporation’s net income shall exceed the
lesser of $1,000,000 or 4% of shareholders’ equity. For the purposes of this plan, the term
shareholders’ equity shall be the amount at the beginning of the year and shall include any amount
shown as the minimum pension liability adjustment on the company’s statement of shareholders’
equity.

     c) The basic value of each bonus unit is equal to a defined percentage of available corporate
net income.

     i) Available corporate net income is defined as net income, excluding any net gain arising
from the sale of the Leeds facility, reduced by a carve out amount which is 4% of shareholders’
equity minus the remainder of the percent return on shareholders’ equity minus 4%, multiplied by
shareholders’ equity. ( If return on shareholders’ equity is 8% or greater, the carveout is
zero)

     ii)
The defined percentage is as follows: .15% if the return on shareholders’ equity is
under 8%; .15% plus an additional .005% for each 1% that the return on shareholders’ equity
exceeds 7% if the return on equity is between 8% and 23%; and the return on equity divided by
100 if return on equity exceeds 23%.

     d) The basic value of a bonus unit may be increased by up to 50% based on an individual or a
group’s performance against specific financial targets which are set in selected key result areas.
The targets may vary by group and are changed as appropriate. Each target is worth 0 to 50 points.
If a target is achieved it is worth 50 points but if only a part of the target is achieved it is
worth the result of 50 points multiplied by the percentage achieved. The total points from all
target goals are averaged and become the percentage used to increase the basic bonus. Key result
areas may include operating margins, return on assets, inventory turnover, revenue growth and other
goals.

4) TERMINATION

     If a participant’s employment terminates during the year, the amount of incentive payment, if
any, shall be determined by the Compensation Committee of the Board of Directors. A participant’s
bonus becomes vested on December 31 of each year and will not be affected by termination after the
completion of the year.

5) PAYMENT OF BONUS

     a) The Company, at the discretion of corporate management, may make quarterly payments of up
to 75% of the bonus accrued, based on unaudited financial statements.

     b) Final payment of the full incentive will be made within 75 days after the end of each year,
but not before the Corporate audit is complete.exv10w23a

 

Exhibit 10.23a

AMENDMENT TO EQUIPMENT LEASE AGREEMENT

     This AMENDMENT TO EQUIPMENT LEASE AGREEMENT (this “Amendment”) is made effective as of the
15th day of September, 2005, and is entered into by and between (i) the BOARD OF TRUSTEES OF THE
UNIVERSITY OF ARKANSAS on behalf of THE UNIVERSITY OF ARKANSAS FOR MEDICAL SCIENCES (“Hospital”),
and (ii) GK FINANCING, LLC, a California limited liability company (“GKF”),

Recitals:

     WHEREAS, GKF and Hospital executed an Equipment Lease Agreement dated October 29th, 1998 (the
“Lease”), and desire to amend the Lease as set forth herein.

     NOW THEREFORE, for valuable consideration received, the receipt and sufficiency of which are
acknowledged, the parties agree as follows:

Agreement:

     1. Defined Terms. Unless otherwise defined herein, the capitalized terms used herein
shall have the same meanings set forth in the Lease.

     2. Hospital’s Direct Cost Component. Effective as of the date of this Amendment,
Exhibit 8.1 of the Lease shall be deleted and replaced with Exhibit 8.1 attached hereto.

     3. Full Force and Effect. Except as amended by this Amendment, all of the terms and
provisions of the Lease shall remain in full force and effect.

     IN WITNESS WHEREOF, the parties have this Amendment executed as of the date first written
above.

	 	 	 	 	 	 	 	 	 	 	 
	GK FINANCING, LLC	 	 	 	BOARD OF TRUSTEES OF THE	 	 
	 	 	 	 	 	 	UNIVERSITY OF ARKANSAS on behalf of	 	 
	 	 	 	 	 	 	THE UNIVERSITY OF ARKANSAS FOR MEDICAL SCIENCES	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

Name:

Title:

	 	Craig K. Tagawa
 

Craig K. Tagawa
Chief Executive Officer
	 	 	 	By:

Name:

Title:
	 	Richard A. Pierson
 

Richard A. Pierson
Vice Chancellor for Clinical Programs
	 	 

1

 

Exhibit 8.1

HOSPITAL’S DIRECT COST COMPONENT

	 	 	 
	Registered nurse

	 	*
	 
	 	 
	Recovery room

	 	*
	 
	 	 
	Hospital daily charge

	 	*
	 
	 	 
	Hospital, including ventilator daily charge

	 	*
	 
	 	 
	MRI procedure

	 	*
	 
	 	 
	CT procedure

	 	*
	 
	 	 
	Angiography procedure

	 	*
	 
	 	 
	Physicist

	 	*
	 
	 	 
	Locum tenens expense

	 	*

2exv10w50

 

Exhibit 10.50

EQUIPMENT LEASE AGREEMENT

          This EQUIPMENT LEASE AGREEMENT (“Agreement”) is made and entered into on August 7, 2003, by
and between GK FINANCING, LLC, a California limited liability company (“GKF”) and BAPTIST HOSPITAL
OF EAST TENNESSEE, a Tennesse not for profit corporation (“Hospital”), with reference to the
following facts:

R E C I T A L S

          A. GKF owns a Leksell Stereotactic Gamma Knife Unit (the “Equipment”) which it acquired from
Elekta Instruments, Inc., a Georgia corporation (“Elekta”).

          B. Hospital wishes to lease the Equipment from GKF, and GKF is willing to lease the Equipment
to Hospital, upon the terms, covenants, conditions and agreements set forth in this Agreement.

A G R E E M E N T

          NOW, THEREFORE, in consideration of the mutual covenants, conditions and agreements set forth
herein, and for such other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:

     1. Lease. Subject to and in accordance with the covenants and conditions set forth in
this Agreement, GKF hereby leases to Hospital, and Hospital hereby leases from GKF, the Equipment.
The Equipment to be leased to Hospital pursuant to this Agreement shall include the latest approved
Gamma Knife technology available as of the date of this Agreement (i.e., Model C with Automatic
Positioning System), including all standard hardware and software related thereto.

     2. LGK Agreement. Simultaneously with the execution of this Agreement, Hospital and
Elekta shall enter into that certain LGK Agreement (the “LGK Agreement”) a copy of which is
attached hereto as Exhibit A. Hospital shall perform, satisfy and fulfill all of its obligations
arising under the LGK Agreement when and as required thereunder. Hospital acknowledges that GKF is
a third party beneficiary of the LGK Agreement and, in that capacity, GKF shall be entitled to
enforce Hospital’s performance, satisfaction and fulfillment of its obligations thereunder.

     3. Term of the Agreement. The initial term of this Agreement (the “Term”) shall
commence as of the date hereof and, unless earlier terminated or extended in accordance with the
provisions of this Agreement, shall continue for a period of ten (10) years following the earlier
of July 1, 2005 or the date of the performance of the first clinical Gamma Knife procedure (the
“First Procedure Date”) at the Site. Hospital’s obligation to make the payments to GKF for the
Equipment described in Section 8 below shall commence as of the First Procedure Date.

     4. Certificate of Need; User License; GKF Policy Committee.

          4.1 GKF acknowledges that Hospital will require a certificate of need (“CON”) issued by the
Tennessee Health Services and Development Agency in order to install

 

 

and operate the Equipment at the Site. As soon as reasonably possible following the date of
this Agreement, Hospital shall apply for and use its best efforts to obtain in a timely manner a
CON for the installation and use of the Equipment at the Site, and shall be reimbursed by GKF upon
presentation of invoices not to exceed an agreed upon budget for all costs and expenses relating
thereto, including all legal fees and expenses. GKF and Hospital shall agree in writing on a CON
cost budget prior to the preparation of the CON application. The application for the CON shall be
prepared in coordination with GKF, and shall require the prior written approval of both GKF and
Hospital prior to its submission to the applicable authorities, which approval shall not be
unreasonably withheld. If either party has not approved or disapproved such CON application in
writing within thirty (30) days following its submission to such party for approval, such party
shall be deemed to have approved the same. The CON shall be filed and owned by Hospital. In the
event Hospital’s application for a CON is denied, this Agreement shall automatically terminate and
all parties shall be released from the further performance of any obligations or duties arising
under this Agreement. If the CON application is denied, GKF and Hospital agree to evenly share the
costs of the CON application.

          4.2 Hospital shall, at its sole cost and expense, apply for and obtain in a timely manner a
User License from the Nuclear Regulatory Commission and, if necessary, from the applicable state
agency authorizing it to take possession of and maintain the Cobalt supply required in connection
with the use of the Equipment during the term of this Agreement. Hospital also shall, at its sole
cost and expense, apply for and obtain in a timely manner all other licenses, permits, approvals,
consents and authorizations which may be required by state or local governmental or other
regulatory agencies for the development, construction and preparation of the Site, the charging of
the Equipment with its Cobalt supply, the conduct of acceptance tests with respect to the
Equipment, and the use of the Equipment during the Term, as more fully set forth in Article 2.1 of
the LGK Agreement. GKF shall reimburse Hospital for its direct costs to obtain a User License and
any other licenses, permits, approvals, consents and authorizations required by this Section 4.2
upon presentation of invoices.

          4.3 This Agreement is subject to approval by the Policy Committee of GKF. In the event GKF’s
Policy Committee does not approve this Agreement, this Agreement shall automatically terminate and
all parties shall be released from the further performance of any obligations or duties arising
under this Agreement.

     5. Delivery of Equipment; Site.

          5.1 GKF shall coordinate with Elekta and Hospital to have the Equipment delivered to Hospital
at 137 Blount Avenue, Knoxville, Tennessee (the “Site”) on or prior to the delivery date agreed
upon by Hospital and Elekta in the LGK Agreement. GKF makes no representations or warranties
concerning delivery of the Equipment to the Site or the actual date thereof.

          5.2 Subject to Section 6 below, Hospital, at its cost and expense, shall provide a safe,
convenient Site for the Equipment. The location of the Site shall be subject to the prior approval
of GKF.

     6. Site Preparation and Installation of Equipment.

 

 

          6.1 GKF, at its cost and expense, shall prepare all plans and specifications required to
prepare, construct and improve the Site for the installation, use and operation of the Equipment
during the Term. GKF’s Site improvement responsibilities may include creation of several walls to
assist in the relocation of the department currently located in the Site. It is not anticipated
that GKF’s costs to assist in relocation of the department currently located in the Site will be
material. The plans and specifications (i) shall be approved by Hospital, which approval shall not
be unreasonably withheld or delayed; (ii) shall comply in all respects with the site planning
criteria attached as Exhibit E to the LGK Agreement (collectively the “Site Planning Criteria”);
and (iii) to the extent required by applicable law, shall be submitted to all state and federal
agencies for their review and approval. GKF, at its cost and expense, shall obtain and maintain
all permits, certifications, approvals or authorizations required by applicable federal, state or
local laws, rules or regulations necessary to prepare, construct and improve the Site as provided
above during the term of this agreement.

          6.2 GKF, at its cost and expense, shall prepare, construct and improve the Site as necessary
for the installation, use and operation of the Equipment during the Term, including, without
limitation, providing all temporary or permanent shielding required for the charging of the
Equipment with the Cobalt supply and for its subsequent use, selecting and constructing a proper
foundation for the Equipment and the temporary or permanent shielding, aligning the Site for the
Equipment, and installing all electrical systems and other wiring required for the Equipment. In
connection with the construction of the Site, GKF, at its cost and expense, shall select, purchase
and install all radiation monitoring equipment, devices, safety circuits and radiation warning
signs required at the Site in connection with the use and operation of the Equipment. GKF shall be
responsible for the shipment, storage, placement and removal of all Cobalt and depleted Cobalt.
Any depleted Cobalt supply shall be properly disposed of by GKF at such time as GKF shall deem
necessary, in GKF’s sole and absolute judgment.

          6.3 In addition to construction and improvement of the Site, GKF, at its cost and expense,
shall be responsible for the installation of the Equipment at the Site, including the positioning
of the Equipment on its foundation at the Site in compliance with the Site Planning Criteria.

          6.4 During the Term, GKF, at its cost and expense, shall maintain the Site in a good working
order, condition and repair, reasonable wear and tear excepted.

     7. Marketing Support.

          7.1 Not less than ninety (90) days prior to the First Procedure Date and the commencement of
each succeeding twelve (12) month period during the Term, GKF and Hospital shall jointly develop an
annual marketing plan, budget and timeline, which shall be implemented by Hospital with the support
of GKF, based on the approved budget and timeline. Hospital’s approval of such plan, budget and
timeline shall not be unreasonably withheld or delayed. If Hospital has not approved or
disapproved the same within thirty (30) days following its receipt, Hospital shall be deemed to
have approved the same. GKF shall be * responsible for any out-of-pocket marketing expenses paid
to unrelated third parties that are included in the marketing plan budget. Any marketing efforts
conducted independently by Hospital shall be at Hospital’s expense, and subject to coordination
with GKF.

 

 

          7.2 The Gamma Knife program at the Hospital shall be given a name mutually agreed to by GKF
and Hospital (the “Program”). All communications to the public regarding the Program may identify
the Program as being associated with GKF and Hospital, provided that all such communications are in
accordance with the communications and marketing plan adopted or approved by Hospital and GKF.
Hospital shall use its best efforts to promote the Program and to encourage the use thereof by the
Public and medical community.

     8. Lease Payments.

          8.1 In consideration for, and as compensation to, GKF for (i) the lease of the Equipment by
GKF to Hospital pursuant to this Agreement; (ii) payment of “Startup Costs”, (iii) the preparation
by GKF of all plans and specifications required to prepare, construct and improve the Site for the
installation, use and operation of the Equipment; (iv) the preparation, construction and
improvement of the Site as necessary for the installation, use and operation of the Equipment; (v)
the installation by GKF of the Equipment at the Site; (vi) the marketing of the services to be
provided using the Equipment; and (vii) the maintenance by GKF of the Site and the Equipment in a
good working order, condition and repair, on a monthly basis, Hospital shall pay the “Lease
Payment” to GKF for each “Procedure” that is performed by Hospital or its representatives or
affiliates, that are directly or indirectly owned and/or controlled, in whole or in part, by
Hospital irrespective of whether the Procedure is performed on the Equipment or using any other
equipment or devices. As used herein:

     (1) For each Procedure that is performed using the Equipment, “Lease Payment”
shall be equal to *. For each Procedure using any other equipment or devices, Lease
Payment shall be equal to the Technical Component Collections for any other
equipment or devices during each such month.

     (2) “Technical Component Collections” means the total amount actually collected
by Hospital or its representatives or affiliates during each month from any and all
payor sources, including, without limitation, patients, insurance companies, state
or federal government programs or any other third party payors, as reimbursement for
the technical component of each Procedure, irrespective of whether the Procedure is
performed on the Equipment or using any other equipment or devices. The technical
fees to be billed for Procedures performed utilizing the Equipment during the Term
of this Agreement shall be an amount which is economically justifiable based upon
GKF’s direct operating expenses and its total project costs, together with a return
thereon. Hospital shall consult and mutually agree with GKF from time to time
regarding the amount of the technical fees to be billed by Hospital for Procedures
that are performed utilizing the Equipment and any revisions thereto. Subject to
compliance with the standard described in the preceding sentence, Hospital and GKF
shall mutually agree on the setting or revision of the amount of the technical fees
and the acceptance of technical fee component amounts with third party payors prior
to their implementation.

     (3) “Cost Component” means the costs incurred by Hospital during the
corresponding month for services and personnel associated with the

 

 

performance of Procedures, excluding (i) Lease Payments, (ii) physician and
other professional fees, and (iii) direct or indirect administrative overhead
expenses. Hospital’s Cost Component shall be limited to those costs set forth in
the schedule attached hereto, as Exhibit 8.1, irrespective of whether the Procedures
are performed on an inpatient or outpatient basis.

     (4) “Procedure” shall mean any treatment that involves stereotactic, external,
single fraction, conformal radiation, commonly called radiosurgery, that may include
one or more isocenters during the patient treatment session, delivered to any
site(s) superior to the foramen magnum.

If no Procedures are performed utilizing the Equipment or any other equipment or devices during any
month, no Lease Payments shall be owing by Hospital to GKF for such month. If Technical Component
Collections relating to the Equipment are less than Hospital’s Cost Component relating to the
Equipment in any given month, GKF shall reimburse Hospital for said shortfall, provided that
Hospital has complied with its obligations regarding the timely submission of claims as set forth
in Section 8.2 below, and provided, further, that GKF shall have no obligation to reimburse
Hospital for any shortfalls relating to any other equipment or devices. No costs comprising
Hospital’s Cost Component shall be permitted to cumulate. All or any portion of any Cost Component
which is not paid in full by GKF to Hospital within thirty (30) days after GKF’s receipt of
Hospital’s invoice shall bear interest at the annual rate of five percent (5%) in excess of the
Federal Reserve discount rate then in effect as published in the Wall Street Journal or similar
publication (or the maximum monthly interest rate permitted to be charged by law between an
unrelated, commercial borrower and lender, if less) until the unpaid Cost Component payment,
together with all accrued interest thereon is paid in full. If no Procedures are performed in a
given month, the only Hospital Cost Component incurred will be for physical facility space,
standard staffing costs and miscellaneous operating costs as set forth in Exhibit 8.1.

          8.2 Within ten (10) business days following the end of each month (or portion thereof) during
the term of this Agreement, Hospital shall pay the Lease Payments to GKF and shall concurrently
inform GKF in writing as to the number of Procedures performed during that month utilizing the
Equipment and any other equipment or devices. To facilitate Hospital’s billing and collection for
Procedures performed, within three (3) business days after any Procedure using the Equipment is
performed, the administrative support individual referenced in Section 11.3 below shall provide
Hospital with written confirmation of the names of the patients treated. Hospital shall submit
claims for reimbursement to the appropriate payors for each Procedure within ten (10) days after
the patient receiving the treatment is discharged. Such claims shall be submitted under Hospital’s
provider numbers and license. Hospital shall also diligently follow up any unpaid or denied claims
and re-bill and/or contest the same where appropriate so as to maximize Technical Component
Collections. All or any portion of any Lease Payment which is not paid in full within thirty (30)
days after its due date (date of Hospital’s cash receipt from payors) shall bear interest at the
annual rate of five percent (5%) in excess of the Federal Reserve Discount Rate then in effect as
published in the Wall Street Journal or similar publication (or the maximum monthly interest rate
permitted to be charged by law between an unrelated, commercial borrower and lender, if less) until
the unpaid Lease Payment, together with all accrued interest thereon is paid in full. If GKF shall
at any time

 

 

accept a Lease Payment from Hospital after it shall become due, such acceptance shall not
constitute or be construed as a waiver of any or all of GKF’s rights under this Agreement,
including the rights of GKF set forth in Section 20 hereof.

          8.3 Within thirty (30) days after the close of each month, Hospital shall provide GKF with a
written report indicating the status of billings and collections for each Procedure performed
during that month, including, without limitation, the amount of the claim submitted, the amount
received or denied for each such procedure, and copies of the corresponding explanation of benefits
(EOB). Upon request by GKF, Hospital shall furnish to GKF information regarding reimbursement
rates from any or all payor sources for Procedures (applicable to Procedures performed either on an
inpatient or outpatient basis). If such reimbursement rates should change at any time or from time
to time after the date hereof, in each instance, Hospital shall provide written notice thereof to
GKF within thirty (30) days of Hospital receiving notice thereof. Prior to entering into or
renewing any third party payor contracts for the provision of Procedures utilizing the Equipment,
Hospital shall consult with GKF regarding the terms and provisions thereof, including the technical
component reimbursement rates. GKF shall maintain the confidentiality of all information provided
to GKF by Hospital with regard to Procedure charges, billing and reimbursement rates.

          8.4 The parties acknowledge that the Lease Payments to GKF and Hospital’s Cost Component
reflect their respective fair market value, and are not determined in a manner that takes into
account the volume or the value of any referral or other business generated between the parties.

          8.5 Within ten (10) days after Hospital’s receipt of written request from GKF, GKF shall have
the right to audit Hospital’s books and records (including, without limitation, the books and
records pertaining to any other Radiosurgery equipment and devices) during normal business hours to
verify the Technical Component Collections and Hospital’s Costs Component, and Hospital shall
provide GKF with access to such books and records on Hospital’s premises.

          8.6 Risk Sharing Option. Hospital shall have the option in its sole discretion to restructure
the Lease Payments by amending this Agreement as set forth in Exhibit 8.6 attached hereto (“the
Option”). Hospital may exercise the Option only if (a) no “Event of Default” (as defined in
Section 20 below) (and no act or omission which, with the giving of notice and/or the passage of
time, would constitute an Event of Default) shall then have occurred; and (b) Hospital has complied
with all of the requirements set forth in this Section. The Option may be exercised not more than
once by Hospital (i) at any time prior to the First Procedure Date, (ii) on the First Procedure
Date, or (iii) on any anniversary of the First Procedure Date (the “Option Exercise Date”). If
Hospital elects to exercise the Option, Hospital shall give written notice thereof to GKF not less
than thirty (30) days prior to the Option Exercise Date, and shall specify the “Hospital
Percentage” (as defined below). In addition, Hospital shall concurrently execute and deliver to
GKF an Amendment to Equipment Lease Agreement in the form attached hereto as Exhibit 8.6 (the
“Amendment”).

               (a) Exercise of the Option Prior to the First Procedure Date. If Hospital exercises the
Option prior to the First Procedure Date, Hospital shall pay to GKF an

 

 

amount equal to *. Such payment shall be made by Hospital to GKF in immediately available
funds within five (5) days of presentment of an invoice by GKF.

               (b) Exercise of the Option On or After the First Procedure Date. If Hospital exercises the
Option on the First Procedure Date or on any anniversary of such date, Hospital shall pay to GKF an
amount equal to *. Such payment shall be made by hospital to GKF in immediately available funds
within five (5) days of presentment of an invoice by GKF.

               (c) Appraisal to Determine the Fair Market Valuation. If Hospital exercises the Option on or
after the First Procedure Date, within five (5) days following Hospital’s exercise of the Option,
GKF and Hospital shall each select an appraiser to determine the Fair Market Valuation, which
appraisers shall each have not less than ten (10) years’ experience in appraising the value of
healthcare businesses. In such event, the Fair Market Valuation shall be the average of the
valuations of the two appraisers so long as the two valuations are within fifteen percent (15%) of
each other. Should the two valuations not be within fifteen percent (15%) of each other, then the
two appraisers shall mutually select a third appraiser who shall have the same qualifications set
forth above. Following the valuation by the third appraiser, the two valuations that are closest
to each other will be averaged to determine the Fair Market Valuation. GKF and Hospital shall
retain their own appraisers and shall jointly retain the third appraiser; provided that, within
five (5) days following the issuance of the Fiar Market Valuation, Hospital shall reimburse GKF for
all costs and expenses incurred by GKF in connection with such appraisers (including the third
appraiser).

               (d) Definitions. As used herein:

     (1) “Fair Market Valuation” means the fair market value as of the
applicable Option Exercise Date of the projects * (as defined in and
calculated pursuant to the Amendment) over the remaining Term of the
Agreement, without taking into account the costs of the Equipment.

     (2) “GKF Amount” shall mean the sum of GKF’s actual costs and/or losses
incurred in connection with (a) the “Startup Costs”, (b) the construction
and improvement of the site for the installation of the Equipment and the
purchase of the Equipment (which costs shall not include associated with
progress payments of the purchase of the Equipment); (c) the shipment of the
Equipment to the Site, including, without limitation, freight, insurance,
customs, import taxes and duties, interest costs, permit fees, Equipment
storage costs (both prior and subsequent to shipment), and all other costs
and expenses pertaining thereto; (d) the installation of the Equipment,
including, without limitation, rigging costs; (e) any upgrading of the
Equipment as deemed necessary by GKF; (f) any reloading of the Cobalt in the
Equipment; and (g) any and all operating losses incurred by GKF through the
effective date of the Option’s exercise in connection with the lease of the
Equipment to Hospital hereunder (excluding any administrative or overhead
costs or expenses); plus interest accrued on all of the foregoing from the
date incurred by GKF at the floating rate of three percent (3%)

 

 

above the prime rate as established by Bank of American from
time-to-time, which floating rate shall change as and when changed by Bank
of America,

     (3) “Hospital Percentage” means a fixed percentage selected by Hospital
in its sole discretion which shall not *.

     (4) “Startup Costs” means the actual costs incurred by Hospital and
reimbursed by GKF to Hospital (which costs shall not include any
administrative or overhead costs or expenses) to obtain the CON and other
regulatory approvals needed for the installation and use of the Equipment.
All such Startup Costs shall be at their actual cost without administrative
overhead or markup. Within ten (10) days following Hospital’s written
notice to GKF of Hospital’s election to exercise the Option, GKF shall
submit to Hospital a detailed statement of the GKF Amount, and Hospital
shall submit to GKF a detailed statement of Hospital’s Startup Costs. Such
detailed statements shall include documentary proof of expenditures to
justify the amounts claimed for such costs. A final cost accounting of
these aforementioned costs shall be completed no later than six (6) months
following the Option Exercise Date which shall be used for purposes of
calculating the GKF Percentage.

     9. Use of the Equipment.

          9.1 The Equipment shall be used by Hospital only at the Site and shall not be removed
therefrom. Hospital shall use the Equipment only in the regular and ordinary course of Hospital’s
business operations and only within the capacity of the Equipment as determined by Elekta’s
specifications. Hospital shall not use nor permit the Equipment to be used in any manner nor for
any purpose which the Equipment is not designed or reasonably suitable as indicated to Hospital by
Elekta or GKF.

          9.2 This is an agreement of lease only. Nothing herein shall be construed as conveying to
Hospital any right, title or interest in or to the Equipment, except for the express leasehold
interest granted to Hospital for the Term. All Equipment shall remain personal property (even
though said Equipment may hereafter become attached or affixed to real property) and the title
thereto shall at all times remain exclusively in GKF.

          9.3 During the Term, upon the request of GKF, Hospital shall promptly affix to the Equipment
in a prominent place, or as otherwise directed by GKF, labels, plates, insignia, lettering or other
markings supplied by GKF indicating GKF’s ownership of the Equipment, and shall keep the same
affixed for the entire Term. Hospital hereby authorizes GKF to cause this Lease or any statement
or other instrument showing the interest of GKF in the Equipment to be filed or recorded, or
refiled or re-recorded, with all governmental agencies considered appropriate by GKF, at GKF’s cost
and expense. Hospital also shall promptly execute and deliver, or cause to be executed and
delivered, to GKF any statement or instrument requested by GKF for the purpose of evidencing GKF’s
interest in the Equipment, including financing

 

 

statements and waivers with respect to rights in the Equipment from any owners or mortgagees
of any real estate where the Equipment may be located.

          9.4 At Hospital’s cost and expense, Hospital shall (a) protect and defend GKF’s ownership of
and title to the Equipment from and against all persons claiming against or through Hospital, (b)
at all times keep the Equipment free from any and all liens, encumbrances, attachments, levies,
executions, burdens, charges or legal processes imposed against Hospital, and (c) give GKF
immediate written notice of any matter described in clause (b).

     10. Additional Covenants of Hospital. In addition to the other covenants of Hospital
contained in this Agreement, Hospital shall, at its cost and expense.

          10.1 Provide properly trained, technical and support personnel and supplies required for the
proper performance of Gamma Knife procedures utilizing the Equipment. The cost of technical and
support personnel and supplies required for the proper performance of Gamma Knife procedures
utilizing the Equipment shall be reimbursed to Hospital by GKF. In this regard, Hospital shall use
its best efforts to maintain on staff a minimum of two (2) Gamma Knife trained teams comprised of
neurosurgeons, radiation oncologists and physicists.

          10.2 Direct, supervise and administer the provision of all hospital services relating to Gamma
Knife Procedures in accordance with all applicable laws, rules and regulations.

          10.3 Use best efforts to keep and maintain the Equipment and the Site fully protected, secure
and free from unauthorized access or use by any person.

     11. Additional Covenants of GKF. In addition to the other covenants of GKF contained
in this Agreement, GKF, at its cost and expense, shall:

          11.1 Use its best efforts to require Elekta to meets its contractual obligations to GKF and
Hospital upon delivery of the Equipment and put the Equipment, as soon as reasonably possible, into
good, safe and serviceable condition and fit for its intended use in accordance with the
manufacturer’s specifications, guidelines and field modification instructions.

          11.2 Ensure Hospital’s quiet enjoyment and use of the Equipment, free of the rights of any
other persons except for those rights reserved by GKF or granted to Elekta under the LGK Agreement
or the Purchase Agreement.

          11.3 GKF and Hospital shall mutually select an individual to be located at the Site to provide
Gamma Knife administrative and marketing support services. The individual’s duties shall include
but not be limited to scheduling Gamma Knife patients and coordinating professional and technical
personnel and support services to perform said Gamma Knife treatment. This individual shall also
verify patient insurance. The individual shall also assist with marketing activities on an as
needed basis. This individual is provided by the Hospital and GKF shall reimburse Hospital for the
cost of the individual. GKF and Hospital shall mutually agree on individual.

     12. Maintenance of Equipment; Damage or Destruction of Equipment.

 

 

          12.1 During the Term and except as otherwise provided in this Agreement, GKF, at its cost and
expense, shall (a) maintain the Equipment in good operating condition and repair, reasonable wear
and tear excepted, (b) subject to Hospital’s compliance with its obligations under the LGK
Agreement and under Sections 4, 5, 9, 10, 12, 13 and 16 hereunder, cause the equipment to be in
compliance with all applicable state and federal regulations, and (c) maintain in full force and
effect a Service Agreement with Elekta and any other service or other agreements required to
fulfill GKF’s obligation to repair and maintain the Equipment under this Section 12. Hospital
shall promptly notify GKF in the event of any damage or destruction to the Equipment or of any
required maintenance or repairs to the Equipment, and GKF shall, or shall cause its agent to,
respond to any such maintenance request within 24 hours and either repair or replace the equipment
within 24 hours or as soon as possible and practical. In addition, GKF shall pursue all remedies
available to it under the Service Agreement and under any warranties made by Elekta with respect to
the Equipment so that the Equipment will be free from defects in design, materials and workmanship
and will conform to Elekta’s technical specifications concerning the Equipment.

          12.2 GKF and Elekta shall have the right to access the Equipment for the purpose of inspection
and the performance of repairs at all reasonable times, upon reasonable advance notice and with a
minimum of interference or disruptions to Hospital’s regular business operations.

          12.3 Hospital shall be liable for any damage to or destruction of the Equipment caused by the
misuse, improper use, or other intentional and wrongful or negligent acts or omissions of
Hospital’s officers, employees, agents, and contractors. In the event the Equipment is damaged as
a result of the misuse, improper use, or other intentional and wrongful or negligent acts or
omissions of Hospital’s officers, employees, agents and contractors (other than GKF and Elekta), to
the extent such damage is not covered by the Service Agreement or any warranties or insurance, GKF
may service or repair the Equipment as needed and the cost thereof shall be paid by Hospital to GKF
immediately upon written request; provided that, if GKF’s charges and costs for such
service or repair are not paid in full by Hospital within sixty (60) days after GKF’s request
therefore, in addition to such charges and costs, Hospital shall pay interest thereon to GKF until
paid in full at the annual rate of five percent (5%) in excess of the Federal Reserve Discount Rate
then in effect, as published in the Wall Street Journal or similar publication (or the maximum
monthly interest rate permitted to be charged by law between an unrelated, commercial borrower and
lender, if less) and costs incurred by GKF in collecting such amount from Hospital (other than
attorneys’ fees). Any work so performed by GKF shall not deprive GKF of any of its rights,
remedies or actions against Hospital for such damages.

          12.4 If the Equipment is rendered unusable as a result of any failure of, physical damage to
or destruction of the Equipment, Hospital shall give GKF written notice thereof. GKF shall
determine, within thirty (30) days after it is given written notice of such damage or destruction,
whether the Equipment can be repaired. Subject to Section 12.3 above, in the event GKF determines
that the Equipment cannot be repaired, at the election of GKF in GKF’s sole and absolute
discretion, (a) GKF, at its cost and expense, may replace the Equipment as soon as reasonably
possible taking into account the availability of replacement equipment from Elekta, Elekta’s other
then existing orders for equipment, and the then existing limitations on Elekta’s manufacturing
capabilities, and (b) in such event, this Agreement shall continue in

 

 

full force and effect as though such damage or destruction had not occurred. If GKF elects
not to replace the Equipment, GKF shall provide written notice of such election to Hospital, and
this Agreement shall terminate on the date that is ninety (90) days following the date of such
notice. In the event GKF determines that the Equipment can be repaired, GKF shall cause the
Equipment to be repaired as soon as reasonably possible thereafter. Hospital shall fully cooperate
with GKF to effect the replacement of the Equipment or the repair of the Equipment (including,
without limitation, providing full access to the Site) following the damage or destruction thereof.

     13. Alterations and Upgrades to Equipment. Hospital shall not make any modifications,
alterations or additions to the Equipment (other than normal operating accessories or controls)
without the prior written consent of GKF. Hospital shall not, and shall not permit any person
other than representatives of Elekta or any other person authorized by GKF to, effect any
inspection, adjustment, preventative or remedial maintenance, or repair to the Equipment without
the prior written consent of GKF. All modifications, alterations, additions, accessories or
operating controls incorporated in or affixed to the Equipment (herein collectively called
“additions” and included in the definition of “Equipment”) shall become the property of the GKF
upon termination of this Agreement.

     14. Financing of Equipment by GKF. GKF, in its sole discretion, may finance the
Equipment. Financing may be in the form of an installment loan, a capitalized lease or other
commercially available debt or financing instrument. If GKF finances the Equipment through an
installment loan, GKF shall be required to provide the Equipment as collateral for the loan. If
GKF finances the Equipment through a capitalized lease, title shall vest with the lessor until 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”), GKF may assign its interest under this Agreement
as security for the financing. Hospital’s interest under this Agreement shall be subject to the
interests of the Lender and Hospital shall execute such documentation as the Lender shall
reasonably require in furtherance of this Section; provided, however, such assignment shall not
relieve GKF of its obligation to Hospital under this Agreement.

     15. Equipment Operational Costs. GKF shall be responsible for all costs and expenses
for the operation and use of the Equipment. Significant costs and expenses are enumerated in
Exhibit 8.1. Between Hospital and GKF, Hospital shall be fully liable for all negligent,
intentional or wrongful acts or omissions of Hospital, its officers, directors, employees and
agents.

     16. Taxes. GKF shall pay all sales or use taxes imposed or assessed in connection
with the purchase of the Equipment and all personal property taxes imposed, levied or assessed on
the ownership and possession of the Equipment during the Term. All other taxes, assessments,
licenses or other charges imposed, levied or assessed on the Equipment during the Term shall be
paid by Hospital before the same shall become delinquent, whether such taxes are assessed or would
ordinarily be assessed against GKF or Hospital; provided, however, Hospital shall not be required
to pay any federal, state or local income, franchise, corporation or excise taxes imposed upon
GKF’s net income realized from the lease of the Equipment. In case of a failure by Hospital to pay
any taxes, assessments, licenses or other charges when and as required under this Section, GKF may
(in GKF’s sole and absolute discretion) pay all or any part of such

 

 

taxes, in which event the amount paid by GKF shall be immediately payable by Hospital to GKF
upon written request; provided that, if GKF is not repaid in full by Hospital within sixty
(60) days after GKF’s request therefor, in addition to the repayment of the amounts paid by GKF,
Hospital shall pay interest thereon to GKF until paid in full at the annual rate of five percent
(5%) in excess of the Federal Reserve Discount Rate then in effect, as published in the Wall Street
Journal or similar publication (or the maximum monthly interest rate permitted to be charged by law
between an unrelated, commercial borrower and lender, if less) and costs incurred by GKF in
collecting such amount from Hospital (other than attorneys’ fees).

     17. No Warranties by GKF. Hospital warrants that as of the First Procedure Date, it
shall have (a) thoroughly inspected the Equipment, (b) determined that the Equipment is consistent
with the size, design, capacity and manufacture selected by it, and (c) satisfied itself that to
the best of its knowledge the Equipment is suitable for Hospital’s intended purposes and is good
working order, condition and repair at the time of acceptance. GKF SUPPLIES THE EQUIPMENT UNDER
THIS AGREEMENT IN ITS “AS IS” CONDITION. GKF, NOT BEING THE MANUFACTURER OF THE EQUIPMENT OR THE
MANUFACTURER’S AGENT, MAKES NO WARRANTY OR REPRESENTATION, EITHER EXPRESSED OR IMPLIED, AS TO THE
EQUIPMENT’S MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR USE, DESIGN, CONDITION,
DURABILITY, CAPACITY, MATERIAL OR WORKMANSHIP OR AS TO PATENT INFRINGEMENT OR THE LIKE. As between
GKF and Hospital, Hospital shall bear all risks with respect to the foregoing warranties. GKF
shall not be liable for any direct, indirect and consequential losses or damages suffered by
Hospital or by any other person for, and Hospital expressly waives any right to hold GKF liable
hereunder for, any claims, demands and liabilities arising out of or in connection with the design
or manufacture, possession or operation of the Equipment, including injury to persons or property
resulting from the failure of, defective or faulty design, operation, condition, suitability or use
of the Equipment. All warranty or other similar claims with respect to the Equipment shall be
made by Hospital solely and exclusively against persons other than GKF, including Elekta or any
other manufacturers or suppliers. In this regard and with prior written approval of GKF, Hospital
may, in GKF’s name, but at Hospital’s sole cost and expense, enforce all warranties, agreements or
representations, if any, which may have been made by Elekta or manufacturers, suppliers or other
third parties regarding the Equipment to GKF or Hospital. GKF shall not be responsible for the
operation of the Equipment, however it shall be GKF’s responsibility that the equipment be properly
maintained. GKF and Hospital shall mutually agree to an acceptable delivery date for the
Equipment.

     18. Termination for Economic Justification.

          18.1 Following the initial twenty-four (24) months after the First Procedure Date and
following each subsequent 12 month period thereafter during the Term, GKF shall have the option to
terminate this Agreement if, within a reasonable period of time after GKF’s written request,
Hospital does not provide GKF with a reasonable economic justification to continue this Agreement
and the provision of Gamma Knife services at the Hospital. GKF’s determination shall be based upon
the utilization of the Equipment and other factors considered relevant by GKF in the exercise of
its discretion. If GKF elects to terminate pursuant to this Section, GKF shall give written notice
thereof to Hospital not less than ninety (90) days prior to the effective date of the termination
designated in GKF’s written notice.

 

 

          18.2 Notwithstanding the provisions of Section 18.1, if at any time during the Term of this
Agreement, Hospital is suspended or terminated from participation in the Medicare program, GKF
shall have the option to terminate this Agreement immediately by giving written notice thereof to
Hospital.

          18.3 As a result of any termination of this Agreement pursuant to this Section, GKF may enter
upon the Site under Hospital supervision and remove the Equipment and any improvements made by GKF
to the Site without liability of any kind or nature for appropriate removal or GKF may demand that
Hospital remove and return the Equipment and such improvements to GKF, all at GKF’s sole cost and
expense. GKF shall restore the Site to a similar pre-deinstallation appearance and condition.

     19. Options to Extend Agreement. As of the end of the Term, Hospital shall have the
option either to:

          19.1 Extend the Term of this Agreement for a five (5) year period of time upon the terms and
conditions of this Agreement; or

          19.2 Terminate this Agreement as of the expiration of the Term.

Hospital shall exercise one (1) of the two (2) options referred to above by giving an irrevocable
written notice thereof to GKF at least twelve (12) months prior to the expiration of the initial
Term. Any such notice shall be sufficient if it states in substance that Hospital elects to
exercise its option and states which of the two (2) options referred to above Hospital is
exercising. If Hospital fails to exercise the option granted herein at least twelve (12) months
prior to the expiration of the initial Term, the option shall lapse and this Agreement shall expire
as of the end of the initial Term. Further, if Hospital exercises the option to extend the Term
and the parties are unable to mutually agree upon the length of the extension of the Term or any
other terms or conditions applicable to such extension prior to the expiration of the Term, this
Agreement shall expire as of the end of the initial Term.

     20. Events of Default by Hospital and Remedies.

          20.1 The occurrence of any one of the following shall constitute an event of default under
this Agreement (an “Event of Default”):

               20.1.1 Hospital fails to pay any Lease Payment when due pursuant to Paragraph 8 above and such
failure continues for a period of thirty (30) days after written notice thereof is given by GKF or
its assignee to Hospital; however, if Hospital cures the rent payment default within the applicable
thirty (30) day period, such default shall not constitute an Event of Default.

               20.1.2 Hospital attempts to remove, sell, transfer, encumber, assign, sublet or part with
possession of the Equipment or any items thereof, except as expressly permitted herein.

               20.1.3 Hospital fails to observe or perform any of its covenants, duties or obligations
arising under this Agreement or the LGK Agreement and such failure continues for a

 

 

period of thirty (30) days after written notice thereof by GKF to Hospital; however, if
Hospital cures the default within the applicable thirty (30) day period or if the default
reasonably requires more than thirty (30) days to cure, Hospital commences to cure the default
during the initial thirty (30) day period and Hospital diligently completes the cure as soon as
reasonably possible following the end of the thirty (30) day period, such default shall not
constitute an Event of Default.

               20.1.4 Hospital ceases doing business as a going concern, makes an assignment for the benefit
of creditors, admits in writing its inability to pay its debts as they become due, files a
voluntary petition in bankruptcy, is adjudicated a bankrupt or an insolvent, files a petition
seeking for itself any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar arrangement under any present or future statute, law or regulation or files
an answer admitting the material allegations of a petition filed against it in any such proceeding,
consents to or acquiesces in the appointment of a trustee, receiver, or liquidator of it or of all
or any substantial part of its assets or properties, or it or its shareholders shall take any
action looking to its dissolution or liquidation.

               20.1.5 Within sixty (60) days after the commencement of any proceedings against Hospital
seeking reorganization, arrangement, readjustment, liquidation, dissolution or similar relief under
any present or future statute, law or regulation, such proceedings shall not have been dismissed,
or if within thirty (30) days after the appointment without Hospital’s consent or acquiescence of
any trustee, receiver or liquidator of it or of all or any substantial part of its assets and
properties, such appointment shall not be vacated.

          20.2 Upon the occurrence of an Event of Default with respect to Hospital, GKF may at its
option do any or all of the following:

               20.2.1 By written notice to Hospital, immediately terminate this Agreement as to the
Equipment, wherever situated. As a result of the termination, GKF may enter upon the Site and
remove the Equipment and any improvements made by GKF to the Site without liability of any kind or
nature for so doing or GKF may demand that Hospital remove and return the Equipment and such
improvements to GKF, all at Hospital’s sole cost and expense.

               20.2.2 Recover damages from Hospital as may be awarded by a court of competent jurisdiction
for the loss of the bargain represented by this Agreement. For purposes of determining such
damages, the parties agree that the following methodology shall be used: (a) the amount of such
damages shall be equal to the present value of the unpaid estimated future Lease Payments to be
made by Hospital to GKF through the end of the Term discounted at the rate of nine percent (9%);
and (b) the unpaid estimated future Lease Payments shall be based on the historical trend of
payments made by Hospital to GKF hereunder taking into account known factors which could impact the
historical trend through the end of the Term. Hospital and GKF acknowledge that the methodology
set forth in this Section constitutes a reasonable method to calculate GKF’s damages resulting from
an Event of Default under the circumstances existing as of the date of this Agreement. GKF shall
use reasonable commercial efforts to mitigate its damages by attempting to sell or lease the
Equipment; provided that (i) GKF shall not be obligated to give preference to the sale or
lease of the Equipment over the sale, lease or other

 

 

disposition of similar equipment or improvements owned or leased by GKF, (ii) GKF shall have
no obligation to sell or lease any improvements made by GKF to the Site, and (iii) GKF’s inability
in good faith to mitigate damages shall not limit or otherwise affect the foregoing methodology for
determining damages as set forth in this Section.

               20.2.3 Sell, dispose of, hold, use or lease the Equipment or any improvements made by GKF to
the Site, as GKF in its sole and absolute discretion may determine (and GKF shall not be obligated
to give preference to the sale, lease or other disposition of the Equipment or improvements over
the sale, lease or other disposition of similar Equipment or improvements owned or leased by GKF).

               20.2.4 Exercise any other right or remedy which may be available to GKF under the Uniform
Commercial Code or any other applicable law or proceed by appropriate court action, without
affecting GKF’s title or right to possession of the Equipment or improvements, to enforce the terms
hereof or to recover damages for the breach hereof or to cancel this Agreement as to the Equipment.

In addition to the foregoing remedies, Hospital shall be liable to GKF for all reasonable costs and
expenses incurred by GKF as a result of the Event of Default or the exercise of GKF’s remedies.

          20.3 Upon termination of this Agreement or the exercise of any other rights or remedies under
this Agreement or available under applicable law following an Event of Default, Hospital shall,
without further request or demand, pay to GKF all Lease Payments and other sums then owing under
this Agreement. Hospital shall in any event remain fully liable for all damages as may be provided
by law and for all costs and expenses incurred by GKF on account of such default, including but not
limited to, all court costs. The rights and remedies afforded GKF under this Agreement shall be
deemed cumulative and not exclusive, and shall be in addition to any other rights or remedies to
GKF provided by law or in equity.

     21. Removal of Equipment. Upon expiration of the Term, GKF, at its cost and expense,
shall remove the Equipment from the Site not more than one hundred (120) days following the last
day of the Term; provided that all of GKF’s right, title and interest in and to the
improvements made by GKF to the Site pursuant to Section 6 above shall thereupon transfer to
Hospital.

     22. Insurance.

          22.1 During the Term, GKF shall, at its cost and expense, purchase and maintain in effect an
all risk property and casualty insurance policy covering the Equipment. The all risk property and
casualty insurance policy shall be for an amount not less than the replacement cost of the
Equipment. The all risk property and casualty insurance policy maintained by GKF shall be
evidenced by a certificate of insurance or other reasonable documentation which shall be delivered
by GKF to Hospital upon request following the commencement of this Agreement and as of each annual
renewal of such policy during the Term.

 

 

          22.2 During the Term, Hospital shall, at its cost and expense, purchase and maintain in effect
general and professional liability insurance covering the use or operation of the Equipment by
Hospital’s employees and agents. The general and professional liability insurance policies shall
each provide coverage in amounts not less than One Million Dollars ($1,000,000.00) per occurrence
and One and Five Million Dollars ($5,000,000.00) annual aggregate. The policies to be maintained
by Hospital hereunder shall be evidenced by a certificate of insurance or other reasonable
documentation which shall be delivered by Hospital to GKF no later than the First Procedure Date
and as of each annual renewal of such policies during the Term. Hospital shall require any
physicians using the equipment to show evidence of professional liability insurance consistent with
Hospital’s Medical Staff Bylaws.

          22.3 During the construction of the Site and prior to the First Procedure Date, GKF, at its
cost and expense, shall purchase and maintain a general liability insurance policy which conforms
with the coverage amounts and other requirements described in Section 22.2 above and which names
Hospital as an additional insured party. The policy to be maintained by GKF hereunder shall be
evidenced by a certificate of insurance or other reasonable documentation which shall be delivered
by GKF to Hospital prior to the commencement of any construction at the Site.

          22.4 During the Term, Hospital shall purchase and maintain all workers compensation insurance
to the maximum extent required by applicable law.

     23. Indemnification.

          23.1 Hospital and GKF each hereby covenants and agrees that it will defend, indemnify and hold
the other party and the other party’s officers, directors, members, employees and agents at all
times harmless from and against any loss, damage and expense (including reasonable attorneys’ fees
and other costs of defense) caused by or arising out of: (i) any liability or obligation related to
the business of the indemnifying party prior to the date hereof; (ii) any obligation or liability
arising from services provided under this Agreement by the indemnifying party to the extent any
such liability or obligation directly results from the negligence or intentional misconduct of the
indemnifying party, it’s employees or agents ; or (iii) any obligation or liability resulting from
a breach of any provision of this Agreement by the indemnifying party, it’s employees or agents.
The obligations of the parties under this Section shall survive the expiration or earlier
termination of this Agreement.

          23.2 Any party that intends to enforce an indemnity obligation shall give the indemnifying
party notice of any claim as soon as possible, but the failure to give such notice shall not
constitute a waiver or release of the indemnifying party and shall not affect the rights of the
indemnified party to recover under this indemnity, except to the extent the indemnifying party is
materially prejudiced thereby. In connection with any claim giving rise to indemnity under this
Section resulting from or arising out of any claim or legal proceeding by a person who is not a
party to this Agreement, the indemnifying party, at its sole cost and expense, may, upon

 

 

written notice to the indemnified party, assume control of the defense of such claim or legal
proceeding, to the extent that the indemnifying party admits in writing its indemnification
liability to the indemnified party with respect to all material elements thereof. If the
indemnifying party assumes the defense of any such claim or legal proceeding, the obligations of
the indemnifying party hereunder as to such claim or legal proceeding shall be to take all steps
necessary in the defense or settlement thereof and to hold the indemnified party harmless from and
against any losses, damages, expenses or liability caused by or arising out of any settlement
approved by the indemnifying party and the indemnified party or any judgment in connection with
such claim or legal proceeding. Each indemnified party shall cooperate with the indemnifying party
in the defense of any such action, the defense of which is assumed by the indemnifying party.
Except with the consent of the indemnified party, which consent may be withheld at the indemnified
party’s sole discretion, the indemnifying party shall not consent to any settlement or the entry of
any judgment arising from any such claim or legal proceeding which, in each case, does not include
as an unconditional term thereof the delivery by the claimant or the plaintiff to the indemnified
party of a release from all liability in respect thereof. If the indemnifying party does not assume
the defense of any claim or litigation, any indemnified party may defend against such claim or
litigation in such manner as it may deem appropriate, including but not limited to settling such
claim or litigation, after giving notice of the same to the indemnifying party, on such terms as
the indemnified party may deem appropriate. The indemnifying party will, promptly after any of the
same is incurred, reimburse the indemnified party in accordance with the provisions hereof for all
damages, losses, liabilities, costs and expenses incurred by the indemnified party.

          23.3 The indemnity obligations under this Section shall survive the termination of this
Agreement with respect to events occurring during or relating to the Term.

     24. Restrictive Covenant.

          24.1 During the Term of this Agreement, neither GKF nor American Shared Radiosurgery Services
(“ASRS”) shall, directly or indirectly, within the * of Baptist Health System, own, operate or sell
any Gamma Knife system.

          24.2 GKF and ASRS acknowledge that; (i) the terms contained in this Section are necessary for
the commercially reasonable and proper protection of the Hospital’s interests; (ii) each and every
covenant and restriction contained in this Section is reasonable in respect of such matter, length
of time and geographical area; and (iii) the Hospital is relying on the representations of the
parties contained in this Section that they shall abide by and be bound by each of the aforesaid
covenants and restrictions.

          24.3 If any court or tribunal of competent jurisdiction determines that the duration,
geographical limit or any other aspect of the provisions of this Section is unenforceable in
accordance with its terms in a particular jurisdiction, the provisions of this Section shall not
terminate, but shall be deemed amended to the extent required to render them valid and

 

 

enforceable in such jurisdiction and such court or tribunal is hereby authorized and directed
to amend this Agreement only to the extent that such court or tribunal determines such an amendment
is necessary to make it valid and enforceable in said jurisdiction.

          24.4 Each of GKF and ASRS further agree that damages at law would be an insufficient remedy
for the Hospital in the event that any of them violate the provisions of this Section, and that the
Hospital shall be entitled to make an application to a court of competent jurisdiction to obtain
injunctive relief.

          24.5 The restrictive covenants contained in this Section shall automatically terminate and be
of no further force and effect upon the termination of this Agreement for any reason.

     25. Miscellaneous.

          25.1 Binding Effect. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns. Neither party shall assign this
Agreement nor any of its respective rights hereunder and Hospital shall not sublease the Equipment
without the prior written consent of the other party, which consent shall not be unreasonably
withheld. An assignment or sublease shall not relieve the assigning party or sublessor of any
liability for performance of this Agreement during the remainder of the Term. Any purported
assignment or sublease made without the other party’s prior written consent shall be null, void and
of no force or effect.

          25.2 Agreement to Perform Necessary Acts. Each party agrees to perform any further
acts and execute and deliver any further documents which may be reasonably necessary or otherwise
reasonably required to carry out the provisions of this Agreement.

          25.3 Validity. If for any reason any clause or provision of this Agreement, or the
application of any such clause or provision in a particular context or to a particular situation,
circumstance or person, should be held unenforceable, invalid or in violation of law by any court
or other tribunal of competent jurisdiction, then the application of such clause or provision in
contexts or to situations, circumstances or persons other than that in or to which it is held
unenforceable, invalid or in violation of law shall not be affected thereby, and the remaining
clauses and provisions hereof shall nevertheless remain in full force and effect.

          25.4 Attorney’s Fees and Costs. In the event of any action, arbitration or other
proceedings between or among the parties hereto with respect to this Agreement, each party shall
pay for their own attorneys’ fees and related costs and expenses, irrespective of which party is
deemed to be the prevailing party.

          25.5 Entire Agreement; Amendment. This Agreement together with the Exhibits attached
hereto constitutes the full and complete agreement and understanding between the parties hereto
concerning the subject matter hereof and shall supersede any and all prior

 

 

written and oral agreements with regard to such subject matter. This Agreement may be
modified or amended only by a written instrument executed by all of the parties hereto.

          25.6 Number and Gender. Words in the singular shall include the plural, and words in
a particular gender shall include either or both additional genders, when the context in which such
words are used indicates that such is the intent.

          25.7 Effect of Headings. The titles or headings of the various paragraphs hereof are
intended solely for convenience or reference and are not intended and shall not be deemed to
modify, explain or place any construction upon any of the provisions of this Agreement.

          25.8 Counterparts. This Agreement may be executed in one or more counterparts by the
parties hereto. All counterparts shall be construed together and shall constitute one agreement.

          25.9 Governing Law. This Agreement shall be interpreted and enforced in accordance
with the internal laws, and not the law of conflicts, of the State of Florida applicable to
agreements made and to be performed in that State.

          25.10 Exhibits. All exhibits attached hereto and referred to in this Agreement are
hereby incorporated by reference herein as though fully set forth at length.

          25.11 Ambiguities. The general rule that ambiguities are to be construed against the
drafter shall not apply to this Agreement. In the event that any provision of this Agreement is
found to be ambiguous, each party shall have an opportunity to present evidence as to the actual
intent of the parties with respect to such ambiguous provision.

          25.12 Representations. Each of the parties hereto represents (a) that no
representation or promise not expressly contained in this Agreement has been made by any other
party hereto or by any of its agents, employees, representatives or attorneys; (b) that this
Agreement is not being entered into on the basis of, or in reliance on, any promise or
representation by such party or individual, expressed or implied, other than such as are set forth
expressly in this Agreement; (c) that it has been represented by counsel of its own choice in this
matter or has affirmatively elected not to be represented by counsel; (d) it is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its organization, (e)
it has full power and authority to execute, deliver and perform this Agreement, and (f) the
execution, delivery and performance of this Agreement has been duly authorized by all necessary
corporate or other similar action.

          25.13 Non-Waiver. No failure or delay by a party to insist upon the strict
performance of any term, condition, covenant or agreement of this Agreement, or to exercise any
right, power or remedy hereunder or under law or consequent upon a breach hereof or thereof shall
constitute a waiver of any such term, condition, covenant, agreement, right, power or

 

 

remedy or of any such breach or preclude such party from exercising any such right, power or
remedy at any later time or times.

          25.14 Notices. All notices, requests, demands or other communications required or
permitted to be given under this Agreement shall be in writing and shall be delivered to the party
to whom notice is to be given either (a) by personal delivery (in which case such notice shall be
deemed to have been duly given 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 notice shall be deemed
given on the business day following deposit with the air courier service), or (c) by United States
mail, first class, postage prepaid, registered or certified, return receipt requested (in which
case such notice shall 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:

	 	 
 

 
 

 
 

 
 

	 	    

A party to this Agreement may change his, her or its address for purposes of this Section by
giving written notice to the other parties in the manner specified herein.

          25.15 Special Provisions Respecting Medicare and Medicaid Patients

               25.15.1 Hospital and GKF shall generate such records and make such disclosures as may be
required, from time to time, by the Medicare, Medicaid and other third party payment programs with
respect to this Agreement in order to meet all requirements for participation and payment
associated with such programs, including but not limited to the matters covered by Section
1861(v)(1)(I) of the Social Security Act.

               25.15.2 For the purpose of compliance with Section 1861(v)(1)(I) of the Social Security Act,
as amended, and any regulations promulgated pursuant thereto, both parties agree to comply with the
following statutory requirements (a) Until the expiration of four (4) years after the termination
of this Agreement, both parties shall make available, upon written request to the Secretary of
Health and Human Services or, upon request, to the Comptroller General of the United States, or any
of their duly authorized representatives, the contract, and books, documents and records of such
party that are necessary to certify the nature and extent of such costs, and (b) if either party
carries out any of the duties of the contract through a subcontract with a value or cost of $10,000
or more over a twelve month period, with a related organization, such subcontract shall contain a
clause to the effect that until the expiration of four (4) years after the furnishing of such
services pursuant to such subcontract, the related
organization shall make available, upon written request to the Secretary, or upon request to
the

 

 

Comptroller General, or any of their duly authorized representatives the subcontract, and
books, documents and records of such organization that are necessary to verify the nature and
extent of such costs.

          25.16 Force Majeure. Failure to perform by either party will be excused in the event
of any delay or inability to perform its duties under this Agreement directly or indirectly caused
by conditions beyond its reasonable control, 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 in the event of any such circumstance. Further, once such
an event is resolved, the parties shall again perform their respective obligations under this
Agreement.

          25.17 Independent Contractor Status. With respect to the performance of the duties
and obligations arising under this Agreement, nothing in this Agreement is intended nor shall be
construed to create a partnership, an employer/employee relationship, a joint venture relationship,
or a lease or landlord/tenant relationship between GKF and Hospital. GKF acknowledges that
physicians practicing at Hospital are not employees or agents of Hospital, but independent
community practitioners.

          25.18 Incidental Access. All information, written, electronic and oral, regarding
patients of Hospital, whether demographic, clinical, or financial is confidential and protected
health information (PHI) under state law and federal regulation. As a covered entity as defined by
the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), Hospital holds all
information pertaining to its patients as privileged and confidential. The parties are committed
to complying with the Privacy Standards of HIPAA and other state and federal regulations. In the
course of performing functions in relation to Hospital you may be exposed to or acquire
confidential information including but not limited to data, reports, records, summaries, tables and
studies whether written or oral, fixed in hard copy or contained in any computer database. GKF (i)
understands and acknowledges that patient information is confidential and protected by law, (ii)
understands that patient information should be kept confidential and that any dissemination,
distribution or copy of protected health information is strictly prohibited, (iii) shall not
disclose confidential information to any third party, (iv) shall advise each of their employees,
agents or representatives of their obligations to keep such information confidential, (v) breaches,
including wrongful disclosure or intentional misuse of patient information could result in civil
and/or criminal penalties resulting in monetary fines and/or imprisonment pursuant to federal
regulations and (vi) agrees to establish and maintain appropriate safeguards to protect patient
information.

 

 

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the
date first set forth above.

	 	 	 	 	 	 	 
	“GKF”	 	GK FINANCING, LLC,	 	 
	 	 	a California limited liability company	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Craig K. Tagawa
 

Craig K. Tagawa,
	 	 
	 

	 	 	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	“HOSPITAL”	 	BAPTIST HOSPITAL OF EAST TENNESSEE,	 	 
	 	 	a Tennessee not for profit corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Stephen N. Clapp
 

Stephen N. Clapp
	 	 
	 

	 	Title:
	 	Senior Vice President	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Caryn Hawthorne
 

Caryn Hawthorne
	 	 
	 

	 	Title:
	 	Chief Financial Officer	 	 

 

 

Exhibit A

LGK AGREEMENT

 

 

Exhibit 8.1

HOSPITAL’S COST COMPONENT

	 	 	 
	Physical facility space

	 	*
	 
	 	 
	Registered nurse

	 	*
	 
	 	 
	Physicist

	 	*
	 
	 	 
	Clinical coordinator (Section 11.3)

	 	*
	 
	 	 
	Recovery room

	 	*
	 
	 	 
	Hospital per diem charge

	 	*
	 
	 	 
	MRI procedure with contrast

	 	*
	 
	 	 
	MRI procedure without contrast

	 	*
	 
	 	 
	CT procedure with contrast

	 	*
	 
	 	 
	CT procedure without contrast

	 	*
	 
	 	 
	Angiography procedure

	 	*
	 
	 	 
	Billing and collection fee

	 	*

On each anniversary of the first procedure date, Hospital may adjust these cost components up or
down, which increases or decreases shall directly correlate to increases or decreases in Hospitals
direct cost (excluding administrative or overhead expenses) supported by documentation reasonably
satisfactory to GKF.

Any other billable hospital services (i.e., medical supplies, lab tests, office supplies, etc.)
necessary to perform a Gamma Knife procedure not expressly set forth in this exhibit will be
reimbursed to Hospital at Hospital’s costs (excluding administrative or overhead expenses).

 

 

Exhibit 8.6

AMENDMENT TO EQUIPMENT LEASE AGREEMENT

 

 

AMENDMENT TO EQUIPMENT LEASE AGREEMENT

     This AMENDMENT TO EQUIPMENT LEASE AGREEMENT (this “Amendment”) is made and entered into
effective as of the 7th day of August, 2003, by and between GK FINANCING, LLC, a California limited
liability company (“GKF”), and BAPTIST HOSPITAL OF EAST TENNESSEE, a Tennessee non-profit
corporation (“Hospital”), with reference to the following facts:

R E C I T A L S

A. GKF and Hospital have entered into a certain Equipment Lease Agreement dated August 7, 2003
(the “Agreement”).

B. Pursuant to Section 8.6 of the Agreement, Hospital has the option to amend the Agreement in
accordance with the provisions of such Section 8.6. Hospital desires to exercise its option by
agreeing to execute and deliver this Amendment to GKF.

C. GKF desires to amend the Agreement as provided in Section 8.6 thereof.

A G R E E M E N T

NOW, THEREFORE, in consideration of the mutual covenants, conditions and agreements set forth
herein, and for such other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:

     1 Defined Terms. Unless otherwise defined herein, the capitalized terms used
herein shall have the same meanings given to them in the Agreement.

     2 Extension of the Lease Term. The Term of the Agreement shall be extended to
the date that is ten (10) years following the Option Exercise Date.

     3 Lease Payments. The Lease Payments payable by Hospital under the Agreement
shall be restructured and redefined as follows:

     (a) For Procedures that are performed using the Equipment, “Lease Payment” shall be
amended to mean an amount equal to (a) the *, times (b) the arithmetical total of the *
relating to the Equipment minus the * (as each of such terms is defined below) during each
month. For Procedures that are performed using any other equipment or devices, “Lease
Payments” shall be equal to the * relating to such other equipment or devices during each
such month.

     (b) “GKF Percentage” means *.

     (c) “Technical Component Collections” shall be amended to mean the total amount *
by Hospital or its representatives or affiliates during each month from any and all payor
sources, including, without limitation, patients, insurance companies, state
or federal government programs or any other third party payors, as reimbursement for
the technical component of each Procedure irrespective of whether the Procedure is performed
on the Equipment or using any other equipment or devices. The technical fees

 

 

to be billed
for Procedures performed utilizing the Equipment during the Term of this Agreement shall be
an amount which is economically justifiable based upon each party’s “Direct Operating
Expenses” and the “Total Project Cost” (as defined below), together with a return thereon.
Hospital shall consult and mutually agree with GKF from time to time regarding the amount of
the technical fees to be billed by Hospital for Procedures that are performed utilizing the
Equipment and any revisions thereto. Subject to compliance with the standard described in
the preceding sentence, Hospital and GKF shall mutually agree on the setting or revision of
the amount of the technical fees and the acceptance of technical fee component amounts with
third party payors prior to their implementation.

     (d) “Direct Operating Expenses” means *.

     (e) “Hospital’s Direct Operating Expenses” means the costs incurred by Hospital
during the subject month for services and personnel associated with the performance of
Procedures utilizing the Equipment, excluding (i) Lease Payments, (ii) physician and other
professional fees, and (iii) direct or indirect administrative overhead expenses.
Hospital’s Cost Component shall be limited to those costs set forth in Exhibit 8.1 of the
Agreement, irrespective of whether the Procedures are performed on an inpatient or
outpatient basis.

     (f) “GKF’s Direct Operating Expenses” means the following expenses incurred by GKF
during the subject month in connection with the Equipment: Maintenance and repairs,
personal property taxes, sales and use tax on Lease Payments made to GKF, marketing,
insurance and all other direct expenses. All Direct Operating Expenses of either party
shall be at their actual cost without administrative overhead or markup. Within ten (10)
days following the implementation of this Amendment, and on each anniversary date
thereafter, GKF shall submit to the Hospital an estimate of GKF’s Direct Operating Expenses,
which shall be subject to the reasonable approval of Hospital. All Hospital Direct
Operating Expenses and GKF Direct Operating Expenses shall be at their actual cost without
administrative overhead or markup.

          3.1 Monthly Calculation of Lease Payment. Within ten (10) days after the last day of
each month during the Term (and upon the termination or expiration of the Term with respect to a
period shorter than a calendar month), each party shall submit to the other a statement setting
forth such party’s respective “Direct Operating Expenses” with respect to such month (or portion
thereof). The parties shall also calculate the Technical Component Collections (determined on a
cash basis) with respect to cash receipts for Procedures performed utilizing the Equipment
collected in such month, and within ten (10) days after the conclusion of such month or portion
thereof Hospital shall provide to GKF all revenue data necessary to perform such calculation.

          3.2 Timing of Lease Payments. The Lease Payments shall be due and payable by
Hospital on a monthly basis within fifteen (15) days after GKF submits to Hospital its
statement setting forth its portion of Direct Operating Expenses for such month. Furthermore,
Lease Payments shall be due and payable within fifteen (15) days after the close of each month
following the termination or expiration of this Agreement to the extent any Technical

 

 

Component
Collections associated with Procedures performed utilizing the Equipment during the Term are
collected after the termination or expiration of this Agreement; provided that no Direct
Operating Expenses shall be deducted in calculating such Lease Payments following the termination
or expiration of the Agreement since such Direct Operating Expenses would already have been
deducted in calculating the Lease Payments made during the Term of the Agreement. The terms and
provisions of this Section shall survive the expiration or earlier termination of this Agreement.

          3.3 Payment Priority for Direct Operating Expenses. Notwithstanding anything to
the contrary contained herein, all * shall be paid from the Technical Component Collections prior
to making any Lease Payments to GKF. If the Technical Component Collections during any month are
less than the Direct Operating Expenses during such month, GKF and Hospital shall be reimbursed for
their respective Direct Operating Expenses incurred by them during such month in an amount equal to
the GKF Percentage or the Hospital Percentage (as applicable) multiplied by the Technical Component
Collections for such month. Any unpaid shortfall shall be carried over to subsequent month(s) and
receive priority in payment as provided above until paid in full.

          3.4 Right to Inspect Books. Throughout the Term and thereafter until final
settlement of all amounts owed to or claimed by either party under this Agreement, each party shall
have the right to inspect, audit and copy the other party’s books and records which relate to the
accounting for and calculation of Lease Payments, Technical Component Collections and Direct
Operating Expenses.

          3.5 Survival. All of the terms and provisions of this Section 3 shall survive the
termination or expiration of this Agreement.

     4. Effectiveness. This Amendment shall become effective on the Option Exercise
Date provided that the conditions and requirements set forth in Section 8.6 of the Agreement have
been met and/or satisfied.

     5. Conflicts. To the extent any of the provisions of this Amendment conflict
with any of the provisions of the Agreement, the provisions of this Amendment shall prevail and
control.

[Document continued on next page]

 

 

     6. Full Force and Effect. Except as amended herein, all of the terms and provisions of
the Agreement shall remain unchanged and in full force and effect.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the
Effective Date.

	 	 	 	 	 	 	 
	“GKF”:	 	GK FINANCING, LLC,	 	 
	 	 	a California limited liability company	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Craig K. Tagawa	 	 
	 

	 	 	 	 

Craig K. Tagawa,
	 	 
	 

	 	 	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	“Hospital”:	 	BAPTIST HOSPITAL OF EAST	 	 
	 	 	TENNESSEE, a Tennessee not for	 	 
	 	 	profit corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Stephen N. Clapp
 

Stephen N. Clapp
	 	 
	 

	 	Title:
	 	 Senior Vice President	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Caryn Hawthorne	 	 
	 

	 	Name:
	 	 

Caryn Hawthorne
	 	 
	 

	 	Title:
	 	 Chief Financial Officer

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