EXHIBIT 10.37
AMENDMENT NUMBER THREE
TO
LEASE AGREEMENT FOR A GAMMA KNIFE UNIT
BETWEEN
REGENTS OF THE UNIVERSITY OF CALIFORNIA
AND
GK FINANCING, LLC
This AMENDMENT NUMBER THREE TO LEASE AGREEMENT FOR A GAMMA KNIFE UNIT
(the "Amendment") is dated as of the 22nd day of June 2001, and is entered into
between GK FINANCING, LLC, a California limited liability company ("GKF"), and
The Regents of the University of California, a California corporation
("University"), with reference to the following facts:
RECITALS
A. Reference is made to a certain Lease Agreement for a Gamma Knife Unit
(as amended, the "Agreement") which was dated July 6, 1990 but which first
became effective on September 17, 1991, between University and American Shared
Hospital Services, a California corporation ("ASHS").
B. The Agreement was amended pursuant to a certain Amendment Number One
to the Lease Agreement for a Gamma Knife Unit (the "First Amendment") dated
effective August 1, 1995 between University and ASHS.
C. The Agreement was subsequently assigned (i) by ASHS to its
wholly-owned subsidiary, American Shared Radiosurgery Services ("ASRS"), and
then, by ASRS to GKF, which assignment was consented to by University pursuant
to a certain Estoppel Certificate and Consent to Assignment dated December 21,
1995; and (ii) by University to UCSF-Stanford Health Care, a California non
profit public benefit corporation ("UCSF SHC").
D. Effective February 6, 1998, UCSF SHC and GKF entered into a certain
Amendment Number Two to the Lease Agreement for a Gamma Knife Unit (the "Second
Amendment").
E. GKF and University desire to further amend the Agreement as provided
below.
NOW THEREFORE, for valuable consideration, the receipt and sufficiency
of which are acknowledged, the parties hereby amend the Agreement as follows:
AGREEMENT
1. Defined Terms. Unless otherwise defined herein, the capitalized terms
used herein shall have the same meanings set forth in the Agreement.
2. Extension of Term. The Term of the Agreement shall expire on the
later of September 17, 2010, or at the end of the ninth (9th) "Rate Year" (as
defined in Section 5 below), subject to earlier termination by University
pursuant to Section 8 below.
3. Transfer of Title to the New Unit. Section 8 of the Second Amendment
is deleted in its entirety. In furtherance thereof, University acknowledges and
agrees that it shall not (nor have the opportunity to) acquire title to the
Leksell Gamma Knife Model B Unit (the "New Unit") that is currently being leased
by GKF to University under the Agreement, and that title to the New Unit shall
remain with GKF.
4. Upgrade of the New Unit. GKF shall be responsible for upgrading the
New Unit with a new Leksell Gamma Knife Model C (the "Model C") to be located at
the Site (i.e., 505 Parnassus Avenue, San Francisco, California); GKF shall be
responsible for the costs of implementing changes to the Site which are required
to support the Model C. However, University will provide University personnel
and services upon request and as required by GKF to upgrade the New Unit to the
Model C at no cost to GKF. Such personnel and services shall include but not be
limited to, oversight supervision and assistance by University's Office of
Design and Construction with construction and compliance with OSHPD
requirements, and by University physicists with nuclear regulatory compliance
issues and the calibration of the Model C. It is anticipated but not guaranteed
that the New Unit will be upgraded to the Model C in or around October 2001.
a. The Model C shall be installed by GKF after all appropriate
licenses, permits, approvals, consents and authorizations (collectively, the
"Permits") have been obtained by University at University's cost (other than any
filing or registration fees which shall be paid for by GKF) for the upgrade
process, including, without limitation, the proper handling of the cobalt-60
during the upgrade process. The timing and procedure for such upgrade shall be
as mutually agreed upon between the parties. As used herein, the "installation"
of the Model C by GKF shall mean the upgrading of the New Unit at the Site but
does not include the loading of new cobalt-60 sources.
5. Per Procedure Payment. Effective on the date the Model C becomes
operational to perform clinical treatments (the "Operational Date"), Section 6
of the Second Amendment shall be deleted and replaced with the following:
"(a) In consideration of, among other things, GKF's agreement to
upgrade the New Unit to the Model C, effective on the
Operational Date and continuing until title to the Model C is
transferred by GKF to University pursuant to Section 7 below, as
the lease payment for the Model C, University shall pay to GKF
the sum of * for each "Procedure" (as defined below) that is
performed by University or its representatives or affiliates,
irrespective of whether the Procedure is performed on the Model
C or using any other equipment or devices. As used herein, a
"Procedure" shall mean any single fraction cranial/intracranial
radiosurgery treatment.
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"(b) The foregoing payment for each Procedure shall apply to
each of the first * Procedures performed during any "Rate Year".
If the number of Procedures performed during any Rate Year
exceeds * Procedures, then, the payment for each of such
Procedures in excess of * Procedures performed during the
remainder of such Rate Year shall be * per Procedure. As used
herein, a "Rate Year" shall mean each consecutive twelve (12)
month period commencing from the Operational Date; provided
that, if University reloads the cobalt-60 into the Model C prior
to taking title to the Model C pursuant to section 7 below, (i)
the Rate Year in which that occurs shall be automatically
extended by the period of time that the Model C is unavailable
for Procedures due to such cobalt reloading, and (ii) the next
succeeding Rate Year shall commence on the expiration of the
Rate Year described in clause (i) above, as so extended.
"(c) Within ten (10) days after University's receipt of written
request by GKF, GKF shall have the right to audit University's
books and records (including, without limitation, the books and
records pertaining to any other radiosurgery equipment or
devices) to verify the number of Procedures that have been
performed by University, and University shall provide GKF with
access to such books and records; provided that any patient
names or identifiers shall not be disclosed."
6. Cobalt Reloading. It is anticipated that after the Model C has been
in clinical operation for three (3) years, University will remove and reload the
cobalt-60 into the Model C during the fourth (4th) Rate Year. University shall
be responsible for all costs associated with the removal and disposal of the
depleted cobalt and the installation of the new cobalt-60 into the Model C. In
addition, University shall indemnify GKF for the foregoing in the same manner as
GKF is indemnified in Section 8(d) of the Agreement.
7. Transfer of Title to Model C. At the end of the sixth (6th) Rate Year
or September 17, 2007, whichever is later (the "Transfer Date"), GKF shall
transfer all of its right, title and interest in and to the Model C to
University in consideration for the payment by University to GKF of *
8. Services Performed by GKF. In addition to GKF's responsibilities
under the Agreement, GKF shall provide marketing support and research funding
assistance, and use its efforts to include University in networks with third
party payors, where warranted, for the provision of Gamma Knife services. Such
services shall include the following:
a. Sponsoring a guest lecturer for Gamma Knife symposiums, if
appropriate, in each of the first six (6) Rate Years.
b. Assisting in the funding of, at minimum, one research project
related to the clinical applications of the Gamma Knife to functional procedures
(i.e., epilepsy, Parkinson).
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Additional research projects with Gamma Knife clinical applications shall be
considered on a case-by-case basis. Research projects are to be brought to GKF
for its review and approval.
c. Develop a marketing plan annually for review by University.
GKF and University shall meet at minimum quarterly to review the effectiveness
of the marketing plan.
During each of the seventh (7th), eighth (8th) and ninth (9th) Rate
Years, University shall pay GKF the sum of * for each of such Rate Years for
providing the services described in this Section 8 during such Rate Years.
Payment by University to GKF shall be made in monthly installments of * each,
commencing on the first day of the seventh (7th) Rate Year and continuing on the
same day of each succeeding month thereafter until the expiration or termination
of the Agreement. Notwithstanding the foregoing, if University permanently
discontinues providing Gamma Knife services following the Transfer Date,
University shall have the right to terminate this Agreement by giving not less
than thirty (30) days prior written notice to GKF, and upon such termination,
neither party shall have any further obligation to the other party pursuant to
this Section 8 other than for payment of any amounts owed to GKF hereunder
through the date of such termination.
9. Allocation of Responsibility. It is understood by the parties that
GKF is not responsible for any additional hardware, cobalt reloading, software
changes and/or other modifications to the Model C except as agreed upon in
writing by University and GKF. The Agreement may be modified to reflect any
additional changes or modifications.
10. Financing. GKF shall ensure that the financing of its Model C shall
not restrict or prohibit the transfer of title to the Model C pursuant to
Section 7 above.
11. Acknowledgment of Assignment. University represents and warrants to
GKF that UCSF SHC has assigned to University of all of UCSF SHC's rights and
obligations under the Agreement and the LGU Agreement (as defined in the
Agreement), and University hereby accepts such assignment and assumes and agrees
to perform all of University's obligations arising thereunder.
12. Captions. The captions and paragraph headings used herein are for
convenience only and shall not be used in construing or interpreting this
Amendment.
13. Full Force and Effect. Except as amended by this Amendment, all of
the terms and provisions of the Agreement including amendments shall remain in
full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment effective
as of the date first written above.
GK FINANCING, LLC THE REGENTS OF THE UNIVERSITY OF
CALIFORNIA
By: /s/ William Arnold By: /s/ Craig K. Tagawa
--------------------------- ---------------------------
Name: William Arnold Name: Craig K. Tagawa
Title: Chief Operating Officer Title: Chief Executive Officer
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