10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2016 or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________.

Commission file number 1-08789

American Shared Hospital Services

(Exact name of registrant as specified in its charter)

California	94-2918118
(State or other jurisdiction of	(IRS Employer
Incorporation or organization)	Identification No.)

Four Embarcadero Center, Suite 3700, San Francisco, California	94111
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (415) 788-5300

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x    No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

(Check one):

Large Accelerated Filer ¨Accelerated Filer ¨Non-Accelerated Filer ¨Smaller reporting company x

As of August 3, 2016, there are outstanding 5,367,647 shares of the Registrant’s common stock.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AMERICAN SHARED HOSPITAL SERVICES

CONDENSED CONSOLIDATED BALANCE SHEETS

	(unaudited)
ASSETS	June 30, 2016			December 31, 2015
Current assets:
Cash and cash equivalents	$	1,764,000		$	2,209,000
Restricted cash		50,000			50,000
Accounts receivable, net of allowance for  doubtful accounts of $100,000 at June 30, 2016  and $100,000 at December 31, 2015		3,840,000			3,038,000
Other receivables		72,000			107,000
Prepaid expenses and other current assets		801,000			603,000
Total current assets		6,527,000			6,007,000
Property and equipment:
Medical equipment and facilities		95,069,000			83,267,000
Office equipment		722,000			721,000
Deposits and construction in progress		6,892,000			10,796,000
		102,683,000			94,784,000
Accumulated depreciation and amortization		(50,883,000	)		(47,661,000	)
Net property and equipment		51,800,000			47,123,000
Investment in equity securities		579,000			579,000
Other assets		395,000			405,000
Total assets	$	59,301,000		$	54,114,000

LIABILITIES AND	(unaudited)
SHAREHOLDERS’ EQUITY	June 30, 2016		December 31, 2015
Current liabilities:
Accounts payable	$	218,000	$	375,000
Employee compensation and benefits		275,000		156,000
Other accrued liabilities		1,361,000		1,162,000
Current portion of long-term debt		2,599,000		2,674,000
Current portion of obligations under capital leases		5,124,000		4,331,000
Total current liabilities		9,577,000		8,698,000
Long-term debt, less current portion		4,989,000		6,923,000
Long-term capital leases, less current portion		14,802,000		9,190,000
Deferred revenue, less current portion		663,000		719,000
Deferred income taxes		3,580,000		3,404,000
Shareholders’ equity:
Common stock (10,000,000 authorized; 5,368,000 shares issed and outstanding at June 30, 2016 and 5,364,000 shares at December 31, 2015)		10,376,000		10,376,000
Additional paid-in capital		5,853,000		5,734,000
Retained earnings		4,164,000		4,020,000
Total equity-American Shared Hospital Services		20,393,000		20,130,000
Non-controlling interest in subsidiaries		5,297,000		5,050,000
Total shareholders’ equity		25,690,000		25,180,000
Total liabilities and shareholders’ equity	$	59,301,000	$	54,114,000

See accompanying notes

2

AMERICAN SHARED HOSPITAL SERVICES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three months ended June 30,						Six months ended June 30,
	2016			2015			2016			2015
Medical services revenue	$	4,518,000		$	4,394,000		$	8,756,000		$	8,511,000
Costs of revenue:
Maintenance and supplies		250,000			281,000			494,000			614,000
Depreciation and amortization		1,649,000			1,593,000			3,211,000			3,098,000
Other direct operating costs		780,000			718,000			1,479,000			1,400,000
		2,679,000			2,592,000			5,184,000			5,112,000
Gross Margin		1,839,000			1,802,000			3,572,000			3,399,000
Selling and administrative expense		963,000			979,000			1,912,000			1,800,000
Interest expense		433,000			345,000			718,000			665,000
Operating income		443,000			478,000			942,000			934,000
(Loss) on write down investment in equity securities		-			(2,114,000	)		-			(2,114,000	)
(Loss) on early extinguishment of debt		-			-			(108,000	)		-
Interest and other income		3,000			5,000			8,000			11,000
Income (loss) before income taxes		446,000			(1,631,000	)		842,000			(1,169,000	)
Income tax expense		93,000			106,000			157,000			236,000
Net income (loss)		353,000			(1,737,000	)		685,000			(1,405,000	)
Less: Net (income) attributable to non-controlling interests		(260,000	)		(233,000	)		(541,000	)		(437,000	)
Net income (loss) attributable to American Shared Hospital Services	$	93,000		$	(1,970,000	)	$	144,000		$	(1,842,000	)
Net income (loss) per share:
Earnings (loss) per common share - basic	$	0.02		$	(0.36	)	$	0.03		$	(0.34	)
Earnings (loss) per common share - diluted	$	0.02		$	(0.36	)	$	0.03		$	(0.34	)

See accompanying notes

3

AMERICAN SHARED HOSPITAL SERVICES

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

	PERIODS ENDED DECEMBER 31, 2015 AND JUNE 30, 2016
					Additional								Non-controlling
	Common		Common		Paid-in		Retained			Sub-Total			Interests in
	Shares		Stock		Capital		Earnings			ASHS			Subsidiaries			Total
Balances at January 1, 2015		5,361,000		10,376,000		5,508,000		5,542,000			21,426,000			4,728,000			26,154,000
Stock-based compensation expense		3,000		-		226,000		-			226,000			-			226,000
Non-controlling interest investment in subsidiaries		-		-		-		-			-			46,000			46,000
Cash distributions to non-controlling interests		-		-		-		-			-			(670,000	)		(670,000	)
Net (loss) income		-		-		-		(1,522,000	)		(1,522,000	)		946,000			(576,000	)
Balances at December 31, 2015		5,364,000		10,376,000		5,734,000		4,020,000			20,130,000			5,050,000			25,180,000
Stock-based compensation expense		4,000		-		119,000		-			119,000			-			119,000
Non-controlling interest investment in subsidiaries		-		-		-		-			-			7,000			7,000
Cash distributions to non-controlling interests		-		-		-		-			-			(301,000	)		(301,000	)
Net income		-		-		-		144,000			144,000			541,000			685,000
Balances at June 30, 2016 (unaudited)		5,368,000	$	10,376,000	$	5,853,000	$	4,164,000		$	20,393,000		$	5,297,000		$	25,690,000

See accompanying notes

4

AMERICAN SHARED HOSPITAL SERVICES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six months ended June 30,
	2016			2015
Operating activities:
Net income (loss)	$	685,000		$	(1,405,000	)
Adjustments to reconcile net income (loss) to net cash from operating activities:
Depreciation and amortization		3,234,000			3,124,000
(Gain) on sale of assets		(1,000	)		-
Loss on write down of investment in equity securities		-			2,114,000
Loss on early extinguishment of debt		108,000			-
Deferred income tax		176,000			16,000
Stock-based compensation expense		119,000			94,000
Other non-cash items		4,000			24,000
Changes in operating assets and liabilities:
Receivables		(767,000	)		(454,000	)
Prepaid expenses and other assets		(262,000	)		64,000
Customer deposits/deferred revenue		(108,000	)		(13,000	)
Accounts payable and accrued liabilities		213,000			305,000
Net cash from operating activities		3,401,000			3,869,000
Investing activities:
Payment for purchase of property and equipment		(575,000	)		(1,344,000	)
Investment in equity securities		-			(5,000	)
Net cash (used in) investing activities		(575,000	)		(1,349,000	)
Financing activities:
Principal payments on long-term debt		(2,059,000	)		(979,000	)
Principal payments on capital leases		(2,055,000	)		(1,804,000	)
Proceeds from long-term debt financing on property and equipment		-			1,023,000
Proceeds from certificate of deposit		-			9,000,000
Payments on line of credit		-			(8,780,000	)
Capital contributions from non-controlling interests		7,000			27,000
Distributions to non-controlling interests		(301,000	)		(268,000	)
Proceeds from capital lease financing for reimbursement of payments for acquisition of equipment		1,137,000			-
Net cash (used in) financing activities		(3,271,000	)		(1,781,000	)
Net change in cash and cash equivalents		(445,000	)		739,000
Cash and cash equivalents at beginning of period		2,209,000			1,059,000
Cash and cash equivalents at end of period	$	1,764,000		$	1,798,000
Supplemental cash flow disclosure:
Cash paid during the period for:
Interest	$	1,066,000		$	889,000
Income taxes paid (refunds)	$	97,000		$	(6,000	)
Schedule of non-cash investing and financing activities
Acquisition of equipment with capital lease financing	$	7,401,000		$	1,160,000

See accompanying notes

5

AMERICAN SHARED HOSPITAL SERVICES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Basis of Presentation

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring accruals and entries to record the impairment of the Company’s investment in equity securities) necessary to present fairly American Shared Hospital Services’ consolidated financial position as of June 30, 2016 and the results of its operations for the three and six month periods ended June 30, 2016 and 2015, which results are not necessarily indicative of results on an annualized basis. Consolidated balance sheet amounts as of December 31, 2015 have been derived from audited consolidated financial statements.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2015 included in the Company’s 10-K filed with the Securities and Exchange Commission.

These condensed consolidated financial statements include the accounts of American Shared Hospital Services (the “Company”) and its subsidiaries as follows: The Company wholly-owns the subsidiaries OR21, Inc. (“OR21 LLC”), MedLeader.com, Inc. (“MedLeader”), PBRT Orlando, LLC (“Orlando”) and American Shared Radiosurgery Services (“ASRS”). The Company is also the majority owner of Long Beach Equipment, LLC (“LBE”). ASRS is the majority-owner of GK Financing, LLC (“GKF”) which wholly-owns the subsidiaries GK Financing U.K., Limited (“GKUK”), and Instituto de Gamma Knife del Pacifico S.A.C. (“GKPeru”). GKF is also the majority-owner of the subsidiaries Albuquerque GK Equipment, LLC (“AGKE”) and Jacksonville GK Equipment, LLC (“JGKE”).

The Company through its majority-owned subsidiary, GKF, provided Gamma Knife units to seventeen medical centers as of June 30, 2016 in the states of Arkansas, California, Oregon, Connecticut, Florida, Illinois, Massachusetts, Mississippi, Nevada, New Jersey, New Mexico, New York, Tennessee, Oklahoma, Ohio, Texas, and Washington.

The Company through its wholly-owned subsidiary, Orlando, provided proton beam radiation therapy (“PBRT”) and related equipment, to a new customer in the United States, which treated its first patient during the second quarter of 2016. The Company also directly provides radiation therapy and related equipment, including Intensity Modulated Radiation Therapy (“IMRT”), Image Guided Radiation Therapy (“IGRT”) and a CT Simulator to the radiation therapy department at an existing Gamma Knife site in the United States.

The Company formed the subsidiaries GKUK and GKPeru, for the purposes of expanding its business internationally into the United Kingdom and Peru; LBE and Orlando to provide proton beam therapy services in Long Beach, California and Orlando, Florida; and AGKE and JGKE to provide Gamma Knife services in Albuquerque, New Mexico and Jacksonville, Florida. AGKE began operation in the second quarter of 2011 and JGKE began operation in the fourth quarter of 2011. Orlando treated its first patient in April 2016. GKPeru is expected to begin operation in the second half of 2016. GKUK is inactive and LBE is not expected to generate revenue within the next two years.

6

The Company continues to develop its design and business model for “The Operating Room for the 21st Century” ^SM (“OR21” ^SM), through its 50% owned OR21, LLC. The remaining 50% is owned by an architectural design company. OR21 is not expected to generate significant revenue within the next two years.

MedLeader was formed to provide continuing medical education online and through videos for doctors, nurses and other healthcare workers. This subsidiary is not operational at this time.

Based on the guidance provided in accordance with Accounting Standards Codification (“ASC”) 280 Segment Reporting (“ASC 280”), the Company has analyzed its subsidiaries which are all in the business of leasing radiosurgery and radiation therapy equipment to healthcare providers, and concluded there is one reportable segment, Medical Services Revenue. The Company provides Gamma Knife, PBRT, and IGRT equipment to eighteen hospitals in the United States as of June 30, 2016. These eighteen locations operate under different subsidiaries of the Company, but offer the same service, radiosurgery and radiation therapy. The operating results of the subsidiaries are reviewed by the Company’s Chief Executive Officer and Chief Financial Officer, who are also deemed the Company’s Chief Operating Decision Makers (“CODMs”) and this is done in conjunction with all of the subsidiaries and locations.

On January 14, 2016, the Company entered into a definitive lease agreement for financing of its MEVION S250 at UF Health Cancer Center at Orlando Health (“Orlando Health”). The proceeds of $8,200,000 received to date, from this financing of approximately $8,400,000, were used to pay-down the $1,000,000 in Promissory Notes (the “Notes”) with four members of the Company’s Board of Directors, reimburse the Company for freight costs associated with the MEVION S250, and to fund two of the remaining milestone payments for the MEVION S250 of approximately $7,100,000. Total proceeds from capital lease financing for reimbursement of payments for acquisition of equipment, were approximately $1,137,000.

Based on the guidance provided in accordance with ASC 405 Extinguishment of Liabilities (“ASC 405”) and ASC 470 Debt Modifications and Extinguishments (“ASC 470”), the pay-down of the Notes is considered an extinguishment of debt and, as such, the difference between the net carrying amount of the Notes and the costs of extinguishment was recognized as a loss on the Company’s condensed consolidated Statements of Operations. During the six month period ended June 30, 2016, the Company recorded a loss on early extinguishment of debt of $108,000. The Notes were issued with common stock warrants with an estimated fair value of $145,000. The unamortized balance of the discount on the Notes, of $80,000, and deferred fees incurred from the issuance of the Note of approximately $28,000, were recorded as a loss on early extinguishment.

7

Based on guidance provided in ASC 320 Investments–Debt and Equity Securities (“ASC 320”) and Staff Accounting Bulletins (“SAB”) Topic 5M Other Than Temporary Impairment (“OTTI”) of Certain Investments in Equity Securities (“SAB Topic 5M”), the Company analyzed the related events of Mevion Medical Systems, Inc. (“Mevion”), formerly Still River Systems, that occurred in the second and third quarters of 2015 and its impact on the Company’s investment. The Company determined that these circumstances indicated a decline in value of its Mevion investment that was other-than-temporary, and concluded that a write-down of the carrying value should be recognized. As of June 30, 2015, the Company adjusted its investment in Mevion to the estimated fair value of $600,000 and recorded a $2,114,000 impairment loss. The $2,114,000 other than temporary impairment of its investment in Mevion is recorded in other income (loss) on the Company’s Condensed Consolidated Statement of Operations.

During the period ended December 31, 2015, the Company engaged a third party expert to review and corroborate its assessment of the fair value of the Mevion investment. Based on the third party analysis, an additional impairment loss of $26,000 was recognized by the Company during the three months ended December 31, 2015. The fair value of the Company’s investment in Mevion, as of December 31, 2015 and June 30, 2016 was approximately $579,000. The impairment loss for the year ended December 31, 2015 was $2,140,000.

Based on the guidance provided in ASC 410 Asset Retirement Obligations (“ASC 410”), the Company analyzed the lease agreement with Orlando Health for the PBRT system and determined an asset retirement obligation (“ARO”) exists to remove the unit at the end of the lease term. The fair value of the ARO liability is not reasonable to estimate at this time, due to uncertainties about timing, cost and, outcome of the ARO, therefore no liability has been recorded as of June 30, 2016. The Company will re-evaluate this position on a periodic basis when facts and circumstances change that could affect this conclusion.

In May 2014, the Financial Accounting Standards Board “(FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), (“ASU 2014-09”), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in United States Generally Accepted Accounting Principles (“GAAP”) when it becomes effective. The new standard is effective for the Company for annual reporting periods beginning after December 15, 2017. Early application is permitted for reporting periods beginning after December 15, 2016. The standard permits the use of either the retrospective or cumulative effect transition method. In July 2015, the FASB voted to delay the effective date of this standard until the first quarter of 2018. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures and has not yet selected a transition method.

In August 2014, FASB issued ASU No. 2014-15, Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”), which provides guidance on determining when and how to disclose going-concern uncertainties in financial statements. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. ASU 2014-15 applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. The Company is currently evaluating the impact of this update on future disclosures concerning its liquidity position.

In January 2015, the FASB issued ASU No. 2015-01, Income Statement-Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items (“ASU 2015-01”), which eliminates from GAAP the concept of extraordinary items and requires that an entity separately classify, present, and disclose extraordinary events and transactions. This ASU will also align more closely GAAP income statement presentation guidance with International Accounting Standards (“IAS”) 1, Presentation of Financial Statements, which prohibits the presentation and disclosure of extraordinary items. The new standard was effective for the Company on January 1, 2016. The standard permits the use of either the retrospective or prospective application. The Company adopted ASU 2015-01 on January 1, 2016 and the adoption did not have a material impact on the condensed consolidated financial statements and related disclosures.

8

In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis (“ASU 2015-02”), which is intended to improve targeted areas of consolidation guidance for legal entities. The ASU focuses on the consolidation evaluation for reporting organizations that are required to evaluate whether they should consolidate certain legal entities. In addition to reducing the number of consolidation models from four to two, the new standard simplifies the FASB ASC and improves current GAAP. The new standard was effective for the Company on January 1, 2016. The Company adopted ASU 2015-02 on January 1, 2016 and the adoption did not have a material impact on the condensed consolidated financial statements and related disclosures.

In April 2015, the FASB issued ASU No. 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”), which requires that debt issuance costs related to a recognized debt liability, be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. The new standard was effective for the Company on January 1, 2016.

The Company adopted ASU 2015-03 on January 1, 2016, on a retrospective basis. Debt issuance costs that were previously recorded as other assets on the Company’s condensed consolidated Balance Sheets were reclassified as an offset to the respective debt instrument for which they were derived. During the six month period ended June 30, 2016 and as of December 31, 2015, $67,000 and $72,000 were reclassified from current and noncurrent other assets to current and noncurrent debt, respectively.

In January 2016, the FASB issued ASU No. 2016-01 Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”) which requires equity investments, except those accounted for under the equity method of accounting or those that result in consolidation of the investee, to be measured at fair value with changes in fair value recognized in net income. The new guidance is effective for the Company on January 1, 2018. Early adoption is permitted. The standard permits the use of cumulative-effect transition method. The Company is evaluating the effect that ASU 2016-01 will have on its consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU No. 2016-02 Leases (“ASU 2016-02”), which requires lessees to recognize, for all leases, at the commencement date, a lease liability and a right-of-use asset. Under the new guidance, lessor accounting is largely unchanged. The new guidance is effective for the Company on January 1, 2019. Early adoption is permitted. The Company is evaluating the effect that ASU 2016-02 will have on its consolidated financial statements and related disclosures.

9

In March 2016, the FASB issued ASU No. 2016-09 Compensation – Stock Compensation (Topic 718) (“ASU 2016-09”) which changes five aspects of accounting for share-based payment award transactions including 1) accounting for income taxes; 2) classification of excess tax benefits on the statement of cash flows; 3) forfeitures; 4) minimum statutory tax withholding requirements; and 5) classification of employee taxes paid on the statement of cash flows when an employer withholds shares for tax-withholding purposes. The new guidance is effective for the Company for interim and annual periods beginning after December 15, 2016. Early adoption is permitted. The Company is evaluating the effect that ASU 2016-09 will have on its consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU No. 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires measurement and recognition of expected credit losses for financial assets held. The new guidance is effective for fiscal periods beginning after December 15, 2019. Early adoption is permitted for fiscal periods beginning after December 15, 2018. The Company is evaluating the effect that ASU 2016-13 will have on its consolidated financial statements and related disclosures.

As of June 30, 2016, the Company adopted a new accounting policy for the depreciation of PBRT property and equipment. Property and equipment are stated at cost less accumulated depreciation. Depreciation is determined using the modified units of production method, which is a function of both usage and time of the equipment. The estimated useful life of the PBRT unit in Orlando is 10 years, after accounting for salvage value on the equipment. Salvage value is based on the estimated fair value of the equipment at the end of its useful life.

Note 2. Per Share Amounts

Per share information has been computed based on the weighted average number of common shares and dilutive common share equivalents outstanding. The computation for the three and six month periods ended June 30, 2016 excluded approximately 605,000 and 627,000 of the Company’s stock options, respectively, because the exercise price of the options was higher than the average market price during those periods.

Pursuant to GAAP, potentially dilutive common stock equivalents, such as dilutive stock options, are not considered when their inclusion in reporting earnings per share would be dilutive to reported losses incurred per share. Because the Company reported a loss for the three and six month periods ending June 30, 2015, the potentially dilutive effects of approximately 38,000 of the Company’s stock options and 14,000 unvested restricted stock units were not considered for the reporting period, respectively.

10

The following table sets forth the computation of basic and diluted earnings per share for the three and six month periods ended June 30, 2016 and 2015:

	Three months ended June 30,					Six months ended June 30,
	2016		2015			2016		2015
Net income (loss) attributable to American Shared Hospital Services	$	93,000	$	(1,970,000	)	$	144,000	$	(1,842,000	)
Weighted average common shares for basic earnings per share		5,552,000		5,484,000			5,548,000		5,480,000
Diluted effect of stock options and restricted stock		16,000		-			16,000		-
Weighted average common shares for diluted earnings per share		5,568,000		5,484,000			5,564,000		5,480,000
Basic earnings (loss) per share	$	0.02	$	(0.36	)	$	0.03	$	(0.34	)
Diluted earnings (loss) per share	$	0.02	$	(0.36	)	$	0.03	$	(0.34	)

Note 3. Stock-based Compensation

On June 2, 2010, the Company’s shareholders approved an amendment and restatement of the 2006 Stock Incentive Plan (the “2006 Plan”). Among other things, the amendment and restatement renamed the 2006 Plan to the Incentive Compensation Plan (the “Plan”) and increased the number of shares of the Company’s common stock reserved for issuance under the Plan by an additional 880,000 shares from 750,000 shares to 1,630,000 shares. The shares are reserved for issuance to officers of the Company, other key employees, non-employee directors, and advisors. The Plan serves as successor to the Company’s previous two stock-based employee compensation plans, the 1995 and 2001 Stock Option Plans. The shares reserved under those two plans, including the shares of common stock subject to currently outstanding options under the plans, were transferred to the Plan, and no further grants or share issuances will be made under the 1995 and 2001 Plans. On June 16, 2015, the Company’s shareholders approved an amendment and restatement of the Plan in order to extend the term of the Plan by two years.

Stock-based compensation expense associated with the Company’s stock-based options to employees is calculated using the Black-Scholes valuation model. The Company’s stock-based awards have characteristics significantly different from those of traded options, and changes in the subjective input assumptions can materially affect the fair value estimates. The estimated fair value of the Company’s option grants is estimated using assumptions for expected life, volatility, dividend yield, and risk-free interest rate which are specific to each award. The estimated fair value of the Company’s options is amortized over the period during which an employee is required to provide service in exchange for the award (requisite service period), usually the vesting period. Accordingly, stock-based compensation cost before income tax effect, for the Company’s options and restricted stock awards, in the amount of $60,000 and $119,000 is reflected in net income for the three and six month periods ended June 30, 2016 compared to $58,000 and $94,000 in the same periods prior year, respectively. At June 30, 2016, there was approximately $416,000 of unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan. This cost is expected to be recognized over a period of approximately four years.

11

The following table summarizes restricted stock awards, consisting primarily of annual automatic grants and deferred compensation to non-employee directors, for the six month period ended June 30, 2016:

	Restricted Stock Awards/Units			Grant Date Weighted- Average Fair Value		Intrinsic Value
Outstanding at January 1, 2016		3,000		$	2.58	$	-
Granted		35,000		$	1.94	$	-
Vested		(16,000	)	$	1.89	$	-
Forfeited		-		$	-	$	-
Outstanding at June 30, 2016		22,000		$	2.06	$	-

The following table summarizes stock option activity for the six month period ended June 30, 2016:

	Stock Options			Grant Date Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (in Years)
Outstanding at January 1, 2016		614,000		$	2.86		5.10
Granted		20,000		$	2.19		6.93
Exercised		-		$	-		-
Forfeited		(4,000	)	$	2.10		-
Outstanding at June 30, 2016		630,000		$	2.85		4.68
Exercisable at June 30, 2016		90,000		$	2.75		3.00

Note 4. Investment in Equity Securities

As of June 30, 2016 and December 31, 2015 the Company had a $579,000 investment in the common stock of Mevion, representing an approximate 0.46% interest in Mevion. The Company accounts for this investment under the cost method.

The Company carries its investment in Mevion at cost and reviews it for impairment on a quarterly basis, or as events or circumstances might indicate that the carrying value of the investment may not be recoverable. During the period ended December 31, 2015, the Company determined that its investment was other than temporarily impaired. In determining the fair value of the Company’s common stock in Mevion, the Company engaged a third party expert to review and corroborate its assessment of the fair value of the investment. The third party utilized the market approach and an option waterfall model calibrated to Mevion’s last round of funding. Each equity class was examined and priced according to its liquidation preferences. The fair value of the Company’s investment in Mevion, as of December 31, 2015, was approximately $579,000 with an impairment loss for the year then ended of $2,140,000.

The Company reviewed this investment at June 30, 2016 in light of both current market conditions and the ongoing needs of Mevion to raise cash to continue its development of the first compact, single room PBRT system. Based on its analysis, the Company determined no additional impairment needs to be recognized as of June 30, 2016.

12

The Company’s first MEVION S250 PBRT unit was contracted with Orlando Health, Inc. under a ten (10) year, revenue sharing arrangement.  The Marjorie and Leonard Williams Center for Proton Therapy at Orlando Health treated its first patient on April 6, 2016.

Note 5. Fair Value of Financial Instruments

The Company’s disclosures of the fair value of financial instruments is based on a fair value hierarchy which prioritizes the inputs to the valuation techniques used to measure fair value into three levels. Level 1 inputs are unadjusted quoted market prices in active markets for identical assets and liabilities that the Company has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for assets or liabilities, and reflect the Company’s own assumptions about the assumptions that market participants would use in pricing the asset or liability.

The estimated fair value of the Company’s assets and liabilities as of June 30, 2016 and December 31, 2015 were as follows (in thousands):

	Level 1		Level 2		Level 3		Total		Carrying Value
June 30, 2016
Assets:
Cash, cash equivalents, restricted cash	$	1,814	$	-	$	-	$	1,814	$	1,814
Investment in equity securities		-		-		579		579		579
Total	$	1,814	$	-	$	579	$	2,393	$	2,393
Liabilities:
Debt obligations	$	-	$	-	$	7,662	$	7,662	$	7,588
Total	$	-	$	-	$	7,662	$	7,662	$	7,588
December 31, 2015
Assets:
Cash, cash equivalents, restricted cash	$	2,259	$	-	$	-	$	2,259	$	2,259
Investment in equity securities		-		-		579		579		579
Total	$	2,259	$	-	$	579	$	2,838	$	2,838
Liabilities:
Debt obligations	$	-	$	-	$	9,744	$	9,744	$	9,597
Total	$	-	$	-	$	9,744	$	9,744	$	9,597

Note 6. Repurchase of Common Stock

In 1999 and 2001, the Board of Directors approved resolutions authorizing the Company to repurchase up to a total of 1,000,000 shares of its own stock on the open market, which the Board reaffirmed in 2008. There were no shares repurchased in 2016 or 2015. There are approximately 72,000 shares remaining under this repurchase authorization.

13

Note 7. Income Taxes

The Company generally calculates its effective income tax rate at the end of an interim period using an estimate of the annualized effective income tax rate expected to be applicable for the full fiscal year. However, when a reliable estimate of the annualized effective income tax rate cannot be made, the Company computes its provision for income taxes using the actual effective income tax rate for the results of operations reported within the year-to-date periods. The Company’s effective income tax rate is highly influenced by relative income or losses reported and the amount of the nondeductible stock-based compensation associated with grants of its common stock options and historically from the results of foreign operations. A small change in estimated annual pretax income (loss) can produce a significant variance in the annualized effective income tax rate given the expected amount of these items. As a result, the Company has computed its provision for income taxes for the three and six month periods ended June 30, 2016 and 2015 by applying the actual effective tax rates to income or (loss) reported within the condensed consolidated financial statements through those periods.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This quarterly report to the Securities and Exchange Commission may be deemed to contain certain forward-looking statements with respect to the financial condition, results of operations and future plans of American Shared Hospital Services, which involve risks and uncertainties including, but not limited to, the risks of the Gamma Knife and radiation therapy businesses, the risks of developing The Operating Room for the 21^st Century^SM program, and the risks of investing in Mevion. Further information on potential factors that could affect the financial condition, results of operations and future plans of American Shared Hospital Services is included in the filings of the Company with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 and the definitive Proxy Statement for the Annual Meeting of Shareholders held on June 21, 2016.

The Company had seventeen Gamma Knife units in operation on June 30, 2016 and June 30, 2015. Two of the Company’s customer contracts are through subsidiaries where GKF or its subsidiary is the majority owner and managing partner. Ten of the Company’s seventeen current Gamma Knife customers are under fee-per-use contracts, and seven customers are under retail arrangements. The Company’s contracts to provide radiation therapy and related equipment services to an existing Gamma Knife customer and at the Company’s new site, Orlando Health, are also considered retail arrangements. Retail arrangements are further classified as either turn-key or revenue sharing. Revenue from fee per use contracts is determined by each hospital’s contracted rate. For revenue sharing arrangements, the Company receives a contracted percentage of the reimbursement received by the hospital. Under turn-key arrangements, the Company receives payment from the hospital in the amount of its reimbursement from third party payors, and is responsible for paying all the operating costs of the equipment. Operating costs are determined primarily based on historical treatment protocols and cost schedules with the hospital. The Company records an estimate of operating costs which are reviewed on a regular basis and adjusted as necessary to more accurately reflect the actual operating costs. For the turn-key sites, the Company also shares a percentage of net operating profit. The Company records an estimate of net operating profit based on estimated revenues, less estimated operating costs.

14

Prior to April 1, 2013, Medicare’s reimbursement rate for Gamma Knife treatment had been relatively stable. Congress’s enactment of the American Taxpayer Relief Act of 2012, however, reduced Medicare’s Gamma Knife reimbursement rate from approximately $9,900 to $5,300, effective April 1, 2013. This change caused a substantial reduction in the Company’s revenues during 2013 and 2014. Effective January 1, 2015, the Centers for Medicare and Medicaid (CMS) established a Comprehensive Ambulatory Payment Classification for single session radiosurgery treatments, which increased the reimbursement rate (for a Medicare Gamma Knife treatment) by approximately $4,100 to $9,700. CMS has established a 2016 total reimbursement rate of approximately $8,800 for a Medicare Gamma Knife treatment.

Medical services revenue increased by $124,000 and $245,000 to $4,518,000 and $8,756,000 for the three and six month periods ended June 30, 2016 from $4,394,000 and $8,511,000 for the three and six month periods ended June 30, 2015, respectively. The Company’s PBRT system at Orlando Health treated its first patient in April 2016. For the three and six month periods ended June 30, 2016, revenues from this system were $446,000 compared to $0 in the same periods prior year. This increase was offset by a decrease in Gamma Knife revenue of $319,000 and $192,000 for the three and six month periods ended June 30, 2016, respectively. For the three and six month periods the decrease in Gamma Knife revenue was due to a decline in volume. Excluding a customer contract that expired after the first quarter 2015, Gamma Knife revenue increased $55,000 for the six month period ended June 30, 2016, due to a favorable payor mix at the Company’s retail sites.

The number of Gamma Knife procedures decreased by 36 and 34 to 482 and 963 for the three and six month periods ended June 30, 2016 from 518 and 997 in the same periods in the prior year, respectively. For the three month period ended June 30, 2016, the lower volume was due to normal, cyclical fluctuations. For the six month period ended June 30, 2016, excluding a customer contract that expired after the first quarter 2015, Gamma Knife procedures decreased by 8, due to normal, cyclical fluctuations. PBRT volume is reported by fractions per patient. Total fractions for the three and six month periods ended June 30, 2016 were 442.

Total costs of revenue increased by $87,000 and $72,000 to $2,679,000 and $5,184,000 for the three and six month periods ended June 30, 2016, respectively, from $2,592,000 and $5,112,000 for the three and six month periods ended June 30, 2015, respectively. Maintenance and supplies decreased by $31,000 and $120,000 for the three and six month periods ended June 30, 2016, respectively, due to the expiration of maintenance contracts at existing sites. Depreciation and amortization increased by $56,000 and $113,000 for the three and six month periods ended June 30, 2016 due to depreciation incurred on the PBRT system. Other direct operating costs increased by $62,000 and $79,000 for the three and six month periods ended June 30, 2016 due to marketing and property taxes incurred for the Company’s PBRT system.

15

Selling and administrative costs decreased by $16,000 and increased $112,000 to $963,000 and $1,912,000 for the three and six month periods ended June 30, 2016 from $979,000 and $1,800,000 for the same periods in the prior year, respectively. For the three month period ended June 30, 2016, the decrease was driven by legal fees, offset by increased rent expense. For the six month period ended June 30, 2016, the increase was due to accounting and consulting fees, payroll, and rent expense. Payroll expense increased because the Company converted two temporary positions to full time positions effective July 1, 2015 and January 11, 2016, respectively. Rent expense increased because the Company’s sublease of a portion of its existing office space expired in May 2016.

Interest expense increased by $88,000 and $53,000 to $433,000 and $718,000 for the three and six month periods ended June 30, 2016 from $345,000 and $665,000 for the three and six month periods ended June 30, 2015, respectively. Interest expense increased for the three and six month periods ended June 30, 2016, due to the interest incurred on the PBRT lease financing. This increase was offset by a lower average principal base on the Gamma Knife debt and leases, compared to prior year, effectively reducing interest expense.

The Company recorded a loss on the write down of its equity investment in Mevion of $2,114,000 for the three and six month periods ended June 30, 2015. The Company determined its investment in Mevion was other-than-temporary and wrote down the carrying value of the investment accordingly. In determining the fair value of the Company’s common stock in Mevion, the Company reviewed certain scenarios from the P-WERM analysis as well as additional analyses and estimated the value of its common stock investment in Mevion at approximately $600,000. The Company adjusted its investment in Mevion to the estimated fair value of $600,000 and recorded a $2,114,000 impairment loss. This transaction is treated as a capital loss for tax purposes which may be deducted only to the extent the Company has capital gains. The Company is not aware of any event or transaction planned where the Company would generate a capital gain. Therefore a full valuation allowance was recorded against the income tax benefit from the impairment loss, and the net impact to the income tax provision for the three and six month periods ended June 30, 2015 was $0.

During the period ended December 31, 2015, the Company engaged a third party expert to review and corroborate its assessment of the fair value of the Mevion investment. Based on the third party analysis, an additional impairment loss of $26,000 was recognized by the Company during the three months ended December 31, 2015. The fair value of the Company’s investment in Mevion, as of December 31, 2015 and June 30, 2016 was approximately $579,000. The impairment loss for the year ended December 31, 2015 was $2,140,000.

The Company incurred a loss on early extinguishment of debt of $108,000 during the six month period ended June 30, 2016, compared to $0 in the same period prior year. In February 2016, the Company used a portion of the proceeds from the lease financing for its first MEVION S250 to pay down the $1,000,000 of Notes that were issued pursuant to the Note agreements between the Company and four members of the Company’s Board of Directors. The Notes and warrant agreements permit for early payment without penalty to the Company. The Notes were issued with common stock warrants with an estimated fair value of $145,000. The unamortized balance of the discount on the Notes, of $80,000, and deferred fees incurred from the issuance of the Note of approximately $28,000, were recorded as a loss on early extinguishment of debt on the Company’s condensed consolidated Statement of Operations.

16

Interest and other income decreased by $2,000 and $3,000 to $3,000 and $8,000 for the three and six month periods ended June 30, 2016 from $5,000 and $11,000 for the three and six month periods ended June 30, 2015, respectively. Interest and other income is generated from deferred revenue and interest earned on investments.

The Company had income tax expense of $93,000 and $157,000 for the three and six month periods ended June 30, 2016 compared to income tax expense of $106,000 and $236,000 for the three and six month periods ended June 30, 2015, respectively. For the three and six month periods ended June 30, 2016, income tax expense was primarily due to taxable income attributable to GKF and Orlando operations. For the six month period ended June 30, 2016, the decrease in income tax expense was due to lower taxable income attributable to the Company, driven by the loss on early extinguishment of debt.

Net income attributable to non-controlling interest increased by $27,000 and $104,000 to $260,000 and $541,000 for the three and six month periods ended June 30, 2016 from $233,000 and $437,000 for the three and six month periods ended June 30, 2015. Non-controlling interest primarily represents the 19% interest of GKF owned by a third party, as well as non-controlling interests in subsidiaries of GKF owned by third parties that began operations in 2011. Variances in net income attributable to non-controlling interest represent the relative increase or decrease in profitability of GKF and these ventures.

The Company had net income of $93,000, or $0.02 per diluted share, and $144,000, or $0.03 per diluted share, for the three and six month periods ended June 30, 2016, compared to a net loss of $1,970,000, or $0.36 per diluted share, and $1,842,000, or $0.34 per diluted share, in the same periods in the prior year, respectively. Excluding the loss on early extinguishment of debt, net of estimated taxes, and the loss attributable to an impairment charge related to the Company’s equity investment in Mevion, net income decreased $51,000 and $64,000 for the three and six month periods ended June 30, 2016. For the three month period, the decrease was due to a decline in Gamma Knife volume and revenue, offset by PBRT revenue. For the six month period, the decrease was due to a decline in Gamma Knife volume and selling and administrative costs.

Liquidity and Capital Resources

The Company had cash and cash equivalents of $1,764,000 at June 30, 2016 compared to $2,209,000 at December 31, 2015. The Company’s cash position decreased by $445,000 due to payments for the purchase of property and equipment of $575,000, principal payments on long term debt and capital leases of $4,114,000, and distributions to non-controlling interests of $301,000. These decreases were offset by net cash from operating activities of $3,401,000, capital contributions of $7,000, and proceeds from capital lease financing for reimbursement of payments for acquisition of equipment of $1,137,000.

The Company had cash and cash equivalents of $1,798,000 at June 30, 2015 compared to $1,059,000 at December 31, 2014. The Company’s cash position increased by $739,000 due to net cash from operating activities of $3,869,000, proceeds from long-term debt financing on property and equipment of $1,023,000, capital contributions of $27,000, and net proceeds from the certificate of deposit and pay-down on the line of credit of $220,000. These decreases were offset by payments for the purchase of property and equipment of $1,344,000, investment in equity securities of $5,000, principal payments on long term debt and capital leases of $2,783,000, and distributions to non-controlling interests of $268,000.

17

The Company has scheduled interest and principal payments under its debt obligations of approximately $2,244,000 and scheduled capital lease payments of approximately $6,499,000 during the next 12 months. The Company believes that its cash flow from cash on hand, operations, and other resources are adequate to meet its scheduled debt and capital lease obligations during the next 12 months. See additional discussion below related to commitments.

The Company as of June 30, 2016 had shareholders’ equity of $25,690,000, negative working capital of $3,050,000 and total assets of $59,301,000.

Commitments

As of June 30, 2016, the Company had commitments to purchase two MEVION S250 PBRT systems for $25,800,000 and the Company had $2,000,000 in non-refundable deposits toward the purchase of these two PBRT systems from Mevion. The non-refundable deposits are recorded in the Condensed Consolidated Balance Sheets as deposits and construction in progress. The Company’s first MEVION S250 PBRT treated its first patient in April 2016. In January 2016, the Company secured lease financing of approximately $8,400,000 and payment of $6,700,000 was remitted to Mevion. The financing company also reimbursed the Company approximately $1,100,000 in previously remitted progress payments to Mevion and freight costs. An additional payment of $400,000 was remitted to Mevion in April 2016, using proceeds from the lease financing, following acceptance of the PBRT system at Orlando Health. The final payment of approximately $200,000 is due to Mevion during 2016 which will be paid using the remaining proceeds from the January 2016 lease financing. Total PBRT commitments as of June 30, 2016 were $26,000,000.

The Company and Mevion have not agreed on construction and delivery timetables for the second and third PBRT units for which the Company has purchase commitments. The Company is actively seeking sites for these units but to date has not entered into agreements with any party for either placement of a PBRT unit or the related financing. In the past, the Company and Mevion have established construction and delivery timetables, and therefore progress payment dates, only after the Company has notified Mevion that there is a proposed site for the unit. Accordingly, the timing of the required payments for the remaining $25,800,000 of the Company’s purchase commitments remains uncertain. The Company’s position is that these payments should not commence until a site is available for a PBRT unit and the related financing is in place.

As of June 30, 2016, the Company had commitments to purchase one Gamma Knife Perfexion system, three Cobalt-60 reloads, and is scheduled to install one Gamma Knife Model 4C system, which the Company previously financed and owns. Total Gamma Knife commitments as of June 30, 2016 were $4,850,000. The Model 4C unit is scheduled to be installed in the second half of 2016 at the Company’s new customer site in Peru. There are cash requirements for the Peru commitment in the next 12 months of approximately $200,000. The Company believes that cash flow from cash on hand and operations will be sufficient to cover this payment. The Perfexion unit is for a site yet to be determined and it is the Company’s intent to finance this unit. One Cobalt-60 reload is for an existing site, scheduled for 2016, and the Company has a commitment to finance this reload. The remaining two Cobalt-60 reloads are for existing customers and are scheduled to occur in 2017. It is the Company’s intent to finance these reloads. There are no significant cash requirements, pending financing, for the Perfexion system or the Cobalt-60 reloads in the next 12 months. There can be no assurance that financing will be available for the Company’s current or future projects, or at terms that are acceptable to the Company.

18

The Company estimates the following commitments for each of the equipment systems with expected timing of payments as follows as of June 30, 2016:

	2016		Thereafter		Total
Proton Beam Units	$	200,000	$	25,800,000	$	26,000,000
Gamma Knife Units		1,100,000		3,750,000		4,850,000
Total Commitments	$	1,300,000	$	29,550,000	$	30,850,000

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company does not hold or issue derivative instruments for trading purposes and is not a party to any instruments with leverage or prepayment features. The Company does not have affiliation with partnerships, trusts or other entities whose purpose is to facilitate off-balance sheet financial transactions or similar arrangements, and therefore has no exposure to the financing, liquidity, market or credit risks associated with such entities. At June 30, 2016 the Company had no significant long-term, market-sensitive investments.

Item 4. Controls and Procedures

Under the supervision and with the participation of our management, including our chief executive officer and our chief financial officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934. These controls and procedures are designed to ensure that material information relating to the company and its subsidiaries is communicated to the chief executive officer and the chief financial officer. Based on that evaluation, our chief executive officer and our chief financial officer concluded that, as of June 30, 2016, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to the chief executive officer and the chief financial officer, and recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on our evaluation we concluded that there has been no change during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

19

Any system of controls, however well designed and operated, can provide only reasonable, and not absolute assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

There are no changes from those listed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information.

None.

20

Item 6. Exhibit Index

			Incorporated by reference herein
Exhibit
Number		Description	Form	Exhibit	Date
10.1	*	Purchased Services Agreement (for a Gamma Knife Unit) dated as of November 19, 2008 between GK Financing, LLC and Kettering Medical Center.
10.1a	*	First Amendment to Purchased Services Agreement (for a Gamma Knife Unit) dated as of June 11, 2009 between GK Financing, LLC and Kettering Medical Center.
10.2	*	Addendum to Lease Agreement for a Gamma Knife Unit dated as of April 13, 2007, between GK Financing, LLC and OSF Healthcare System.
10.2a	*	Addendum Two to Lease Agreement for a Gamma Knife Unit dated as of October 31, 2012 between GK Financing, LLC and OSF Healthcare System.
10.2b	*#	Addendum Three to Lease Agreement for a Gamma Knife Unit dated as of June 7, 2016 between GK Financing, LLC and OSF Healthcare System.
10.3	*#	Proton Beam Radiation Therapy Lease Agreement dated as of October 18, 2006 between American Shared Hospital Services and Orlando Regional Healthcare System, Inc.
10.3a	*#	Amendment One to Proton Beam Radiation Therapy Lease Agreement dated as of August 12, 2012 between American Shared Hospital Services and Orlando Health, Inc., formerly known as Orlando Regional Healthcare System, Inc.
31.1	*	Certification of Chief Executive Officer pursuant to Rule 13a-14a/15d-14a, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	*	Certification of Chief Financial Officer pursuant to Rule 13a-14a/15d-14a, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	ǂ	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	*	XBRL Instance Document
101.SCH	*	XBRL Taxonomy Extension Schema Document
101.CAL	*	XBRL Taxonomy Calculation Linkbase Document
101.DEF	*	XBRL Taxonomy Definition Linkbase Document
101.LAB	*	XBRL Taxonomy Label Linkbase Document
101.PRE	*	XBRL Taxonomy Extension Presentation Linkbase Document
	*	Filed herewith.
	ǂ	Furnished herewith.
	#	Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the SEC.

21

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

AMERICAN SHARED HOSPITAL SERVICES

Registrant

Date:	August 11, 2016	/s/ Ernest A. Bates, M.D.
		Ernest A. Bates, M.D.
		Chairman of the Board and Chief Executive Officer
Date:	August 11, 2016	/s/ Craig K. Tagawa
		Craig K. Tagawa
		Senior Vice President
		Chief Operating and Financial Officer

22

EX-10.1

Exhibit 10.1

PURCHASED SERVICES AGREEMENT

THIS PURCHASED SERVICES AGREEMENT (“Agreement”) is made and entered into as of November 19, 2008, by and between GK FINANCING, LLC, a California limited liability company (“GKF”), or its wholly owned subsidiary whose obligation under this agreement shall be guaranteed by GKF, and KETTERING MEDICAL CENTER, an Ohio non-profit corporation, (“Medical Center”), with reference to the following facts:

RECITALS

WHEREAS, Medical Center wants to obtain the right to use a Leksell Gamma Knife Perfexion (the “Equipment”), manufactured by Elekta Instruments, Inc., a Georgia corporation ("Elekta"), which will replace the existing Leksell Stereotactic Gamma Unit, model B (the "Model B"), currently being used by Medical Center; and

WHEREAS, GKF is willing to provide Medical Center with the right to use the Equipment which GKF has acquired from Elekta, pursuant to the terms and conditions of this Agreement.

AGREEMENT

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.          Right to Use the Equipment. Subject to and in accordance with the covenants and conditions set forth in this Agreement, GKF hereby grants the right to use the Equipment to Medical Center, and Medical Center hereby accepts the right to use the Equipment from GKF. The Equipment to be placed at the Medical Center pursuant to this Agreement shall include the Gamma Knife technology as specified in Exhibit 1, including all hardware and software related thereto.

2.          LGK Agreement. Simultaneously with the execution of this Agreement, Medical Center and Elekta shall enter into that certain Leksell Gamma Knife End User Agreement pertaining to the Equipment (the “LGK Agreement”), a copy of which is attached hereto as Exhibit 2. Medical Center shall perform, satisfy and fulfill all of its obligations arising under the LGK Agreement when and as required thereunder. Medical Center acknowledges that GKF is a third party beneficiary of the LGK Agreement and, in that capacity, GKF shall be entitled to enforce Medical Center’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 seven (7) years following the date of the performance of the first clinical Procedure (as defined in Section 8) performed on the Equipment (the “First Procedure Date”) at the Site (as defined in Section 5.1). The parties agree to amend this Agreement to memorialize the First Procedure Date upon the performance of the first clinical Procedure performed on the Equipment. Medical Center’s obligation to make the “Purchased Services Payments” to GKF for the Equipment described in Section 8 below shall commence as of the First Procedure Date.

4.          User License. Medical Center shall apply for and use its reasonable efforts to 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. Medical Center also shall apply for and use its reasonable efforts to 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 provide assistance to the Medical Center in applying for and for obtaining all such licenses, permits, approvals, consents or authorizations. If the applicable regulatory authorities affirmatively decline to issue a required license, permit, approval, consent or authorization notwithstanding Medical Center’s best efforts to obtain the same, all parties shall be released from further performance or any obligations or duties arising under this Agreement.

5. Delivery of Equipment; Site.

5.1           GKF shall coordinate with Elekta and Medical Center to have the Equipment delivered to Medical Center at the site at which the Model B is currently located, as described in Exhibit 5.1 of this Agreement (the “Site”), which delivery is anticipated to be on or before July 2009, subject to all approvals and User Licenses having been obtained, and provided that, if such delivery date is in advance of the expiration of the current term of the existing Lease Agreement For A Gamma Knife Unit dated June 1, 1998, between GKF and Medical Center (as amended, the “Prior Agreement”), which results in an early termination of the Prior Agreement, then, the parties will negotiate an extension to the Term of this Agreement to offset the effect of such early termination of the Prior Agreement. GKF makes no representations or warranties, and assumes no responsibility or liability, concerning delivery of the Equipment to the Site or the actual date thereof. Medical Center shall bear no risk of loss prior to actual delivery of Equipment to the Site.

- 2 - 

5.2           Medical Center shall provide access to the Site for the Equipment. GKF at its cost and expense shall prepare the Site for the Equipment in accordance with Elekta’s guidelines, specifications, technical instructions and site planning criteria (which site planning criteria are attached as Exhibit 5.2 of this Agreement) (collectively the “Site Planning Criteria”). The location of the Site has been agreed upon by Medical Center and GKF as described in Exhibit 5.1 of this Agreement.

6. Site Preparation, Deinstallation of Model B and Installation of Equipment.

6.1           GKF, at its cost, expense and risk, shall prepare all plans and specifications required to construct and improve the Site for the installation, use and operation of the Equipment during the Term. The plans and specifications shall comply in all respects with the Site Planning Criteria and with all applicable federal, state and local laws, rules and regulations. All plans and specifications prepared by or on behalf of GKF (and all material changes thereto following approval by Medical Center and Elekta) shall be subject to the written approval of Medical Center and Elekta prior to commencement of construction at the Site. GKF shall provide Medical Center and Elekta with a reasonable period of time for the review and consideration of all plans and specifications following the submission thereof for approval (and Medical Center shall not unreasonably withhold or delay its approval). Following approval of the plans and specifications by Medical Center and Elekta, GKF, at its cost and expense, shall assist Medical Center in obtaining all permits, certifications, approvals or authorizations required by applicable federal, state or local laws, rules or regulations necessary to construct and improve the Site for the installation, use and operation of the Equipment.

6.2           Based upon the plans and specifications approved by Medical Center and Elekta, GKF, at its cost, expense and risk, 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, if any, at the Site in connection with the use and operation of the Equipment, all in accordance with applicable federal, state and local laws, rules, regulations or custom.

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6.3           GKF, at its cost, expense and risk, 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           GKF warrants and ensures that, to its best knowledge, upon completion of the preparation, construction and improvement of the Site, including the positioning of the Equipment on its foundation at the Site and installation of the Equipment, the Site shall comply in all material respects with the Site Planning Criteria and all applicable federal, state and local laws, rules and regulations, and be safe and suitable for the ongoing use and operation of the Equipment during the Term. GKF agrees to indemnify, defend and hold Medical Center harmless from any loss, or claim, suit or proceeding brought against the Medical Center in connection with or arising from GKF’s noncompliance with GKF’s warranties and assurances provided under this Section 6.4. It is acknowledged that the existing site and location that are currently being used for the Model B pursuant to the Prior Agreement (the “Existing Site”) will continue to be used for the Equipment following the deinstallation and removal of the Model B and GKF’s modifications to the Site to accommodate the Equipment. Notwithstanding anything to the contrary contained in this Agreement, (a) nothing set forth in this Agreement shall eliminate, modify or limit any or all of Medical Center’s representations, warranties and/or obligations set forth in the Prior Agreement with respect to the Existing Site, all of which shall remain unchanged and in full force and effect, and shall survive the termination or expiration of the Prior Agreement; and (b) GKF makes no representation or warranty and assumes no liabilities with respect to the work performed by or on behalf of Medical Center pursuant to the Prior Agreement in connection with the Existing Site.

6.5           GKF at its cost, expense and risk, shall coordinate with Elekta the deinstallation and removal of the Model B including unloading and disposing of the cobalt. GKF agrees to provide Medical Center the option to retain its existing headframes and fiducial boxes; and in the event that Medical Center exercises this option, GKF also agrees that it shall, at its sole cost and expense, refurbish the existing headframes.

6.6           GKF shall use its reasonable efforts to satisfy its obligations under this Section 6 in a timely manner. GKF shall keep Medical Center informed on a regular basis of its progress in the design of the Site, the preparation of plans and specifications, the construction and improvement of the Site, and the satisfaction of its other obligations under this Section 6. In all events, GKF shall complete all construction and improvement of the Site required for the installation, positioning and testing of the Equipment on or prior to the delivery date described in Section 5.1 above. During the Term, Medical Center, at its cost and expense, shall maintain the Site in a good working order, condition and repair, reasonable wear and tear excepted.

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6.7           Notwithstanding anything to the contrary contained in this Agreement, GKF’s responsibility for all costs and expenses incurred in connection with Section 6.1, 6.2, and 6.3 shall not exceed One Hundred Fifty-Two Thousand Dollars ($152,000.00) in the aggregate. All costs and expenses in excess of One Hundred Fifty-Two Thousand Dollars ($152,000.00) shall be the responsibility of Medical Center.

7.          Marketing Support. GKF, in coordination with Medical Center, shall provide Medical Center with marketing support for the service to be provided by Medical Center using the Equipment. 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 Medical Center shall develop a mutually agreed upon marketing budget and plan (“Plan”) for the clinical service to be supported by the Equipment for the succeeding twelve (12) month period of the Term. Once approved, the Plan shall be implemented by Medical Center in accordance with its terms. If Medical Center has not approved or disapproved of the Plan within sixty (60) days following its receipt, Medical Center shall be deemed to have approved the same. All advertisements, brochures and other marketing materials pertaining to the Plan shall be subject to review and written approval by Medical Center and GKF prior to their use. Medical Center and GKF shall discuss the Plan on a regular basis not less than once per quarter. Medical Center’s and any Medical Center subsidiary’s or related corporation’s name, trademarks, service marks, or other identifying names, marks, images or designations shall be and remain the sole and exclusive property of Medical Center, but which may be used in any written pre-approved marketing materials without payment of any license or royalty fee. As funds are expended by Medical Center in accordance with the Plan, Medical Center shall submit invoices (together with documentary evidence supporting the invoices) for its expenditures paid to third parties and, promptly following the receipt of such invoices, GKF shall reimburse Medical Center for fifty percent (50%) of approved expenditures, provided that such portion to be reimbursed by GKF shall not exceed an average of Seventy-Five Thousand Dollars ($75,000) annually during the term of the Agreement. It is acknowledged by the parties that such expenses to be reimbursed by GKF as provided in Section 7 have been included in GKF’s calculation of Medical Center’s Purchased Services Payments so as to allow GKF to recover such GKF expenses during the Term of this Agreement.

8. Purchased Services Payments.

(a)          The parties have negotiated this Agreement at arm’s length based upon reasonable and jointly derived assumptions regarding the capacity for clinical services available from the Equipment, Medical Center’s capabilities in providing high quality radiation oncology services, market dynamics, GKF’s risk in providing the Equipment, and the provision to GKF of a reasonable rate of return on its investment in support of the Equipment. Based thereon, the Parties believe that the “Purchased Services Payments” as defined below represent fair market value for the use of the Equipment, the deinstallation and removal of the Model B, the preparation, construction and improvement of the Site, and the marketing support and other services to be provided by GKF to Medical Center hereunder. Medical Center undertakes no obligation to perform any minimum number of Procedures on the Equipment, and the use of the Equipment for the performance of Procedures is wholly based upon the independent judgment of physicians who order such Procedures to meet the medical needs of their patients.

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(b)          In consideration for and as compensation to GKF for deinstallation and removal of the Model B, the preparation, construction and improvement of the Site, installation and use of the Equipment, the Equipment modification allowance referenced in Section 13.1 below, and marketing support and the other additional services to be provided by GKF under this Agreement, Medical Center shall pay to GKF, on a monthly basis, the applicable “Purchased Services Payments” (as defined below) for each "Procedure" that is performed by Medical Center or its representatives or affiliates, whether on an inpatient or outpatient basis, and irrespective of whether the Procedure is performed on the Equipment or using any other equipment or devices, including but not limited to any “Additional GK Leksell Unit” (defined below). Notwithstanding the foregoing, and for the avoidance of doubt, if at any time in addition to the Equipment, Medical Center purchases, leases or otherwise acquires from any third party the use of a Leksell Gamma Knife unit(s) of any model type or configuration (an “Additional GK Leksell Unit”), then, in addition to the Purchased Services Payments that are payable to GKF for Procedures performed using the Equipment as set forth above, Medical Center shall pay to GKF the Purchased Services Payments on a monthly basis for any and all Procedures performed using the Additional GK Leksell Unit, and/or any other equipment or devices, whether on an inpatient or outpatient basis. The parties acknowledge that the Purchased Services Payments represent fair market value for the use of the Equipment as described in this Agreement. As used herein:

(i)          "Procedure" means 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. “Procedure” shall expressly exclude (1) any procedures which the Equipment is unable to perform or which, in the opinion of Elekta, the Equipment is not designed or reasonably suitable to perform; and/or (2) any fractionated procedures for a single tumor involving more than a single fraction (commonly called fractionated stereotactic radiotherapy) where such fractionated treatment is medically indicated.

(ii)         “Purchased Services Payments” shall be equal to the applicable percentage of the “Technical Component Collections” relating to each Procedure as set forth in Exhibit 8 attached hereto performed using the Equipment, any Additional GK Leksell Unit and/or any other equipment or devices during the Term of this Agreement.

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(iii)        “Technical Component Collections” means the total amount actually collected by Medical Center 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, including, without limitation, all copayments and deductibles, as reimbursement for the technical component of all services (including, but not limited to, treatment planning and delivery, imaging, medical supplies, pharmacy, laboratory, and recovery room) pertaining to each Procedure performed on the Equipment, any Additional GK Leksell Unit and/or any other equipment or devices during the term of this Agreement. The technical fees to be billed for each Procedure (on an individual basis and not collectively) that is performed utilizing the Equipment, any Additional GK Leksell Unit and/or any other equipment or devices 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. For all Procedures that are performed utilizing the Equipment, any Additional GK Leksell Unit and/or any other equipment or devices, Medical Center shall consult in advance with GKF from time to time regarding the amount of such technical fees to be billed by Medical Center. Subject to compliance with the standard described in the preceding sentence, Medical Center and GKF shall mutually agree on the setting or revision of the amount of, or portion comprising, such technical fees on no more than an annual basis to ensure that such fees remain consistent with fair market value, and the acceptance of the technical fee component amounts with third party payors prior to their implementation.

(c)          On or before the fifteenth (15) day and the last day of each month (or portion thereof) during the term of this Agreement, Medical Center shall inform GKF in writing as to (i) the number of Procedures performed during that month utilizing the Equipment (and, if applicable, any Additional GK Leksell Unit and/or any other equipment or devices); and (ii) the Technical Component Collections during that month. Medical Center shall submit claims for reimbursement to the appropriate payors for each Procedure within thirty (30) days after the patient receiving the treatment is discharged. If no Technical Component Collections are received during any month, then, no Purchased Services Payments shall be owing by Medical Center to GKF for that month. During the Term of this Agreement, Medical Center shall, by the thirtieth (30th) day of each month, remit GKF’s aggregate Purchased Services Payment for the immediately preceding month, and, for a period of twenty-five (25) months following the termination or expiration of this Agreement (the “Collections Run-Out Period”), Medical Center shall, by the thirtieth (30th) day of each such month, continue to remit GKF’s aggregate Purchased Services Payment pertaining to Technical Component Collections received during the Collections Run-Out Period as applicable to Procedures performed during the Term. All or any portion of a Purchased Services Payment which is not paid in full within sixty (60) days after its due date shall bear interest at the rate of one percent (1%) per month (or the maximum monthly interest rate permitted to be charged by law between an unrelated, commercial borrower and lender, if less) until the unpaid Purchased Services Payment together with all accrued interest thereon is paid in full. If GKF shall at any time accept a Purchased Services Payment from Medical Center 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.

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(d)          Within thirty (30) days after the close of each month, Medical Center shall provide GKF with a patient de-identified written report indicating the status of billings and collections for each Procedure performed during that month using the Equipment, any Additional GK Leksell Unit and/or any other equipment or devices, including, without limitation, the amount of the claim submitted and the amount received for each such Procedure. Upon request by GKF, Medical Center 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, Medical Center shall provide written notice thereof to GKF within five (5) days of Medical Center receiving notice thereof.

(e)          Within ten (10) days after Medical Center’s receipt of written request by GKF, GKF shall have the right to audit all applicable books and records during normal business hours to verify the number of Procedures performed and Technical Component Collections received by Medical Center or its agents, representatives or affiliates, utilizing the Equipment, any Additional GK Leksell Unit and/or any other equipment or devices, and Medical Center shall provide GKF (or cause GKF to be provided) with access to such books and records; provided that any patient names or identifiers or other confidential and Protected Health Information (as defined and required by state and federal law) shall not be disclosed.

(f)          The provisions of this Section 8 shall survive the termination or expiration of this Agreement.

9. Use of the Equipment.

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

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9.2           Notwithstanding anything to the contrary contained in this Agreement, this is an agreement of purchasing a service only. Nothing herein shall be construed as conveying to Medical Center any right, title or interest in or to the Equipment, except for the express right to use the Equipment granted herein to Medical Center during 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, Medical Center shall promptly affix to the Equipment an identifying label supplied by GKF indicating GKF’s ownership of the Equipment, and shall keep the same affixed for the entire Term. Medical Center hereby authorizes GKF to cause this Agreement 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. Medical Center also shall promptly execute and deliver, or cause to be executed and delivered, to GKF any statement or instrument reasonably requested by GKF for the purpose of evidencing GKF’s interest in the Equipment, including UCC financing statements and other relevant 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 Medical Center's cost and expense, Medical Center shall (a) protect and defend GKF’s ownership of and title to the Equipment from and against all persons claiming against or through Medical Center, (b) at all times keep the Equipment free from any and all liens, encumbrances, attachments, levies, executions, burdens, charges or legal processes imposed against Medical Center, (c) give GKF immediate written notice of any matter described in clause (b), and (d) in the manner described in Section 22 below indemnify GKF harmless from and against any loss, cost or expense (including reasonable attorneys’ fees) with respect to any of the foregoing.

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

10.1         Provide properly trained professional, technical and support personnel and supplies required for the proper performance of Gamma Knife procedures utilizing the Equipment. In this regard, Medical Center shall make reasonable efforts to maintain on staff a minimum of two (2) Gamma Knife trained teams comprised of neurosurgeons, radiation oncologists and physicists. The Gamma Knife shall be available for use by all credentialed neurosurgeons, radiation oncologists and physicists.

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10.2         Direct, supervise and administer the provision of all services relating to the performance of Procedures utilizing the Equipment in accordance with all applicable laws, rules and regulations.

10.3         Provide reasonable and customary marketing materials (i.e. brochures, announcements, etc.) together with administrative and physician support (e.g., seminars for physicians by neurosurgeons and radiation therapists, in accordance with Medical Center’s policies and procedures, etc.) for the Equipment to be operated by the Medical Center. The obligation to provide marketing materials and administration and physician support shall be included in, and not in addition to, the annual marketing budget referenced in Section 7 above.

10.4         Keep and maintain the Equipment and the Site fully protected, secure and free from unauthorized access or use by any person to the extent that Medical Center provides security for its other radiation oncology services.

10.5         Operate a fully functional radiation therapy department at the Site or Affiliate site which shall include the Equipment.

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 Medical Center 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         Cause Medical Center to enjoy the 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.

11.3         Cover the tuition costs for up to ten (10) Perfexion training slots for physicians and physicists who will be using the Equipment. Travel and entertainment associated with training shall not be the responsibility of GKF.

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, and (b) maintain in full force and effect an Advanced Service Agreement with Elekta (“Service Agreement”) and any other service or other agreements required to fulfill GKF’s obligation to repair and maintain the Equipment under this Section 12. Medical Center 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, regardless of whether such repairs or maintenance are covered or not covered by the Service Agreement. 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 at all times during the Term of this Agreement be free from defects in design, materials and workmanship and will conform to Elekta’s technical specifications concerning the Equipment.

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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 Medical Center’s regular business operations.

12.3         Medical Center shall be liable for, and in the manner described in Section 22 below shall indemnify GKF from and against, 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 Medical Center’s officers, employees, agents, contractors and physicians. 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 Medical Center’s officers, employees, agents, contractors and/or physicians, 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 Medical Center to GKF immediately upon written request together with interest thereon at the rate of one percent (1%) per month (or the maximum monthly interest rate permitted to be charged by law between an unrelated, commercial borrower and lender, if less) and reasonable attorneys’ fees and costs incurred by GKF in collecting such amount from Medical Center. Any work so performed by GKF shall not deprive GKF of any of its rights, remedies or actions against Medical Center for such damages.

12.4         If the Equipment is rendered unusable as a result of any physical damage to or destruction of the Equipment, Medical Center 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. In the event GKF determines that the Equipment cannot be repaired (a) subject to Section 12.3 above, GKF, at its cost and expense, shall 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, (b) the Term of this Agreement shall be extended for the period of time the Equipment is unusable, and (c) this Agreement shall continue in full force and effect as though such damage or destruction had not occurred. 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. Medical Center 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.

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13. Alterations and Upgrades to Equipment.

13.1         Medical Center 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. Medical Center 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. Included in this Agreement is an Equipment modification allowance of Two Hundred Thousand Dollars ($200,000.00) for modifications that are mutually agreed upon by the parties hereto. Equipment modification costs in excess of Two Hundred Thousand Dollars ($200,000.00) shall be the responsibility of Medical Center.

13.2         The necessity and financial responsibility for modifications, additions or upgrades to the Equipment, including the reloading of the Cobalt-60 source, shall be mutually agreed upon by GKF and Medical Center. If (a) GKF and Medical Center agree to reload the Cobalt-60 source (i.e., on or around the end of the fifth (5^th) year of the Term), and (b) GKF pays the reload costs associated therewith up to Nine Hundred Thousand Dollars ($900,000), then, notwithstanding any provisions to the contrary herein, the initial Term shall be automatically extended for an additional three (3) years. Cobalt-60 reload costs in excess of Nine Hundred Thousand Dollars ($900,000) shall be the responsibility of Medical Center. Alternatively, Medical Center may elect to pay the entire costs of the Cobalt-60 reload in which case the Term of the Agreement shall remain unchanged.

13.3         All software upgrades provided at no charge to GKF under the terms of its maintenance agreement with Elekta shall be provided at no charge to Medical Center. All other software upgrades shall be the responsibility of Medical Center, and shall not be included as part of the Equipment modification allowance.

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. Medical Center’s interest under this Agreement shall be subordinate to the interests of the Lender.

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15.         Equipment Operational Costs. Except as otherwise expressly provided in this Agreement, Medical Center shall be responsible and liable for all costs and expenses incurred, directly or indirectly, in connection with the operation and use of the Equipment during the Term, including, without limitation, but subject to Section 11.3 above, the costs and expenses required to provide trained physicians, professionals, and technical and support personnel, supplies and other items required to properly operate the Equipment and perform Procedures.

16.         Taxes. GKF shall pay all sales or use taxes imposed or assessed in connection with the use or purchase of the Equipment and all personal property taxes imposed, levied or assessed on the ownership and possession of the Equipment during the Term. Unless Medical Center provides GKF with a tax exemption certificate, all other taxes, assessments, licenses or other charges imposed, levied or assessed on the Equipment during the Term for which Medical Center is not expressly exempt, shall be paid by Medical Center before the same shall become delinquent, whether such taxes are assessed or would ordinarily be assessed against GKF or Medical Center; provided, however, Medical Center 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 Purchased Services Payments of the Equipment. In case of a failure by either party to pay any taxes, assessments, licenses or other charges when and as required under this Section, the other party may pay all or any part of such taxes, in which event the amount paid by such paying party shall be immediately payable to the paying party upon written request together with interest thereon at the rate of at the rate of one percent (1%) per month (or the maximum monthly interest rate permitted to be charged by law between an unrelated, commercial borrower and lender, if less).

17.         No Warranties by GKF. Medical Center warrants that as of the First Procedure Date, it shall have (a) thoroughly inspected the Equipment to the best of their knowledge, (b) determined that to the best of its knowledge 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 Medical Center intended purposes and is good working order, condition and repair. GKF will work with Medical Center in good faith to remedy any problems identified in writing by Medical Center during Medical Center's inspection. 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 Medical Center, Medical Center shall bear all risks with respect to the foregoing warranties. Notwithstanding the foregoing, GKF shall use its best efforts to ensure that all benefits under the manufacturer’s warranty shall run to the Medical Center. GKF shall not be liable for any direct, indirect and consequential losses or damages suffered by Medical Center or by any other person, and Medical Center expressly waives any right to hold GKF liable hereunder for, any claims, demands and liabilities arising out of or in connection with the design, manufacture, possession or operation of the Equipment, including, without limitation, 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 Medical Center solely and exclusively against Elekta and any other manufacturers or suppliers, but shall in no event be asserted against GKF. In this regard and with prior written approval of GKF, Medical Center may, in GKF’s name, but at Medical Center’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 Medical Center. GKF shall not be responsible for the delivery or operation of the Equipment or for any delay or inadequacy of either or both of the foregoing.

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18.         Termination for Economic Justification. If, following the initial twenty four (24) months after the First Procedure Date and following each subsequent 12 month period thereafter during the Term, based upon the utilization of the Equipment and other factors considered relevant by GKF in the exercise of its reasonable discretion, within a reasonable period of time after GKF’s written request, Medical Center does not provide GKF with a reasonable economic justification to continue this Agreement and the utilization of the Equipment at the Medical Center, then and in that event, GKF shall have the option to terminate this Agreement by giving a written notice thereof to Medical Center not less than one hundred eighty (180) days prior to the effective date of the termination designated in GKF’s written notice. Without limiting the generality of the foregoing, for purposes of this Section, “reasonable economic justification to continue this Agreement” shall not be deemed to exist (and GKF shall have the option to terminate this Agreement) if, during the twelve (12) month period immediately preceding the issuance of GKF’s written notice of termination, the “Net Cash Flow” is negative. As used herein, “Net Cash Flow” shall mean, for the applicable period, (a) the aggregate Purchased Services Payments actually received by GKF during such period, minus (b) the sum of the aggregate (i) debt service on the Equipment, (ii) maintenance expenses, (iii) marketing support, and (iv) Equipment-related personal property taxes and insurance during such period.

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

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19.1         Extend the Term of this Agreement for a specified period of time and upon such other terms and conditions as may be agreed upon by GKF and Medical Center;

19.2         Terminate this Agreement as of the expiration of the Term. Upon the expiration of the Term and within a reasonable time thereafter, GKF, at its cost and expense, may enter upon the Site under Medical Center supervision and remove the Equipment.

19.3         Medical Center may elect to purchase the Equipment from GKF for the fair market value amount (as mutually agreed upon by the parties) as of the expiration date of Term, payable in cash (or other immediately available federal funds), at the end of the Term.

Medical Center shall exercise one (1) of the three (3) options referred to above by giving an irrevocable written notice thereof to GKF at least one (1) year prior to the expiration of the initial Term. Any such notice shall be sufficient if it states in substance that Medical Center elects to exercise its option and states which of the three (3) options referred to above Medical Center is exercising. If Medical Center fails to exercise the option granted herein at least one (1) year 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 Medical Center exercises the option specified in Section 19.1 above 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 and Remedies.

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

20.1.1           Medical Center fails to pay any Purchased Services 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 Medical Center; however, if Medical Center cures the Purchased Services Payment default within the applicable thirty (30) day period, such default shall not constitute an Event of Default.

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

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20.1.3           Medical Center 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 Medical Center; however, if Medical Center cures the default within the applicable thirty (30) day period or if the default reasonably requires more than thirty (30) days to cure, Medical Center commences to cure the default during the initial thirty (30) day period and Medical Center diligently completes the cure within sixty (60) days following the end of the thirty (30) day period, such default shall not constitute a Medical Center Event of Default; provided that the foregoing cure periods shall not apply to a Medical Center Event of Default under Subsections 20.1.1 or 20.1.2.

20.1.4            Medical Center 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 Medical Center 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 Medical Center 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.

20.1.6           Medical Center is suspended or terminated from participation in the Medicare program.

20.2         GKF Event of Default. The occurrence of any one of the following shall constitute a GKF event of default under this Agreement (a “GKF Event of Default”):

20.2.1           GKF causes Medical Center’s quiet enjoyment and use of the Equipment pursuant to this Agreement to be materially interfered with (other than by reason of a Medical Center Event of Default or in connection with servicing, maintenance or repairs as contemplated in this Agreement), and GKF fails to cure such default within thirty (30) days after written notice thereof is given by Medical Center or its assignee to GKF; however, if GKF cures such default within the applicable thirty (30) day period, such default shall not constitute an GKF Event of Default.

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20.2.2           GKF fails to pay or reimburse Medical Center for any monies payable by GKF to Medical Center pursuant to this Agreement and such failure continues for a period of thirty (30) days after written notice thereof is given by Medical Center or its assignee to GKF; however, if GKF cures the default within the applicable thirty (30) day period, such default shall not constitute a GKF Event of Default.

20.2.3           GKF fails to maintain in full force and effect the Service Agreement or any other service or other agreements required to fulfill GKF’s obligation to repair and maintain the Equipment under Section 12 above, and such failure continues for a period of fifteen (15) days after written notice thereof is given by Medical Center or its assignee to GKF; however, if GKF cures the default within the applicable fifteen (15) day period, such default shall not constitute a GKF Event of Default.

20.2.4           GKF fails to observe or perform any of its covenants, duties or obligations arising under this Agreement and such failure continues for a period of thirty (30) days after written notice thereof by Medical Center to GKF; however, if GKF cures the default within the applicable thirty (30) day period or if the default reasonably requires more than thirty (30) days to cure, GKF commences to cure the default during the initial thirty (30) day period and GKF diligently completes the cure within sixty (60) days following the end of the thirty (30) day period, such default shall not constitute a GKF Event of Default; provided that the foregoing cure periods shall not apply to a GKF Event of Default under Subsections 20.2.1, 20.2.2, or 20.2.3.

20.2.5           GKF 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.

20.2.6           Within sixty (60) days after the commencement of any proceedings against GKF 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 GKF 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.

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20.3         Upon the occurrence of a Medical Center Event of Default or a GKF Event of Default, the non-breaching party may at its option do any or all of the following:

20.3.1           By written notice to GKF, Medical Center may at its option immediately terminate this Agreement as to the Equipment, wherever situated, but only upon the occurrence of a GKF Event of Default under Subsections 20.2.1 20.2.2 and/or 20.2.3. As a result of such termination, Medical Center may, at its option and upon written notice to GKF, demand that GKF immediately enter upon the Site and remove the Equipment at GKF’s sole cost and expense. For the avoidance of doubt, Medical Center shall not have the right to terminate this Agreement by reason of a GKF Event of Default, other than due to the occurrence of a GKF Event of Default under Subsections 20.2.1 20.2.2 and/or 20.2.3.

20.3.2           By written notice to Medical Center, GKF may at its option immediately terminate this Agreement as to the Equipment, wherever situated, but only upon the occurrence of any of the Medical Center Events of Default as set forth in Subsections 20.1.1, 20.1.2, 20.1.6 and/or noncompliance with Sections 10.1 and/or 10.5 above (which noncompliance has not been cured within the periods set forth in Section 20.1.3 above) (collectively, the “Termination Defaults”). For the avoidance of doubt, but without limiting GKF’s rights under Section 18 above (Termination for Economic Justification), GKF shall not have the right to terminate this Agreement by reason of a Medical Center Event of Default, other than due to the occurrence of any Termination Default. As a result of such termination pursuant to any Termination Default, GKF may (a) provide reasonable notice to Medical Center of its intention to remove the Equipment, and upon such date as provided by notice, GKF may then enter upon the Site and remove the Equipment in a manner and at a time that causes least amount of disruption to patient care, or, at Medical Center’s election, Medical Center shall remove and return the Equipment to GKF, but in either event at Medical Center’s sole cost and expense; and (b) recover from Medical Center as liquidated damages for the loss of the bargain represented by this Agreement and not as a penalty an amount equal to the present value of the unpaid estimated future Purchased Services Payments to be made by Medical Center to GKF through the end of the Term discounted at the rate of nine percent (9%), which liquidated damages shall become immediately due and payable. The unpaid estimated future Purchased Services Payments shall be based on the prior twelve (12) months Purchased Services Payments made by Medical Center to GKF hereunder with an annual four (4%) percent increase thereof through the end of the Term. Medical Center and GKF acknowledge that the liquidated damages formula set forth in this Section constitutes a reasonable method to calculate GKF’s damages resulting from any Termination Default and under the circumstances existing as of the date of this Agreement.

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20.3.3           With respect to all other Medical Center Events of Default, GKF may:

A.           Sell, dispose of, hold, use or lease the Equipment, 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 over the sale, lease or other disposition of similar Equipment owned or leased by GKF).

B.           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, to enforce the terms hereof or to recover damages for the breach hereof or to cancel this Agreement as to the Equipment.

20.3.3           Upon termination of this Agreement or the exercise of any other rights or remedies under this Agreement or available under applicable law following a Medical Center Event of Default, Medical Center shall, without further request or demand, pay to GKF all Purchased Services Payments and other sums owing under this Agreement. In the event that Medical Center shall pay the liquidated damages referred to in Section 20.3.2 above to GKF, GKF shall pay to Medical Center promptly after receipt thereof all rentals or proceeds received from the reletting or sale of the Equipment during the balance of the initial Term (after deduction of all costs and expenses, including reasonable attorneys fees and costs, incurred by GKF as a result of the Event of Default), said amount never to exceed the amount of the liquidated damages paid by Medical Center. However, Medical Center acknowledges that GKF shall have no obligation to sell the Equipment. Medical Center 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 and reasonable attorneys’ fees.

20.3.4           Subject to Section 17 above, each party shall in any event remain fully liable to the other non-defaulting party for all damages as may be provided by law and for all costs and expenses incurred by the non-defaulting party on account of such default, including but not limited to, all court costs and reasonable attorneys’ fees.

20.3.5           Subject to Sections 20.3.1 and 20.3.2 above (regarding limitations on the right to terminate this Agreement), the rights and remedies afforded a non-defaulting party under this Agreement shall be deemed cumulative and not exclusive, and shall be in addition to any other rights or remedies available to the non-defaulting party provided by law or in equity.

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21. Insurance.

21.1         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. Medical Center shall be named as an additional insured party on the all risk property and casualty insurance policy to the extent of its interest in the Equipment arising under this Agreement. 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 Medical Center upon request following the commencement of this Agreement and as of each annual renewal of such policy during the Term.

21.2         During the Term, Medical Center shall, at its cost and expense, self-insure (subject to GKF’s reasonable approval pursuant to Section 21.5 below) or purchase, and maintain in effect general liability and professional liability insurance coverage/policies covering the Site (together with all premises where the Site is located) and the use or operation of the Equipment by Medical Center or its officers, directors, agents, employees, contractors or physicians. The general liability and professional liability insurance policies shall provide coverage in amounts not less than One Million Dollars ($1,000,000.00) per occurrence and Five Million Dollars ($5,000,000.00) annual aggregate. GKF shall be named as additional insured party on the general liability and professional liability insurance coverage/policies to be maintained hereunder by Medical Center. The coverage/policies to be maintained by Medical Center hereunder shall be evidenced by a certificate of insurance or other reasonable documentation which shall be delivered by Medical Center upon request to GKF no later than the First Procedure Date and as of each annual renewal of such policies during the Term. Notwithstanding anything to the contrary herein, subject to Section 6.4 above and any contributory fault by Medical Center and/or its employees, contractors, affiliates, agents or representatives, neither Medical Center nor its insurer shall be liable to GKF for any injury or loss to persons or property caused by the failure or malfunction of the Equipment itself or the improper installation of the Equipment or the improper installation and/or cleaning of hydraulic hoses in connection with the installation of new Equipment; but, as to improper installation of the Equipment, such liability shall be that of and remain with GKF; and as to the Equipment itself, the liability shall be that of and remain with the manufacturer under the LGK Agreement.

21.3         During the construction of the Site and prior to the First Procedure Date, Medical Center, at its cost and expense, shall self-insure (subject to GKF’s reasonable approval pursuant to Section 21.5 below) or purchase, and maintain a general liability insurance policy which conforms with the coverage amounts and other requirements described in Section 21.2 above and which names GKF as an additional insured party. The policy to be maintained by Medical Center hereunder shall be evidenced by a certificate of insurance or other reasonable documentation which shall be delivered by Medical Center to GKF prior to the commencement of any construction at the Site.

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21.4         During the Term, Medical Center and GKF shall purchase and maintain all workers compensation insurance to the maximum extent required by applicable law.

21.5         If Medical Center elects to self-insure, within twenty (20) days following the date hereof, Medical Center shall submit to GKF, in writing, information on Medical Center’s proposed self-insurance program and obtain GKF’s approval of the program, which approval shall not be unreasonably withheld. If GKF does not disapprove of such self-insurance program within thirty (30) days following its receipt of such information, GKF shall be deemed to have given its approval.

22. Indemnification.

22.1         Medical Center shall be liable for and shall indemnify, defend, protect and hold GKF and its members, managers, officers, employees, agents and contractors (collectively “GKF”) harmless from and against all losses, claims, damages, liabilities, assessments, deficiencies, actions, proceedings, orders, judgments, liens, costs and other expenses (including reasonable attorney’s fees) of any nature or kind whatsoever asserted against or incurred by GKF (collectively “Damages”) which in any manner arise out of or relate to (a) the failure by Medical Center to fully perform, observe or satisfy its covenants, duties or obligations contained in this Agreement or in the LGK Agreement; (b) negligent, intentional or wrongful acts or omissions by Medical Center or any of its officers, directors, agents, contractors (or their subcontractors), or employees in connection with the use and operation of the Equipment during the Term; (c) defects arising out of materials or parts provided, modified or designed by Medical Center for or with respect to the Site; (d) the maintenance of the Site during the Term by Medical Center; (e) Damages to the Equipment caused by the negligent or wrongful acts or omissions of Medical Center, its agents, officers, employees or contractors (if the Equipment is destroyed or rendered unusable, subject to Section 22.7 below, this indemnity shall extend up to (but not exceed) the full replacement value of the Equipment at the time of its destruction less salvage value, if any); (f) the events or occurrences described in Article 7.3 of the LGK Agreement to the same extent that Medical Center agrees to indemnify Elekta thereunder (other than with respect to the failure of the Site to comply with the Site Planning Criteria or defective maintenance of the Equipment under the Service Agreement); and (g) any other matters for which Medical Center has specifically agreed to indemnify GKF pursuant to this Agreement.

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22.2         GKF shall be liable for and shall indemnify, defend, protect and hold Medical Center and its directors, members, managers, officers, employees, agents and contractors (collectively “Medical Center”) harmless from and against all losses, claims, damages, liabilities, assessments, deficiencies, actions, proceedings, orders, judgments, liens, costs and other expenses (including reasonable attorney’s fees) of any nature or kind whatsoever asserted against or incurred by Medical Center (collectively “Damages”) which in any manner arise out of or relate to (a) the failure by GKF to fully perform, observe or satisfy its covenants, duties or obligations contained in this Agreement; (b) negligent, intentional or wrongful acts or omissions by GKF or any of its officers, directors, agents, contractors (or their subcontractors), or employees in connection with the installation or removal of the Equipment, (c) the failure by GKF to maintain the Equipment as provided in this Agreement; and (d) any other matters for which GKF has specifically agreed to indemnify Medical Center pursuant to this Agreement.

22.3         Upon the occurrence of an event for which GKF or Medical Center is entitled to indemnification under this Agreement (“Indemnitee”), such party shall give written notice thereof to the other party setting forth the type and amount of Damages. If the indemnity relates to a Third Party Claim (as defined in Section 22.4 below), the matter shall be subject to Section 22.4 below. If the indemnity relates to any Damages other than a Third Party Claim, not more than thirty (30) days after written notice is given, the indemnifying party shall acknowledge its obligation in writing to the Indemnitee to indemnify hereunder and pay the Damages in full to the Indemnitee.

22.4         GKF or Medical Center, as Indemnitee, shall give written notice to the other party as Indemnitor as soon as reasonably possible after the Indemnitee has knowledge of any third party claim or legal proceedings (“Third Party Claim”) for which the Indemnitee is entitled to indemnification under this Section 22. Indemnitor shall (a) immediately assume, at its sole cost and expense, the defense of the Third Party Claim with legal counsel approved by the Indemnitee (which approval will not be unreasonably withheld, delayed or conditioned), and (b) as soon as reasonably possible after Indemnitee’s written notice is given to the Indemnitor, acknowledge in writing to Indemnitee its obligation to indemnify Indemnitee in accordance with the terms of this Agreement. If either party as the Indemnitor fails to assume the defense of a Third Party Claim or fails to timely acknowledge in writing its obligation to indemnify the Indemnitee, then, the Indemnitee may assume the defense of the Third Party Claim in the manner described in Section 22.5 below. Each party shall cooperate with the other in the defense of any Third Party Claim. Any settlement or compromise of a Third Party Claim to which either party is a party shall be subject to the express written approval of the other party, which approval shall not be unreasonably withheld, delayed or conditioned as long as an unconditional term of the settlement or compromise is the full and absolute release of the Indemnitee from all Damages arising out of the Third Party Claim. Either party as Indemnitee, at its own cost and expense, may participate on its own behalf with legal counsel of its own selection in the defense of any Third Party Claim which may have a material impact on it.

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22.5         If either party having the obligation as Indemnitor fails to promptly assume the defense of any Third Party Claim, the Indemnitee may assume the defense of the Third Party Claim with legal counsel selected by the Indemnitee, all at the Indemnitor’s cost and expense. The defense of an action by an Indemnitee under this Section 22.5 shall not impair, limit or otherwise restrict Indemnitor’s indemnification obligations arising under this Section 22 or Indemnitee’s right to enforce such obligations.

22.6         The indemnity obligations under this Section 22 shall expire on the expiration of the applicable statute of limitations relating to the underlying claim that is the subject of the indemnification claim. Any indemnification obligation shall be in proportion to the amount of responsibility found attributable to the Indemnitor.

22.7         The indemnification obligations set forth in this Agreement are intended to supplement, and not supersede, supplant or replace, any coverage for Damages which may be available under any insurance policies that may be maintained by GKF or Medical Center. In the event any Damages may be covered by insurance policies, the parties shall exercise good faith and use their best efforts to obtain the benefits of and apply the available insurance coverage to the Damages subject to indemnification under this Agreement. In the event that an insurer provides coverage under an insurance policy on the basis of a “reservation of rights”, the indemnification obligations under this Agreement shall apply to all Damages which are finally determined as not being covered under the insurance policy.

23. Miscellaneous.

23.1         Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Medical Center shall not assign this Agreement or any of its rights hereunder or sublease the Equipment without the prior written consent of GKF, which consent shall not be unreasonably withheld; provided, however that the Medical Center may assign this Agreement without prior written consent of GKF to an entity controlled by, controlling, or under common control with the Medical Center and which entity is the holder of the general acute care hospital license for the facility at which the Equipment is located, and provided further, that such entity shall have credit rating and financial position equivalent to or higher than that of Medical Center as reasonably determined by GKF. Unless otherwise agreed to in writing by GKF, an assignment or sublease shall not relieve Medical Center of any liability for performance of this Agreement during the remainder of the Term. Any purported assignment or sublease made without GKF’s prior written consent shall be null, void and of no force or effect.

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23.2         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.

23.3         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.

23.4         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, the non-prevailing party or parties to such action, arbitration or proceedings shall pay to the prevailing party or parties all costs and expenses, including reasonable attorneys’ fees, incurred in the defense or prosecution thereof by the prevailing party or parties. The party which is a “prevailing party” shall be determined by the arbitrator(s) or judge(s) hearing the matter and shall be the party who is entitled to recover his, her or its costs of suit, whether or not the matter proceeds to a final judgment, decree or determination. A party not entitled to recover his, her or its costs of suit shall not recover attorneys’ fees. If a prevailing party or parties shall recover a decision, decree or judgment in any action, arbitration or proceeding, the costs and expenses awarded to such party may be included in and as part of such decision, decree or judgment.

23.5         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.

23.6         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.

23.7         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.

23.8         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.

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23.9         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 Ohio applicable to agreements made and to be performed in that State by a court of competent jurisdiction sitting in Montgomery County, Ohio. The parties waive, to the fullest extent they may effectively do so, the defense of an inconvenient or inappropriate forum to the maintenance of any action or proceeding, and waive any defense based on lack of personal jurisdiction of any such party.

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

23.11         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.

23.12         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, 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.

23.13         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.

23.14         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:

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To GKF:	Craig K. Tagawa
	Chief Executive Officer
	GK Financing, LLC
	Four Embarcadero Center, Suite 3700
	San Francisco, CA 94111
To Medical Center:	Kettering Medical Center
	Attn: Walter Sackett
	VP, Clinical Services
	3535 Southern Boulevard
	Kettering, OH 45429

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.

23.15 Special Provisions Respecting Medicare and Medicaid Patients

23.15.1         Medical Center and GKF shall generate such records and make such disclosures as may be required, from time to time, by the Medicare, Medicaid, TriCare, HCAP 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.

23.15.2         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.

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23.16         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. Notwithstanding the foregoing, and for the avoidance of doubt, no reductions or other changes to reimbursement amounts and/or payment methodology(ies) pertaining to any third party payors or governmental programs, including, without limitation, Medicare, Medicaid, any other federal or state programs, and/or any commercial payors, shall be deemed to constitute a force majeure event under this Section, and shall not excuse or delay Medical Center’s obligations under this Agreement or provide Medical Center with the right to terminate this Agreement. However, in the event that two independent legal counsel specializing in healthcare law (collectively, the “Independent Legal Counsel”), who are resident in states other than Ohio and California issue separate written legal opinions addressed to both of the parties stating that any federal, state or local law or regulation currently existing or hereinafter enacted, or any final or non-appealable construction or interpretation of such law or regulation or enforcement of such laws or regulations which hereinafter occurs, makes performance of this Agreement impossible, illegal or disqualifies a party from providing services to Medicare or Medicaid patients, the parties mutually agree to use their best efforts to enter into a modification of this Agreement to make substantial performance of this Agreement possible, legal or to qualify a party to provide its services to Medicare or Medicaid patients; but if (a) the parties are unable to reach agreement upon appropriate modification following thirty (30) days of good faith negotiations, or sooner if required by law, and (b) the Independent Legal Counsel each determine in writing that any such modification would be impossible, illegal or would disqualify a party from providing services to Medicare or Medicaid patients, then, this event shall be deemed to constitute a force majeure event under this Section, and shall provide either party with the right to terminate this Agreement without further obligations except for those accruing to the date of termination and those obligations surviving the date of termination as provided hereunder. Each party shall select one of the two Independent Legal Counsel to render the aforementioned opinions. All costs and expenses of the Independent Legal Counsel will be borne by the party initiating the request unless the determination is made by the Independent Legal Counsel as described above that the performance of this Agreement is impossible, illegal or disqualifies a party from providing services to Medicare or Medicaid patients, in which event, such costs and expenses shall be shared equally between the parties. In the event that the two Independent Legal Counsel render conflicting opinions, either the parties hereto shall decide upon a third attorney who meets the above qualifications or shall instruct the Independent Legal Counsel to select a third attorney specializing in healthcare law to review and render an opinion, which opinion by such third attorney shall be binding on both parties. Under the circumstance of having to select a third attorney, the costs of the Independent Legal Counsel shall be borne by the party selecting such counsel and the costs of the third attorney shall be borne equally by the parties.

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23.17         Independent Contractor. It is mutually understood and agreed that nothing in this Agreement is intended nor shall be construed to create between GKF and Medical Center, with respect to their relationship hereunder, an employer/employee relationship, a partnership or joint venture relationship, or a landlord/tenant relationship.

23.18         Supplier and Owner of Equipment. The parties hereto agree that, notwithstanding anything to the contrary set forth in this Agreement, this Agreement is and shall be treated and interpreted as a "finance lease," as such term is defined in Article 2A of the Uniform Commercial Code and Chapter 1310 of the Ohio Revised Code, that GKF shall be treated as a finance lessor who is entitled to the benefits and releases from liability accorded to a finance lessor under Article 2A of the Uniform Commercial Code and Chapter 1310 of the Ohio Revised Code. In furtherance of the foregoing, Medical Center acknowledges that, before signing this Agreement, GKF has informed Medical Center in writing (a) that Elekta is the entity supplying the Equipment to GKF, (b) that Medical Center is entitled (under Section 2A of the Uniform Commercial Code and Chapter 1310 of the Ohio Revised Code) to the promises and warranties, including those of any third party, provided to GKF by Elekta which is the entity supplying the goods in connection with or as part of the contract by which GKF acquired the Equipment or the right to possession and use of the Equipment, and (c) that Medical Center may communicate with Elekta and receive an accurate and complete statement of those promises and warranties, including any disclaimers and limitations of them or of remedies. Medical Center also acknowledges that Medical Center has selected Elekta to supply the Equipment and has directed GKF to acquire the Equipment or the right to possession and use of the Equipment from Elekta.

23.19         Termination of Model B Lease. The existing Lease Agreement For a Gamma Knife Unit dated June 1, 1998 (as amended, the “Prior Agreement”), between GKF and Medical Center shall continue in full force and effect until the Model B is deinstalled by GKF pursuant to Section 6.5 above, at which time the Prior Agreement shall terminate, except for any payments or other obligations which remain due and owing as of such termination, and/or any provisions that are intended to survive such termination.

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23.20         Business Associate. This Agreement shall be deemed to incorporate all terms that HIPAA requires to be included in a business associate contract pertaining to such information, as applicable; provided that any breach of any of the terms of such business associate contract shall not give Medical Center the right to terminate this Agreement given that termination of this Agreement would not be feasible, and that such breach shall instead be reported to the Secretary of the Department of Health and Human Services in accordance with 45 C.F.R. 164.504(e)(1)(ii)(B).

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
	By:	/s/ Ernest A. Bates
		Title: CEO
		Date: 12-09-08
“MEDICAL CENTER”	KETTERING MEDICAL CENTER
	By:	/s/ Brett Spenst
		Title: VP of Finance & Operations
		Date: 11-19-08

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Exhibit 1

GAMMA KNIFE TECHNOLOGY

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Exhibit 2

LGK AGREEMENT

The following provisions shall be added to the Elekta Instruments, Inc. (“Elekta”) LGK End User Agreement (“LGK Agreement”), and are hereby incorporated into such LGK Agreement by this reference, and GKF agrees that its agreement with Elekta shall include that such provisions shall be included in LGK’s Agreement with the Medical Center, subject to acceptance by Elekta:

Business Associate.  Elekta and its employees, agents and/or contractors will have access to patient protected health information maintained by the Medical Center in order to perform certain service and support functions, and, therefore, in compliance with the Health Insurance Portability and Accountability Act, Elekta agrees to execute the Business Associate Agreement tendered to it by the Medical Center.

Patent and Copyright Indemnity. Elekta will defend or settle, at its own expense, any claim or suit against Medical Center alleging that any Elekta Equipment or parts furnished under the LGK Agreement with Medical Center infringe any United States patent or copyright. Elekta will also pay all damages and costs that by final judgment may be assessed against Medical Center due to such infringement. If the Equipment provided under Medical Center’s Agreement with GKF becomes, or in Elekta’s opinion is likely to become the subject of an infringement suit, Elekta will, at its option: (1) work with GKF to procure for Medical Center the right to continue using the Equipment; (2) cooperate with GKF to replace or modify the Equipment to provide Medical Center with a non-infringing product that is functionally equivalent in all material respects; or (3) work with GKF to remove the Equipment from Medical Center’s Site at no cost and expense to Medical Center and to terminate both the GKF Agreement and the LKG Agreement with Medical Center related to the Equipment without further obligation of Medical Center to either party.

Delivery and Defective Equipment Indemnity.  Elekta agrees to fully indemnify, defend and hold harmless the Medical Center and its affiliates, and their respective directors, officers, employees and agents from and against any and all claims, losses, expenses, liabilities, injuries to persons or property, judgments, settlements, suits, damages or costs (including reasonable attorneys’ fees and expenses) arising out of, or in any way related to, or caused by defective Equipment provided to Medical Center under its agreement with Electa or GKF, or materials or parts furnished for such Equipment during the Term of any such Agreement. Elekta additionally agrees to solely bear the risk of loss concerning the Equipment during delivery to the Medical Center and agrees to fully indemnify, defend and hold harmless the Medical Center from and against any and all loss or damage to Equipment during or prior to delivery to Medical Center Site.

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Special Activity Certificates. Elekta agrees that any Gamma Knife experienced neurosurgeon and/or radiation physicist or other physician furnished by Elekta to provide on-site application training shall obtain a Special Activity Certificate from the Ohio State Medical Board and shall be credentialed by the Medical Center’s medical staff prior to the provision of such on-site training.

Response Time for Technical Support. Elekta agrees that its response time for any requested on-site or remote technical support shall be provided within the time frames indicated in a separate document provided to the Medical Center entitled “Leksell Gamma Knife Perfexion Advanced Service and Support Service Description”.

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Exhibit 5.1

EXISTING GAMMA KNIFE SITE LOCATED AT KETTERING MEDICAL CENTER

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Exhibit 5.2

SITE PLANNING CRITERIA

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Exhibit 8

PURCHASED SERVICES PAYMENTS

Year	Annual Paid Procedures Performed	Percentage of Technical Component Collections Payable To GKF For Each Procedure
1-7	1-150	39.5	%*
1-7	151+	29.5	%

Notwithstanding anything to the contrary set forth herein, for purposes of determining the Purchased Services Payments, the number of annual Procedures performed shall be reset to zero (0) at the commencement of each anniversary of the First Procedure Date.

For Procedure count purposes, any patient treatment provided on a fractionated basis shall count as one (1) Procedure. Charity cases shall not be included in the annual Procedures performed count.

* Commencing upon the utilization of any portion or all of the Equipment Modification Allowance stipulated in Section 13.1 above, and continuing through the remaining Term of the Agreement, the Purchased Services Payments for each of the first one hundred fifty (150) Procedures performed during any annual period during the Term shall be increased from thirty-nine and one-half percent (39.5%) to forty-one and two-tenths percent (41.2%). The Purchased Services Payments for each additional Procedure in excess of 150 Procedures performed during any such annual period shall remain unchanged as provided above.

Charity Cases

As a means to support Medical Center’s mission of providing charity care for persons who require Gamma Knife procedures who are not covered by Medicare, Medicaid, TriCare, Ohio’s Hospital Care Assurance Program, or private insurance programs (whether indemnity, preferred provider, health maintenance organization, etc.) and who do not have the means to pay for such procedures based on Medical Centers adopted standards of indigency, GKF agrees that Medical Center may perform Procedures on a charity or unreimbursed basis so long as no such charity or unreimbursed Procedures are counted towards the number of annual paid Procedures performed for purposes of determining the Purchased Services Payments due hereunder. Medical Center shall be solely responsible (and GKF shall not in any manner be or become responsible) for determining whether any person meets the standards of indigency. Medical Center shall provide reasonable written documentation evidencing satisfaction of the conditions set forth herein to GKF at or prior to the expected time of treatment.

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EX-10.1A

Exhibit 10.1a

FIRST AMENDMENT TO PURCHASED SERVICES AGREEMENT

This FIRST AMENDMENT TO PURCHASED SERVICES AGREEMENT (this “Amendment”) is dated effective as of the 11 day of June, 2009, and is entered into between GK FINANCING, LLC, a California limited liability company (“GKF”), or its wholly owned subsidiary whose obligations hereunder shall be guaranteed by GKF, and KETTERING MEDICAL CENTER, an Ohio non-profit corporation, (“Medical Center”).

Recitals:

WHEREAS, GKF and Medical Center are parties to a certain Purchased Services Agreement dated December 9, 2008 (the “Agreement”), which the parties desire to amend as set forth herein.

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. Pursuant to Sections 5.1 and 23.19 of the Agreement, the parties agreed that if the Equipment is delivered to the Site in advance of the expiration of the current term of the Prior Agreement, then (i) the Prior Agreement would terminate early upon the deinstallation of the Model B; and (ii) the parties would negotiate an extension to the Term of the Agreement to offset the effect of the early termination of the Prior Agreement. It is acknowledged that the term of the Prior Agreement originally expired on June 13, 2009, but was terminated one hundred three (103) days early (on March 3, 2009) by reason of the deinstallation of the Model B. Accordingly, in order to offset the early termination of the Prior Agreement, the Term of the Agreement as set forth in Section 3 of the Agreement is hereby extended by an additional one hundred three (103) days beyond the date that is seven (7) years following the date of the First Procedure Date at the Site.

3.          Amendment to Section 6.7. Section 6.7 of the Agreement is hereby deleted in its entirety and replaced with the following:

“6.7           Notwithstanding anything to the contrary contained in this Agreement, GKF’s responsibility for all costs and expenses incurred in connection with Section 6.1, 6.2, and 6.3 shall not exceed One Hundred Sixty Thousand Dollars ($160,000) in the aggregate. All costs and expenses in excess of One Hundred Sixty Thousand Dollars ($160,000) shall be the responsibility of Medical Center.”

4.          Full Force and Effect. Except as amended by this Amendment, all of the terms and provisions of the Agreement shall remain in full force and effect. Notwithstanding the foregoing, to the extent of any conflict or inconsistency between the terms and provisions of this Amendment and that of the Agreement, the terms and provisions of this Amendment shall prevail and control.

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

GKF:		Hospital:
GK FINANCING, LLC		KETTERING MEDICAL CENTER
By:	/s/ Ernest A. Bates	By:	/s/ Brett Spenst
	Ernest A. Bates, M.D.	Name:	Brett Spenst
	Policy Committee Member	Title:	VP of Finance & Operations

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EX-10.2

Exhibit 10.2

ADDENDUM

TO LEASE AGREEMENT FOR A GAMMA KNIFE UNIT

This ADDENDUM TWO TO LEASE AGREEMENT FOR A GAMMA KNIFE UNIT (this “Addendum”) is dated effective as of April 13, 2007, and is entered into between GK FINANCING, LLC, a California limited liability company (“GKF”) or its wholly owned subsidiary whose obligation under this Agreement shall be guaranteed by GKF, and OSF Healthcare System, an Illinois not for profit corporation, owner and operator of St. Francis Medical Center (“Medical Center”), with reference to the following recitals:

Recitals:

WHEREAS, on February 18, 2000, GKF and Medical Center executed a Lease Agreement for a Gamma Knife Unit (the “Lease”); and

WHEREAS, the parties desire to further amend the terms and provisions of the Lease as set forth herein.

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

Agreement:

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

2. Extension of Lease Term.

a. It is acknowledged that the Commencement Date of the Lease is May 14, 2001. In view of the provisions set forth below in this Section, Section 18 of the Lease is hereby deleted in its entirety.

b. In consideration of the “Upgrade and First Reload” described below, the Term of the Lease as set forth in Section 6 of the Lease is hereby extended for an additional five (5) years (collectively, the “First Extension”). The First Extension shall commence on May 14, 2011 (which is the expiration date of the initial Term of the Lease).

c. If the “Second Reload” is performed as described below, then, in consideration thereof, the Term of the Lease (as extended by the First Extension) shall be automatically extended for an additional three (3) years (collectively, the “Second Extension”). The Second Extension shall commence on May 14, 2016 (which is the expiration date of the First Extension).

d. All references in the Lease to the “Term” shall be deemed to refer to the Term, as extended by the First Extension and the Second Extension, as applicable.

3. Upgrade and Cobalt Reload of the Equipment. Section 15 of the Lease is hereby deleted in its entirety and replaced with the following:

“15.1 Upgrade and First Reload. Subject to the terms and conditions set forth below, (a) GKF, at GKF’s cost and expense, shall replace and upgrade the Equipment to a Leksell Gamma Knife Perfexion model (the “Perfexion Model”) and reload the Equipment (as upgraded) with new cobalt-60 (the “Upgrade and First Reload”), which Upgrade and First Reload shall be performed at the Site; and (b) GKF shall use its commercially reasonable efforts to perform the Upgrade and First Reload during summer/fall 2007, subject to availability of the Perfexion Model from the equipment manufacturer. It is anticipated that the Equipment will be unavailable to perform procedures for approximately four to five weeks due to the Upgrade and First Reload process. Medical Center agrees to be responsible for all insurance, rigging, site modifications and installation costs related to the Upgrade and First Reload, and the de-installation and removal of the existing Equipment.

“15.2 Second Reload. Subject to the terms and conditions set forth below, (a) GKF may elect, at its sole option and at its cost and expense, to reload the Perfexion Model with new cobalt-60 (the “Second Reload”), which Second Reload shall be performed at the Site; and (b) if GKF has elected to do so, GKF shall use its commercially reasonable efforts to perform the Second Reload during the 13^th year of the Lease. Medical Center agrees to be responsible for all insurance, rigging, site modifications and installation costs related to the Second Reload.

“15.3 Medical Center Support. In connection with both the Upgrade and First Reload and the Second Reload, Medical Center, at Medical Center’s cost and expense, shall provide GKF with Medical Center personnel (including Medical Center physicists) and services upon request and as required by GKF, among other things, to oversee, supervise and assist with construction and compliance with local, state and federal regulatory requirements and with nuclear regulatory compliance issues and the calibration of the Perfexion model.

“15.4 Permits. Notwithstanding the foregoing, the Upgrade and First Reload and the Second Reload (if applicable) shall be performed by GKF only after all necessary and appropriate licenses, permits, approvals, consents and authorizations, including, without limitation, the proper handling of the cobalt-60 (collectively, the “Permits”), have been obtained by Medical Center at Medical Center’s sole cost and expense (other than any filing or registration fees which shall be paid for by GKF). The timing and procedure for such Upgrade and First Reload and the Second Reload (if applicable) shall be as mutually agreed upon between the parties. Notwithstanding anything to the contrary contained in this Agreement, GKF makes no representation or warranty to Medical Center concerning the Upgrade and First Reload and/or the Second Reload (if applicable), and GKF shall have no obligation or liability to pay any damages to Medical Center resulting therefrom.

“15.5 All references in this Agreement to (a) “Installation” shall be deemed to refer to the Upgrade and First Reload and the Second Reload, as applicable; and (b) “Equipment” shall be deemed, immediately following its upgrade, to mean the Perfexion Model.”

4. Per Procedure Payment.

a. Notwithstanding the provisions of Section 7 of the Lease, commencing from and after the first day of the first month after installation of the Perfexion Model, the per procedure payment set forth in Section 7 of the Lease shall be amended to equal Nine Thousand Two Hundred and Fifty Dollars ($9,250) per procedure, and no further adjustment to such per procedure payment shall be made based on the number of procedures performed during any year or other time period under the Lease. As used in the Lease, the term “procedure” shall mean each individual treatment session (fraction), whether performed on an inpatient or outpatient basis, during which a patient receives treatment, imaging or other procedures, including, without limitation, treatment planning and delivery, imaging and other ancillary services, using the Equipment and/or any other equipment or devices that are used in lieu of, or as an alternative to, the Equipment.

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5. No Responsibility for Additional Upgrades or Reloading. Notwithstanding anything to the contrary contained herein or in the Lease, it is understood by the parties that GKF is not responsible for any additional upgrades, hardware, cobalt reloading, software changes and/or other modifications to the Perfexion Model, except as expressly set forth herein or otherwise agreed upon in writing by Medical Center and GKF.

6. Captions. The Captions and paragraph headings used herein are for convenience only and shall not be used in construing or interpreting this Addendum.

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

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

GKF:		Medical Center:
GK FINANCING, LLC		OSF HEALTHCARE SYSTEM, owner and operator of Saint Francis Medical Center
By:	/s/ Ernest A. Bates	By:	/s/ John Moore
Name:	Ernest A. Bates, M.D.	Name:	John Moore
Title:	GKF Policy Committee Member	Title:	Chief Executive Officer

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EX-10.2A

Exhibit 10.2a

ADDENDUM TWO

TO LEASE AGREEMENT FOR A GAMMA KNIFE UNIT

This ADDENDUM TWO TO LEASE AGREEMENT FOR A GAMMA KNIFE UNIT (this “Addendum Two”) is dated effective as of October 31, 2012, and is entered into between GK Financing, LLC, a California limited liability company (“GKF”) or its wholly owned subsidiary whose obligation under this Agreement shall be guaranteed by GKF, and OSF Healthcare System, an Illinois not for profit corporation, owner and operator of St. Francis Medical Center (“Medical Center”), with reference to the following recitals:

Recitals:

WHEREAS, on February 18, 2000, GKF and Medical Center executed a Lease Agreement for a Gamma Knife Unit, as amended by a certain Addendum to Lease Agreement for a Gamma Knife Unit dated as of April 13, 2007 (as amended, the “Lease”); and

WHEREAS, the parties desire to amend the terms and provisions of the Lease as set forth herein.

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

Agreement:

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

2. Extend System.

a. It is acknowledged that the Medical Center wishes to add the Extend system to the Perfexion Model.

b. Subject to the terms and conditions set forth in Section 3 (Per Procedure Payment) below, (i) GKF at GKF’s cost and expense shall add the Extend system to the Perfexion Model; and (ii) GKF shall use its commercially reasonable efforts to perform the Extend system addition in fourth quarter 2013.

3. Per Procedure Payment.

a. Without modifying, amending or otherwise affecting the per procedure payments payable by Medical Center for the Perfexion Model under the Lease, commencing from and after the first clinical use of the Extend system, Medical Center shall pay to GKF a per treatment payment for using the Extend system, which payment shall be in the amount of Ten Thousand Dollars ($10,000) per treatment, irrespective of the number of treatments performed using the Extend system. As used in this Addendum Two, the term “treatment” shall mean each course of treatment (two to five fractions), whether performed on an inpatient or outpatient basis, during which a patient receives treatment using the Extend and/or any other equipment or devices that are used in lieu of, or as an alternative to, the Extend system. Medical Center shall be billed on the fifteenth (15th) and the last day of each month for the actual number of treatments performed using the Extend system during the first and second half of the month, respectively. Medical Center shall pay the treatments invoiced within thirty (30) days after being invoiced. Interest shall begin to accrue at the rate of 1-112% per month on all invoices remaining unpaid after 45 days.

4. Captions. The captions and paragraph headings used herein are for convenience only and shall not be used in construing or interpreting this Addendum Two.

5. Full Force and Effect. Except as amended by this Addendum Two, all of the terms and provisions of the Lease shall remain in full force and effect and shall be applicable to the Extend system, where appropriate; provided that, nothing set forth in this Addendum Two shall modify, amend or otherwise affect any of the parties respective obligations under the Lease with respect to the Perfexion Model.

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

GK FINANCING, LLC		OSF HEALTHCARE SYSTEM, owner and operator of Saint Francis Medical Center
By:	/s/ Ernest A. Bates	By:	/s/ Kevin D. Schocplein
Name:	Ernest A. Bates, M.D.	Name:	Kevin D. Schocplein
Title:	GKF Policy Committee Member	Title:	CEO

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EX-10.2B

Exhibit 10.2b

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2. [*****] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

ADDENDUM THREE

TO LEASE AGREEMENT FOR A GAMMA KNIFE UNIT

This ADDENDUM THREE TO LEASE AGREEMENT FOR A GAMMA KNIFE UNIT (this “Addendum Three”) is dated effective as of June 7, 2016, and is entered into between GK Financing, LLC, a California limited liability company (“GKF”), and OSF Healthcare System, an Illinois not for profit corporation, owner and operator of St. Francis Medical Center (“Medical Center”), with reference to the following recitals:

Recitals:

WHEREAS, on February 18, 2000, GKF and Medical Center executed a Lease Agreement for a Gamma Knife Unit, as amended by (i) a certain Addendum to Lease Agreement for a Gamma Knife Unit (incorrectly referenced therein as Addendum Two to Lease Agreement) dated effective as of April 13, 2007 (“Addendum One”); and (ii) a certain Addendum Two to Lease Agreement for a Gamma Knife Unit dated effective as of October 31, 2012 (“Addendum Two”) (such Lease Agreement, as amended by Addendum One and Addendum Two, is referred to herein as the “Lease”); and

WHEREAS, the parties desire to further amend the terms and provisions of the Lease as set forth herein.

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

Agreement:

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

2. Extension of Lease Term. Notwithstanding anything to the contrary set forth in the Lease, in consideration of the “Second Reload” described below, the Term of the Lease (as extended by the First Extension) shall be automatically extended for a period of four (4) years (the “Second Extension”), which Second Extension shall commence on the date the first “procedure” is performed immediately following the completion of the Second Reload. In no event shall the Term of the Lease be extended beyond October 14, 2020.

3. Second Cobalt Reload of the Equipment. Section 15.2 of the Lease (Second Reload) (as set forth in Section 3 of Addendum One) is hereby deleted in its entirety and replaced with the following:

“15.2 Second Reload. Subject to the terms and conditions set forth below, (a) GKF shall at its sole cost and expense, reload the Perfexion Model with new cobalt-60 (the “Second Reload”), which Second Reload shall be performed at the Site; and (b) GKF shall use its commercially reasonable efforts to perform the Second Reload during third/fourth quarter 2016. GKF also agrees to be responsible for all insurance, rigging, site modifications and installation costs related to the Second Reload. All references in this Agreement to the “Second Reload” shall be deemed to refer to the Second Reload as defined above.”

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2. [*****] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

4. Per Procedure Payment. Effective May 15, 2016, the first paragraph of Section 7 of the Lease (as amended by Section 4.a of Addendum One) shall be deleted in its entirety and replaced with the following:

“7. Per Procedure Payments. Medical Center shall schedule use of the Equipment at its sole discretion and shall be obligated to no minimum number of procedures. Commencing from and after May 15, 2016 (the “2016 Per Procedure Rate Adjustment Date”), Medical Center shall pay to GKF a per procedure payment equal to (i) [*****] per procedure for procedures [*****] performed in each year of the Agreement for the use of the Equipment, and (ii) [*****] per procedure for procedures [*****] and above during each year of the Agreement for the use of the Equipment. For purposes of the foregoing per procedure calculation, procedure counts are not cumulative and the procedure count reverts to zero (0) on the 2016 Per Procedure Rate Adjustment Date and on each anniversary date thereafter. As used in this Agreement, the term “procedure” shall mean each individual treatment session (fraction), whether performed on an inpatient or outpatient basis, during which a patient receives treatment, imaging or other procedures, including, without limitation, treatment planning and delivery, imaging and other ancillary services, using the Equipment and/or any other equipment or devices that are used in lieu of, or as an alternative to, the Equipment. Medical Center shall be billed on the fifteenth (15th) and the last day of each month for the actual number of procedures performed during the first and second half of the month, respectively. Medical Center shall pay the procedures invoiced within thirty (30) days after being invoiced. Interest shall begin to accrue at the rate of one and one-half percent (1.5%) per month on all invoices remaining unpaid after forty-five (45) days.”

5. Captions. The Captions and paragraph headings used herein are for convenience only and shall not be used in construing or interpreting Addendum Three.

6. Full Force and Effect. Except as amended by this Addendum Three, all of the terms and provisions of the Lease shall remain in full force and effect, including, without limitation, Medical Center’s obligation to pay the per treatment payment for using the Extend system as set forth in Addendum Two.

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

GKF:		Medical Center:
GK FINANCING, LLC		OSF HEALTHCARE SYSTEM, owner and operator of Saint Francis Medical Center
By:	/s/ Ernest A. Bates
Name:	Ernest A. Bates, M.D.	By:	/s/ Sister Diane Marie McGrew, OSF
Title:	GKF Policy Committee Member
		Name:	Sister Diane Marie McGrew, OSF
		Title:	President

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EX-10.3

Exhibit 10.3

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2. [*****] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

PROTON BEAM RADIATION THERAPY LEASE AGREEMENT

THIS PROTON BEAM RADIATION THERAPY LEASE AGREEMENT (“Agreement”) is made and entered into on October 18, 2006, by and between AMERICAN SHARED HOSPITAL SERVICES, a California corporation or its wholly-owned subsidiary whose obligations under this Agreement shall be guaranteed by American Shared Hospital Services (“ASHS”), and ORLANDO REGIONAL HEALTHCARE SYSTEM, INC., a Florida corporation (“HOSPITAL”), with reference to the following facts:

RECITALS

WHEREAS, HOSPITAL desires to lease from ASHS a Clinatron 250 proton beam radiation therapy system, manufactured by Still River Systems, Inc., when available (hereinafter referred to as the "Equipment"); and

WHEREAS, ASHS is willing to lease the Equipment, when available, to HOSPITAL pursuant to the terms and conditions of this Agreement, which Equipment will be acquired by ASHS from Still River Systems, Inc., a Delaware corporation (“Manufacturer”).

AGREEMENT

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, ASHS hereby leases to HOSPITAL, and HOSPITAL hereby leases from ASHS, the Equipment. The Equipment to be leased to HOSPITAL pursuant to this Agreement shall include the proton beam radiation therapy technology as specified in Exhibit 1, including all hardware and software related thereto.

2.          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 date of the performance of the first clinical procedure on the Equipment at the Site (the “First Procedure Date”). HOSPITAL’s obligation to make the rental payments to ASHS for the Equipment described in Section 7 below shall commence as of the First Procedure Date.

3. User License.

3.1.          HOSPITAL shall apply for and obtain in a timely manner all licenses, permits, approvals, consents and authorizations which may be required by federal, state or local governmental or other regulatory agencies for the development, construction and preparation of the Site, the conduct of acceptance tests with respect to the Equipment, and the use of the Equipment during the Term. Notwithstanding any provision of this Agreement, HOSPITAL shall not be responsible for obtaining FDA approval of the Equipment.

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2. [*****] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

4. Delivery of Equipment; Site.

4.1.          ASHS shall coordinate with Manufacturer and HOSPITAL to have the Equipment delivered to HOSPITAL at 1414 Kuhl Avenue, Orlando, Florida, 32806 (the “Site”) on or prior to the delivery date agreed upon by HOSPITAL, ASHS and Manufacturer, which delivery date may be adjusted by the parties depending upon, among other things, the progress of construction at the Site or HOSPITAL’s election to accept a later-manufactured unit (as adjusted, the “Expected Delivery Date”). If, by January 20, 2012, the Equipment has not obtained FDA approval or is not delivered to the Site, and such non-delivery is not due to any fault of HOSPITAL and/or any delays in the construction or improvement of the Site, then, either HOSPITAL or ASHS shall each have the right at their respective option, without penalty or liability to the other party, to terminate this Agreement by giving the other party not less than thirty (30) days’ prior written notice of termination. It is intended that HOSPITAL will receive the second unit of the same type and model of equipment as the Equipment that is currently on order by ASHS from Manufacturer (which is intended to be either the fourth or fifth unit manufactured by the Manufacturer) with an Expected Delivery Date of July 20, 2009 (subject to adjustment as provided above), so long as HOSPITAL is the second party to contract with ASHS for such equipment, otherwise, the order of priority of shipment will be based on HOSPITAL’s order of contracting with ASHS relative to ASHS’s other customers. Notwithstanding the foregoing, ASHS makes no representations or warranties concerning delivery of the Equipment to the Site or the actual date thereof.

4.2.          HOSPITAL, at its cost and expense, shall provide a safe, convenient and properly prepared Site for the Equipment in accordance with Manufacturer’s guidelines, specifications, technical instructions and site planning criteria (which site planning criteria are attached as Exhibit 2) (collectively the “Site Planning Criteria”). The location of the Site shall be subject to the prior approval of ASHS, which approval shall not be unreasonably withheld or delayed. In no event shall the review and approval of the location of the Site take longer than thirty (30) days.

5. Site Preparations and Installation of Equipment.

5.1.          HOSPITAL, at its cost, expense and risk, shall prepare all plans and specifications required to construct and improve the Site for the installation, use and operation of the Equipment during the Term. The plans and specifications shall comply in all respects with the Site Planning Criteria and with all applicable federal, state and local laws, rules and regulations. All plans and specifications prepared by or on behalf of HOSPITAL (and all material changes thereto following approval by ASHS and Manufacturer) shall be subject to the written approval of ASHS and Manufacturer prior to commencement of construction at the Site. The approvals required by ASHS or the Manufacturer shall not be unreasonably withheld or delayed. HOSPITAL shall provide ASHS and Manufacturer with a reasonable period of time for the review and consideration of all plans and specifications following the submission thereof for approval. In no event shall the review of HOSPITAL’s site plans by ASHS or Manufacturer take longer than thirty (30) days following HOSPITAL’s submission of completed site plans. Following approval of the plans and specifications by ASHS and Manufacturer, HOSPITAL, at its cost and expense, shall obtain all permits, certifications, approvals or authorizations required by applicable federal, state or local laws, rules or regulations necessary to construct and improve the Site for the installation, use and operation of the Equipment.

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2. [*****] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

5.2.          Based upon the plans and specifications approved by ASHS and Manufacturer, HOSPITAL, at its cost, expense and risk, 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 for the Equipment, selecting and constructing a proper foundation for the Equipment, 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, HOSPITAL, 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, all in accordance with applicable federal, state and local laws, rules, regulations or custom.

5.3.          HOSPITAL, at its cost, expense and risk, 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. The Manufacturer will coordinate the installation and positioning of the Equipment with HOSPITAL, and the schedule for installation and positioning of the Equipment shall be subject to the approval of HOSPITAL, which approval shall not be unreasonably withheld or delayed.

5.4.          Upon completion of construction, the Site shall (a) comply in all respects with the Site Planning Criteria and all applicable federal, state and local laws, rules and regulations, and (b) be safe and suitable for the ongoing use and operation of the Equipment during the Term.

5.5.          HOSPITAL shall use its best efforts to satisfy its obligations under this Section 5 in a timely manner. HOSPITAL shall keep ASHS informed on a regular basis of its progress in the design of the Site, the preparation of plans and specifications, the construction and improvement of the Site, and the satisfaction of its other obligations under this Section 5. In all events, HOSPITAL shall complete all construction and improvement of the Site required for the installation, positioning and testing of the Equipment on or prior to the date (the “Completion Date”) that is fourteen (14) months following the date of shipment by the Manufacturer of the first unit of the same type and model of equipment as the Equipment. If the Site is not complete by the Completion Date plus a sixty (60) day grace period (other than by reasons of force majeure as provided in Section 22 below) (the “late completion date”), HOSPITAL shall reimburse ASHS for its out-of-pocket financing costs incurred with respect the Equipment at the Bank of America prime interest rate (which rate is sometimes referred to by the Bank as its “reference rate”) plus 2% based upon ASHS’s cost of the Equipment for the period between the late completion date and the date that the Site is completed to the extent necessary to allow for the installation, positioning and testing of the Equipment. In no event shall HOSPITAL be liable to reimburse ASHS, for any delays in FDA approval of the Equipment, delays in delivery or installation of the Equipment by the Manufacturer, or other delays, provided that none of such delays are caused by HOSPITAL. Notwithstanding anything to the contrary set forth in this Agreement, in no event shall ASHS be responsible or liable to HOSPITAL or any third party for any delays in FDA approval of the Equipment, delays in delivery or installation of the Equipment by the Manufacturer, or other delays not caused by ASHS.

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2. [*****] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

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

5.7.          Neither the review and approval of Site plans, specifications and/or positioning plans by ASHS and/or Manufacturer, nor the construction of any other Site preparation, shall relieve HOSPITAL for liability for damages to the Equipment caused by the failure to comply with applicable federal, state or local laws or regulations, including building codes, or those portions of the Site Planning Criteria relating to the load bearing capacity of the floor of the treatment room and to radiation protection, and no contributory negligence shall be asserted by HOSPITAL with respect to ASHS.

6.          Marketing Support. ASHS, in coordination with HOSPITAL, shall provide marketing support for the service to be provided by HOSPITAL using the Equipment. 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, ASHS and HOSPITAL shall develop a mutually agreed upon marketing budget and plan (“Plan”) for the clinical service to be supported by the Equipment for the succeeding twelve (12) month period of the Term. Once approved, the Plan shall be implemented by HOSPITAL in accordance with its terms. All advertisements, brochures and other marketing materials pertaining to the Plan shall be subject to review and written approval by HOSPITAL and ASHS prior to their use. HOSPITAL and ASHS shall discuss the Plan on a regular basis not less than once per quarter. HOSPITAL’s and any HOSPITAL subsidiary’s or related corporation’s name, trademarks, service marks, or other identifying names, marks, images, or designations shall be and remain the sole and exclusive property of HOSPITAL. As funds are expended by HOSPITAL in accordance with the Plan, HOSPITAL shall submit invoices (together with documentary evidence supporting the invoices) for its expenditures and, promptly following the receipt of such invoices, ASHS shall reimburse HOSPITAL for [*****] of approved expenditures. ASHS’s reimbursement to HOSPITAL shall not exceed an average of [*****] annually for the term of the Agreement. It is acknowledged by the parties that such expenses to be reimbursed by ASHS as provided in this Section 6 have been included in ASHS’s calculation of HOSPITAL’s Lease Payments so as to allow ASHS to recover such ASHS reimbursed expenses during the Term of this Agreement; provided that, without limiting or otherwise affecting HOSPITAL’s obligation to pay the Lease Payments as set forth herein, in no event shall ASHS have any recourse against HOSPITAL to recover any marketing expense reimbursement paid by ASHS to HOSPITAL pursuant to this Section 6.

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2. [*****] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

7.          Per Procedure Payments. The parties have negotiated this Agreement at arm’s length based upon reasonable, jointly derived, assumptions regarding the capacity for clinical services available from the Equipment, HOSPITAL’s capabilities in providing high quality radiation oncology services and market dynamics, ASHS’s risk in providing the Equipment, and the provision to ASHS of a reasonable rate of return on its investment in support of the Equipment. Based thereon, the Parties believe that the “Lease Payments” as defined in Subsection 7.1 below represent fair market value for the Equipment and support payments to be made by ASHS to HOSPITAL. HOSPITAL undertakes no obligation to perform any particular number of Procedures on the Equipment and the use of the Equipment for the performance of Procedures is wholly based on the independent judgment of physicians who order such Procedures to meet the medical needs of their patients.

7.1.          In consideration of and as compensation to ASHS for (i) the lease of the Equipment to HOSPITAL pursuant to this Agreement; (ii) the marketing support provided pursuant to Section 6 above; and (iii) the reimbursement of a portion of the costs pertaining to the technical and support personnel related to operation of the Equipment and the third party billing services pursuant to Section 14 below, HOSPITAL shall, on a monthly basis, pay the Lease Payment to ASHS for each “Procedure” that is performed on any and all patients at HOSPITAL, on an inpatient or outpatient basis, irrespective of whether the Procedure is performed by HOSPITAL, its representatives or affiliates, or any other person or entity. As used herein the payments shall be calculated as follows:

For Month 1 through Month 12 following the First Procedure Date:

(Technical Component Collections multiplied by [*****]) less ([*****] of HOSPITAL’s marketing support costs not to exceed [*****] annually as set forth in Section 6) less (Technical Component Collections multiplied by [*****] multiplied by [*****] for billing services as set forth in Section 14)

For Month 13 through Month 84 following the First Procedure Date:

(Technical Component Collections multiplied by [*****]) less ([*****] of HOSPITAL’s marketing support costs not to exceed [*****] annually as set forth in Section 6) less (Technical Component Collections multiplied by [*****] multiplied by [*****] for billing services as set forth in Section 14) less ([*****] or HOSPITAL’s actual direct costs, whichever is lower, as set forth in Section 14)

For Month 85 following the First Procedure Date and thereafter:

(Technical Component Collections multiplied by [*****]) less ([*****] of HOSPITAL’s marketing support costs not to exceed [*****] annually as set forth in Section 6) less (Technical Component Collections multiplied by [*****] multiplied by [*****] for billing services as set forth in Section 14)

(a)          The “Lease Payment” during any month shall be equal to [*****] of the “Technical Component Collections” relating to each Procedure during such month.

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2. [*****] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

(b)          “Procedure” shall mean each individual treatment session (fraction), whether performed on an inpatient or outpatient basis, during which a patient receives proton treatment, image-guidance associated with delivery of proton beam in room, including, without limitation, proton treatment planning and delivery, using any of the Equipment and/or any other equipment or devices that are used in lieu of, or as an alternative to, any of the Equipment; provided that the use of any photon-emitting linear accelerator shall not be deemed to be in lieu of or as an alternative to the Equipment, and any procedures performed using such photon-emitting linear accelerators shall not be deemed to be a Procedure for which a Lease Payment is payable hereunder.

(c)          “Technical Component Collections” means any and all amounts, including, without limitation, all copayments and deductibles, actually collected by HOSPITAL, its representatives and/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 all services pertaining to each Procedure, which collected amounts shall be adjusted for any refunds, payor offsets, and external collection fees actually paid by HOSPITAL (to the extent such fees are not already included in the third party billing services reimbursed by ASHS pursuant to Section 14 below); provided that no adjustments shall be made to the Technical Component Collections for any refunds and/or payor offsets if appealed in accordance with the terms of its payor agreements and applicable Federal and State laws and regulations, until such appeal has been finally adjudicated. HOSPITAL will endeavor to have claims submitted within thirty (30) days of discharge, provided that substantially all claims will be submitted within ninety (90) days of discharge. It is understood that HOSPITAL may write off certain accounts in compliance with HOSPITAL’s collection protocols where such accounts have been taken through such protocols and where it would no longer be cost effective to track and account for any minor recoveries on such written off accounts. For all contracting, pricing, and collection activities relating to HOSPITAL’s performance hereunder, HOSPITAL agrees to use practices consistent with practices utilized by HOSPITAL for other services provided at HOSPITAL. For inpatients requiring treatment, the percentage of Procedure charges to total inpatient charges resulting from that inpatient stay for the patient shall be applied to all collections for that inpatient stay and will apply to this definition of Technical Component Collections.  For non-Medicare outpatients if there is a payor defined fee schedule for Procedure charges, Technical Component Collections under that fee schedule shall define payments.  In the absence of a payor defined contracted fee schedule for Procedure charges, for non-Medicare outpatients requiring treatment, the percentage of Procedure charges to total outpatient charges for that claim for the patient shall be applied to all patient collections for such claim and will apply to this definition for Technical Component Collections.

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2. [*****] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

7.2.          If no Technical Component Collections are received during any month, then, no Lease Payment shall be owed by HOSPITAL to ASHS for that month. During the Term of this Agreement, HOSPITAL shall, by the twenty-fifth (25th) day of each month, remit ASHS’s aggregate Lease Payment for the immediately preceding month, and, for a period of eighteen (18) months following the termination or expiration of this Agreement (the “Collections Run-Out Period”), HOSPITAL shall, by the twenty-fifth (25th) day of each such month, continue to remit ASHS’s aggregate Lease Payment pertaining to Technical Component Collections received during the Collections Run-Out Period for Procedures performed during the Term of this Agreement for which Lease Payments to ASHS had not previously been made. Notwithstanding the foregoing, the Collections Run-Out Period shall be extended with respect to any and all claims that are then being appealed or pursued through HOSPITAL’s collections protocols until such time as such claims have been finally adjudicated, collected or written off, as applicable. All or any portion of a Lease Payment which is not paid in full within forty-five (45) days after its due date shall bear interest at the rate of one and one-half percent (1.50%) per month (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 ASHS 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 ASHS’s rights under this Agreement, including the rights of ASHS set forth in Section 19 hereof.

7.3.          On a weekly basis during the term of this Agreement, HOSPITAL shall inform ASHS in writing as to the number of Procedures performed during the immediately preceding week. Within thirty (30) days after the close of each month, HOSPITAL shall provide ASHS with a written report indicating the Technical Component Collections for that month and the status of billings and collections for each Procedure performed during that month, including, without limitation, the amount of the claim submitted and the amount received for each such Procedure. HOSPITAL and ASHS will jointly work on a mutually acceptable format for such reports. Upon request by ASHS, HOSPITAL shall furnish to ASHS information regarding reimbursement rates from any or all payor sources for Procedures. 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 ASHS within five (5) days of HOSPITAL receiving notice thereof.

7.4.          Within ten (10) days after HOSPITAL’s receipt of written request by ASHS, ASHS shall have the right to audit HOSPITAL’s books and records to verify the number of Procedures and technical component revenues that have been performed and revenue received by HOSPITAL or its agents, representatives or affiliates, utilizing the Equipment and any other equipment or devices, and HOSPITAL shall provide ASHS (or cause ASHS to be provided) with access to such books and records; provided that any patient names or identifiers shall not be disclosed.

7.5.          The provisions of this Section 7 shall survive the termination or expiration of this Agreement.

8. Use of the Equipment.

8.1.          The Equipment shall be used by HOSPITAL only at the Site and shall not be removed therefrom except by mutual written agreement of the parties. 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 manufacturer’s specifications. HOSPITAL shall not use nor permit the Equipment to be used in any manner nor for any purpose which, in the opinion of Manufacturer or ASHS, the Equipment is not designed or reasonably suitable. HOSPITAL may use the Equipment for medical research purposes provided that such uses shall not unreasonably interfere with the use of the Equipment for patient care purposes.

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2. [*****] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

8.2.          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 ASHS.

8.3.          During the Term, upon the request of ASHS, HOSPITAL shall promptly affix to the Equipment in a prominent place, or as otherwise directed by ASHS, labels, plates, insignia, lettering or other markings supplied by ASHS indicating ASHS’s ownership of the Equipment, and shall keep the same affixed for the entire Term. HOSPITAL hereby authorizes ASHS to cause this Lease or any statement or other instrument showing the interest of ASHS in the Equipment to be filed or recorded, or refiled or re-recorded, with all governmental agencies considered appropriate by ASHS, at HOSPITAL’s cost and expense. HOSPITAL also shall promptly execute and deliver, or cause to be executed and delivered, to ASHS any statement or instrument requested by ASHS for the purpose of evidencing ASHS’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. All placements and content of labels, insignia, plates, lettering, and markings on the Equipment or located in HOSPITAL’s premises shall be subject to the approval of HOSPITAL, which approval shall not be unreasonably withheld or delayed.

8.4.          At HOSPITAL’s cost and expense, HOSPITAL shall (a) protect and defend ASHS’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, (c) give ASHS immediate written notice of any matter described in clause (b), and (d) in the manner described in Section 21 below indemnify ASHS harmless from and against any loss, cost or expense (including reasonable attorneys’ fees) with respect to any of the foregoing.

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

9.1.          Provide properly trained professional, technical and support personnel and supplies required for the proper performance of procedures utilizing the Equipment. In this regard, HOSPITAL shall use its best efforts to maintain on staff a sufficient number of trained teams to operate the Equipment to meet the operating schedule set forth below, comprised of, but not limited to, radiation oncologists, radiation therapists, medical physicists and registered nurses. The Equipment shall be available for use by all credentialed radiation oncologists under contract with M.D. Anderson Cancer Center Orlando to provide radiation oncology services at HOSPITAL facilities. The Equipment shall be available for treatment twelve (12) hours per day or more at least five (5) days per week (excluding holidays), if necessary, to handle patient loads without a patient backlog in excess of one week.

9.2.          Direct, supervise and administer the diagnosis, treatment and care of all patients who receive procedures.

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2. [*****] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

9.3.          Provide reasonable and customary marketing materials (i.e. brochures, announcements, etc.) together with administrative and physician support (e.g., seminars for physicians by radiation oncologists, etc.) for the service to be operated by the HOSPITAL.

9.4.          Keep and maintain the Equipment and the Site fully protected, secure and free from unauthorized access or use by any person.

9.5.          Operate, directly or through a subsidiary or affiliated corporation, a full range of radiation therapy services on the campus where the Site is located.

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

10.1.          Use its best efforts to require the Manufacturer to meet its contractual obligations to ASHS 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.

10.2.          Cause HOSPITAL to enjoy the use of the Equipment, free of the rights of any other persons except for those rights reserved by ASHS or granted to the Manufacturer pursuant to this Agreement, the Equipment purchase agreement and/or any service agreement pertaining to the Equipment. HOSPITAL shall have the right to review and comment on (but not approve) such service agreement. HOSPITAL may communicate with the Manufacturer and receive an accurate and complete statement of the promises and warranties in such purchase agreement, including any disclaimers and limitations of them or of remedies, but HOSPITAL have no approval rights regarding the same. ASHS shall enter into a service agreement with the Manufacturer no later than November 30, 2006 with respect to the foregoing, and to the provisions of Section 11.1 below otherwise this Agreement shall be void and of no further force or effect, and neither party shall have any further obligations hereunder:

a) A warranty that the Equipment will achieve 90% uptime.

b)            An agreement that trained Manufacturer personnel will be available for maintenance and repair of the Equipment from 8:00 a.m. to 5:00 p.m., Eastern Time, Monday through Friday, excluding holidays, during the warranty period.

c)            Thirty (30) minute telephone response time by Manufacturer personnel during the warranty period.

d)            Both parties acknowledge that the Manufacturer’s warranty obligations are not expected to include an obligation for, or impose liability upon, Manufacturer to reimburse either ASHS or HOSPITAL for any lost revenues or profits, consequential or punitive damages associated with Equipment down time.

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2. [*****] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

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

11.1.          During the Term and except as otherwise provided in this Agreement, ASHS at its cost and expense, shall (a) maintain the Equipment in good operating condition and repair, reasonable wear and tear excepted, and (b) maintain in full force and effect a Service Agreement with the Manufacturer and any other service or other agreements required to fulfill ASHS’s obligation to repair and maintain the Equipment under this Section 11. HOSPITAL shall promptly notify ASHS in the event of any damage or destruction to the Equipment or of any required maintenance or repairs to the Equipment, regardless of whether such repairs or maintenance are covered or not covered by the Service Agreement. ASHS shall pursue all remedies available to it under the Service Agreement and under any warranties made by the Manufacturer with respect to the Equipment so that the Equipment will be free from defects in design, materials and workmanship and will conform to Manufacturer’s technical specifications concerning the Equipment. HOSPITAL shall have the right to review (but not approve) the Service Agreement and warranties referenced in this Section 11.1.

11.2.          ASHS and Manufacturer 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.

11.3.          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, contractors and physicians, to the extent such damage is not covered by the Service Agreement or any warranties or insurance, ASHS may service or repair the Equipment as needed and the cost thereof shall be paid by HOSPITAL to ASHS immediately upon written request together with interest thereon at the rate of one and one-half percent (1.50%) per month (or the maximum monthly interest rate permitted to be charged by law between an unrelated, commercial borrower and lender, if less). Any work so performed by ASHS shall not deprive ASHS of any of its rights, remedies or actions against HOSPITAL for such damages.

11.4.          If the Equipment is rendered unusable as a result of any physical damage to or destruction of the Equipment, HOSPITAL shall give ASHS written notice thereof. ASHS shall determine, within thirty (30) days after it is given written notice of such damage or destruction, whether the Equipment can be repaired. In the event ASHS determines that the Equipment cannot be repaired (a) subject to Section 11.3 above, ASHS at its cost and expense, shall replace the Equipment as soon as reasonably possible taking into account the availability of replacement equipment from Manufacturer, Manufacturer’s other then existing orders for equipment, and the then existing limitations on manufacturing capabilities, and (b) this Agreement shall continue in full force and effect as though such damage or destruction had not occurred. In the event ASHS determines that the Equipment can be repaired, ASHS shall cause the Equipment to be repaired as soon as reasonably possible thereafter. HOSPITAL shall fully cooperate with ASHS 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.

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2. [*****] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

12. Alterations and Upgrades to Equipment.

12.1.          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 ASHS. HOSPITAL shall not, and shall not permit any person other than representatives of Manufacturer or any other person authorized by ASHS and reasonably approved by HOSPITAL to, effect any inspection, adjustment, preventative or remedial maintenance, or repair to the Equipment without the prior written consent of ASHS. 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 ASHS upon termination of this Agreement. The approvals required by ASHS as set forth above shall not be unreasonably withheld or delayed so long as none of the actions contemplated by HOSPITAL will or might, in ASHS’s sole judgment, invalidate or terminate any warranty or service agreement with Manufacturer or other interested third party.

12.2.          The necessity and financial responsibility for modifications, additions or upgrades to the Equipment shall be mutually agreed upon by ASHS and HOSPITAL.

13.         Financing of Equipment by ASHS. ASHS, 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 ASHS finances the Equipment through an installment loan, ASHS shall be required to provide the Equipment as collateral for the loan. Notwithstanding the foregoing, any collateral interest created by ASHS in favor of any third party shall be subject to all rights of HOSPITAL created herein to possess and use the Equipment on the terms set forth in this Agreement. If ASHS finances the Equipment through a capitalized lease, title shall vest with the lessor until such time as ASHS exercises its buy-out option under the lease, if any. If required by the lender, lessor or other financing entity (the “Lender”), ASHS 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, provided that HOSPITAL shall have the right to possess and use the Equipment as set forth herein so long as HOSPITAL is not in default hereunder as defined in Section 19 below.

14.         Equipment Operational Costs. Except as otherwise expressly provided in this Agreement, HOSPITAL shall be responsible and liable for all costs and expenses incurred, directly or indirectly, in connection with the operation and use of the Equipment during the Term, including, without limitation, the costs and expenses required to provide trained physicians, professionals, and technical and support personnel, supplies and other items required to properly operate the Equipment and perform procedures. From the thirteenth (13^th) month through the eighty-fourth (84^th) month after the First Procedure Date, and so long as an Event of Default with respect to HOSPITAL has not occurred and is then continuing, ASHS agrees to reimburse HOSPITAL for its direct costs incurred (excluding HOSPITAL’s indirect costs and administrative overhead) for HOSPITAL’s technical and support personnel related to the operation of the Equipment, which reimbursement shall be in an amount not to exceed the lower of (a) [*****] per month, or (b) HOSPITAL’s [*****]. Additionally, ASHS agrees to reimburse HOSPITAL for its third party billing services in the amount of [*****] of the Lease Payment paid to ASHS. It is agreed that the aggregate amount reimbursable by ASHS pursuant to this Section may be deducted from the applicable monthly Lease Payment then payable to ASHS in the manner set forth in Section 7.1 above. It is acknowledged by the parties that such expenses to be reimbursed by ASHS as provided in this Section 14 have been included in ASHS’s calculation of HOSPITAL’s Lease Payments so as to allow ASHS to recover such ASHS reimbursed expenses during the Term of this Agreement; provided that, without limiting or otherwise affecting HOSPITAL’s obligation to pay the Lease Payments as set forth herein, in no event shall ASHS have any recourse against HOSPITAL to recover any such expense reimbursement paid by ASHS to HOSPITAL pursuant to this Section 14. Between HOSPITAL and ASHS, HOSPITAL shall be fully liable for, and in the manner described in Section 21 below shall indemnify and hold ASHS harmless from and against, all negligent, intentional or wrongful acts or omissions of such physicians, professional, technical and support personnel.

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2. [*****] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

15.         Taxes. ASHS 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 ASHS or HOSPITAL; provided, however, HOSPITAL shall not be required to pay any federal, state or local income, franchise, corporation or excise taxes imposed upon ASHS’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, ASHS may pay all or any part of such taxes, in which event the amount paid by ASHS shall be immediately payable by HOSPITAL to ASHS upon written request together with interest thereon at the rate of one and one-half percent (1.50%) per month (or the maximum monthly interest rate permitted to be charged by law between an unrelated, commercial borrower and lender, if less) from the date that ASHS paid taxes that were previously unpaid by HOSPITAL.

16.         No Warranties by ASHS. 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 in good working order, condition and repair. ASHS SUPPLIES THE EQUIPMENT UNDER THIS AGREEMENT IN ITS “AS IS” CONDITION. ASHS 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 ASHS and HOSPITAL, HOSPITAL shall bear all risks with respect to the foregoing. ASHS shall not be liable for any direct, indirect and consequential losses or damages suffered by HOSPITAL or by any other person, and HOSPITAL expressly waives any right to hold ASHS liable hereunder for, any claims, demands and liabilities arising out of or in connection with the design, 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 any Manufacturers, suppliers or other third parties, but shall in no event be asserted against ASHS. In this regard, HOSPITAL shall have the non-exclusive right, at HOSPITAL’s sole cost and expense, to enforce all warranties, agreements or representations, if any, which may have been made by Manufacturer, suppliers or other third parties regarding the Equipment to ASHS or HOSPITAL. ASHS shall not be responsible for the delivery, installation or operation of the Equipment or for any delay or inadequacy of any or all of the foregoing.

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2. [*****] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

17. Termination.

17.1.          Termination by ASHS for Economic Justification. If, following the initial eighteen (18) months after the First Procedure Date and following each subsequent twelve (12) month period thereafter during the Term, based upon the utilization of the Equipment and other factors considered relevant by ASHS in the exercise of its discretion, within a reasonable period of time after ASHS‘s written request not to exceed sixty (60) days following such written request, HOSPITAL does not provide ASHS with a reasonable economic justification to continue this Agreement, then and in that event, ASHS shall have the option to terminate this Agreement by giving a written notice thereof to HOSPITAL not less than ninety (90) days prior to the effective date of the termination designated in ASHS’s written notice. For purposes of this Section, “reasonable economic justification to continue this Agreement” shall not be deemed to exist if, during any six (6) month period, the “Net Cash Flow” is negative. As used herein, “Net Cash Flow” shall mean, for the applicable six (6) month period, (a) the aggregate Lease Payments during such period, minus (b) the sum of (i) the debt service on the Equipment, (ii) maintenance expenses, (iii) marketing support, (iv) personnel and billing service reimbursement, and (v) Equipment related personal property taxes and insurance. For purposes of the calculation of Net Cash Flow under this Section 17.1, ASHS will not exceed the following parameters: (1) finance the Equipment based on an amortization period of not less than seven (7) years and an interest rate no higher than the then-current Seven Year U.S. Treasury Notes plus 400 basis points, and (2) obtain a service agreement with the Manufacturer pursuant to which the covered maintenance expenses thereunder shall not exceed One Million Five Hundred Thousand Dollars ($1,500,000.00) per annum.

17.2. Termination by HOSPITAL.

17.2.1.          If, at any time prior to the commencement of construction of the Site pursuant to Section 5 above, HOSPITAL’s Board of Directors determines that HOSPITAL’s financial position has materially and adversely changed from the date of execution of this Agreement such that HOSPITAL would incur financial hardship in performing its obligations under this Agreement, then, HOSPITAL shall have the option to terminate this Agreement by giving written notice thereof to ASHS, which notice shall be accompanied by (a) a true and correct copy of the HOSPITAL Board’s resolution and minutes, duly certified by the HOSPITAL’s chief executive officer, stating that HOSPITAL’s financial position has materially and adversely changed from the date of execution of this Agreement such that HOSPITAL would incur financial hardship in performing its obligations under this Agreement; and (b) a certified bank check in the amount of [*****] in lawful money of the United States of America and in immediately available funds (the “Termination Fee”) which Termination Fee shall be deemed to be liquidated damages for the loss of the bargain represented by this Agreement and not as a penalty, which liquidated damages HOSPITAL acknowledges is a reasonable method to calculate ASHS’s damages resulting from such termination under the circumstances existing as of the date of this Agreement. It is understood and agreed that, notwithstanding anything to the contrary contained in this Agreement, in no event shall ASHS have any obligation or liability to refund, reimburse, credit, offset or return to HOSPITAL or its successors or assigns all or any portion of the Termination Fee, even if, without limiting the generality of the foregoing, (i) the Equipment is subsequently sold or re-leased at any time (which ASHS shall have no obligation to do), or (ii) a Revivor Event occurs and this Agreement is reinstated pursuant to Section 17.2.2 below.

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2. [*****] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

17.2.2.          Notwithstanding any prior termination of this Agreement in accordance with the provisions of Section 17.2.1 above, immediately upon the occurrence of a “Revivor Event,” this Agreement (and all of the parties’ respective rights and obligations hereunder) shall automatically be deemed to be revived, reinstated and in full force and effect without further action or execution by any of the parties as if this Agreement had not been terminated pursuant to Section 17.2.1 above (with the exception of Section 17.2 which shall be deemed deleted upon such revival and reinstatement), and the parties shall thereupon agree upon a new Expected Delivery Date. As used herein, a “Revivor Event” shall be deemed to occur (a) if, at any time during the period that is five (5) years after the Expected Delivery Date, HOSPITAL and/or any of its agents, affiliates or representatives enters into negotiations, discussions, an agreement and/or commitment to purchase, lease or otherwise acquire, either alone or jointly with others, any proton equipment or device that is the same or similar to the Equipment or that may be used in lieu of, or as an alternative to, the Equipment; provided that photon-emitting linear accelerators shall not be deemed to be the same or similar to the Equipment or that may be used in lieu of or as an alternative to the Equipment; and/or (b) if, at any time following the termination of this Agreement pursuant to Section 17.2.1 above, HOSPITAL and/or any of its agents, affiliates, representatives, successors or assigns initiates or participates in, directly or indirectly, any legal action, proceeding or arbitration, at law or in equity, seeking to recover, offset, obtain reimbursement or invalidate all or any portion of the Termination Fee. HOSPITAL shall notify ASHS in writing within ten (10) days following the occurrence of a Revivor Event.

17.2.3           The provisions of this Section 17.2 shall survive the termination or expiration of this Agreement.

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

18.1. Extend the Term of this Agreement for five (5) years.

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

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2. [*****] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

HOSPITAL shall exercise one (1) of the two (2) options referred to above by giving an irrevocable written notice thereof to ASHS 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.

19. Events of Default by HOSPITAL and Remedies.

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

19.1.1           HOSPITAL fails to pay any Lease Payment when due pursuant to Paragraph 7 above and such failure continues for a period of fifteen (15) days after written notice thereof is given by ASHS or its assignee to HOSPITAL; however, if HOSPITAL cures the Lease Payment default within the applicable fifteen (15) day period, such default shall not constitute an Event of Default.

19.1.2           HOSPITAL attempts to remove, sell, transfer, encumber, assign, sublet or part with possession of the Equipment or any items thereof.

19.1.3           HOSPITAL fails to observe or perform any of its material covenants, duties or obligations arising under this Agreement and such failure continues for a period of thirty (30) days after written notice thereof by ASHS 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.

19.1.4            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.

19.1.5           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 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.

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2. [*****] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

19.1.6           HOSPITAL is suspended or terminated from participation in the Medicare program.

19.2.          Upon the occurrence of an Event of Default with respect to HOSPITAL, ASHS may at its option do any or all of the following:

19.2.1           By written notice to HOSPITAL, immediately terminate this Agreement as to the Equipment, wherever situated. As a result of the termination, ASHS may enter upon the Site and remove the Equipment without liability to HOSPITAL of any kind or nature for so doing or ASHS may demand that HOSPITAL remove and return the Equipment to ASHS, all at HOSPITAL sole cost and expense.

19.2.2           In the event of Default as defined under Section 19.1.1 and 19.1.2, recover from HOSPITAL as liquidated damages for the loss of the bargain represented by this Agreement and not as a penalty an amount equal to the sum of the Lease Payments past due with interest as specified, plus the present value of the unpaid estimated future Lease Payments to be made by HOSPITAL to ASHS through the end of the Term discounted at the rate of nine percent (9%), which liquidated damages shall become immediately due and payable. The unpaid estimated future Lease Payments shall be based on the prior twelve (12) months Lease Payments made by HOSPITAL to ASHS hereunder with an annual three (3%) percent increase thereof through the end of the Term. HOSPITAL and ASHS acknowledge that the liquidated damages formula set forth in this Section 19.2.2 constitutes a reasonable method to calculate ASHS’s damages resulting from an Event of Default under the circumstances existing as of the date of this Agreement.

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

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

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2. [*****] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

19.3.          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 ASHS all Lease Payments and other sums owing under this Agreement. In the event that HOSPITAL shall pay the liquidated damages referred to in Section 19.2.2 above to ASHS, ASHS shall pay to HOSPITAL promptly after receipt thereof all rentals or proceeds received from the reletting or sale of the Equipment during the balance of the initial Term (after deduction of all costs and expenses, including reasonable attorneys fees and costs, incurred by ASHS as a result of the Event of Default), said amount never to exceed the amount of the liquidated damages paid by HOSPITAL. ASHS will use its commercially reasonable efforts to re-lease or sell the Equipment in a manner that maximizes the financial return from the Equipment under the circumstances then existing, but ASHS makes no representation or warranty that such re-leasing or sale can be effectuated. However, HOSPITAL acknowledges that ASHS shall have no obligation to sell the Equipment. 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 ASHS on account of such default, including but not limited to, all court costs and reasonable attorneys’ fees. The rights and remedies afforded ASHS under this Agreement shall be deemed cumulative and not exclusive, and shall be in addition to any other rights or remedies to ASHS provided by law or in equity.

20. Insurance.

20.1.          During the Term, ASHS shall, at its cost and expense, purchase and maintain in effect an all risk property and casualty insurance policy covering the Equipment. The insurance carrier selected by ASHS shall have an “A” rating by Best. The all risk property and casualty insurance policy shall be for an amount not less than the replacement cost of the Equipment. HOSPITAL shall be named as an additional insured party on the all risk property and casualty insurance policy to the extent of its interest in the Equipment arising under this Agreement. The all risk property and casualty insurance policy maintained by ASHS shall be evidenced by a certificate of insurance or other reasonable documentation which shall be delivered by ASHS to HOSPITAL upon request following the commencement of this Agreement and as of each annual renewal of such policy during the Term.

20.2.          During the Term, HOSPITAL shall, at its cost and expense, purchase and maintain in effect general liability and professional liability insurance policies covering the Site (together with all premises where the Site is located) and the use or operation of the Equipment by HOSPITAL or its officers, directors, agents, employees, contractors or physicians. The general liability and professional liability insurance policies shall provide coverage in amounts not less than One Million Dollars ($1,000,000.00) per occurrence and Five Million Dollars ($5,000,000.00) annual aggregate. ASHS shall be named as additional insured party on the general liability and professional liability insurance policies to be maintained hereunder by HOSPITAL. 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 ASHS no later than the First Procedure Date and as of each annual renewal of such policies during the Term. Notwithstanding the foregoing, HOSPITAL may elect to self-insure for all risks provided for in this Section 20.2 and Section 20.3 below through an appropriate program of self-insurance.

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2. [*****] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

20.3.          During the construction of the Site and prior to the First Procedure Date, HOSPITAL, 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 20.2 above and which names ASHS as an additional insured party. The policy 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 ASHS prior to the commencement of any construction at the Site.

20.4.          During the Term, HOSPITAL shall purchase and maintain all workers compensation insurance to the extent required by applicable law.

21. Indemnification.

21.1.          HOSPITAL’s Indemnification. HOSPITAL shall indemnify, defend, protect and hold ASHS and its members, managers, officers, employees, agents and contractors (collectively “ASHS Indemnified Parties”) harmless from and against all losses, claims, damages, liabilities, assessments, deficiencies, actions, proceedings, orders, judgments, liens, costs and other expenses (including reasonable attorney’s fees) of any nature or kind whatsoever asserted against or incurred by any or all of the ASHS Indemnified Parties (collectively “Damages”) which in any manner arise out of or relate to (a) the failure by HOSPITAL to fully perform, observe or satisfy its covenants, duties or obligations contained in this Agreement; (b) the use and operation of the Equipment during the Term; (c) the design, construction and preparation of the Site by HOSPITAL or any of its officers, directors, agents, contractors (or their subcontractors), or employees, or the maintenance of the Site during the Term by HOSPITAL or any of its officers, directors, agents, contractors (or their subcontractors), or employees, including, without limitation, defects arising out of materials or parts provided, modified or designed by or on behalf of HOSPITAL for or with respect to the Site; (d) Damages to the Equipment from the defective, faulty or improper design, construction or preparation of the Site or the installation and positioning of the Equipment; (e) Damages to the Equipment (including any Damages arising out of or related to violations by HOSPITAL, its agents, officers, physicians, employees or contractors of the Service Agreement) caused by the negligent or wrongful acts or omissions of HOSPITAL, its agents, officers, physicians, employees or contractors (in the event the Equipment is destroyed or rendered unusable, subject to Section 21.7 below, this indemnity shall extend up to (but not exceed) the full replacement value of the Equipment at the time of its destruction less salvage value, if any); and (f) any other matters for which HOSPITAL has specifically agreed to indemnify any of the ASHS Indemnified Parties pursuant to this Agreement.

21.2.          ASHS’s Indemnification. ASHS shall indemnify, defend, protect and hold HOSPITAL and its members, managers, officers, employees, agents and contractors (collectively “HOSPITAL Indemnified Parties”) harmless from and against all Damages of any nature or kind whatsoever asserted against or incurred by any or all of the HOSPITAL Indemnified Parties which in any manner arise out of or relate to the failure by ASHS to maintain the Equipment as provided in this Agreement.

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2. [*****] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

21.3.          Upon the occurrence of an event for which any of the ASHS Indemnified Parties or the HOSPITAL Indemnified Parties is entitled to indemnification under this Agreement (an “Indemnified Party”), the Indemnified Party shall give written notice thereof to the indemnifying party setting forth the type and amount of Damages. If the indemnity relates to a Third Party Claim (as defined in Section 21.4 below), the matter shall be subject to Section 21.4 below. If the indemnity relates to any Damages other than a Third Party Claim, not more than thirty (30) days after the Indemnified Party’s written notice is given, the indemnifying party either shall acknowledge in writing to the Indemnified Party the indemnifying party’s obligation to indemnify hereunder and pay the Damages in full to the Indemnified Party or dispute its obligation to indemnify in a written notice delivered to the Indemnified Party. If the indemnifying party disputes the obligation to indemnify, the parties shall meet and negotiate in good faith to mutually resolve the disagreement regarding indemnification.

21.4.          The Indemnified Party shall give written notice to the indemnifying party as soon as reasonably possible after it has knowledge of any third party claim or legal proceedings (“Third Party Claim”) for which the Indemnified Party is entitled to indemnification under this Section 21. The indemnifying party shall (a) immediately assume, at its sole cost and expense, the defense of the Third Party Claim with legal counsel approved by the Indemnified Party (which approval will not be unreasonably withheld, delayed or conditioned), and (b) as soon as reasonably possible after the Indemnified Party’s written notice is given to the indemnifying party, acknowledge in writing to the Indemnified Party the indemnifying party’s obligation to indemnify the Indemnified Party in accordance with the terms of this Agreement. If the indemnifying party fails to assume the defense of a Third Party Claim or fails to timely acknowledge in writing its obligation to indemnify the Indemnified Party, the Indemnified Party may assume the defense of the Third Party Claim in the manner described in Section 21.5 below. The Indemnified Party shall cooperate with the indemnifying party in the defense of any Third Party Claim. Any settlement or compromise of a Third Party Claim to which the Indemnified Party is a party shall be subject to the express written approval of the Indemnified Party, which approval shall not be unreasonably withheld, delayed or conditioned as long as an unconditional term of the settlement or compromise is the full and absolute release of the Indemnified Party from all Damages arising out of the Third Party Claim. The Indemnified Party, at its own cost and expense, may participate on its own behalf with legal counsel of its own selection in the defense of any Third Party Claim which may have a material impact on the Indemnified Party.

21.5.          If the indemnifying party fails to promptly assume the defense of any Third Party Claim, the Indemnified Party may assume the defense of the Third Party Claim with legal counsel selected by the Indemnified Party, all at the indemnifying party’s cost and expense. The defense of an action by the Indemnified Party under this Section 21.5 shall not impair, limit or otherwise restrict the indemnifying party’s indemnification obligations arising under this Section 21 or the Indemnified Party’s right to enforce such obligations.

21.6.          The indemnity obligations under this Section 21 shall survive the termination of this Lease with respect to events occurring during or relating to the Term.

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2. [*****] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

21.7.          The indemnification obligations set forth in this Agreement are intended to supplement, and not supersede, supplant or replace, any coverage for Damages which may be available under any insurance policies that may be maintained by the Indemnified Party or the indemnifying party. In the event any Damages may be covered by insurance policies, the parties shall exercise good faith and use their best efforts to obtain the benefits of and apply the available insurance coverage to the Damages subject to indemnification under this Agreement. In the event that an insurer provides coverage under an insurance policy on the basis of a “reservation of rights”, the indemnification obligations under this Agreement shall apply to all Damages which are finally determined as not being covered under the insurance policy.

22. Miscellaneous.

22.1.          Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. HOSPITAL shall not assign this Agreement or any of its rights hereunder or sublease the Equipment without the prior written consent of ASHS, which consent shall not be unreasonably withheld, and subject further to the consent of any Lender that holds legal title or a security interest in the Equipment. ASHS shall not assign this Agreement or any of its rights hereunder without the prior written consent of HOSPITAL, which consent shall not be unreasonably withheld. An assignment or sublease shall not relieve HOSPITAL of any liability for performance of this Agreement during the remainder of the Term. Any purported assignment or sublease made without ASHS’s prior written consent shall be null, void and of no force or effect. Notwithstanding the foregoing, either party shall have the right to assign this Agreement and any of its rights hereunder without the prior consent of the other party where all or substantially all of the assets, capital stock and/or ownership of the assigning party are being sold or transferred to a third party and where such third party is of equal or greater financial strength as the assigning party; provided that the assigning party shall provide the other party with not less than sixty (60) days prior written notice of such assignment, accompanied with financial statements and other documentation evidencing such third party’s financial strength.

22.2.          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.

22.3.          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.

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2. [*****] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

22.4.          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, the non-prevailing party or parties to such action, arbitration or proceedings shall pay to the prevailing party or parties all costs and expenses, including reasonable attorneys’ fees, incurred in the defense or prosecution thereof by the prevailing party or parties. The party which is a “prevailing party” shall be determined by the arbitrator(s) or judge(s) hearing the matter and shall be the party who is entitled to recover his, her or its costs of suit, whether or not the matter proceeds to a final judgment, decree or determination. A party not entitled to recover his, her or its costs of suit shall not recover attorneys’ fees. If a prevailing party or parties shall recover a decision, decree or judgment in any action, arbitration or proceeding, the costs and expenses awarded to such party may be included in and as part of such decision, decree or judgment.

22.5.          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.

22.6.          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.

22.7.          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.

22.8.          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.

22.9.          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. This section, however, shall not be determinative for purposes of selecting venue for any action.

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

22.11.         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.

22.12.         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, 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.

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2. [*****] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

22.13.         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.

22.14.         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 ASHS:	Craig K. Tagawa
	Chief Operating Officer
	American Shared Hospital Services
	Four Embarcadero Center, Suite 3700
	San Francisco, CA 94111
With a copy to:	Tin Kin Lee, Esq.
	Tin Kin Lee Law Offices
	55 S. Lake Avenue, Suite 705
	Pasadena, CA 91101
To HOSPITAL:	Sherrie Sitarik
	Executive Vice-President
	Orlando Regional Healthcare System, Inc.
	1414 Kuhl Avenue
	Orlando, FL 32806
With a copy to:	David L. Evans, Esq.
	Mateer Harbert
	Suite 600, Two Landmark Center
	225 E. Robinson Street
	Orlando, FL 32801

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2. [*****] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

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.

22.15. Special Provisions Respecting Medicare and Medicaid Patients

22.15.1         HOSPITAL and ASHS 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.

22.15.2         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.

22.16.         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, hurricanes, 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. For the avoidance of doubt, no reductions or other changes to reimbursement amounts and/or payment methodology(ies) pertaining to any third party payors or governmental programs, including, without limitation, Medicare, Medicaid, any other federal or state programs, and/or any commercial payors, shall be deemed to constitute a force majeure event under this Section, and shall not excuse or delay a party’s performance under this Agreement.

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2. [*****] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

22.17.         Relationship of the Parties. This Agreement is intended to create an operating lease for the Equipment between the parties as independent contractors. This Agreement shall not be deemed to create an employment, joint venture, partnership, principal/agent, or any relationship between the parties other than an independent contractor relationship.

22.18.         Article 2A Notice. ASHS and HOSPITAL agree that this Agreement is a Finance Lease as that term is defined in Article 2A of the Uniform Commercial Code. HOSPITAL acknowledges that ASHS has apprised HOSPITAL in writing of the identity of the Manufacturer. ASHS hereby notifies HOSPITAL that HOSPITAL (a) is entitled under Article 2A of the Uniform Commercial Code to the promises and warranties, including those of any third party, provided to ASHS by the Manufacturer, and (b) may communicate with the Manufacturer and receive an accurate and complete statement of those promises and warranties, including any disclaimers and limitations of them or of remedies.

22.19.         Confidentiality. Both parties acknowledge that in the course of their dealings, each party may acquire information about the other, its business activities and operations, its technical information and trade secrets, and confidential patient information, which are highly confidential and proprietary to each party (the “Confidential Information”). Confidential Information shall not include (i) information generally available to or known by the public, (ii) information independently developed outside the scope of this Agreement without reference to that made available under this Agreement, or) verifiable information which was known to the recipient prior to receipt from the other party. Each party shall hold all such Confidential Information in strict confidence and shall not reveal the same except pursuant to a court order or upon request of the other party. The Confidential Information shall be safeguarded with a reasonable degree of care. Each party shall immediately return to the other party all Confidential Information upon written request by the other party. HOSPITAL shall use reasonable efforts to remove or de-identify any information or data to be reviewed or audited by ASHS; provided that, if protected health information will be disclosed to ASHS because it is impracticable for HOSPITAL to remove or de-identify such information given the volume of data to be reviewed or audited by ASHS, then, ASHS will execute HOSPITAL’s HIPAA Business Associate agreement in the form attached as Exhibit 3 to this Agreement.

22.20.         Board Approval. This Agreement shall be subject to the approval of the Board of Directors of ORHS at a meeting of the Board to be held no later than November 30, 2006, with the results of such Board decision to be promptly communicated to ASHS. In the event that the Board of Directors of ORHS should not approve this Agreement at such meeting and ORHS so notifies ASHS within five (5) business days after such meeting, this Agreement shall be void and of no further force or effect, and neither party shall have any further obligations hereunder.

[Signatures continued on next page]

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2. [*****] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

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

“ASHS”		“HOSPITAL”
AMERICAN SHARED HOSPITAL SERVICES		ORLANDO REGIONAL HEALTHCARE SYSTEM, INC.
By:	/s/ Ernest A. Bates	By:	/s/ Sherrie Sitarik
	Ernest A. Bates, M.D.		Sherrie Sitarik
	Chief Executive Officer		Executive Vice-President
By:	/s/ Craig K. Tagawa	By:	/s/ Stephan J. Harr
	Craig K. Tagawa		Stephan J. Harr
	Chief Operating Officer		Senior Vice-President
		(This Agreement shall not be binding on ORHS unless signed by both of the foregoing officers.)

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2. [*****] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

Exhibit 1

EQUIPMENT

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2. [*****] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

Exhibit 2

SITE PLANNING CRITERIA

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2. [*****] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

Exhibit 3

HIPAA BUSINESS ASSOCIATE AGREEMENT

EX-10.3A

Exhibit 10.3a

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2. [*****] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

AMENDMENT ONE TO

PROTON BEAM RADIATION THERAPY LEASE AGREEMENT

This Amendment One to Proton Beam Radiation Therapy Lease Agreement (this “Amendment”) is dated effective as of August 12, 2012, and is entered into by and between AMERICAN SHARED HOSPITAL SERVICES (“ASHS”), a California corporation or its majority-owned subsidiary whose obligations under the Agreement shall be guaranteed by ASHS, and ORLANDO HEALTH, INC., a Florida corporation formerly known as Orlando Regional Healthcare System, Inc. (“Hospital”).

Recitals:

WHEREAS, ASHS and Hospital are parties to a certain Proton Beam Radiation Therapy Lease Agreement dated October 18, 2006 (the “Agreement”), pursuant to which Hospital leases from ASHS, when available, a Mevion S250 (formerly known as a Clinatron 250) proton beam radiation therapy system, manufactured by Mevion Medical Systems, Inc. (the “Manufacturer,” which was formerly known as Still River Systems, Inc.);

WHEREAS, ASHS and Hospital desire to amend the Agreement as set forth herein.

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:

Agreement:

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

2.          Name Changes. The following name changes are acknowledged: (i) Hospital has changed its name from “Orlando Regional Healthcare System, Inc.” to “Orlando Health, Inc.”; (ii) “Manufacturer” has changed its name from “Still River Systems, Inc.” to “Mevion Medical Systems, Inc.”; and (iii) the model name of the “Equipment” has been changed from “Clinatron 250” to “Mevion S250.”

3.          Exhibit 1. Exhibit 1 of the Agreement is hereby deleted in its entirety and replaced with Exhibit 1 attached to this Amendment.

4.          Delivery of Equipment. Section 4.1 of the Agreement is hereby deleted in its entirety and replaced with the following:

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2. [*****] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

“4.1.          ASHS shall coordinate with Manufacturer and Hospital to have the Equipment delivered to Hospital at 1414 Kuhl Avenue, Orlando, Florida, 32806 (the “Site”) on or prior to the delivery date agreed upon by Hospital, ASHS and Manufacturer, which delivery date may be adjusted by the parties depending upon, among other things, the progress of construction at the Site or Hospital’s election to accept a later-manufactured unit (as adjusted, the “Expected Delivery Date”). If by December 31, 2014, the Equipment is not delivered to the Site, and such non-delivery is not due to any material fault of Hospital and/or any material delays in the construction or improvement of the Site, then, Hospital shall have the right, without penalty or liability to ASHS, to terminate this Agreement by giving ASHS not less than thirty (30) days’ prior written notice of termination. If by December 31, 2014, the Equipment is not delivered to the Site as a result of any material fault of Hospital and/or any material delays in the construction or improvement of the Site, then, ASHS shall have the right, without penalty or liability to Hospital, to terminate this Agreement by giving Hospital not less than thirty (30) days’ prior written notice of termination. It is intended that Hospital will receive the first unit of the same type and model of equipment as the Equipment that is currently on order by ASHS from Manufacturer (which is intended to be the fifth unit manufactured by the Manufacturer) with an Expected Delivery Date of 2^nd Calendar Quarter, 2013. Notwithstanding anything to the contrary set forth in the Agreement, ASHS makes no representation or warranties concerning delivery of the Equipment to the Site or the actual date thereof. The Manufacturer announced on June 11, 2012 that it received FDA 510(k) clearance for its MEVION S250 Proton Therapy System.”

5.          Site. The Site Planning Criteria to be utilized by Hospital pursuant to Section 4.2 of the Agreement shall be based on the then-current guidelines, specifications, technical instructions and site planning criteria adopted by the Manufacturer, and Exhibit 2 of the Agreement shall automatically be updated and revised from time-to-time as such Site Planning Criteria are updated and revised by the Manufacturer. Pursuant to Section 4.2 of the Agreement, ASHS approves Hospital’s selection of the Site located at 1414 Kuhl Avenue, Orlando, Florida, 32806.

6.          Completion of Site Construction. The third sentence of Section 5.5 of the Agreement pertaining to the required Completion Date for all construction and improvements to the Site is hereby deleted in its entirety and replaced with the following:

"In all events, Hospital shall complete all construction and improvements of the Site required for the installation, positioning and testing of the Equipment on or prior to April 15, 2013.

7.          Per Procedure Payments. Sections 7.1 and 7.1(a) of the Agreement are hereby deleted in their entirety and replaced with the following:

“7.1.          In consideration of and as compensation to ASHS for (i) the lease of the Equipment to Hospital pursuant to this Agreement; (ii) the marketing support provided pursuant to Section 6 above; and (iii) the reimbursement of a portion of the costs pertaining to the technical and support personnel related to operation of the Equipment and the third party billing services pursuant to Section 14 below, Hospital shall, on a monthly basis, pay the Lease Payment to ASHS for each “Procedure” that is performed on any and all patients at Hospital, on an inpatient or outpatient basis, irrespective of whether the Procedure is performed by Hospital, its representatives or affiliates, or any other person or entity.

“In furtherance of the foregoing, the net amounts payable by the Hospital to ASHS, shall be calculated as follows:

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CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2. [*****] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

"For Month 1 and each month thereafter through and including Month 12 following the First Procedure Date:

"Hospital shall pay to ASHS the Lease Payment (as defined in Section 7.1(a) below), less (1) [*****] of Hospital’s approved marketing support costs not to exceed [*****] annually as set forth in Section 6, less (2) the Lease Payment multiplied by [*****] for third party billing services as set forth in Section 14.

"For Month 13 and each month thereafter through and including Month 84 following the First Procedure Date:

"Hospital shall pay to ASHS the Lease Payment, less (1) [*****] of Hospital’s approved marketing support costs not to exceed [*****] annually as set forth in Section 6, less (2) the Lease Payment multiplied by [*****] for third party billing services as set forth in Section 14, less (3) [*****] or Hospital’s [*****], whichever is lower, for Hospital’s technical and support personnel direct costs as set forth in and subject to Section 14.

"For Month 85 following the First Procedure Date and for each month thereafter:

"Hospital shall pay to ASHS the Lease Payment, less (1) [*****] of Hospital’s approved marketing support costs not to exceed [*****] annually as set forth in Section 6, less (2) the Lease Payment multiplied by [*****] for third party billing services as set forth in Section 14."

"(a)          The “Lease Payment” during any month shall be equal to [*****] of the “Technical Component Collections” relating to each Procedure during such month.”

8.          Additional Covenants of Hospital. The last sentence of Section 9.1 of the Agreement is hereby deleted in its entirety and replaced with the following:

“The Equipment shall be available for treatment at least twelve (12) hours per day, but not to exceed sixteen (16) hours per day, five (5) days per week (excluding holidays and downtime for Equipment maintenance), as necessary to handle patient loads with the desired goal to treat patients within one (1) week following a request to schedule treatment.”

9.          Service Agreement with the Manufacturer. ASHS shall enter into a Service Agreement with Manufacture, or such mutually agreeable Service Agreement provider, no later than nine (9) months after the First Procedure Date, or at such earlier date to assure that there will be no gap between the end of the Equipment Manufacturer’s warranty and the commencement of the term of the Service Agreement. The Manufacturer has represented that the Equipment will be under Equipment Manufacturer’s warranty for the first twelve (12) months after Equipment Acceptance.

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CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2. [*****] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

10.         Alterations and Upgrades to the Equipment. Section 12.2 of the Agreement shall be deleted in its entirety and replaced with the following:

“12.2         If ASHS and Hospital mutually agree in writing to make any modifications, additions, upgrades and/or reloads to the Equipment, then, either (i) [*****] of the cost thereof shall be paid by ASHS and [*****] shall be paid by Hospital, or (ii) [*****] of the cost thereof shall be paid by ASHS, provided that, with respect to this clause (ii) only, ASHS and Hospital shall first have mutually agreed in writing to an increase in the Lease Payment and/or an extension of the Term. The foregoing provisions of this Section shall not alter or amend ASHS’s or Hospital’s repair obligations under Sections 11.1 and 11.3, respectively.”

11.         Financing of Equipment by ASHS. The last sentence of Section 13 of the Agreement (Financing of Equipment by ASHS) is hereby deleted and replaced with the following:

"Hospital's interest under this Agreement shall be subordinate to the interests of the Lender; provided that, so long as no event of default has occurred and is then continuing (and no event has occurred which with the giving of notice and/or the lapse of time would constitute an event of default) under the Lender financing ("Payment Default"), Lender will not disturb Hospital’s quiet use and enjoyment of the Equipment, subject to the terms and conditions of the Lender financing. Additionally, upon request by ASHS, Hospital shall execute and deliver the Lender's form of consent to sublease, or subordination and nondisturbance agreement, or any other statement or instrument requested by the Lender (and reasonably approved by Hospital) for the purpose of (i) evidencing the Lender’s interest in the Equipment and/or this Agreement as may be required by the Lender, (ii) subordinating Hospital's interest under this Agreement to the interests of the Lender, and (iii) providing for Hospital’s quiet use and enjoyment of the Equipment as set forth herein so long as no Payment Default has occurred and is then continuing under the Lender financing. ASHS and the Lender, upon Lender’s agreement to do so, shall notify Hospital in writing within ten (10) business days of any Payment Default by ASHS on the loan/lease agreement for the Equipment installed at the Site."

12.         Termination by ASHS for Economic Justification. The last sentence of Section 17.1 of the Agreement is hereby deleted in its entirety and replaced with the following:

“For purposes of the calculation of Net Cash Flow under this Section 17.1, the following parameters shall be used and/or applied: (1) the debt service on the Equipment will be based on an amortization period of not less than [*****] years and shall bear interest at the actual debt service rate not to exceed the then current Seven Year U.S. Treasury Notes plus 400 basis points, and (2) the maintenance expenses under the service agreement with the Manufacturer shall not exceed [*****] per annum.”

13.         Option to Extend Agreement. The following sentence shall be added to the final paragraph in Section 18.

“ASHS shall be responsible for the removal of the Equipment at its sole cost upon expiration of the final Term of this Agreement. Such removal shall not occur less than thirty (30) days following termination or expiration of this Agreement.”

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CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2. [*****] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

14.         Hospital Option to Fund Cash Shortfall.

(a)          Notwithstanding anything to the contrary set forth in this Amendment and/or the Agreement, in the event for any reason, (i) the aggregate cash payments made or to be made by ASHS to the Manufacturer towards the purchase of the Equipment (collectively, the "ASHS Cash Payment"), plus (ii) the actual net proceeds of any financing obtained by ASHS to purchase the Equipment (the "Net Financing Proceeds"), is insufficient to cover (iii) the total purchase price of the Equipment (the "Equipment Purchase Price") (the amount of such insufficiency being referred to herein as the "Cash Shortfall"), then, (iv) Hospital shall have the option in its sole discretion to make cash payments to ASHS or the Manufacturer, as required, in the total amount of the Cash Shortfall (collectively, the "Hospital Cash Payment"), which Hospital Cash Payment shall be applied towards, and shall facilitate, the purchase of the Equipment. ASHS shall use due diligence to arrange financing on commercially reasonable terms, or a combination of the ASHS Cash Payment and Net Financing Proceeds, to fully fund the Equipment Purchase Price. Provided that ASHS has exercised such due diligence, ASHS makes no representation as to whether it will be able to obtain financing (or as to the amount of such financing) to purchase the Equipment, and ASHS shall have no liability to Hospital in the event ASHS is unable to obtain any or sufficient financing to purchase the Equipment.

(b)          ASHS shall notify Hospital in writing of the amount of the Cash Shortfall (the "Cash Shortfall Notice"), and Hospital shall have ninety (90) days following its receipt of the Cash Shortfall Notice within which to notify ASHS whether Hospital elects to fund the Hospital Cash Payment. Failure by Hospital to notify ASHS in writing of Hospital's decision within such ninety (90) day period shall mean that Hospital declines to fund the Hospital Cash Payment. In the event Hospital declines to fund the Hospital Cash Payment, then, (i) this Agreement shall automatically terminate with no further force and effect, and ASHS and Hospital shall each be released from any and all obligations or duties arising under this Agreement ab initio as if this Agreement had never been entered into between the parties; (ii) neither ASHS nor Hospital shall have any obligation or liability to reimburse the other party for any or all costs and expenses incurred by either party with respect to this Agreement, including, without limitation, any construction and/or site improvement costs; (iii) Hospital shall make no claim or assert any right to purchase or otherwise acquire the same unit of Equipment that is currently on order by ASHS from Manufacturer (which is intended to be the fifth unit manufactured by the Manufacturer) (the "Reserved Unit") that would otherwise have been leased to Hospital pursuant to this Agreement but for the termination of this Agreement; and (iv) ASHS shall retain all rights with respect to the Reserved Unit, including without limitation, the right to purchase, lease, assign and/or relocate the Reserved Unit to any third party and/or site of ASHS's choosing in ASHS's sole discretion.

(c)          If Hospital elects to fund the Hospital Cash Payment, then (i) the Hospital Cash Payment shall be paid by Hospital as and when due to the Manufacturer; and (ii) the Agreement shall remain in full force and effect, except that:

(i)          The Lease Payment equal to (A) [*****] of the Technical Component Collections relating to each Procedure during any month, shall be reduced to (B) [[*****] multiplied by the “ASHS Percentage”] of the Technical Component Collections relating to each Procedure during any month.

(ii)         The deduction from the Lease Payment for the marketing support costs of (A) [*****] of Hospital’s approved marketing support costs not to exceed [*****] annually, shall be reduced to (B) [[*****] multiplied by the ASHS Percentage] of Hospital’s approved marketing support costs not to exceed [[*****] multiplied by the ASHS Percentage] annually.

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CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2. [*****] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

(iii)        The deduction from the Lease Payment for third party billing services (pursuant to Sections 7.1 and 14 of the Agreement, as amended) in the amount of [*****] of the Lease Payment shall remain unchanged.

(iv)        Where applicable, the deduction from the Lease Payment for Hospital’s technical and support personnel direct costs (pursuant to Sections 7.1 and 14 of the Agreement, as amended) in the amount of (A) [*****] or Hospital’s [*****], whichever is lower, shall be reduced to (B) [[*****] multiplied by the ASHS Percentage] or [Hospital’s [*****] multiplied by the ASHS Percentage], whichever is lower.

(v)         On a monthly basis, Hospital shall reimburse to ASHS, Hospital's share of the “ASHS Expenses,” which share shall be equal to the "Hospital Percentage" times the aggregate unreimbursed ASHS Expenses incurred by ASHS. Such payment of Hospital's share of the ASHS Expenses shall be made concurrently with the payment of each monthly Lease Payment, independently and irrespective of the amount of the Lease Payment.

(d)          Definitions. As used herein,

(i)          The "ASHS Expenses" shall mean the sum of the actual out-of-pocket costs and expenses incurred by ASHS in connection with (A) maintaining and repairing the Equipment (pursuant to Section 11 of the Agreement, as amended); (B) the Service Agreement with the Manufacturer or other mutually agreeable Service Agreement provider (pursuant to Section 11 of the Agreement, as amended), (C) taxes (pursuant to Section 15 of the Agreement) (but excluding payment of any federal, state or local income, franchise, corporation or excise taxes imposed upon ASHS’s net income realized from the lease of the Equipment); and (D) insurance (pursuant to Section 20 of the Agreement).

(ii)         The "ASHS Percentage" shall mean the "ASHS Portion" divided by the Equipment Purchase Price, expressed as a percentage.

(iii)        The "ASHS Portion" shall mean the sum of the ASHS Cash Payment plus the Net Financing Proceeds.

(iv)        The "Hospital Percentage" shall mean the Hospital Cash Payment divided by the Equipment Purchase Price, expressed as a percentage.

(e)          Example. For example, assuming the Equipment Purchase Price is [*****] and the ASHS Portion is [*****], then, (i) the Hospital Cash Payment would be equal to [*****] [i.e., [*****] - [*****]], (ii) the ASHS Percentage would be equal to [*****] [i.e., [*****] divided by [*****]], (iii) the Hospital Percentage would be equal to [*****] [i.e., [*****] divided by [*****]], and (iv) the Lease Payment during any month would be equal to [*****] of the Technical Component Collections during such month [i.e., [*****] multiplied by [*****]]. Furthermore, assuming the Technical Component Collections for a given month (between month 13 and month 84 following the First Procedure Date) are [*****], Hospital's approved marketing support costs are [*****], Hospital's technical and support personnel direct costs are [*****], and the ASHS Expenses are [*****], then, (A) the Lease Payment for that month would be equal to [*****] [i.e., [*****] multiplied by [*****]], and (B) the net amount payable by the Hospital to ASHS for that month would be equal to [*****] [i.e. [*****] minus [*****] (for marketing support costs, i.e., [*****] multiplied by [*****]), minus [*****] (for third party billing services, i.e., [*****] multiplied by [*****]), minus [*****] (for Hospital's technical and support personnel direct costs, i.e., [*****] multiplied by [*****]), plus [*****] (for Hospital's share of the ASHS Expenses, i.e., [*****] multiplied by [*****]).

- 6 -

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2. [*****] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

15.         Miscellaneous. This Amendment may be executed in separate counterparts and may be delivered by fax or electronic mail, each of which when so executed and delivered shall be an original, but all of which counterparts shall together constitute the same instrument. The captions and paragraph headings used herein are for convenience only and shall not be used in construing or interpreting this Amendment. Except as amended by this Amendment, all of the terms and provisions of the Agreement shall remain in full force and effect. To the extent any of the terms of the Agreement conflict with the terms of this Amendment, the terms and provisions of this Amendment shall prevail and control.

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

ASHS:		Hospital:
AMERICAN SHARED		ORLANDO HEALTH, INC.
HOSPITAL SERVICES
		By:	/s/ P.S. Elswick
By:	/s/ Ernest A. Bates, M.D.		P. Shannon Elswick
	Ernest A. Bates, M.D.		President, Adult Hospital Group
	President and CEO
		By:	/s/ Stephan J. Harr
			Stephan J. Harr
			Senior Vice President
		(This Agreement shall not be binding on Orlando Health, Inc. unless signed by both of the above signatories)

- 7 -

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2. [*****] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

Exhibit 1

A.           The following is a detailed product list and performance specifications of the System:

v Mevion S250 as described in Exhibit 1 of the Agreement between ASHS and Mevion which states the following:

1.1 Proton Cyclotron

1.2 Gantry to position proton beam source

1.3 Couch for positioning of patient

1.4 Treatment console

1.5 Interface to Varis or IMPAC R&V system

1.6 Hand pendant controls

1.7 In room display console

1.8 Radiographic alignment system (providing 3D volumetric image data)

1.9 In room exposure control station

1.10 In room radiographic set up console

1.11 Treatment planning system

1.11.1 One (1) seat of Varian Eclipse or CMS XiO Proton Beam Plan Module

1.11.2 DICOM or other import and export, including Print, Store, and Work list Management functions

1.11.3 Aperture and RCB file output to production system

1.12 Varis or IMPAC database extensions for protons

1.13. Final aperture/RCB production system software interface and license

1.14. Two (2) sets of product manuals

1.15 On site training for use of all systems for up to 6 users

1.16 Training for three (3) biomedical technicians for first response

Ø Treatment planning system – Following the successful completion of acceptance testing for the Equipment, ASHS shall transfer ownership of one work station and one “seat” to Hospital for no additional compensation upon termination of the Agreement or at such time as the Treatment Planning System is no longer included in the ASHS financing, whichever is earlier. With the exception of the Treatment Planning System and interfaces to be provided by ASHS as set forth in sections 1.5, 1.11, 1.12 and 1.13, Hospital shall be solely responsible for all software costs related to the Equipment, including, without limitation, purchase, licensing, installation and updating costs.

B. Initial Acceptance Specifications: Subject to any amendments required as a result of FDA review of the Equipment, or otherwise agreed to by the parties, the Equipment shall conform in all respects to the following specifications (excluding minor deviations from the specifications that do not interfere with the use of or adversely affect performance of the System):

1) [*****]

2) [*****]

- 8 -

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4) AND 240.24b-2. [*****] INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST FILED SEPARATELY WITH THE COMMISSION. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

3) [*****]

4) [*****]

5) [*****]

6) [*****]

7) [*****]

8) [*****]

9) [*****]

10) [*****]

11) [*****]

12) [*****]

13) [*****]

14) [*****]

15) [*****]

16) [*****]

17) [*****]

- 9 -

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Ernest A. Bates, M.D., as chief executive officer of American Shared Hospital Services, certify that:

1. I have reviewed this quarterly report on Form 10-Q of American Shared Hospital Services;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

August 11, 2016

/s/ Ernest A. Bates, M.D.

Ernest A. Bates, M.D.

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Craig K. Tagawa., as chief financial officer of American Shared Hospital Services, certify that:

1. I have reviewed this quarterly report on Form 10-Q of American Shared Hospital Services;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

August 11, 2016

/s/ Craig K. Tagawa

Craig K. Tagawa

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The certification set forth below is being submitted in connection with the Quarterly Report on Form 10-Q of American Shared Hospital Services for the quarterly period ended June 30, 2016 (the “Report”) for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code.

Ernest A. Bates, M.D., the Chief Executive Officer and Craig K. Tagawa, the Chief Financial Officer of American Shared Hospital Services, each certifies that, to the best of his knowledge:

1.     the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.     the information contained in the Report fairly presents, in all material respects, the financial condition and results of operationsof American Shared Hospital Services.

August 11, 2016

/s/ Ernest A. Bates, M.D.

Ernest A. Bates, M.D.

Chief Executive Officer

/s/ Craig K. Tagawa

Craig K. Tagawa

Chief Financial Officer

XML

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2016	Aug. 03, 2016
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q2
Entity Registrant Name	AMERICAN SHARED HOSPITAL SERVICES
Entity Central Index Key	0000744825
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Trading Symbol	AMS
Entity Common Stock, Shares Outstanding		5,367,647

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 1,764,000	$ 2,209,000
Restricted cash	50,000	50,000
Accounts receivable, net of allowance for doubtful accounts of $100,000 at June 30, 2016 and $100,000 at December 31, 2015	3,840,000	3,038,000
Other receivables	72,000	107,000
Prepaid expenses and other current assets	801,000	603,000
Total current assets	6,527,000	6,007,000
Property and equipment:
Medical equipment and facilities	95,069,000	83,267,000
Office equipment	722,000	721,000
Deposits and construction in progress	6,892,000	10,796,000
Property and equipment	102,683,000	94,784,000
Accumulated depreciation and amortization	(50,883,000)	(47,661,000)
Net property and equipment	51,800,000	47,123,000
Investment in equity securities	579,000	579,000
Other assets	395,000	405,000
Total assets	59,301,000	54,114,000
Current liabilities:
Accounts payable	218,000	375,000
Employee compensation and benefits	275,000	156,000
Other accrued liabilities	1,361,000	1,162,000
Current portion of long-term debt	2,599,000	2,674,000
Current portion of obligations under capital leases	5,124,000	4,331,000
Total current liabilities	9,577,000	8,698,000
Long-term debt, less current portion	4,989,000	6,923,000
Long-term capital leases, less current portion	14,802,000	9,190,000
Deferred revenue, less current portion	663,000	719,000
Deferred income taxes	3,580,000	3,404,000
Shareholders' equity:
Common stock (10,000,000 authorized; 5,368,000 shares issed and outstanding at June 30, 2016 and 5,364,000 shares at December 31, 2015)	10,376,000	10,376,000
Additional paid-in capital	5,853,000	5,734,000
Retained earnings	4,164,000	4,020,000
Total equity-American Shared Hospital Services	20,393,000	20,130,000
Non-controlling interest in subsidiaries	5,297,000	5,050,000
Total shareholders' equity	25,690,000	25,180,000
Total liabilities and shareholders' equity	$ 59,301,000	$ 54,114,000

XML

CONDENSED CONSOLIDATED BALANCE SHEETS [Parenthetical] - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Allowance for doubtful accounts (in dollars)	$ 100,000	$ 100,000
Common stock, shares authorized	10,000,000	10,000,000
Common stock, shares issued	5,368,000	5,364,000
Common stock, shares outstanding	5,368,000	5,364,000

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Medical services revenue	$ 4,518,000	$ 4,394,000	$ 8,756,000	$ 8,511,000
Costs of revenue:
Maintenance and supplies	250,000	281,000	494,000	614,000
Depreciation and amortization	1,649,000	1,593,000	3,211,000	3,098,000
Other direct operating costs	780,000	718,000	1,479,000	1,400,000
Costs of revenue	2,679,000	2,592,000	5,184,000	5,112,000
Gross Margin	1,839,000	1,802,000	3,572,000	3,399,000
Selling and administrative expense	963,000	979,000	1,912,000	1,800,000
Interest expense	433,000	345,000	718,000	665,000
Operating income	443,000	478,000	942,000	934,000
(Loss) on write down investment in equity securities	0	(2,114,000)	0	(2,114,000)
(Loss) on early extinguishment of debt	0	0	(108,000)	0
Interest and other income	3,000	5,000	8,000	11,000
Income (loss) before income taxes	446,000	(1,631,000)	842,000	(1,169,000)
Income tax expense	93,000	106,000	157,000	236,000
Net income (loss)	353,000	(1,737,000)	685,000	(1,405,000)
Less: Net (income) attributable to non-controlling interests	(260,000)	(233,000)	(541,000)	(437,000)
Net income (loss) attributable to American Shared Hospital Services	$ 93,000	$ (1,970,000)	$ 144,000	$ (1,842,000)
Net income (loss) per share:
Earnings (loss) per common share - basic	$ 0.02	$ (0.36)	$ 0.03	$ (0.34)
Earnings (loss) per common share - diluted	$ 0.02	$ (0.36)	$ 0.03	$ (0.34)

XML

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY - USD ($)	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Sub-Total ASHS [Member]	Non-controlling Interest [Member]
Balances at Dec. 31, 2014	$ 26,154,000	$ 10,376,000	$ 5,508,000	$ 5,542,000	$ 21,426,000	$ 4,728,000
Balances (in shares) at Dec. 31, 2014		5,361,000
Stock based compensation expense	226,000	$ 0	226,000	0	226,000	0
Stock based compensation expense (in shares)		3,000
Non-controlling interest investment in subsidiaries	46,000	$ 0	0	0	0	46,000
Cash distributions to non-controlling interests	(670,000)	0	0	0	0	(670,000)
Net (loss) income	(576,000)	0	0	(1,522,000)	(1,522,000)	946,000
Balances at Dec. 31, 2015	25,180,000	$ 10,376,000	5,734,000	4,020,000	20,130,000	5,050,000
Balances (in shares) at Dec. 31, 2015		5,364,000
Stock based compensation expense	119,000	$ 0	119,000	0	119,000	0
Stock based compensation expense (in shares)		4,000
Non-controlling interest investment in subsidiaries	7,000	$ 0	0	0	0	7,000
Cash distributions to non-controlling interests	(301,000)	0	0	0	0	(301,000)
Net (loss) income	685,000	0	0	144,000	144,000	541,000
Balances at Jun. 30, 2016	$ 25,690,000	$ 10,376,000	$ 5,853,000	$ 4,164,000	$ 20,393,000	$ 5,297,000
Balances (in shares) at Jun. 30, 2016		5,368,000

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Operating activities:
Net income (loss)	$ 685,000	$ (1,405,000)
Adjustments to reconcile net income (loss) to net cash from operating activities:
Depreciation and amortization	3,234,000	3,124,000
(Gain) on sale of assets	(1,000)	0
Loss on write down of investment in equity securities	0	2,114,000
Loss on early extinguishment of debt	108,000	0
Deferred income tax	176,000	16,000
Stock-based compensation expense	119,000	94,000
Other non-cash items	4,000	24,000
Changes in operating assets and liabilities:
Receivables	(767,000)	(454,000)
Prepaid expenses and other assets	(262,000)	64,000
Customer deposits/deferred revenue	(108,000)	(13,000)
Accounts payable and accrued liabilities	213,000	305,000
Net cash from operating activities	3,401,000	3,869,000
Investing activities:
Payment for purchase of property and equipment	(575,000)	(1,344,000)
Investment in equity securities	0	(5,000)
Net cash (used in) investing activities	(575,000)	(1,349,000)
Financing activities:
Principal payments on long-term debt	(2,059,000)	(979,000)
Principal payments on capital leases	(2,055,000)	(1,804,000)
Proceeds from long-term debt financing on property and equipment	0	1,023,000
Proceeds from certificate of deposit	0	9,000,000
Payments on line of credit	0	(8,780,000)
Capital contributions from non-controlling interests	7,000	27,000
Distributions to non-controlling interests	(301,000)	(268,000)
Proceeds from capital lease financing for reimbursement of payments for acquisition of equipment	1,137,000	0
Net cash (used in) financing activities	(3,271,000)	(1,781,000)
Net change in cash and cash equivalents	(445,000)	739,000
Cash and cash equivalents at beginning of period	2,209,000	1,059,000
Cash and cash equivalents at end of period	1,764,000	1,798,000
Supplemental cash flow disclosure:
Interest	1,066,000	889,000
Income taxes paid (refunds)	97,000	(6,000)
Schedule of non-cash investing and financing activities
Acquisition of equipment with capital lease financing	$ 7,401,000	$ 1,160,000

XML

Basis of Presentation

6 Months Ended

Jun. 30, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

Note 1. Basis of Presentation

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring accruals and entries to record the impairment of the Company’s investment in equity securities) necessary to present fairly American Shared Hospital Services’ consolidated financial position as of June 30, 2016 and the results of its operations for the three and six month periods ended June 30, 2016 and 2015, which results are not necessarily indicative of results on an annualized basis. Consolidated balance sheet amounts as of December 31, 2015 have been derived from audited consolidated financial statements.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2015 included in the Company’s 10-K filed with the Securities and Exchange Commission.

These condensed consolidated financial statements include the accounts of American Shared Hospital Services (the “Company”) and its subsidiaries as follows: The Company wholly-owns the subsidiaries OR21, Inc. (“OR21 LLC”), MedLeader.com, Inc. (“MedLeader”), PBRT Orlando, LLC (“Orlando”) and American Shared Radiosurgery Services (“ASRS”). The Company is also the majority owner of Long Beach Equipment, LLC (“LBE”). ASRS is the majority-owner of GK Financing, LLC (“GKF”) which wholly-owns the subsidiaries GK Financing U.K., Limited (“GKUK”), and Instituto de Gamma Knife del Pacifico S.A.C. (“GKPeru”). GKF is also the majority-owner of the subsidiaries Albuquerque GK Equipment, LLC (“AGKE”) and Jacksonville GK Equipment, LLC (“JGKE”).

The Company through its majority-owned subsidiary, GKF, provided Gamma Knife units to seventeen medical centers as of June 30, 2016 in the states of Arkansas, California, Oregon, Connecticut, Florida, Illinois, Massachusetts, Mississippi, Nevada, New Jersey, New Mexico, New York, Tennessee, Oklahoma, Ohio, Texas, and Washington.

The Company through its wholly-owned subsidiary, Orlando, provided proton beam radiation therapy (“PBRT”) and related equipment, to a new customer in the United States, which treated its first patient during the second quarter of 2016. The Company also directly provides radiation therapy and related equipment, including Intensity Modulated Radiation Therapy (“IMRT”), Image Guided Radiation Therapy (“IGRT”) and a CT Simulator to the radiation therapy department at an existing Gamma Knife site in the United States.

The Company formed the subsidiaries GKUK and GKPeru, for the purposes of expanding its business internationally into the United Kingdom and Peru; LBE and Orlando to provide proton beam therapy services in Long Beach, California and Orlando, Florida; and AGKE and JGKE to provide Gamma Knife services in Albuquerque, New Mexico and Jacksonville, Florida. AGKE began operation in the second quarter of 2011 and JGKE began operation in the fourth quarter of 2011. Orlando treated its first patient in April 2016. GKPeru is expected to begin operation in the second half of 2016. GKUK is inactive and LBE is not expected to generate revenue within the next two years.

The Company continues to develop its design and business model for “The Operating Room for the 21st Century” ^SM (“OR21” ^SM), through its 50% owned OR21, LLC. The remaining 50% is owned by an architectural design company. OR21 is not expected to generate significant revenue within the next two years.

MedLeader was formed to provide continuing medical education online and through videos for doctors, nurses and other healthcare workers. This subsidiary is not operational at this time.

Based on the guidance provided in accordance with Accounting Standards Codification (“ASC”) 280 Segment Reporting (“ASC 280”), the Company has analyzed its subsidiaries which are all in the business of leasing radiosurgery and radiation therapy equipment to healthcare providers, and concluded there is one reportable segment, Medical Services Revenue. The Company provides Gamma Knife, PBRT, and IGRT equipment to eighteen hospitals in the United States as of June 30, 2016. These eighteen locations operate under different subsidiaries of the Company, but offer the same service, radiosurgery and radiation therapy. The operating results of the subsidiaries are reviewed by the Company’s Chief Executive Officer and Chief Financial Officer, who are also deemed the Company’s Chief Operating Decision Makers (“CODMs”) and this is done in conjunction with all of the subsidiaries and locations.

On January 14, 2016, the Company entered into a definitive lease agreement for financing of its MEVION S250 at UF Health Cancer Center at Orlando Health (“Orlando Health”). The proceeds of $8,200,000 received to date, from this financing of approximately $8,400,000, were used to pay-down the $1,000,000 in Promissory Notes (the “Notes”) with four members of the Company’s Board of Directors, reimburse the Company for freight costs associated with the MEVION S250, and to fund two of the remaining milestone payments for the MEVION S250 of approximately $7,100,000. Total proceeds from capital lease financing for reimbursement of payments for acquisition of equipment, were approximately $1,137,000.

Based on the guidance provided in accordance with ASC 405 Extinguishment of Liabilities (“ASC 405”) and ASC 470 Debt Modifications and Extinguishments (“ASC 470”), the pay-down of the Notes is considered an extinguishment of debt and, as such, the difference between the net carrying amount of the Notes and the costs of extinguishment was recognized as a loss on the Company’s condensed consolidated Statements of Operations. During the six month period ended June 30, 2016, the Company recorded a loss on early extinguishment of debt of $108,000. The Notes were issued with common stock warrants with an estimated fair value of $145,000. The unamortized balance of the discount on the Notes, of $80,000, and deferred fees incurred from the issuance of the Note of approximately $28,000, were recorded as a loss on early extinguishment.

Based on guidance provided in ASC 320 Investments–Debt and Equity Securities (“ASC 320”) and Staff Accounting Bulletins (“SAB”) Topic 5M Other Than Temporary Impairment (“OTTI”) of Certain Investments in Equity Securities (“SAB Topic 5M”), the Company analyzed the related events of Mevion Medical Systems, Inc. (“Mevion”), formerly Still River Systems, that occurred in the second and third quarters of 2015 and its impact on the Company’s investment. The Company determined that these circumstances indicated a decline in value of its Mevion investment that was other-than-temporary, and concluded that a write-down of the carrying value should be recognized. As of June 30, 2015, the Company adjusted its investment in Mevion to the estimated fair value of $600,000 and recorded a $2,114,000 impairment loss. The $2,114,000 other than temporary impairment of its investment in Mevion is recorded in other income (loss) on the Company’s Condensed Consolidated Statement of Operations.

During the period ended December 31, 2015, the Company engaged a third party expert to review and corroborate its assessment of the fair value of the Mevion investment. Based on the third party analysis, an additional impairment loss of $26,000 was recognized by the Company during the three months ended December 31, 2015. The fair value of the Company’s investment in Mevion, as of December 31, 2015 and June 30, 2016 was approximately $579,000. The impairment loss for the year ended December 31, 2015 was $2,140,000.

Based on the guidance provided in ASC 410 Asset Retirement Obligations (“ASC 410”), the Company analyzed the lease agreement with Orlando Health for the PBRT system and determined an asset retirement obligation (“ARO”) exists to remove the unit at the end of the lease term. The fair value of the ARO liability is not reasonable to estimate at this time, due to uncertainties about timing, cost and, outcome of the ARO, therefore no liability has been recorded as of June 30, 2016. The Company will re-evaluate this position on a periodic basis when facts and circumstances change that could affect this conclusion.

 

In May 2014, the Financial Accounting Standards Board “(FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), (“ASU 2014-09”), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in United States Generally Accepted Accounting Principles (“GAAP”) when it becomes effective. The new standard is effective for the Company for annual reporting periods beginning after December 15, 2017. Early application is permitted for reporting periods beginning after December 15, 2016. The standard permits the use of either the retrospective or cumulative effect transition method. In July 2015, the FASB voted to delay the effective date of this standard until the first quarter of 2018. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures and has not yet selected a transition method.

In August 2014, FASB issued ASU No. 2014-15, Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”), which provides guidance on determining when and how to disclose going-concern uncertainties in financial statements. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. ASU 2014-15 applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. The Company is currently evaluating the impact of this update on future disclosures concerning its liquidity position.

In January 2015, the FASB issued ASU No. 2015-01, Income Statement-Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items (“ASU 2015-01”), which eliminates from GAAP the concept of extraordinary items and requires that an entity separately classify, present, and disclose extraordinary events and transactions. This ASU will also align more closely GAAP income statement presentation guidance with International Accounting Standards (“IAS”) 1, Presentation of Financial Statements, which prohibits the presentation and disclosure of extraordinary items. The new standard was effective for the Company on January 1, 2016. The standard permits the use of either the retrospective or prospective application. The Company adopted ASU 2015-01 on January 1, 2016 and the adoption did not have a material impact on the condensed consolidated financial statements and related disclosures.

In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis (“ASU 2015-02”), which is intended to improve targeted areas of consolidation guidance for legal entities. The ASU focuses on the consolidation evaluation for reporting organizations that are required to evaluate whether they should consolidate certain legal entities. In addition to reducing the number of consolidation models from four to two, the new standard simplifies the FASB ASC and improves current GAAP. The new standard was effective for the Company on January 1, 2016. The Company adopted ASU 2015-02 on January 1, 2016 and the adoption did not have a material impact on the condensed consolidated financial statements and related disclosures.

In April 2015, the FASB issued ASU No. 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”), which requires that debt issuance costs related to a recognized debt liability, be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. The new standard was effective for the Company on January 1, 2016.

The Company adopted ASU 2015-03 on January 1, 2016, on a retrospective basis. Debt issuance costs that were previously recorded as other assets on the Company’s condensed consolidated Balance Sheets were reclassified as an offset to the respective debt instrument for which they were derived. During the six month period ended June 30, 2016 and as of December 31, 2015, $67,000 and $72,000 were reclassified from current and noncurrent other assets to current and noncurrent debt, respectively.

In January 2016, the FASB issued ASU No. 2016-01 Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”) which requires equity investments, except those accounted for under the equity method of accounting or those that result in consolidation of the investee, to be measured at fair value with changes in fair value recognized in net income. The new guidance is effective for the Company on January 1, 2018. Early adoption is permitted. The standard permits the use of cumulative-effect transition method. The Company is evaluating the effect that ASU 2016-01 will have on its consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU No. 2016-02 Leases (“ASU 2016-02”), which requires lessees to recognize, for all leases, at the commencement date, a lease liability and a right-of-use asset. Under the new guidance, lessor accounting is largely unchanged. The new guidance is effective for the Company on January 1, 2019. Early adoption is permitted. The Company is evaluating the effect that ASU 2016-02 will have on its consolidated financial statements and related disclosures.

In March 2016, the FASB issued ASU No. 2016-09 Compensation – Stock Compensation (Topic 718) (“ASU 2016-09”) which changes five aspects of accounting for share-based payment award transactions including 1) accounting for income taxes; 2) classification of excess tax benefits on the statement of cash flows; 3) forfeitures; 4) minimum statutory tax withholding requirements; and 5) classification of employee taxes paid on the statement of cash flows when an employer withholds shares for tax-withholding purposes. The new guidance is effective for the Company for interim and annual periods beginning after December 15, 2016. Early adoption is permitted. The Company is evaluating the effect that ASU 2016-09 will have on its consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU No. 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires measurement and recognition of expected credit losses for financial assets held. The new guidance is effective for fiscal periods beginning after December 15, 2019. Early adoption is permitted for fiscal periods beginning after December 15, 2018. The Company is evaluating the effect that ASU 2016-13 will have on its consolidated financial statements and related disclosures.

As of June 30, 2016, the Company adopted a new accounting policy for the depreciation of PBRT property and equipment. Property and equipment are stated at cost less accumulated depreciation. Depreciation is determined using the modified units of production method, which is a function of both usage and time of the equipment. The estimated useful life of the PBRT unit in Orlando is 10 years, after accounting for salvage value on the equipment. Salvage value is based on the estimated fair value of the equipment at the end of its useful life.

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Per Share Amounts

6 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

Note 2. Per Share Amounts

Per share information has been computed based on the weighted average number of common shares and dilutive common share equivalents outstanding. The computation for the three and six month periods ended June 30, 2016 excluded approximately 605,000 and 627,000 of the Company’s stock options, respectively, because the exercise price of the options was higher than the average market price during those periods.

Pursuant to GAAP, potentially dilutive common stock equivalents, such as dilutive stock options, are not considered when their inclusion in reporting earnings per share would be dilutive to reported losses incurred per share. Because the Company reported a loss for the three and six month periods ending June 30, 2015, the potentially dilutive effects of approximately 38,000 of the Company’s stock options and 14,000 unvested restricted stock units were not considered for the reporting period, respectively.

The following table sets forth the computation of basic and diluted earnings per share for the three and six month periods ended June 30, 2016 and 2015:

	Three months ended June 30,				Six months ended June 30,
	2016		2015		2016		2015
Net income (loss) attributable to American Shared Hospital Services	$	93,000	$	(1,970,000)	$	144,000	$	(1,842,000)
Weighted average common shares for basic earnings per share		5,552,000		5,484,000		5,548,000		5,480,000
Diluted effect of stock options and restricted stock		16,000		-		16,000		-
Weighted average common shares for diluted earnings per share		5,568,000		5,484,000		5,564,000		5,480,000
Basic earnings (loss) per share	$	0.02	$	(0.36)	$	0.03	$	(0.34)
Diluted earnings (loss) per share	$	0.02	$	(0.36)	$	0.03	$	(0.34)

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Stock-based Compensation

6 Months Ended

Jun. 30, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Note 3. Stock-based Compensation

On June 2, 2010, the Company’s shareholders approved an amendment and restatement of the 2006 Stock Incentive Plan (the “2006 Plan”). Among other things, the amendment and restatement renamed the 2006 Plan to the Incentive Compensation Plan (the “Plan”) and increased the number of shares of the Company’s common stock reserved for issuance under the Plan by an additional 880,000 shares from 750,000 shares to 1,630,000 shares. The shares are reserved for issuance to officers of the Company, other key employees, non-employee directors, and advisors. The Plan serves as successor to the Company’s previous two stock-based employee compensation plans, the 1995 and 2001 Stock Option Plans. The shares reserved under those two plans, including the shares of common stock subject to currently outstanding options under the plans, were transferred to the Plan, and no further grants or share issuances will be made under the 1995 and 2001 Plans. On June 16, 2015, the Company’s shareholders approved an amendment and restatement of the Plan in order to extend the term of the Plan by two years.

Stock-based compensation expense associated with the Company’s stock-based options to employees is calculated using the Black-Scholes valuation model. The Company’s stock-based awards have characteristics significantly different from those of traded options, and changes in the subjective input assumptions can materially affect the fair value estimates. The estimated fair value of the Company’s option grants is estimated using assumptions for expected life, volatility, dividend yield, and risk-free interest rate which are specific to each award. The estimated fair value of the Company’s options is amortized over the period during which an employee is required to provide service in exchange for the award (requisite service period), usually the vesting period. Accordingly, stock-based compensation cost before income tax effect, for the Company’s options and restricted stock awards, in the amount of $60,000 and $119,000 is reflected in net income for the three and six month periods ended June 30, 2016 compared to $58,000 and $94,000 in the same periods prior year, respectively. At June 30, 2016, there was approximately $416,000 of unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan. This cost is expected to be recognized over a period of approximately four years.

The following table summarizes restricted stock awards, consisting primarily of annual automatic grants and deferred compensation to non-employee directors, for the six month period ended June 30, 2016:

	Restricted Stock Awards/Units		Grant Date Weighted- Average Fair Value		Intrinsic Value
Outstanding at January 1, 2016		3,000	$	2.58	$	-
Granted		35,000	$	1.94	$	-
Vested		(16,000)	$	1.89	$	-
Forfeited		-	$	-	$	-
Outstanding at June 30, 2016		22,000	$	2.06	$	-

The following table summarizes stock option activity for the six month period ended June 30, 2016:

	Stock Options		Grant Date Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (in Years)
Outstanding at January 1, 2016		614,000	$	2.86		5.10
Granted		20,000	$	2.19		6.93
Exercised		-	$	-		-
Forfeited		(4,000)	$	2.10		-
Outstanding at June 30, 2016		630,000	$	2.85		4.68
Exercisable at June 30, 2016		90,000	$	2.75		3.00

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Investment in Equity Securities

6 Months Ended

Jun. 30, 2016

Investments, All Other Investments [Abstract]

Cost-method Investments, Description [Text Block]

Note 4. Investment in Equity Securities

As of June 30, 2016 and December 31, 2015 the Company had a $579,000 investment in the common stock of Mevion, representing an approximate 0.46% interest in Mevion. The Company accounts for this investment under the cost method.

The Company carries its investment in Mevion at cost and reviews it for impairment on a quarterly basis, or as events or circumstances might indicate that the carrying value of the investment may not be recoverable. During the period ended December 31, 2015, the Company determined that its investment was other than temporarily impaired. In determining the fair value of the Company’s common stock in Mevion, the Company engaged a third party expert to review and corroborate its assessment of the fair value of the investment. The third party utilized the market approach and an option waterfall model calibrated to Mevion’s last round of funding. Each equity class was examined and priced according to its liquidation preferences. The fair value of the Company’s investment in Mevion, as of December 31, 2015, was approximately $579,000 with an impairment loss for the year then ended of $2,140,000.

The Company reviewed this investment at June 30, 2016 in light of both current market conditions and the ongoing needs of Mevion to raise cash to continue its development of the first compact, single room PBRT system. Based on its analysis, the Company determined no additional impairment needs to be recognized as of June 30, 2016.

The Company’s first MEVION S250 PBRT unit was contracted with Orlando Health, Inc. under a ten (10) year, revenue sharing arrangement.  The Marjorie and Leonard Williams Center for Proton Therapy at Orlando Health treated its first patient on April 6, 2016.

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Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2016

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

Note 5. Fair Value of Financial Instruments

The Company’s disclosures of the fair value of financial instruments is based on a fair value hierarchy which prioritizes the inputs to the valuation techniques used to measure fair value into three levels. Level 1 inputs are unadjusted quoted market prices in active markets for identical assets and liabilities that the Company has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for assets or liabilities, and reflect the Company’s own assumptions about the assumptions that market participants would use in pricing the asset or liability.

The estimated fair value of the Company’s assets and liabilities as of June 30, 2016 and December 31, 2015 were as follows (in thousands):

	Level 1		Level 2		Level 3		Total		Carrying Value
June 30, 2016
Assets:
Cash, cash equivalents, restricted cash	$	1,814	$	-	$	-	$	1,814	$	1,814
Investment in equity securities		-		-		579		579		579
Total	$	1,814	$	-	$	579	$	2,393	$	2,393
Liabilities:
Debt obligations	$	-	$	-	$	7,662	$	7,662	$	7,588
Total	$	-	$	-	$	7,662	$	7,662	$	7,588
December 31, 2015
Assets:
Cash, cash equivalents, restricted cash	$	2,259	$	-	$	-	$	2,259	$	2,259
Investment in equity securities		-		-		579		579		579
Total	$	2,259	$	-	$	579	$	2,838	$	2,838
Liabilities:
Debt obligations	$	-	$	-	$	9,744	$	9,744	$	9,597
Total	$	-	$	-	$	9,744	$	9,744	$	9,597

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Repurchase of Common Stock

6 Months Ended

Jun. 30, 2016

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

Note 6. Repurchase of Common Stock

In 1999 and 2001, the Board of Directors approved resolutions authorizing the Company to repurchase up to a total of 1,000,000 shares of its own stock on the open market, which the Board reaffirmed in 2008. There were no shares repurchased in 2016 or 2015. There are approximately 72,000 shares remaining under this repurchase authorization.

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Income Taxes

6 Months Ended

Jun. 30, 2016

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 7. Income Taxes

The Company generally calculates its effective income tax rate at the end of an interim period using an estimate of the annualized effective income tax rate expected to be applicable for the full fiscal year. However, when a reliable estimate of the annualized effective income tax rate cannot be made, the Company computes its provision for income taxes using the actual effective income tax rate for the results of operations reported within the year-to-date periods. The Company’s effective income tax rate is highly influenced by relative income or losses reported and the amount of the nondeductible stock-based compensation associated with grants of its common stock options and historically from the results of foreign operations. A small change in estimated annual pretax income (loss) can produce a significant variance in the annualized effective income tax rate given the expected amount of these items. As a result, the Company has computed its provision for income taxes for the three and six month periods ended June 30, 2016 and 2015 by applying the actual effective tax rates to income or (loss) reported within the condensed consolidated financial statements through those periods.

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Per Share Amounts (Tables)

6 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

The following table sets forth the computation of basic and diluted earnings per share for the three and six month periods ended June 30, 2016 and 2015:

	Three months ended June 30,				Six months ended June 30,
	2016		2015		2016		2015
Net income (loss) attributable to American Shared Hospital Services	$	93,000	$	(1,970,000)	$	144,000	$	(1,842,000)
Weighted average common shares for basic earnings per share		5,552,000		5,484,000		5,548,000		5,480,000
Diluted effect of stock options and restricted stock		16,000		-		16,000		-
Weighted average common shares for diluted earnings per share		5,568,000		5,484,000		5,564,000		5,480,000
Basic earnings (loss) per share	$	0.02	$	(0.36)	$	0.03	$	(0.34)
Diluted earnings (loss) per share	$	0.02	$	(0.36)	$	0.03	$	(0.34)

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Stock-based Compensation (Tables)

6 Months Ended

Jun. 30, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Share-based Compensation, Restricted Stock Units Award Activity [Table Text Block]

The following table summarizes restricted stock awards, consisting primarily of annual automatic grants and deferred compensation to non-employee directors, for the six month period ended June 30, 2016:

	Restricted Stock Awards/Units		Grant Date Weighted- Average Fair Value		Intrinsic Value
Outstanding at January 1, 2016		3,000	$	2.58	$	-
Granted		35,000	$	1.94	$	-
Vested		(16,000)	$	1.89	$	-
Forfeited		-	$	-	$	-
Outstanding at June 30, 2016		22,000	$	2.06	$	-

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

The following table summarizes stock option activity for the six month period ended June 30, 2016:

	Stock Options		Grant Date Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (in Years)
Outstanding at January 1, 2016		614,000	$	2.86		5.10
Granted		20,000	$	2.19		6.93
Exercised		-	$	-		-
Forfeited		(4,000)	$	2.10		-
Outstanding at June 30, 2016		630,000	$	2.85		4.68
Exercisable at June 30, 2016		90,000	$	2.75		3.00

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Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2016

Fair Value Disclosures [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

The estimated fair value of the Company’s assets and liabilities as of June 30, 2016 and December 31, 2015 were as follows (in thousands):

	Level 1		Level 2		Level 3		Total		Carrying Value
June 30, 2016
Assets:
Cash, cash equivalents, restricted cash	$	1,814	$	-	$	-	$	1,814	$	1,814
Investment in equity securities		-		-		579		579		579
Total	$	1,814	$	-	$	579	$	2,393	$	2,393
Liabilities:
Debt obligations	$	-	$	-	$	7,662	$	7,662	$	7,588
Total	$	-	$	-	$	7,662	$	7,662	$	7,588
December 31, 2015
Assets:
Cash, cash equivalents, restricted cash	$	2,259	$	-	$	-	$	2,259	$	2,259
Investment in equity securities		-		-		579		579		579
Total	$	2,259	$	-	$	579	$	2,838	$	2,838
Liabilities:
Debt obligations	$	-	$	-	$	9,744	$	9,744	$	9,597
Total	$	-	$	-	$	9,744	$	9,744	$	9,597

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Basis of Presentation (Details Textual) - USD ($)		3 Months Ended			6 Months Ended		12 Months Ended
	Jan. 14, 2016	Jun. 30, 2016	Dec. 31, 2015	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Proceeds from Long-term Capital Lease Obligations					$ 1,137,000	$ 0
Debt obligations, Carrying Value		$ 7,588,000	$ 9,597,000		7,588,000		$ 9,597,000
Payments to Acquire Property, Plant, and Equipment, Total					575,000	1,344,000
Loss on early extinguishment of debt		0		$ 0	(108,000)	0
Other than Temporary Impairment Losses, Investments		0		2,114,000	$ 0	2,114,000
Property, Plant and Equipment, Useful Life					10 years
Equity Method Investment, Other than Temporary Impairment			26,000
Accounting Standards Update 2015-03 [Member]
New Accounting Pronouncement or Change in Accounting Principle, Cumulative Effect of Change on Equity or Net Assets		67,000	72,000		$ 67,000		72,000
Notes Payable [Member]
Loss on early extinguishment of debt					(108,000)
Debt Instrument, Face Amount		145,000			145,000
Unamortized discount on Notes		80,000			80,000
Deferred fees from issuance of Note					28,000
Mevion Medical Systems Inc [Member]
Proceeds from Long-term Capital Lease Obligations	$ 8,200,000
Debt obligations, Carrying Value	8,400,000
Repayments of Notes Payable	1,000,000
Purchase Commitment, Remaining Minimum Amount Committed	7,100,000
Payments to Acquire Property, Plant, and Equipment, Total	$ 1,137,000
Investments, Fair Value Disclosure, Total		$ 579,000	$ 579,000	$ 600,000	$ 579,000	600,000	579,000
Other than Temporary Impairment Losses, Investments						$ 2,114,000	$ 2,140,000
OR21 LLC [Member]
Equity Method Investment, Ownership Percentage		50.00%			50.00%
Architectural Design Company [Member]
Equity Method Investment, Ownership Percentage		50.00%			50.00%

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Per Share Amounts (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Schedule Of Earnings Per Share Basic And Diluted [Line Items]
Net income (loss) attributable to American Shared Hospital Services	$ 93,000	$ (1,970,000)	$ 144,000	$ (1,842,000)
Weighted average common shares for basic earnings per share	5,552,000	5,484,000	5,548,000	5,480,000
Diluted effect of stock options and restricted stock	16,000	0	16,000	0
Weighted average common shares for diluted earnings per share	5,568,000	5,484,000	5,564,000	5,480,000
Basic earnings (loss) per share	$ 0.02	$ (0.36)	$ 0.03	$ (0.34)
Diluted earnings (loss) per share	$ 0.02	$ (0.36)	$ 0.03	$ (0.34)

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Per Share Amounts (Details Textual) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	605,000		627,000
Employee Stock Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount		38,000		38,000
Restricted Stock Units (RSUs) [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount		14,000		14,000

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Stock-based Compensation (Details) - Restricted Stock Units (RSUs) [Member]	6 Months Ended
	Jun. 30, 2016 $ / shares shares
Shareholders Equity [Line Items]
Nonvested, Number of Options, Outstanding | shares	3,000
Nonvested, Number of Options, Granted | shares	35,000
Nonvested, Number of Options, Vested | shares	(16,000)
Nonvested, Number of Options, Forfeited | shares	0
Nonvested, Number of Options, Outstanding | shares	22,000
Weighted Average Grant-Date Fair Value, Nonvested, Outstanding	$ 2.58
Weighted Average Grant-Date Fair Value, Nonvested, Granted	1.94
Weighted Average Grant-Date Fair Value, Nonvested, Vested	1.89
Weighted Average Grant-Date Fair Value, Nonvested, Forfeited	0
Weighted Average Grant-Date Fair Value, Nonvested, Outstanding	2.06
Intrinsic Value, Outstanding	0
Intrinsic Value, Granted	0
Intrinsic Value, Vested	0
Intrinsic Value, Forfeited	0
Intrinsic Value, Outstanding	$ 0

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Stock-based Compensation (Details 1) - $ / shares	6 Months Ended	12 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Schedule Of Share Based Compensation Stock Options Activity [Line Items]
Number of Options, Beginning balance	614,000
Number of Options, Granted	20,000
Number of Options, Exercised	0
Number of Options, Forfeited	(4,000)
Number of Options, Ending balance	630,000	614,000
Number of Options, Exercisable	90,000
Weighted Average Exercise Price, Beginning balance	$ 2.86
Weighted Average Exercise Price, Granted	2.19
Weighted Average Exercise Price, Exercised	0
Weighted Average Exercise Price, Forfeited	2.1
Weighted Average Exercise Price, Ending balance	2.85	$ 2.86
Grant Date Weighted Average Exercise Price, Exercisable	$ 2.75
Weighted Average Remaining Contractual Life (Years), Balance	4 years 8 months 5 days	5 years 1 month 6 days
Weighted Average Remaining Contractual Life (Years), Granted	6 years 11 months 5 days
Weighted Average Remaining Contractual Life (Years), Exercisable	3 years

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Stock-based Compensation (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Jun. 02, 2010
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated Share Based Compensation Expense	$ 60,000	$ 58,000	$ 119,000	$ 94,000
Incentive Compensation Plan [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Common Stock, Capital Shares Reserved for Future Issuance					880,000
Share-based Compensation, Compensation Cost Not yet Recognized	$ 416,000		$ 416,000
Incentive Compensation Plan [Member] | Maximum [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Common Stock, Capital Shares Reserved for Future Issuance					1,630,000
Incentive Compensation Plan [Member] | Minimum [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Common Stock, Capital Shares Reserved for Future Issuance					750,000

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Investment in Equity Securities (Details Textual) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Schedule of Cost-method Investments [Line Items]
Equity Method Investments	$ 579,000		$ 579,000		$ 579,000
Other than Temporary Impairment Losses, Investments	0	$ 2,114,000	0	$ 2,114,000
Mevion Medical Systems Inc [Member]
Schedule of Cost-method Investments [Line Items]
Equity Method Investments	$ 579,000		$ 579,000
Equity Method Investment, Ownership Percentage	0.46%		0.46%
Investments, Fair Value Disclosure					579,000
Other than Temporary Impairment Losses, Investments					$ 2,140,000

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Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Assets, Carrying Value:
Cash, cash equivalents, restricted cash, Carrying Value	$ 1,814	$ 2,259
Investment in equity securities, Carrying Value	579	579
Total, Carrying Value	2,393	2,838
Liabilities, Carrying Value
Debt obligations, Carrying Value	7,588	9,597
Total, Carrying Value	7,588	9,597
Assets, Fair Value:
Cash, cash equivalents, restricted cash, Fair Value	1,814	2,259
Investment in equity securities, Fair Value	579	579
Total, Fair Value	2,393	2,838
Liabilities, Fair Value
Debt obligations, Fair Value	7,662	9,744
Total, Fair Value	7,662	9,744
Fair Value, Inputs, Level 1 [Member]
Assets, Fair Value:
Cash, cash equivalents, restricted cash, Fair Value	1,814	2,259
Investment in equity securities, Fair Value	0	0
Total, Fair Value	1,814	2,259
Liabilities, Fair Value
Debt obligations, Fair Value	0	0
Total, Fair Value	0	0
Fair Value, Inputs, Level 2 [Member]
Assets, Fair Value:
Cash, cash equivalents, restricted cash, Fair Value	0	0
Investment in equity securities, Fair Value	0	0
Total, Fair Value	0	0
Liabilities, Fair Value
Debt obligations, Fair Value	0	0
Total, Fair Value	0	0
Fair Value, Inputs, Level 3 [Member]
Assets, Fair Value:
Cash, cash equivalents, restricted cash, Fair Value	0	0
Investment in equity securities, Fair Value	579	579
Total, Fair Value	579	579
Liabilities, Fair Value
Debt obligations, Fair Value	7,662	9,744
Total, Fair Value	$ 7,662	$ 9,744

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Repurchase of Common Stock (Details Textual) - shares	Jun. 30, 2016	Dec. 31, 2008
Equity, Class of Treasury Stock [Line Items]
Stock Repurchase Program, Number of Shares Authorized to be Repurchased		1,000,000
Stock Repurchase Program, Remaining Number of Shares Authorized to be Repurchased	72,000