Exhibit 10.1

 

AMERICAN SHARED HOSPITAL SERVICES

 

NOTE AND WARRANT PURCHASE AGREEMENT

 

This Note and Warrant Purchase Agreement, dated as of October 22, 2014, (this
“Agreement”) is entered into between and among American Hospital Services, a
California corporation (the “Company”), and the investors listed on Schedule I
hereto (each an “Investor” and, collectively, the “Investors”). Capitalized
terms not otherwise defined herein shall have the meaning set forth in the form
of Note (as defined below) or Warrant (as defined below) attached hereto as
Exhibits A and B, respectively.

 

RECITALS

 

WHEREAS, the Company has requested that the Investors invest the aggregate sum
of $1,000,000 in return for (i) promissory notes in the principal amount set
forth opposite such Investor’s name on Schedule I hereto and (ii) certain
warrants to purchase shares of the Company’s class of Common Stock No Par Value
(the “Common Stock”), and the Investors are willing to make such investment in
the Company on the terms and conditions set forth herein (the “Notes and
Warrants Purchase”);

 

WHEREAS, the Investors are members of the board of directors of the Company;

 

WHEREAS, the Company and Investors are executing and delivering this Agreement
upon the exemption from securities registration afforded by the rules and
regulations as promulgated by the Securities and Exchange Commission (the “SEC”)
under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities
Act”).

 

AGREEMENT

 

NOW THEREFORE, in consideration of the foregoing and the provisions set forth
below, the parties hereby agree as follows:

 

1. Purchase and Sale. At the Closing (as defined below), on the terms and
subject to the conditions set forth herein, each Investor will severally
purchase from the Company, and the Company will issue and sell severally to each
Investor, (i) a promissory note in the form of Exhibit A hereto (each a “Note”
and collectively the “Notes”) in the principal amount set forth opposite the
Investor’s name on Schedule I hereto and (ii) a warrant in the form of Exhibit B
hereto (each a “Warrant” and collectively the “Warrants,” and collectively with
the Notes and this Agreement, the “Transaction Documents”) in accordance with
the Investor’s individual allocation as set forth on Schedule I hereto.

 

 

 

 

2. Closing and Delivery of the Notes, Warrants and Funds

 

(a) Closing. The closing of the sale of the Notes and Warrants (the “Closing”)
shall occur remotely via exchange of documents and signatures on October 22,
2014 (the “Closing Date”).

 

(b) Delivery. At the Closing, the Company will deliver to each of the Investors
the Note and Warrants to be purchased by such Investor, against receipt by the
Company of the purchase price set forth on Schedule I hereto (the “Purchase
Price”).

 

3. Warrants.

 

(a) Issuance. At the Closing, the Company shall issue the Warrants to the
Investors as provided in Section 1. Each Warrant shall be exercisable at an
exercise price of $2.20 per share (the “Exercise Price”), which is the closing
price per share of the Common Stock on the New York Stock Exchange MKT on the
day preceding the date hereof, and shall expire on the third anniversary of the
Closing Date.

 

(b) Waiver of Standstill. The Company hereby waives any rights it may have
pursuant to provision 3(e) (the “Standstill”) of that certain Common Stock
Purchase Agreement, dated as of June 11, 2014, between and among the Company and
certain of the Investors (the “Common Stock Purchase Agreement”), to prevent
Investors from purchasing and exercising the Warrants. It is understood that the
Standstill otherwise remains in full force and effect.

 

(c) Registration Rights. The Warrant will contain the same registration rights
with respect to the Common Stock underlying the Warrant (the “Warrant Shares”)
as were granted to investors in the Common Stock Purchase Agreement, except that
with respect to the Warrant Shares, the Company agrees to keep the Registration
Statement and Prospectus (each as defined in the Common Stock Purchase
Agreement) effective and current, respectively, for three years from the date
the Registration Statement was filed, or if earlier, until such time as the
number of Warrant Shares remaining unsold may be sold by Investors within 12
months in open market transactions under Rule 144.

 

4. Representations, Warranties and Covenants of the Company. The Company
represents and warrants to each Investor that, as of the date hereof:

 

(a) Due Incorporation, Qualification, etc. The Company is duly formed and
validly existing under the laws of California, with full power and authority to
conduct its business as it is currently being conducted and to own its assets,
and has secured any other authorizations, approvals, permits and orders required
by law for the conduct by the Company of its business as it is currently being
conducted.

 

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(b) Authority. The execution, delivery and performance by the Company of each
Transaction Document to be executed by the Company and the consummation of the
transactions contemplated thereby are within the power of the Company and have
been duly authorized by all necessary actions on the part of the Company.

 

(c) Amendment of Rights Plan. The Company agrees to amend promptly its existing
shareholder rights plan, dated as of March 22, 1999, between the Company and
American Stock Transfer & Trust Company, as rights agent, as amended by the
first amendment dated as of March 12, 2009 (the “Rights Plan”) so that the
issuance and subsequent exercise of the Warrants does not activate any rights
issued to the Company’s shareholders pursuant to the Rights Plan.

 

(d) No Approvals. No consent or authorization of, filing with, notice to or
other act by, or in respect of, any governmental authority or any other person
is required in order for the Company to execute, deliver, or perform any of its
obligations under the Notes or Warrants.

 

(e) No Violations. The execution and delivery of the Notes and Warrants and the
consummation by the Company of the transactions contemplated hereby and thereby
do not and will not (a) violate any provision of the Company's organizational
documents; (b) violate any law or order applicable to the Company or by which
any of its properties or assets may be bound; or (c) constitute a default under
any material agreement or contract by which the Company may be bound.

 

(f) Enforceability. Each of the Note and Warrant is a valid, legal and binding
obligation of the Company, enforceable against it in accordance with their terms
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).

 

(g) Reservation of Shares. The Company shall at all times reserve and keep
available out of its authorized but unissued Common Stock, solely for the
purpose of issuance upon the exercise of the Warrant, the maximum number of
Warrant Shares issuable upon the exercise thereof. The Company shall take all
such actions as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of the Warrant.

 

5. Representations, Warranties and Covenants of Investors. Each Investor, for
that Investor alone, represents and warrants to the Company as follows:

 

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(a) Authority. Each Investor has full legal capacity, power and authority to
execute and deliver this Agreement and to perform its obligations hereunder.

 

(b) Securities Law Compliance. Each Investor acknowledges that the Notes and the
Warrants have not been registered under the Securities Act, or any state
securities laws and, therefore, cannot be resold unless they are registered
under the Securities Act and applicable state securities laws or unless an
exemption from such registration requirements is available. Such Investor is
aware that the Company is under no obligation to effect any such registration
with respect to the Notes or Warrants or to file for or comply with any
exemption from registration. Such Investor has not been formed solely for the
purpose of making this investment and is purchasing the Notes and Warrants to be
acquired by such Investor hereunder for its own account for investment, not as a
nominee or agent, and not with a view to, or for resale in connection with, the
distribution thereof.

 

(c) Accredited Investor. Each Investor is an accredited investor as such term is
defined in Rule 501 of Regulation D under the Securities Act.

 

(d) Filings. Each Investor agrees to either file or amend an existing Statement
of Beneficial Ownership on Schedule 13D or 13G, whichever is applicable, with
the SEC within five days of the Closing Date.

 

6. Miscellaneous

 

(a) Changes. This Agreement may only be amended, modified or supplemented by an
agreement in writing signed by each party hereto.

 

(b) Governing Law. This Agreement and all actions arising out of this Agreement
shall be governed by and construed in accordance with the laws of the State of
California, without regard to the conflicts of law provisions of the State of
California or of any other state.

 

(c) Survival. The representations, warranties, covenants and agreements made
herein shall survive the execution and delivery of this Agreement.

 

(d) Successors and Assigns. Subject to the restrictions on transfer described in
Section ‎6(e) below, the rights and obligations of the Company and the Investors
shall be binding upon and benefit the successors, assigns, heirs, administrators
and transferees of the parties.

 

(e) Assignment by the Company. The rights, interests or obligations hereunder
may not be assigned, by operation of law or otherwise, in whole or in part, by
the Company without the prior written consent of Investors.

 

(f) Entire Agreement. This Agreement together with the other Transaction
Documents constitute the entire agreement among the Company and Investors and
supersede any and all prior agreements, negotiations, understandings and
communications among the parties, whether written or oral, respecting the
subject matter hereof.

 

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(g) Notices. All notices and other communications shall be made in writing and
shall be deemed effectively given upon the earlier of actual receipt or: (i)
personal delivery to the party to be notified; (ii) when sent, if sent by
electronic mail or facsimile; (iii) five days after having been sent by
registered or certified mail; or (iv) one business day after the business day of
deposit with a nationally recognized overnight courier. All communications shall
be sent to the following addresses:

 

If to the Company, to: American Shared Hospital Services   Four Embarcadero
Center, Suite 3700   San Francisco, CA 94111   Facsimile: (415) 788-5660  
Attention: Craig K. Tagawa, Chief Operating Officer and
Chief Financial Officer     With copies to: Davis Polk & Wardwell LLP   1600 El
Camino Real   Menlo Park, CA 94025   Facsimile: (650) 752-3601   Attention:
Daniel G. Kelly, Jr.

 

If to Investors, to its address on the Company’s records or to such other
mailing address or email address as the Company or Investors may designate in
writing.

 

(h) Severability of this Agreement. If any provision of this Agreement shall be
judicially determined to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.

 

(i) Expenses. The Company shall reimburse the Investors up to $ to cover their
legal and other expenses incurred in connection with the Transaction Documents
and the transactions contemplated thereby.

 

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(j) Conflict Waiver. Investors hereby consent to the continued representation of
the Company and its board of directors by Davis Polk & Wardwell LLP (“Davis
Polk”) in relation to the Notes and Warrants Purchase and voluntarily and
knowingly waive any actual or alleged conflict and actual or alleged violation
of ethical or comparable rules applicable to Davis Polk that may arise from its
representation of the Company and its board of directors in connection with the
Notes and Warrants Purchase. In addition, the Investors hereby acknowledge that
their consent and waiver under this Section 6(j) is voluntary and informed, and
that the Investors have been advised of their rights to obtain independent legal
advice with respect to this consent and waiver. The Investors further agree that
they are aware of the extent of their relationship, if any, with Davis Polk, and
the Investors do not require additional information from Davis Polk in order to
understand the nature of this consent. Davis Polk is an express third party
beneficiary of this Section 6(j).

 

(k) Counterparts. This Agreement may be executed in one or more counterparts,
each of which will be deemed an original, but all of which together will
constitute one agreement.

 

(Signature Page Follows)

 

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The parties have caused this Agreement to be duly executed and delivered as of
the date and year first written above.

 

COMPANY:

      AMERICAN SHARED HOSPITAL SERVICES       By: /s/ Ernest A. Bates, M.D.  

 

[Signature Page to Note and Warrant Purchase Agreement]

 

 

 

 

INVESTORS:

 

Raymond C. Stachowiak

By: /s/ Raymond C. Stachowiak    

 

John F. Ruffle By: /s/ John F. Ruffle    

 

Mert Ozyurek By: /s/ Mert Ozyurek    

 

David A. Larson, M.D. By: /s/ David A. Larson, M.D.    

 

 

 

 

SCHEDULE I

 

Name and Address  Note Amount   Warrant Shares  Raymond C. Stachowiak 
$500,000    100,000  John F. Ruffle  $250,000    50,000  Mert Ozyurek 
$200,000    40,000  David A. Larson, M.D.  $50,000    10,000 

 

 

 

 

Exhibit A

FORM OF NOTE

 

 

 

 

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “ACT”) OR UNDER ANY STATE SECURITIES LAW. IT MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED EXCEPT PURSUANT TO THE PROVISIONS OF THE ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH SALE, ASSIGNMENT, PLEDGE OR TRANSFER IS IN COMPLIANCE WITH AN
AVAILABLE EXEMPTION UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS.

 

AMERICAN SHARED HOSPITAL SERVICES

PROMISSORY NOTE

 

$[       ] October 22, 2014   San Francisco, California

 

FOR VALUE RECEIVED, AMERICAN SHARED HOSPITAL SERVICES, a California corporation
(the “Company”) promises to pay to [      ] (the “Investor”), or his registered
assigns, in lawful money of the United States of America the principal sum of
[      ] US dollars ($[      ]), or such lesser amount as shall equal the
outstanding principal amount hereof, together with simple interest from the date
of this Note on the unpaid principal balance at a rate equal to 15% per annum,
computed on the basis of a 360-day year of twelve 30-day months. All unpaid
principal, together with any then unpaid and accrued interest and other amounts
payable hereunder, shall be due and payable on October 22, 2017 (the “Maturity
Date”). This Note is one of the “Notes” issued pursuant to the Note and Warrant
Purchase Agreement of even date herewith (the “Note and Warrant Purchase
Agreement”) between the Company and the Investors (as defined therein).

 

The following is a statement of the rights of Investor and the conditions to
which this Note is subject, and to which Investor, by the acceptance of this
Note, agrees:

 

1. Interest. The Company promises to pay interest on the principal amount of
this Note at the rate per annum described above. Interest on the Note will
accrue from the most recent date to which interest has been paid; or, if no
interest has been paid, from October 22, 2014. The Company will pay interest
monthly on the 22nd of each month (each an “Interest Payment Date”), commencing
with the first Interest Payment Date next succeeding the date hereof, and at the
Maturity Date; provided that any payment of interest to be made on any Interest
Payment Date or on the Maturity Date that is not a Business Day shall be made on
the next succeeding Business Day with the same force and effect as if made on
such Interest Payment Date or the Maturity Date, as the case may be, and no
additional interest shall accrue as a result of such delayed payment. The term
“Business Day” means any day, that is not a Saturday or Sunday, and that is not
a day on which banking institutions in New York City are generally authorized,
obligated or by law or executive order to be closed.

 

 

 

 

2. Prepayment.

 

(a) Optional Prepayment. The Company shall have the right to prepay the
outstanding principal amount of the Note and any accrued interest thereon
(collectively, the “Outstanding Balance”) in whole or in part without penalty or
premium on any date on or after December 31, 2015.

 

(b) Mandatory Prepayment. The Company shall, within five (5) days following the
consummation of the Fifth Milestone Payment (as defined below), prepay the
Outstanding Balance of this Note in whole without penalty or premium. For
purposes of this Section 2(b), the term “Fifth Milestone Payment” shall mean
payment by a third party financial institution to Mevion Medical Systems, Inc.
(“Mevion”) of the fifth milestone payment referenced in that certain System
Build Agreement dated as of February 26, 2007 by and between the Company and
Mevion and $2,000,000 to reimburse the Company for the third and fourth
milestone payments.

 

(c) Repayment upon Mevion IPO. In the event of the initial public offering of
the common stock of Mevion (the “Mevion IPO”), if this Note has not previously
been fully repaid, then, upon receipt of a written request from an Investor, the
Company shall sell some or all of its shares of Mevion’s common stock (the
“Mevion Shares”) and promptly use the proceeds of such sale to prepay the
Outstanding Balance of this Note in whole or in part without penalty or premium,
provided that the Company shall be under no obligation to sell any Mevion Shares
until the Company’s lock-up agreement in connection with the Mevion IPO has
expired. Any such prepayment shall be made on a pro rata basis among the Notes
issued pursuant to the Note and Warrant Purchase Agreement based on the
principal amount of each Note then outstanding.

 

3. Events of Default

 

(a) Each of the following shall constitute an “Event of Default”:

 

(i) Failure to Pay. The Company fails to pay (a) any principal amount of this
Note when due or (b) interest or any other amount when due and such failure
continues for five (5) days after written notice to the Company.

 

(ii) Breach of Representations, Warranties or Covenants. Any representation or
warranty made or deemed made by the Company in the Note and Warrant Purchase
Agreement is incorrect in any material respect on the date as of which such
representation or warranty was made or deemed made. The Company fails to observe
or perform (a) any covenant, condition or agreement contained in the Note and
Warrant Purchase Agreement or (b) any other covenant, obligation, condition or
agreement contained in this Note and such failure continues for 30 days after
written notice to the Company.

 

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(iii) Voluntary Bankruptcy or Insolvency Proceedings. The Company shall (i)
apply for or consent to the appointment of a receiver, trustee, liquidator or
custodian of itself or of all or a substantial part of its property, (ii) be
unable, or admit in writing its inability, to pay its debts generally as they
mature, (iii) make a general assignment for the benefit of its or any of its
creditors, (iv) be dissolved or liquidated, (v) become insolvent (as such term
may be defined or interpreted under any applicable statute), (vi) commence a
voluntary case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or consent to any such relief or to
the appointment of or taking possession of its property by any official in an
involuntary case or other proceeding commenced against it, or (vii) take any
action for the purpose of effecting any of the foregoing; or

 

(iv) Involuntary Bankruptcy or Insolvency Proceedings. Proceedings for the
appointment of a receiver, trustee, liquidator or custodian of the Company or of
all or a substantial part of the property thereof, or an involuntary case or
other proceedings seeking liquidation, reorganization or other relief with
respect to the Company or the debts thereof under any bankruptcy, insolvency or
other similar law now or hereafter in effect shall be commenced and an order for
relief entered or such proceeding shall not be dismissed or discharged within 30
days of commencement.

 

(b) If an Event of Default (other than an Event of Default specified in clause
(iii) or (iv) of Section 3(a) hereof with respect to the Company) shall have
occurred and is continuing, Investors holding at least 50% of the principal
amount of the then outstanding Notes may declare the principal of, and accrued
and unpaid interest on the Note to be due and payable by notice in writing to
the Company and the same shall become immediately due and payable.

 

If an Event of Default specified in clause (iii) or (iv) of Section 3(a) hereof
with respect to the Company occurs and is continuing, then the entire
outstanding principal amount of the Note will automatically become due
immediately and payable in each and every case without presentment, demand,
protest or further notice, all of which are hereby waived by the Company.

 

4. Successors and Assigns. Subject to the restrictions on transfer described in
Sections 6 and 7 below, the rights and obligations of the Company and the
Investor shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties.

 

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5. Waiver and Amendment. Any provision of this Note may be amended, waived or
modified upon the written consent of the Company and the Investor; provided that
the terms of this Note relating to the payment of the principal amount of and
interest on this Note shall not be amended, waived or modified except by the
Investor holding this Note.

 

6. Assignment by the Company. Neither this Note nor any of the rights, interests
or obligations hereunder may be assigned, by operation of law or otherwise, in
whole or in part, by the Company without the prior written consent of the
Investor.

 

7. Notices. All notices, requests, demands, consents, instructions or other
communications required or permitted hereunder shall in writing and faxed,
mailed or delivered to each party at the respective addresses of the parties as
set forth in the Note and Warrant Purchase Agreement, or at such other address
or facsimile number as the Company shall have furnished to the Investor in
writing. All such notices and communications will be deemed effectively given
the earlier of (i) when received, (ii) when delivered personally, (iii) one
business day after being delivered by facsimile (with receipt of appropriate
confirmation), (iv) one business day after being deposited with an overnight
courier service of recognized standing or (v) four days after being deposited in
the U.S. mail, first class with postage prepaid.

 

8. Usury. If any interest is paid on this Note which is deemed to be in excess
of the then legal maximum rate, then that portion of the interest payment
representing an amount in excess of the then legal maximum rate shall be deemed
a payment of principal and applied against the principal of this Note.

 

9. Waivers. The Company hereby waives notice of default, presentment or demand
for payment, protest or notice of nonpayment or dishonor and all other notices
or demands relative to this instrument.

 

10. Governing Law. This Note and all actions arising out of or in connection
with this Note shall be governed by and construed in accordance with the laws of
the State of California, without regard to the conflicts of law provisions of
the State of California, or of any other state.

 

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The Company has caused this Note to be issued as of the date first written
above.

 

  AMERICAN SHARED HOSPITAL SERVICES   By:  

 

 

 

 

Exhibit B

FORM OF WARRANT

 

 

 

 

AMERICAN SHARED HOSPITAL SERVICES

WARRANT FOR THE PURCHASE OF SHARES OF
COMMON STOCK OF AMERICAN SHARED HOSPITAL SERVICES

 

No. ____

Warrant to Purchase
_________ Shares

 

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “ACT”) OR UNDER ANY STATE SECURITIES LAW. IT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED EXCEPT PURSUANT TO THE PROVISIONS OF
THE ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH SALE, ASSIGNMENT, PLEDGE OR TRANSFER IS IN
COMPLIANCE WITH AN AVAILABLE EXEMPTION UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS.

 

FOR VALUE RECEIVED, AMERICAN SHARED HOSPITAL SERVICES, a California corporation
(the “Company”), hereby certifies that [      ], his successor or permitted
assigns (the “Holder”), is entitled, subject to the provisions of this Warrant,
to purchase from the Company, at the times specified herein, [      ] fully paid
and non-assessable shares of Common Stock of the Company, no par value per share
(the “Common Stock”), at a purchase price per share equal to the Exercise Price
(as hereinafter defined). The number of shares of Common Stock to be received
upon the exercise of this Warrant and the price to be paid for a share of Common
Stock are subject to adjustment from time to time as hereinafter set forth.

 

1. Definitions. a) The following terms, as used herein, have the following
meanings:

 

“Affiliate” means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by or under common control with such Person.
For the purpose of this definition, the term “control” (including, with
correlative meanings, the terms “controlling”, “controlled by” and “under common
control with”), as used with respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise.

 

“Aggregate Offering Price” shall mean, calculated on a per share of Common Stock
basis, (i) in respect of any Common Stock, the consideration received by the
Company for the issuance of such Common Stock and (ii) in respect of any
convertible securities (as defined in paragraph ‎8(b)), the sum of (A) the
consideration received by the Company for the issuance of such convertible
securities plus (B) the consideration payable to the Company upon exercise,
exchange or conversion in full of such convertible securities (excluding the
forfeiture of such convertible securities) for the issuance of the underlying
shares of Common Stock.

 

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“Board of Directors” means the board of directors of the Company.

 

“Business Day” means any day except a Saturday, Sunday or other day on which
commercial banks in the City of New York are authorized by law to close.

 

“Current Market Price Per Common Share” means, on any determination date, the
average of the Daily Prices per share of Common Stock for the 20 consecutive
trading days immediately prior to such date. If, on any determination date, the
shares of Common Stock are not traded on a national securities exchange or
quoted by any regulated quotation service, the Current Market Price Per Common
Share shall be the fair market value per share as determined in good faith by
the Board.

 

“Daily Price” means (i) if the shares of Common Stock are then listed and traded
on a national securities exchange, the closing price on the applicable day as
reported by the principal national securities exchange on which such shares are
listed and traded and (ii) if such shares are not then listed and traded on a
national securities exchange, the closing price on such day as quoted by any
regulated quotation service.

 

“Excluded Securities” means shares of Common Stock issued or issuable (i)
pursuant to the Company’s stock option plan or any similar employee compensation
plan of the Company that is approved by the Board of Directors, (ii) pursuant to
the exercise of any convertible securities if no adjustment was required
pursuant to paragraph 7(b) at the time such convertible security was issued,
(iii) pursuant to an underwritten public offering and (iv) as consideration for
or to fund the acquisition of any company, business or asset.

 

“Exercise Price” means $2.20 per Warrant Share, as the same may be adjusted from
time to time as provided in this Warrant.

 

“Expiration Time” means 5:00 p.m. New York City on the third anniversary of the
Closing Date or, if such day is not a Business Day, then until 5:00 p.m. New
York City time on the next succeeding day that is a Business Day.

 

“Note and Warrant Purchase Agreement” means the Note and Warrant Purchase
Agreement dated as of the date hereof among the Company and the holders listed
on the signature pages thereto, as the same may be amended from time to time.

 

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“Person” means an individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.

 

“Warrant Shares” means the shares of Common Stock deliverable upon exercise of
this Warrant, as the same may be adjusted from time to time as provided in this
Warrant.

 

(b) Capitalized terms used but not defined in this Warrant shall have the
meanings assigned to such terms in the Note and Warrant Purchase Agreement.

 

2. Exercise of Warrant.

 

(a) The Holder is entitled to exercise this Warrant in whole or in part at any
time, or from time to time, commencing on the first anniversary of the Closing
Date and ending at the Expiration Time. To exercise this Warrant, the Holder
shall deliver to the Company i) an executed Warrant Exercise Notice
substantially in the form annexed to this Warrant, ii) this Warrant and iii)
subject to paragraph ‎2(e), the applicable Exercise Price. Upon such delivery
and payment, the Holder shall be deemed to be the holder of record of the
Warrant Shares subject to such exercise, notwithstanding that the stock transfer
books of the Company shall then be closed or that certificates representing such
Warrant Shares shall not then be actually delivered to the Holder.

 

(b) The Exercise Price may be paid either by wire transfer of immediately
available funds to an account designated by the Company or by certified or
official bank check or bank cashier’s check payable to the order of the Company.
The Company shall pay any and all documentary, stamp or similar issue or
transfer taxes payable in respect of the issue or delivery of the Warrant
Shares; provided that the Company shall not be required to pay any taxes that
may be payable in respect of any transfer involved in the issuance and delivery
of the Warrant Shares in a name other than that of the Holder.

 

(c) If the Holder exercises this Warrant in part, this Warrant shall be
surrendered by the Holder to the Company and a new Warrant of the same tenor and
for the unexercised number of Warrant Shares registered in the name of the
Holder shall be executed by the Company as promptly as reasonably practicable.

 

(d) Upon surrender of this Warrant in conformity with the foregoing provisions,
the Company shall transfer to the Holder appropriate evidence of ownership of
the shares of Common Stock or other securities or property (including any money)
to which the Holder is entitled, registered or otherwise placed in, or payable
to the order of, the name or names of the Holder as may be directed in writing
by the Holder, and shall promptly deliver such evidence of ownership and any
other securities or property (including any money) to the Person or Persons
entitled to receive the same, together with an amount in cash in lieu of any
fraction of a share as provided in paragraph ‎5 below.

 

4

 

 

(e) In lieu of making a cash payment of the Exercise Price to exercise this
Warrant pursuant to paragraph ‎2(a) (but in all other respects in accordance
with the exercise procedure set forth in paragraph ‎2(a)), the Holder may elect
to convert this Warrant into shares of Common Stock, in which event the Company
will issue to the Holder the number of shares of Common Stock equal to the
amount resulting from the following equation:

 

X = (A - B) x C where:
A

 

X = the number of shares of Common Stock issuable upon exercise pursuant to this
paragraph ‎2(e);

 

A = the Current Market Price Per Common Share on the date on which the Holder
delivers a Warrant Exercise Notice to the Company pursuant to paragraph ‎2(a);

 

B = the Exercise Price; and

 

C = the number of shares of Common Stock as to which this Warrant is being
exercised pursuant to paragraph ‎2(a).

 

If the foregoing calculation results in zero or a negative number, then no
shares of Common Stock shall be issued upon exercise pursuant to this paragraph
‎2(e).

 

3. Restrictive Legend. Certificates representing shares of Common Stock issued
pursuant to this Warrant shall bear a legend substantially in the form of the
legend set forth on the first page of this Warrant to the extent that and for so
long as such legend is required pursuant to applicable securities laws.

 

4. Reservation of Shares. The Company hereby agrees that at all times there
shall be reserved for issuance and delivery upon exercise of this Warrant such
number of its authorized but unissued shares of Common Stock or other securities
of the Company from time to time issuable upon exercise of this Warrant as will
be sufficient to permit the exercise in full of this Warrant. All such shares
shall be duly authorized and, when issued upon such exercise, shall be validly
issued, fully paid and non-assessable, free and clear of all liens, security
interests, charges and other encumbrances or restrictions on sale and free and
clear of all preemptive rights, in each case except restrictions on transfer
contemplated by paragraph ‎3, to the extent set forth in the Note and Warrant
Purchase Agreement and to the extent created by the Holder.

 

5

 

 

5. Fractional Shares. No fractional shares or scrip representing fractional
shares shall be issued upon the exercise of this Warrant, and in lieu of
delivery of any such fractional share to which the Holder may be entitled upon
any exercise of this Warrant, the Company shall pay to the Holder an amount in
cash equal to such fraction multiplied by the Current Market Price Per Common
Share on the Business Day immediately preceding the date on which the Holder
delivers the Warrant Exercise Notice pursuant to paragraph ‎2(a).

 

6. Loss or Destruction of Warrant. Upon receipt by the Company of evidence
satisfactory to it (in the exercise of its reasonable discretion) of the loss,
theft, destruction or mutilation of this Warrant, and (in the case of loss,
theft or destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Warrant, if mutilated, the Company shall
execute and deliver a new Warrant of like tenor and date.

 

7. Anti-dilution Provisions.

 

(a) Common Stock Dividends, Subdivisions or Combinations. If the Company shall
at any time after the date hereof (A) declare and pay a dividend or make a
distribution on Common Stock payable in Common Stock, (B) subdivide or split the
outstanding shares of Common Stock into a greater number of shares or (C)
combine or reclassify the outstanding shares of Common Stock into a smaller
number of shares, then in each such case:

 

(i) the number of Warrant Shares issuable upon exercise of this Warrant
thereafter shall be proportionately adjusted so that the exercise of this
Warrant after such event shall entitle the Holder to receive the aggregate
number of shares of Common Stock that such Holder would have been entitled to
receive had such Holder exercised this Warrant immediately prior to such event;
and

 

(ii) the Exercise Price thereafter shall be adjusted to equal the product of the
Exercise Price in effect immediately prior to such event multiplied by a
fraction 0 the numerator of which shall be the number of Warrant Shares issuable
upon the exercise of this Warrant immediately prior to such event and 0 the
denominator of which shall be the number of Warrant Shares issuable upon the
exercise of this Warrant immediately following such event.

 

Any adjustment made pursuant to this paragraph ‎8(a) shall become effective
immediately after the applicable record date in the case of a dividend or
distribution and immediately after the applicable effective date in the case of
a subdivision, split, combination or reclassification.

 

6

 

 

(b) Certain Issuances of Common Stock or Convertible Securities. If the Company
shall issue or sell any shares of Common Stock (or options, rights, warrants or
other securities convertible into or exchangeable or exercisable for shares of
Common Stock (collectively, “convertible securities”)) (other than Excluded
Securities) without consideration or at an Aggregate Offering Price that is less
than the Current Market Price Per Common Share on the last trading day preceding
the date of the agreement on pricing such shares of Common Stock (or such
convertible securities), then in each such case:

 

(i) the number of Warrant Shares issuable upon exercise of this Warrant
thereafter shall be adjusted to equal the product of the number of Warrant
Shares issuable upon the exercise of this Warrant immediately prior to such
record date (or issuance or sale date, as applicable) multiplied by a fraction 0
the numerator of which shall be the sum of (x) the number of shares of Common
Stock outstanding on such date and (y) the number of additional shares of Common
Stock issued (or into which convertible securities may be exercised or
converted) and 0 the denominator of which shall be the sum of 0 the number of
shares of Common Stock outstanding on such date and 0 the number of shares of
Common Stock that the aggregate consideration for the total number of such
additional shares of Common Stock so issued (or into which convertible
securities may be exercised or converted) would purchase at a price per share
equal to the Current Market Price Per Common Share on such record date (or
issuance or sale date, as applicable); and

 

(ii) the Exercise Price thereafter shall be adjusted to equal the product of the
Exercise Price in effect immediately prior to such record date (or issuance or
sale date, as applicable) multiplied by a fraction (A) the numerator of which
shall be the number of Warrant Shares issuable upon the exercise of this Warrant
immediately prior to such record date (or issuance or sale date, as applicable)
and (B) the denominator of which shall be the number of Warrant Shares issuable
upon the exercise of this Warrant immediately following such record date (or
issuance or sale date, as applicable).

 

Any adjustment made pursuant to this paragraph 8(b) shall become effective
immediately after the applicable record date (or, if no record date is used,
after the issuance or sale date).

 

7

 

 

(c) Consolidation, Merger or Sale of Assets. In the event of any consolidation
of the Company with, or merger of the Company into, any other Person, any merger
of another Person into the Company (other than a merger which does not result in
any reclassification, conversion, exchange or cancellation of outstanding shares
of Common Stock) or any sale or transfer of all or substantially all of the
assets of the Company to the Person formed by such consolidation or resulting
from such merger, as the case may be, the Holder shall have the right thereafter
to exercise this Warrant for the kind and amount of securities, cash and/or
other property receivable upon such consolidation, merger, sale or transfer by a
holder of the number of shares of Common Stock for which this Warrant may have
been exercised immediately prior to such consolidation, merger, sale or
transfer. In determining the kind and amount of securities, cash and/or other
property receivable upon such consolidation, merger, sale or transfer, if the
holders of Common Stock have the right to elect as to the consideration to be
received upon the consummation of such consolidation, merger, sale or transfer,
then the consideration that the Holder shall be entitled to receive upon
exercise shall be deemed to be the kind and amount of consideration received by
the majority of all holders of Common Stock that affirmatively make an election
(or of all such holders if none make an election). Adjustments for events
subsequent to the effective date of such a consolidation, merger, sale or
transfer of assets shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Warrant. In any such event, effective
provisions shall be made in the certificate or articles of incorporation of the
resulting or surviving corporation, in any contract of sale, merger, conveyance,
lease, transfer or otherwise so that the provisions set forth herein for the
protection of the rights of the Holder shall thereafter continue to be
applicable; and any such resulting or surviving corporation shall expressly
assume the obligation to deliver, upon exercise, such shares of stock, other
securities, cash and property.

 

(d) Certain Determinations. For purposes of any computation of any adjustment
required under this paragraph 8:

 

(i) adjustments shall be made successively whenever any event giving rise to
such an adjustment shall occur;

 

(ii) if any portion of any consideration to be received by the Company in a
transaction giving rise to such an adjustment shall be in a form other than
cash, the fair market value of such non-cash consideration shall be utilized in
such computation. Such fair market value shall be determined by the Board of
Directors; provided that if the Holder shall object to any such determination,
the Board of Directors shall retain an independent appraiser reasonably
satisfactory to the Holder to determine such fair market value. The expense of
such independent appraiser shall be shared equally by the Company and the
Holder. The Holder shall be notified promptly of any consideration other than
cash to be received by the Company and furnished with a description of the
consideration and the fair market value thereof, as determined in accordance
with the foregoing provisions;

 

(iii) such calculations shall be made to the nearest one-tenth of a cent or to
the nearest hundredth of a share, as the case may be; and

 

(iv) no adjustment in the Exercise Price or the number of Warrant Shares
issuable upon exercise of the Warrant, as the case may be, shall be required if
the amount of such adjustment would be less than one-tenth of a cent or
hundredth of a share, as the case may be; provided that any adjustments which by
reason of this paragraph ‎8(e)(iv) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment.

 

8

 

 

(e) Certificates as to Adjustments. Upon the occurrence of each adjustment to
the Exercise Price and/or the number of Warrant Shares issuable upon exercise of
this Warrant, the Company shall promptly compute such adjustment in accordance
with the terms hereof and furnish to the Holder a certificate setting forth such
adjustment and showing in reasonable detail the facts upon which such adjustment
is based.

 

(f) Notices. In the event that the Company shall propose at any time to effect
any of the events described in paragraphs ‎(a) through ‎(e) above that would
result in an adjustment to the Exercise Price, the number of Warrant Shares
issuable upon exercise of this Warrant or a change in the type of securities or
property to be delivered upon exercise of this Warrant, the Company shall send
notice to the Holder in the manner set forth in paragraph ‎9. In the case of a
dividend or other distribution, such notice shall be sent at least 10 days prior
to the applicable record date and shall specify such record date and the date on
which such dividend or other distribution is to be made. In any other case, such
notice shall be sent at least 15 days prior to the effective date of any such
event and shall specify such effective date. In all cases, such notice shall
specify such event in reasonable detail, including the effect on the Exercise
Price and the number, kind or class of securities or other property issuable
upon exercise of this Warrant. Failure to furnish any certificate pursuant to
paragraph 7(e) or to give any notice pursuant to this paragraph 7(f), or any
defect in any such certificate or notice, shall not affect the legality or the
validity of the adjustment of the Exercise Price and/or the number of
securities, cash and/or other property issuable upon exercise of this Warrant,
or any transaction giving rise thereto.

 

8. Notices. Any notice, demand or delivery authorized by this Warrant shall be
in writing and shall be given to the Holder or the Company, as the case may be,
at the respective addresses of the parties as set forth in the Note and Warrant
Purchase Agreement, or such other address (or facsimile number) as shall have
been furnished to the party giving or making such notice, demand or delivery.
Each such notice, demand or delivery shall be deemed received on the date of
receipt by the recipient thereof if received prior to 5:00 p.m. in the place of
receipt and such day is a Business Day. Otherwise, any such notice, demand or
delivery shall be deemed not to have been received until the next succeeding
Business Day.

 

9. Rights of the Holder. Prior to any exercise of this Warrant, the Holder shall
not, by virtue hereof, be entitled to any rights of a shareholder of the
Company, including, without limitation, the right to vote, to receive dividends
or other distributions, to exercise any preemptive right or to receive any
notice of meetings of shareholders or any notice of any proceedings of the
Company except as may be specifically provided for herein.

 

9

 

 

10. GOVERNING LAW. THIS WARRANT AND ALL RIGHTS ARISING HEREUNDER SHALL BE
CONSTRUED AND DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA, AND THE PERFORMANCE THEREOF SHALL BE GOVERNED AND ENFORCED IN
ACCORDANCE WITH SUCH LAWS.

 

11. Amendments; Waivers. Any provision of this Warrant may be amended or waived
if, and only if, such amendment or waiver is in writing and signed, in the case
of an amendment, by the Holder and the Company, or in the case of a waiver, by
the party against whom the waiver is to be effective. No failure or delay by
either party in exercising any right, power or privilege hereunder shall operate
as a waiver thereof nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. The rights and remedies herein provided shall be cumulative and
not exclusive of any rights or remedies provided by law.

 

10

 

 

IN WITNESS WHEREOF, the Company has duly caused this Warrant to be signed by its
duly authorized officer and to be dated as of ___________, 2014.

 

  AMERICAN SHARED HOSPITAL SERVICES   By:       Name:     Title:

 

Acknowledged and Agreed:

 

[HOLDER]   By:         Name:     Title:  

 

 

 

 

WARRANT EXERCISE NOTICE

 

(To be delivered prior to exercise of the Warrant
by execution of the Warrant Exercise Subscription Form)

 

To: American Shared Hospital Services

 

The undersigned hereby notifies you of its intention to exercise the Warrant to
purchase shares of Common Stock, no par value, of American Shared Hospital
Services. The undersigned intends to exercise the Warrant to purchase
___________ shares (the “Warrant Shares”) at $______ per Warrant Share (the
Exercise Price currently in effect pursuant to the Warrant). As indicated below,
the undersigned intends to pay the aggregate Exercise Price for the Warrant
Shares by wire transfer of immediately available funds or by certified or
official bank or bank cashier’s check or by reduction in the number of Warrant
Shares that would otherwise be issued upon exercise pursuant to paragraph ‎2(e)
of the Warrant.

 

Date: _________________

      (Signature of Owner)       (Street Address)      
(City)               (State)               (Zip Code)

 

Payment: $                                  wire transfer of immediately
available funds       $                                  certified or official
bank or bank cashier’s check       Reduction in number of Warrant Shares

 

 

 

 

WARRANT EXERCISE SUBSCRIPTION FORM

 

(To be executed only upon exercise of the Warrant
after delivery of Warrant Exercise Notice)

 

To: American Shared Hospital Services

 

The undersigned irrevocably exercises the Warrant for the purchase of
___________ shares (the “Warrant Shares”) of Common Stock, no par value per
share, of American Shared Hospital Services (the “Company”) at $_____ per
Warrant Share (the Exercise Price currently in effect pursuant to the Warrant)
and herewith makes payment of $___________ (such payment being made as specified
in the undersigned’s previously-delivered Warrant Exercise Notice), all on the
terms and conditions specified in the within Warrant Certificate, surrenders
this Warrant Certificate and all right, title and interest therein to the
Company and directs that the Warrant Shares deliverable upon the exercise of
this Warrant be registered or placed in the name and at the address specified
below and delivered thereto.

 

Date: _________________

      (Signature of Owner)       (Street Address)      
(City)               (State)               (Zip Code)

 

 

 

 

Securities and/or check to be issued to:    

 

Please insert social security or identifying number:    

 

Name:    

 

Street Address:    

 

City, State and Zip Code:    

 

Any unexercised portion of the Warrant evidenced by the within Warrant to be
issued to:

 

Please insert social security or identifying number:    

 

Name:    

 

Street Address:    

 

City, State and Zip Code: