AMERICAN SHARED HOSPITAL SERVICES (Form: 10-Q, Received: 08/14/2009 13:26:58)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended June 30, 2009


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


Four Embarcadero Center, Suite 3700, San Francisco, California (Address of Principal Executive Offices)		94111 (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 þ No o

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 o No o

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 o

Accelerated Filer o

Non-Accelerated Filer o
(Do not check if a smaller reporting company)

Smaller reporting company þ

As of August 1, 2009, there are outstanding 4,669,933 shares of the Registrant’s common stock.

TABLE OF CONTENTS


PART I — FINANCIAL INFORMATION
	ITEM 1. FINANCIAL STATEMENTS
	Item 3. Quantitative and Qualitative Disclosures About Market Risk
	Item 4. Controls and Procedures
	PART II — OTHER INFORMATION
	Item 1. Legal Proceedings.
	Item 1A. Risk Factors
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
	Item 3. Defaults Upon Senior Securities.
	Item 4. Submission of Matters to a Vote of Securities Holders.
	Item 5. Other Information.
	Item 6. Exhibits and Reports on Form 8-K.
SIGNATURES
EX-10.21A
EX-10.21B
EX-10.57A
EX-31.1
EX-31.2
EX-32.1

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AMERICAN SHARED HOSPITAL SERVICES
CONDENSED CONSOLIDATED BALANCE SHEETS


	(unaudited)			(audited)
	June 30, 2009			December 31, 2008

ASSETS
Current assets:
Cash and cash equivalents	$	9,861,000		$	10,286,000
Restricted cash		50,000			50,000
Accounts receivable, net of allowance for doubtful accounts of $100,000 in 2009 and $100,000 in 2008		3,801,000			4,229,000

Other receivables		345,000			221,000
Prepaid expenses and other assets		506,000			430,000
Current deferred tax assets		246,000			246,000


Total current assets		14,809,000			15,462,000

Property and equipment:
Medical equipment and facilities		71,923,000			71,854,000
Office equipment		714,000			703,000
Deposits and construction in progress		7,212,000			5,203,000

		79,849,000			77,760,000

Accumulated depreciation and amortization		(33,936,000	)		(33,897,000	)

Net property and equipment		45,913,000			43,863,000

Investment in preferred stock		2,617,000			2,617,000
Other assets		287,000			254,000


Total assets	$	63,626,000		$	62,196,000


LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	414,000		$	262,000
Employee compensation and benefits		261,000			322,000
Other accrued liabilities		872,000			950,000

Current portion of long-term debt		5,319,000			6,341,000
Current portion of obligations under capital leases		1,769,000			1,292,000
Line of credit advances		7,500,000			6,500,000


Total current liabilities		16,135,000			15,667,000

Long-term debt, less current portion		13,874,000			16,386,000
Long-term capital leases, less current portion		8,107,000			4,667,000
Deferred income taxes		2,538,000			2,538,000

Shareholders’ equity:
Common stock, without par value: authorized shares - 10,000,000; issued and outstanding shares - 4,670,000 at June 30, 2009 and 4,712,000 at December 31, 2008		8,783,000			8,877,000
Additional paid-in capital		4,526,000			4,458,000
Retained earnings		6,325,000			6,393,000

Total equity- American Shared Hospital Services		19,634,000			19,728,000
Non-controlling interest in subsidiary		3,338,000			3,210,000

Total shareholders’ equity		22,972,000			22,938,000


Total liabilities and shareholders’ equity	$	63,626,000		$	62,196,000

See accompanying notes

AMERICAN SHARED HOSPITAL SERVICES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)


	Three Months ended June 30,						Six Months ended June 30,
	2009			2008			2009			2008
Medical services revenue	$	4,583,000		$	5,102,000		$	8,750,000		$	9,827,000

Costs of revenue:
Maintenance and supplies		398,000			290,000			793,000			568,000
Depreciation and amortization		1,627,000			1,664,000			3,251,000			3,222,000
Other direct operating costs		640,000			805,000			1,191,000			1,625,000

		2,665,000			2,759,000			5,235,000			5,415,000

Gross Margin		1,918,000			2,343,000			3,515,000			4,412,000

Selling and administrative expense		1,002,000			1,129,000			1,995,000			2,236,000
Transaction costs		123,000			—			320,000			—
Interest expense		529,000			627,000			1,012,000			1,195,000

Operating income		264,000			587,000			188,000			981,000
Other income (expense)		(18,000	)		86,000			16,000			233,000

Income before income taxes		246,000			673,000			204,000			1,214,000
Income tax expense (benefit)		28,000			205,000			(65,000	)		354,000

Net income		218,000			468,000			269,000			860,000
Less: Net income attributable to non-controlling interest		(192,000	)		(255,000	)		(337,000	)		(491,000	)

Net income (loss) attributable to American Shared Hospital Services	$	26,000		$	213,000		$	(68,000	)	$	369,000

Net income (loss) per share:
Earnings per common share — basic	$	0.01		$	0.04		$	(0.01	)	$	0.07

Earnings per common share — assuming dilution	$	0.01		$	0.04		$	(0.01	)	$	0.07

See accompanying notes

AMERICAN SHARED HOSPITAL SERVICES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY


	PERIODS ENDED DECEMBER 31, 2007 AND 2008 AND JUNE 30, 2009
							Additional
	Common			Common			Paid-in			Retained			Sub-Total			Non-controlling
	Shares			Stock			Capital			Earnings			ASHS			Interest in Sub.			Total
Balances at January 1, 2007 (audited)		5,023,000		$	9,317,000		$	4,251,000		$	5,441,000		$	19,009,000		$	3,045,000		$	22,054,000
Options exercised		2,000			3,000			—			—			3,000			—			3,000
Common stock withheld on option exercises		(1,000	)		—			(3,000	)		—			(3,000	)		—			(3,000	)
Stock based compensation expense		2,000			—			69,000			—			69,000			—			69,000
Excess tax benefit from share-based payment arrangements		—			—			(13,000	)		—			(13,000	)		—			(13,000	)
Dividends		—			—			—			(476,000	)		(476,000	)		—			(476,000	)
Cash distributions to non-controlling interest		—			—			—			—			—			(1,026,000	)		(1,026,000	)
Net income		—			—			—			951,000			951,000			1,134,000			2,085,000

Balances at December 31, 2007 (audited)		5,026,000			9,320,000			4,304,000			5,916,000			19,540,000			3,153,000			22,693,000
Repurchase of common stock		(316,000	)		(443,000	)		—			—			(443,000	)		—			(443,000	)
Stock based compensation expense		2,000			—			137,000			—			137,000			—			137,000
True-up tax benefit from share-based payment arrangements		—			—			17,000			—			17,000			—			17,000
Cash distributions to non-controlling interest		—			—			—			—			—			(798,000	)		(798,000	)
Net income		—			—			—			477,000			477,000			855,000			1,332,000

Balances at December 31, 2008 (audited)		4,712,000			8,877,000			4,458,000			6,393,000			19,728,000			3,210,000			22,938,000
Repurchase of common stock		(44,000	)		(94,000	)		—			—			(94,000	)		—			(94,000	)
Stock based compensation expense		2,000			—			68,000			—			68,000			—			68,000
Cash distributions to non-controlling interest		—			—			—			—			—			(209,000	)		(209,000	)
Net income (loss)		—			—			—			(68,000	)		(68,000	)		337,000			269,000

Balances at June 30, 2009 (unaudited)		4,670,000		$	8,783,000		$	4,526,000		$	6,325,000		$	19,634,000		$	3,338,000		$	22,972,000

See accompanying notes

AMERICAN SHARED HOSPITAL SERVICES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)


	Six Months ended June 30,
	2009			2008
Operating activities:
Net income (loss)	$	(68,000	)	$	369,000
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization		3,298,000			3,291,000
Gain on sale of assets		—			(56,000	)
Net income attributable to non-controlling interest		337,000			491,000
Stock based compensation expense		68,000			71,000
Changes in operating assets and liabilities:
Receivables		304,000			(32,000	)
Prepaid expenses and other assets		(128,000	)		56,000
Accounts payable and accrued liabilities		13,000			(350,000	)

Net cash from operating activities		3,824,000			3,840,000

Investing activities:
Payment for purchase of property and equipment		(614,000	)		(2,997,000	)
Proceeds from sale of assets		—			1,473,000
Proceeds from sales and maturities of marketable securities		—			1,905,000

Net cash from investing activities		(614,000	)		381,000

Financing activities:
Cash distribution to non-controlling interest		(209,000	)		(475,000	)
Long term debt financing on purchase of property and equipment		—			2,376,000
Advances on line of credit		1,000,000			—
Payments on line of credit		—			(100,000	)
Stock repurchase		(94,000	)		—
Principal payments on capital leases		(798,000	)		(535,000	)
Principal payments on long-term debt		(3,534,000	)		(3,240,000	)

Net cash from financing activities		(3,635,000	)		(1,974,000	)

Net change in cash and cash equivalents		(425,000	)		2,247,000
Cash and cash equivalents at beginning of period		10,286,000			6,340,000

Cash and cash equivalents at end of period	$	9,861,000		$	8,587,000


Supplemental cash flow disclosure:
Cash paid during the period for:
Interest	$	1,074,000		$	1,561,000
Income taxes	$	51,000		$	116,000

Schedule of non-cash investing and financing activities
Acquisition of equipment with capital lease financing	$	4,715,000		$	2,920,000

See accompanying notes

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 only normal recurring accruals) necessary to present fairly American Shared Hospital Services’ consolidated financial position as of June 30, 2009 and the results of its operations for the three and six month periods ended June 30, 2009 and 2008, which results are not necessarily indicative of results on an annualized basis. Consolidated balance sheet amounts as of December 31, 2008 have been derived from audited financial statements.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2008 included in the Company’s 10-K filed with the Securities and Exchange Commission.

These financial statements include the accounts of American Shared Hospital Services (the “Company”) and its wholly-owned subsidiaries: OR21, Inc. (“OR21”); MedLeader.com, Inc. (“MedLeader”); American Shared Radiosurgery Services (“ASRS”); and ASRS majority-owned subsidiary, GK Financing, LLC (“GK Financing”).

The Company through its majority-owned subsidiary, GK Financing, provided Gamma Knife units to nineteen medical centers as of June 30, 2009 in Arkansas, California, Connecticut, Florida, Illinois, Massachusetts, Mississippi, Nevada, New Jersey, New Mexico, New York, Tennessee, Oklahoma, Ohio, Pennsylvania, Texas and Wisconsin.

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.

All significant intercompany accounts and transactions have been eliminated in consolidation.

Certain reclassifications have been made to the 2008 balances to conform with the 2009 presentation.

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. For the three and six months ended June 30, 2009 basic earnings per share was computed using 4,688,000 and 4,699,000 common shares, respectively, and diluted earnings per share was computed using 4,690,000 and 4,699,000 shares and equivalents, respectively. For the six month period, 1,500 awarded but unvested restricted stock units were not used in the diluted calculation because they

would be anti-dilutive. For the three and six months ended June 30, 2008 basic earnings per share was computed using 5,028,000 and 5,027,000 common shares, respectively and diluted earnings per share was computed using 5,030,000 and 5,029,000 common shares and equivalents, respectively.

Note 3. Stock-based Compensation

On September 28, 2006, the Company’s shareholders approved the 2006 Stock Incentive Plan (the “2006 Plan”) under which 750,000 shares of the Company’s common stock are reserved for issuance of shares to officers of the Company, other key employees, non-employee directors, and advisors. The 2006 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 2006 Plan, and no further grants or share issuances will be made under the 1995 Plan or 2001 Plans. Under the 2006 Plan, there are 1,500 restricted stock units granted, consisting of annual automatic grants to non-employee directors, and approximately 594,000 options granted, of which approximately 254,000 options are vested, as of June 30, 2009.

Compensation expense associated with the Company’s stock-based awards 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 present value estimates. The estimated fair value of the Company’s option grants are estimated using assumptions for expected life, volatility, 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, usually the vesting period. Accordingly, stock-based compensation cost before income tax effect in the amount of approximately $35,000 and $68,000 is reflected in net income for the three and six month periods ended June 30, 2009, respectively, compared to approximately $37,000 and $71,000 in the same periods in the prior year, respectively. The only grants during the six month period ended June 30, 2009 were the annual automatic grants to each non-employee director of 2,000 stock options (6,000 total) and 500 restricted stock units (1,500 total). The grant date fair value of the stock options was calculated at $1.84 per share, and the restricted stock units were valued at the closing market price on the date of the award, or $2.10 per share. No options were exercised during the six month period ended June 30, 2009. There were no excess tax benefits to report.

Note 4. Convertible Preferred Stock Investment

As of June 30, 2009 the Company has a $2,617,000 investment in the convertible preferred stock (“Preferred Stock”) of Still River Systems, Inc. (“Still River”), representing an approximate 3.7% interest in Still River. The Company accounts for this investment under the cost method.

The Preferred Stock is convertible at any time at the option of the holder into shares of common stock of Still River at a conversion price, subject to certain adjustments, but initially set at the original purchase price. The Preferred Stock has voting rights equivalent to the number of common stock shares into which it is convertible, and holders of the Preferred Stock, subject to certain exceptions, have a pro-rata right to participate in subsequent stock offerings. In the event of liquidation, dissolution, or winding up of Still River, the Preferred Stock holders have preference to the holders of common stock, and any other class or series of stock that is junior to the Preferred Stock . The Company does not have the right to appoint a member of the Board of Directors of Still River.

During first quarter 2009, Still River proposed a Series D round of financing to raise cash, which it was able to do, but at a per share price lower than the Company’s cost basis investment. The Company chose not to invest in Series D.

The Company reviews its investment in Still River for impairment on a quarterly basis, or as events or circumstances might indicate that the carrying value of the investment may not be recoverable. The Company evaluated its investment for impairment at December 31, 2008 and reviewed it at March 31, 2009 and again at June 30, 2009 in light of both current market conditions and the ongoing needs of Still River to raise cash to continue its development of the first compact, single room PBRT system. The Company’s impairment analysis of its Still River investment considered, among other things, the following:

	•		Still River recently completed and passed the cold mass test on the prototype unit, a major milestone in the development of the PBRT.

	•		A review of the Still River project by a third party expert hired by the Company revealed no known impediments to completion of the prototype unit.

	•		Still River was able to raise the money it needed in spite of an uncertain economic climate.

The Company estimates that there is an unrealized loss of approximately $1.2 million based on the issuance of the Series D funding compared to the Company’s cost of its investment. However, the Company believes that this investment is only temporarily impaired for the reasons stated above. Therefore, based on the Company’s ability and intent to hold this investment for a reasonable period of time sufficient for a recovery of the cost basis value, the Company does not consider that this investment to be other-than-temporarily impaired at June 30, 2009.

Note 5. Line of Credit

The Company has an $8,000,000 line of credit with the Bank of America (the “Bank”), which is renewable annually and is drawn on from time to time as needed for equipment purchases and working capital. Amounts drawn against the line of credit are at an interest rate per year equal to the Bank’s Prime Rate minus 1.50 percentage points, or alternately the LIBOR rate plus 0.95 percentage points, and are secured by the Company’s cash invested with the Bank. At June 30, 2009, $7,500,000 was borrowed against the line of credit.

Note 6. Fair Value of Financial Instruments

The carrying value of financial instruments including cash and cash equivalents, restricted cash, accounts receivable, accounts payable, and other accrued liabilities approximated their fair value as of June 30, 2009 and December 31, 2008 because of the relatively short maturity of these instruments. The fair value of the Company’s various debt obligations, discounted at currently available interest rates was approximately $28,972,000 and $28,789,000 at June 30, 2009 and December 31, 2008, respectively.

Note 7. 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, and in 2008 the Board reaffirmed this authorization. The Company repurchased approximately 23,000 and 44,000 shares in the three and six month periods ended June 30, 2009, respectively. There are approximately 156,000 shares remaining under this repurchase authorization as of June 30, 2009.

Note 8. Accounting and Reporting for Noncontrolling Interests

Effective January 1, 2009 the Company adopted FASB Statement SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, An Amendment of Accounting Research Bulletin No 51” (“SFAS 160”). SFAS 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, changes in a parent’s ownership of a noncontrolling interest, calculation and disclosure of the consolidated net income attributable to the parent and the noncontrolling interest, changes in a parent’s ownership interest while the parent retains its controlling financial interest and fair value measurement of any retained noncontrolling equity investment. SFAS 160 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The Company has implemented reporting changes required under SFAS 160 with its financial statements for first quarter 2009, and has made certain reclassifications to the 2008 balances to conform with the 2009 presentation.

Note 9. Recent Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 141R, “Business Combinations” (SFAS 141R”), which is intended to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. It establishes principles and requirements for how the acquirer: recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; recognizes and measures the goodwill acquired in the business combination or a gain from the bargain purchase; and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141R is effective for prospective business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 31, 2008. The Company adopted SFAS 141R effective in its first quarter 2009 reporting.

In April 2009, the FASB issued FASB Staff Position No. FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (“FSP FAS 107-1”), to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. FSP FAS 107-1 also amends APB Opinion No. 28, “Interim Financial Reporting”, to require those disclosures in summarized financial information at interim reporting periods. FSP FAS 107-1 is effective for interim and annual reporting periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15, 2009.

In April 2009, the FASB issued FASB Staff Position No. FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (“FSP FAS 115-2”), which amends the other-than-temporary impairment guidance in U.S. GAAP, and provides guidance presentation and on determining whether the holder of an investment in a debt or equity security for which changes in fair value are not regularly recognized in earnings (such as securities classified as held-to-maturity or available-for-sale) should recognize a loss in earnings when the investment is impaired. An investment is impaired if the fair value of the investment is less than its amortized cost basis. FSP FAS 115-2 is effective for interim and annual reporting periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15, 2009.

In April 2009, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 111 (“SAB 111”), which amends Topic 5.M in the Staff Accounting Bulletin Series entitled “Other Than Temporary Impairment of Certain Investments in Debt and Securities”, to exclude debt securities from its scope. SAB 111 maintains the staff’s previous views related to equity securities.

The Company adopted FSP FAS 107-1, FSP FAS 115-2 and SAB 111 effective in its second quarter 2009 reporting.

Effective with its second quarter 2009 the Company adopted FASB Statement SFAS No. 165, “Subsequent Events” (“SFAS 165”). SFAS 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. In particular, SFAS 165 sets forth: the period after the balance sheet date which management should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and the disclosure that an entity should make about events or transactions that occurred after the balance sheet date.

The FASB has approved Accounting Standards Codification effective with interim and annual periods ending after September 15, 2009. Codification is the single source of authoritative nongovernmental US generally accepted accounting principles (GAAP). Codification supersedes all previous level (a) — (d) US GAAP standards issued by a standard-setter, including FASB, American Institute of Certified Public Accountants, Emerging Issues Task Force, and related literature. Among other benefits, Codification is expected to reduce the amount of time and effort required to solve accounting research issues and to improve usability of the literature, thereby mitigating the risk of noncompliance with standards.

Note 10. Subsequent Events

On August 1, 2009, the Company amended its line of credit with the Bank, increasing availability to $9,000,000 and extending it for a period of two years. Under this extension, the interest rate on amounts drawn against the line of credit was amended to be the rate per year equal to the Bank’s Prime Rate, or alternately the LIBOR rate plus 1.50 percentage points.

In accordance with SFAS 165 the Company evaluated events and transactions after June 30, 2009 through August 13, 2009, the date the financial statements were available to be issued, for subsequent events and determined that there were no other events to report during that period.

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 ^® program, and the risks of investing in a development-stage company, Still River Systems, Inc. (“Still River”), without a proven product. 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, 2008 and the definitive Proxy Statement for the Annual Meeting of Shareholders held on May 28, 2009.

Medical services revenue decreased by $519,000 and $1,077,000 to $4,583,000 and $8,750,000 for the three and six month periods ended June 30, 2009 from $5,102,000 and $9,827,000 for the three and six month periods ended June 30, 2008, respectively. The decreases for both the three and six month periods are primarily due to low volume at one of the Company’s Gamma Knife sites and one Gamma Knife unit being out of service for an extended period of time during first and second quarter 2009 for an upgrade to the Perfexion unit. Excluding these two sites, revenue at sites in operation more than one year decreased approximately 6% for both the three and six month periods, respectively. As a result, revenue from Gamma Knife operations decreased to $4,263,000 and $8,087,000 for the three and six month periods ended June 30, 2009 compared to $4,729,000 and $9,090,000 for the three and six month periods ended June 30, 2008. Revenue from the Company’s radiation therapy contract decreased by $53,000 and $74,000 to $320,000 and $663,000 for the three and six month periods ended June 30, 2009 compared to the same periods in the prior year, respectively.

The Company had nineteen Gamma Knife units in operation at June 30, 2009 compared to eighteen in operation at June 30, 2008. One Gamma Knife retail customer chose to exercise an early termination provision in its lease which reduced the number of Gamma Knife units the Company had in operation as of April 1, 2008 to eighteen, however a new customer contract for a Perfexion Gamma Knife unit started operation in third quarter 2008 to increase the total Gamma Knife units in operation back to nineteen. Fourteen of the Company’s nineteen current

Gamma Knife customers are under fee-per-use contracts, and five customers are under retail arrangements. Retail arrangements are further classified as either turn-key or net revenue sharing. Revenue from fee per use contracts is recorded on a gross basis as determined by each hospital’s contracted rate. 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 Gamma Knife. Revenue is recorded on a gross basis and estimated based on historical experience and hospital contracts with third party payors. For net revenue sharing arrangements the Company receives a contracted percentage of the reimbursement received by the hospital less any contracted operating expenses of the Gamma Knife. Revenue is recorded on a net basis and estimated based on historical experience.

The equipment provided under the Company’s contract to provide additional radiation therapy and related equipment services to an existing Gamma Knife customer began operation in September 2007. This contract is considered a retail arrangement and revenue is recorded on a net revenue sharing basis.

The number of Gamma Knife procedures decreased by 34 and 80 to 467 and 898 for the three and six month periods ended June 30, 2009 from 501 and 978 in the same periods in the prior year, respectively. This decrease for both the three and six month periods was primarily due to lower patient volumes at one site and down time of several weeks at one existing Gamma Knife sites for an upgrade to the Perfexion system. For the six month period the decrease was also partially due to the termination of one Gamma Knife contract during first quarter 2008.

Total costs of revenue decreased by $94,000 and $180,000 to $2,665,000 and $5,235,000 for the three and six month periods ended June 30, 2009 from $2,759,000 and $5,415,000 for the three and six month periods ended June 30, 2008. Maintenance and supplies increased by $108,000 and $225,000 for the three and six month periods ended June 30, 2009 compared to the same periods in the prior year, primarily due to contract maintenance that began after the end of the warranty period on three Gamma Knife Perfexion units. Depreciation and amortization decreased by $37,000 for the three month period, and increased by $29,000 for the six month period ended June 30, 2009 compared to the same periods in the prior year. The decrease for the three month period is primarily because there was no depreciation at one site while it was being upgraded to a Gamma Knife Perfexion unit. In addition, depreciation was stopped at one site because the Company is attempting to trade in the unit towards another Gamma Knife unit or place the unit at another site. The increase for the six month period is primarily due to Gamma Knife Perfexion upgrades at two sites during the past year and a new Perfexion system that began operation in the third quarter 2008. This more than offset a reduction in depreciation from a Gamma Knife unit that was sold to a customer at the end of the first quarter 2008, and depreciation being stopped for the unit that the Company is trying to trade-in or place elsewhere. Other direct operating costs decreased by $165,000 and $434,000 for the three and six month periods ended June 30, 2009 compared to the same periods in the prior year. For the three and six month periods the decrease is primarily due to lower operating costs in connection with the Company’s retail sites. For the six month period the decrease is also due to lower site specific marketing related costs.

Selling and administrative costs decreased by $127,000 and $241,000 to $1,002,000 and $1,995,000 for the three and six month periods ended June 30, 2009 from $1,129,000 and $2,236,000 for the same periods in the prior year, respectively. For both the three and six month periods, this decrease was primarily due to lower business development costs, investor relations costs, contributions and depreciation.

As previously disclosed, the Company had engaged in discussions with two parties concerning the possible sale of its 81% interest in GK Financing, with one of the parties providing indicative pricing for the interest that would be attractive to the Company if it were to sell its interest in GK Financing. Accordingly, the Company permitted the prospective acquirer to conduct a due diligence review of GK Financing and the parties engaged in preliminary negotiations of the terms of a transaction. In May 2009 the Company announced that the parties failed to reach an agreement and that the negotiations had terminated. Under applicable accounting rules, the Company is required to expense the legal, accounting, investment banking and other costs incurred for these activities. Accordingly, the Company expensed $123,000 during the three month period and $320,000 for the six month period ended June 30, 2009 for these costs, which are classified separately as Transaction costs.

Interest expense decreased by $98,000 and $183,000 to $529,000 and $1,012,000 for the three and six month periods ended June 30, 2009 from $627,000 and $1,195,000 for the three and six month periods ended June 30, 2008, respectively. This was primarily due to lower interest expense on the Company’s line of credit with a bank and other interest. Higher interest expense from financing Gamma Knife upgrades over the previous several months was offset by lower interest expense on the debt relating to the more mature Gamma Knife units. Gamma Knife units that have more mature debt have lower interest expense because interest expense decreases as the outstanding principal balance of each loan is reduced.

Other income (expense) decreased by $104,000 to expense of $18,000 for the three month period ended June 30, 2009 from income of $86,000 for the same period in the prior year, and decreased $217,000 to $16,000 for the six month period from $233,000 for the same period in the prior year. The decrease for both the three and six month periods was primarily due a reduction in interest income as a result of lower interest rates available on invested cash balances. For the three month period ended June 30, 2009 there was also cost of approximately $20,000 from the early extinguishment of debt. For the six month period ended June 30, 2009, there was no gain on sale of equipment compared to a gain on the sale of equipment of approximately $56,000 for the same period in the prior year.

The Company had income tax expense of $28,000 and an income tax benefit of $65,000 for the three and six month periods ended June 30, 2009 compared to income tax expense of $205,000 and $354,000 for the three and six month periods ended June 30, 2008, respectively. For the three month period, this is due to income before income taxes of $246,000 for the three month period ended June 30, 2009 compared to income before income taxes of $673,000 in the same period in 2008. For the six month period this is due to income before income taxes of $204,000 in the first six months of 2009 compared to income before income taxes of $1,214,000 for the same period in 2008. Based on the Company’s current estimated effective income tax rate for 2009, a 49% income tax provision was applied to net income before income taxes and

net income attributable to non-controlling interest, resulting in an income tax benefit for the six month period and income tax expense for the three month periods ended June 30, 2009, respectively. A 49% income tax provision was applied for both the three and six month periods ended June 30, 2008. The Company’s effective income tax rate is higher than the expected statutory federal and state income tax rates at a consolidated level, primarily due to higher income at the Company’s subsidiary levels in certain states where there are separate state income tax filing requirements.

Net income attributable to non-controlling interest decreased by $63,000 and $154,000 to $192,000 and $337,000 for the three and six month periods ended June 30, 2009 from $255,000 and $491,000 for the three and six month periods ended June 30, 2008, due to decreased profitability of GK Financing. Non-controlling interest represents the 19% interest of GK Financing owned by a third party.

The Company had net income of $26,000, or $0.01 per diluted share, and a net loss of $68,000, or ($0.01) per diluted share, for the three and six month periods ended June 30, 2009, compared to net income of $213,000, or $0.04 per diluted share, and $369,000, or $0.07 per diluted share, in the same periods in the prior year, respectively. The decrease for both the three and the six month periods was primarily due to reduced medical services revenue, transaction costs and lower interest income, partially offset by lower costs of revenue, selling and administrative costs and interest expense.

Liquidity and Capital Resources

The Company had cash and cash equivalents of $9,861,000 at June 30, 2009 compared to $10,286,000 at December 31, 2008. The Company’s cash position decreased by $425,000 due to payments for the purchase of property and equipment of $614,000, principal payments on long term debt and capital leases of $4,332,000, distributions to minority owners of $209,000 and the repurchase of Company stock of $94,000. These decreases were partially offset by net cash from operating activities of $3,824,000 and advances on the Company’s line of credit with a bank of $1,000,000.

The Company as of June 30, 2009 had shareholders’ equity of $22,972,000, a working capital deficit of $1,326,000 and total assets of $63,626,000.

The Company has scheduled interest and principal payments under its debt obligations of approximately $6,673,000 and scheduled capital lease payments of approximately $2,287,000 during the next twelve months.

The Company has an $8,000,000 line of credit with a bank, renewable annually, available as needed for equipment purchases and working capital. Amounts drawn against the line of credit are secured by the Company’s cash invested with the bank. At June 30, 2009 there was $7,500,000 drawn against the line of credit.

Although the Company has a working capital deficit, the Company has recently renewed its line of credit with the bank for a period of two years (see Note 10 to the financial statements), which will move its borrowings under the line of credit to non-current. The Company believes it has the cash flow available to meet its short term capital needs, including its scheduled debt and capital lease obligations during the next twelve months.

The Company at times invests its cash primarily in money market or similar funds and high quality short to long-term fixed income securities in order to maximize current income while minimizing the potential for principal erosion. Due to current economic conditions, the Company has chosen not to invest in securities at this time, and there were no investments in securities as of June 30, 2009. However, when the Company makes these investments, they are classified as securities on the balance sheet and are considered held-to-maturity investments because it is the Company’s ability and intent to hold these securities until maturity. Securities with maturity dates between three and twelve months are classified as current assets, while securities with maturities in excess of one year are classified as long-term.

The Company has a $2,617,000 preferred stock investment in Still River Systems, Inc., a development stage company, which is considered a long-term investment on the balance sheet and is recorded at cost. As of June 30, 2009, the Company also has $2,250,000 in deposits toward the purchase of three Monarch250 proton beam radiation therapy (PBRT) systems from Still River. For the first two machines, the Company has a commitment to total deposits of $3,000,000 per machine until FDA approval is received, at which time the remaining balance is committed. The delivery dates for the first two machines are now anticipated to be in 2010. For the third machine, the Company has a commitment to total deposits of $500,000 until FDA approval is received, at which time the remaining balance is committed. The Company has entered into a partnership agreement with a radiation oncology physician group, which has contributed $50,000 towards the deposits on the third machine. The Still River PBRT system is not commercially proven and there is no assurance FDA approval will be received. The Company reviews the carrying value of these deposits for impairment on a quarterly basis, or as events or circumstances might indicate that the carrying value may not be recoverable.

The Company has made deposits totaling $2,835,000 towards the purchase of a Gamma Knife Perfexion unit and an LGK Model 4 Gamma Knife, both at sites still to be determined, and the upgrade to Model 4C for an existing Gamma Knife unit. It has also made a commitment to upgrade the Gamma Knife unit at an existing site to a Perfexion unit.

Including the commitments for the three Monarch250 systems, the two Perfexion units, the LGK Model 4 Gamma Knife and the Model 4C upgrade, the Company has total remaining commitments to purchase equipment in the amount of approximately $43,000,000. It is the Company’s intent to finance these purchase commitments as needed. However, due to the current economic and credit market conditions, in recent months it has become more difficult to obtain financing for the Company’s projects. In particular, GK Financing recently obtained financing for one Gamma Knife unit where the lender required the Company’s corporate guarantee. Previously, the Company was not required to provide a corporate guarantee for any of GK Financing’s projects. Additionally, the Company’s line of credit with a bank was recently extended for two years at a higher interest rate than during the past year. The Company expects that it will not receive financing commitments from a lender for its PBRT systems until Still River obtains FDA approval on the Monarch250. As such, 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.

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, trust 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, 2009 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, 2009, 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.

There were no changes in our internal control over financial reporting during the three months ended June 30, 2009, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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, 2008.

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

The Board of Directors has authorized the Company to repurchase up to a total of 1,000,000 shares of its own stock on the open market from time to time at prevailing prices. At June 30, 2009 a total of 844,004 shares have been repurchased in the open market pursuant to this authorization at a cost of approximately $1,750,000. The following table sets forth information on our common stock repurchase program for the second quarter of 2009:


					Total Number of		Maximum Number
	Total				Shares Purchased		of Shares that
	Number of		Average		as Part of Publicly		May Yet be
	Shares		Price Paid		Announced		Purchased Under
Period	Purchased		Per Share		Programs		the Programs

April 1 - April 30, 2009		—	$	—		—		—
May 1 - May 31, 2009		—		—		—		—
June 1 - June 30, 2009		22,505		2.13		22,505		155,996

Total Second Quarter		22,505	$	2.13		22,505		155,996

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Submission of Matters to a Vote of Securities Holders.

The Company’s Annual Shareholder Meeting (“Meeting”) was held on May 28, 2009. There were present in person or by proxy at said Meeting shareholders voting 4,178,947 shares that represented 88.56% of the 4,718,883 shares outstanding and entitled to vote at the Meeting, which represented a quorum. At the Meeting, the shareholders:

Voted on the Election of Directors as follows:


Nominee	For		Against
Ernest A. Bates, M.D.		3,775,256		403,691
Olin C. Robison		3,759,504		419,443
John F. Ruffle		3,778,540		400,407
Stanley S. Trotman, Jr.		3,775,147		403,800

All four individuals were elected to serve on the Board of Directors for the following year.

Voted on the ratification of Moss Adams LLP as the Company’s Independent Registered Public Accounting Firm. There were 4,117,991 votes for, 46,030 votes against, and 14,926 votes abstained for a 98.54% vote in favor of total available votes.

Item 5. Other Information.

None.

Item 6. Exhibits and Reports on Form 8-K.

(a) Exhibits

The following exhibits are filed herewith:

10.21a		Purchased Services Agreement for a Gamma Knife Unit dated as of November 19, 2008 between GK Financing, LLC and Kettering Medical Center (Confidential material appearing in this document has been omitted and filed separately with the Securities and Exchange Commission in accordance with Rule 24b-2, promulgated under the Securities and Exchange Act of 1934, as amended. Omitted information has been replaced with asterisks.)

10.21b		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 (Confidential material appearing in this document has been omitted and filed separately with the Securities and Exchange Commission in accordance with Rule 24b-2, promulgated under the Securities and Exchange Act of 1934, as amended. Omitted information has been replaced with asterisks.)

10.57a		First Amendment to Purchased Services Agreement for a Gamma Knife Unit effective as of April 1, 2009 between GK Financing, LLC and University of Southern California (Confidential material appearing in this document has been omitted and filed separately with the Securities and Exchange Commission in accordance with Rule 24b-2, promulgated under the Securities and Exchange Act of 1934, as amended. Omitted information has been replaced with asterisks.)

31.1		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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 13, 2009	/s/ Ernest A. Bates, M.D.
	Ernest A. Bates, M.D.
	Chairman of the Board and Chief Executive Officer


Date: August 13, 2009	/s/ Craig K. Tagawa
	Craig K. Tagawa
	Senior Vice President Chief Operating and Financial Officer

Exhibit10.21a

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.

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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.

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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 * in the aggregate. All costs and expenses in excess of * 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 * of approved expenditures, provided that such portion to be reimbursed by GKF shall not exceed an average of * 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

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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.

(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

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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.

(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.

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

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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.

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.

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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

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Term of this Agreement be free from defects in design, materials and workmanship and will conform to Elekta’s technical specifications concerning the Equipment.

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

13. Alterations and Upgrades to Equipment.

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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 * for modifications that are mutually agreed upon by the parties hereto. Equipment modification costs in excess of * 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 * 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 * 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.

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

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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

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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.

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:

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.

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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.

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.

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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.

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

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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.

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

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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.

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.

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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.

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.

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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.

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.

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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.

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.

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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.

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.

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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 .

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.

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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.

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.

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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:

	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

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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.

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

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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.

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.

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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.

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, M.D.
		Title: Policy Committee Member
		Date: December 9, 2008

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“MEDICAL CENTER”	KETTERING MEDICAL CENTER
	By:	/s/ Brett Spence
		Title: VP of Finance & Operations
		Date: November 19, 2008

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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


	Annual Paid	Percentage of Technical
	Procedures	Component Collections Payable
Year	Performed	To GKF For Each Procedure
*	*	*
*	*	*

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 * Procedures performed during any annual period during the Term shall be increased from . The Purchased Services Payments for each additional Procedure in excess of 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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Exhibit 10.21b

FIRST AMENDMENT TO PURCHASED SERVICES AGREEMENT

This FIRST AMENDMENT TO PURCHASED SERVICES AGREEMENT (this “Amendment”) is dated as of the 11th 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 * in the aggregate. All costs and expenses in excess of * 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.

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


GKF :		Medical Center :

GK FINANCING, LLC		KETTERING MEDICAL CENTER

By:	/s/ Ernest A. Bates, M.D.	By:	/s/ Brett Spenst

	Ernest A. Bates, M.D.		Name: Brett Spenst
	Policy Committee Member		Title: VP of Finance and Operations

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Exhibit 10.57a

FIRST AMENDMENT TO PURCHASED SERVICES AGREEMENT

This FIRST AMENDMENT TO PURCHASED SERVICES AGREEMENT (this “First Amendment”) is effective as of the 1st day of April, 2009, and is entered into by and between GK FINANCING, LLC, a California limited liability company (“GKF”), or its wholly owned subsidiary whose obligations hereunder shall be guaranteed by GKF, and UNIVERSITY OF SOUTHERN CALIFORNIA, a California nonprofit public benefit corporation (“Hospital”).

Recitals :

A. On March 5, 2008, GKF and USC University Hospital, Inc. (“USC University Hospital”), entered into a certain Purchased Services Agreement.

B. Pursuant to a certain letter dated effective as of March 31, 2009, GKF agreed to the transfer and assignment to Hospital of all of USC University Hospital’s right, title and interest in, under and to the Purchased Services Agreement. The Purchased Services Agreement, as assigned to and assumed by Hospital, is referred to herein as the “Agreement.”

C. GKF and Hospital desire to amend the Agreement 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. Amendment to Section 7 . Section 7 of the Agreement (Marketing Support) is hereby deleted in its entirety and replaced with the following:

“7. Marketing . Hospital shall determine whether and how to market the services provided using the Equipment. The parties shall discuss and mutually agree on marketing activities that promote the Equipment and the Hospital services related to the Equipment to the mutual benefit of both parties. If such joint marketing is undertaken, the parties will determine an appropriate allocation of the costs of the marketing based on the relative benefit each receives.”

3. Amendment to Section 8(b) . Section 8(b) of the Agreement is hereby deleted in its entirety and replaced with the following:

“(b) In consideration for and as compensation to GKF for deinstallation and removal of the Model C, the preparation, construction and improvement of the Site, installation of the Equipment and the other additional services to be provided by GKF under this Agreement, Hospital shall pay to GKF, on a monthly basis, the applicable per Procedure payments set forth in Exhibit 8 of this Agreement (the “Purchased

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Services Payments”) for each “Procedure” that is performed using the Equipment at the Site, whether on an inpatient or outpatient basis, and irrespective of the actual amounts billed or collected, if any, pertaining to such procedures. As used herein, a “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.”

4. New Section 9.5 . The following is hereby added as a new Section 9.5 to the Agreement:

“(a) At all times during the term of the Agreement subsequent to the effective date of this First Amendment, Hospital represents and warrants that any and all Procedures performed or to be performed within the “Southern California Region” (as defined below) by Hospital, its representatives and/or affiliates (including, without limitation, USC/Norris Comprehensive Cancer Center), whether on an inpatient or outpatient basis, shall be performed using the Equipment at the Site, except that the foregoing representation and warranty shall not apply (i) to the performance of any Procedures using the existing Cyberknife equipment, as presently configured, upgraded or replaced (the “Cyberknife”), so long as the Procedures using such Cyberknife are performed at the USC/Norris Comprehensive Cancer Center; (ii) to the performance of any Procedures outside the Southern California Region; (iii) to the activities of Hospital-affiliated physicians at facilities not owned or operated by Hospital or its affiliates; or (iv) if the Equipment ceases to represent the prevailing standard of care for Procedures, as determined in accordance with Section 9.5(c) below (the “Equipment Use Representation”). As used herein, the “Southern California Region” shall mean the California counties of Imperial, Los Angeles, Orange, Riverside, San Bernardino, Santa Barbara and Ventura.

“(b) Notwithstanding anything to the contrary contained in this Agreement, in the event of a breach of the Equipment Use Representation at any time or from time-to-time, for any reason or for no reason, then, within thirty (30) days following the occurrence thereof, Hospital shall pay to GKF as liquidated damages for the loss of the benefit from the Equipment Use Representation and not as a penalty, an amount equal to * that is performed using any other equipment or devices (other than the Equipment), including, without limitation, any other Leksell Gamma Knife unit(s) of any model type or configuration ( provided that no such liquidated damages shall be payable for any Procedures performed using the Cyberknife). Such liquidated damages (i) shall be payable for all Procedures performed anywhere within the Southern California Region using such other equipment or devices by Hospital or its representatives or affiliates, whether on an inpatient or outpatient basis, and irrespective of

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the actual amounts billed or collected, if any, pertaining to such Procedures; (ii) shall be in addition to any Purchased Services Payments that are payable to GKF for Procedures performed using the Equipment as set forth herein; and (iii) shall be the sole and exclusive remedy for any breach of the Exclusive Use Representation and shall not apply to any other breach of this Agreement. Hospital and GKF acknowledge that the liquidated damages formula set forth in this Section constitutes a reasonable method to calculate GKF’s damages resulting from a breach of the Equipment Use Representation under the circumstances existing as of the date of this First Amendment.

“(c) A determination as to whether the Equipment ceases to represent the prevailing standard of care for Procedures may be requested in writing by either party at any time on or after the fifth (5 ^th ) anniversary of the First Procedure Date and not more than once during any twelve month period commencing from the fifth (5 ^th ) anniversary of the First Procedure Date. The Equipment shall be deemed not to represent the prevailing standard of care for the performance of Procedures if it is determined in accordance with the procedures set forth in this Section 9.5(c) that it is not medically appropriate to use the Equipment to perform any and all Procedures (other than due to a temporary unavailability of the Equipment to perform Procedures, e.g. , for servicing or Cobalt reloading of the Equipment, if any). The prevailing standard of care for the performance of Procedures shall not mean the best or a better standard of care, but rather is an accepted standard of care within the radiosurgery community. Within ten (10) days following a party’s receipt of a request from the other party, each party shall designate a practicing neurosurgeon who shall have not less than ten (10) years experience in the performance of radiosurgical procedures using various radiosurgical devices, including the Gamma Knife. Within ten (10) days of such designation, each such designee shall mutually agree upon and designate a third neurosurgeon having the same qualifications as described above and who shall have no relationship or medical staff privileges with either Hospital or GKF. The three (3) designated physicians shall have thirty (30) days within which to determine whether the Equipment does not represent the prevailing standard of care for Procedures based on the standard set forth in this Section 9.5(c). Any determination that the Equipment does not represent the prevailing standard of care for Procedures based on the standard set forth in this Section 9.5(c) must be in writing and signed by not less than two (2) of the three (3) physician designees. If the requisite number of physician designees fails to make such determination as provided above, then, the Equipment shall be deemed to continue to represent the prevailing standard of care for Procedures based on the standard set forth in this Section 9.5(c), and the party requesting the determination shall be required to promptly reimburse the other party for any reasonable costs or expenses incurred by the other party in connection with such determination. If the requisite number of physician designees makes the

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determination that the Equipment does not represent the prevailing standard of care for Procedures as provided above, then, (i) from and after the date of such determination, Hospital, its representatives and affiliates, may perform Procedures without using the Equipment without being in breach of the Equipment Use Representation; and (ii) the party not requesting the determination shall be required to promptly reimburse the other party for any reasonable costs or expenses incurred by the other party in connection with such determination.”

5. Amendment to Exhibit 8 . Based in part on GKF’s lowered marketing expense commitment pursuant to this First Amendment, Exhibit 8 to the Agreement is hereby deleted in its entirety and replaced with Exhibit 8 attached to this First Amendment.

6. Other . In connection with the assignment of the Agreement from USC University Hospital to USC, if required by the third party financing company which holds a security interest in the Equipment, Hospital shall promptly execute and deliver a consent to sublease for the purpose of evidencing the Lender’s interest in the Equipment and/or this Agreement.

7. Full Force and Effect . Except as amended by this First 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 First Amendment and that of the Agreement, the terms and provisions of this First Amendment shall prevail and control.

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


GKF:		Hospital:

GK FINANCING, LLC		UNIVERSITY OF SOUTHERN CALIFORNIA

By:	/s/ Craig K. Tagawa	By:	/s/ Clare H Shinnerl

	Craig K. Tagawa Chief Executive Officer		Name: Clare Hansen- Shinnerl Title: Assistant VP, Business Services

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Exhibit 8

PER PROCEDURE PAYMENTS


Year	Annual Procedures Performed	Fee Per Procedure


*	*	*
	*	*
	*	*
	*	*

Notwithstanding anything to the contrary set forth herein, (a) for purposes of determining the per procedure payment, the number of annual procedures performed shall be reset to zero (0) at the commencement of each anniversary of the First Procedure Date; and (b) there shall be no retroactive adjustment of the per procedure payment irrespective of whether the number of procedures performed reaches a lower per procedure payment level. *.

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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 annual 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 annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual 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 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; and

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 changes in the registrant’s internal control over financial reporting that occurred during registrant’s most recent fiscal quarter (or the 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;

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 registrant’s board of directors (or persons performing the equivalent function):

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 controls over financial reporting.

August 13, 2009


/s/ Ernest A. Bates, M.D.
Ernest A. Bates, M.D.
Chief Executive Officer

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;

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

August 13, 2009


/s/ Craig K. Tagawa
Craig K. Tagawa
Chief Financial Officer

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, 2009 (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 operations of American Shared Hospital Services.

August 13, 2009



	/s/ Ernest A. Bates, M.D.
	Ernest A. Bates, M.D.
	Chief Executive Officer


	/s/ Craig K. Tagawa
	Craig K. Tagawa
	Chief Financial Officer

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