Exhibit 10.2
AMERICAN SHARED HOSPITAL SERVICES
LONG-TERM INCENTIVE COMPENSATION PLAN
ARTICLE I
NAME AND PURPOSE
     1.01 Purpose. American Shared Hospital Services, a corporation duly
organized and existing under the laws of State of California (the
“Corporation”), hereby establishes the American Shared Hospital Services
Long-Term Incentive Compensation Plan (the “Plan”) in order to provide a select
group of management and other highly compensated individuals in the
Corporation’s employ with the opportunity to earn additional incentive
compensation contingent upon the Corporation’s attainment of pre-established
performance objectives and their completion of designated service periods and to
defer any compensation so earned until the expiration of a designated period of
time, their separation from service with the Corporation or a substantial change
in the control or ownership of the Corporation. The deferral features of the
Plan shall function as a so-called “top hat” plan of deferred compensation and
shall be subject to the provisions of the Employee Retirement Income Security
Act of 1974 (as amended from time to time) applicable to such a plan.
     1.02 General. The benefits provided under the Plan shall be paid, as they
become due, either directly from the Corporation’s general assets or through a
grantor trust arrangement established in accordance with the provisions of
Article VIII. The interest of each participant (and his or her beneficiary) in
any benefits that become payable under the Plan shall be no greater than that of
an unsecured creditor of the Corporation.
ARTICLE II
ADMINISTRATION OF THE PLAN
     2.01 Plan Administrator. The Plan shall be administered by a committee of
two or more non-employee Board members who qualify as “outside directors” under
Code Section 162(m) and Section 1.162-27(e) of the Treasury Regulations
thereunder. The Board committee acting in such capacity shall hereinafter be
referred to as the Plan Administrator and shall have full and complete authority
to administer the Plan and select the Eligible Employees who are to participate
in the Plan.
     2.02 Authority. The interpretation and construction of any provision of the
Plan and the adoption of rules and regulations for plan administration shall be
made by the Plan Administrator. Decisions of the Plan Administrator shall be
final and binding on all parties who have an interest in the Plan, including
(without limitation) all decisions relating to an individual’s eligibility for
participation in the Plan, his or her entitlement to benefits hereunder and the
amount of any such benefit entitlement. The Plan Administrator shall also have
the discretionary

 

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authority to determine whether the involuntary termination of any Participant’s
Employee status constitutes a Termination for Cause (pursuant to the criteria
set forth in Section 3.18), and such determination shall be final and binding on
the Participant for purposes of such Participant’s benefit entitlement (if any)
under the Plan.
ARTICLE III
DEFINITIONS
     3.01 “Account” shall mean the account maintained on the Corporation’s books
and records for each Participant who elects to defer any Long-Term Incentive
Bonus such Participant earns under the Plan. The Participant’s Account will be
divided into a series of subaccounts, and there will accordingly be a separate
Deferral Subaccount for each Long-Term Incentive Bonus the Participant elects to
defer under the Plan. Each outstanding Account under the Plan shall be adjusted
periodically for investment earnings, gains and losses pursuant to Article VII.
     3.02 “Board” shall mean the Corporation’s Board of Directors.
     3.03 “Change in Control” shall mean a change in ownership or control of the
Corporation effected through any of the following transactions:
     a.  a merger, consolidation or other reorganization approved by the
Corporation’s shareholders in which the persons who beneficially owned (within
the meaning of Rule 13d-3 of the 1934 Act) the Corporation’s outstanding voting
securities immediately prior to such transaction do not immediately thereafter
beneficially own, directly or indirectly and in substantially the same
proportion, securities representing more than fifty percent (50%) of the total
combined voting power of the voting securities of the successor corporation, or
     b.  a shareholder-approved sale, transfer or other disposition of all or
substantially all of the Corporation’s assets, or
     c.  the closing of any transaction or series of related transactions
pursuant to which any person or any group of persons comprising a “group” within
the meaning of Rule 13d-5(b)(1) of the 1934 Act (other than the Corporation or a
person that, prior to such transaction or series of related transactions,
directly or indirectly controls, is controlled by or is under common control
with, the Corporation) becomes directly or indirectly the beneficial owner
(within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing (or
convertible into or exercisable for securities possessing) more than fifty
percent (50%) of the total combined voting power of the Corporation’s securities
(as measured in terms of the power to vote with respect to the election of Board

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members) outstanding immediately after the consummation of such transaction or
series of related transactions, whether such transaction involves a direct
issuance from the Corporation or the acquisition of outstanding securities held
by one or more of the Corporation’s existing shareholders.
     3.04 “Code” shall mean the Internal Revenue Code of 1986, as amended from
time to time.
     3.05 “Corporation” shall mean American Shared Hospital Services Corporation
and any successor or assignee corporation, whether by way of merger, acquisition
or other reorganization.
     3.06 “Deferral Election” shall mean the irrevocable election filed by the
Participant under Article VI of the Plan pursuant to which all or a portion of
his or her Long-Term Incentive Bonus for a particular Earn-Out Period is to be
deferred in accordance with the provisions of the Plan.
     3.07 “Disability or Disabled” shall mean the Participant’s inability to
engage in any substantial gainful employment by reason of any physical or
medical impairment which is expected to result in death or continue for a period
of twelve (12) consecutive months or more.
     3.08 “Earn-Out Period” shall mean the period of one or more consecutive
calendar years established by the Plan Administrator over which the Corporation
must attain the Performance Milestones which the Plan Administrator has
designated for that period.
     3.09 “Eligible Employee” shall mean any executive officer or any other
individual with management responsibilities who is determined by the Plan
Administrator to be a highly compensated Employee in accordance with the
guidelines established from time to time by the Plan Administrator.
     3.10 “Employee” shall mean any person in the employ of the Corporation,
subject to its control and direction as to both the work to be performed and the
manner and method of performance.
     3.11 “Involuntary Termination” shall mean the termination of Employee
status by reason of:
     (i) the Employee’s discharge or dismissal by the Corporation for any reason
other than a Termination for Cause, or
     (ii) the Employee’s death or Disability.
     3.12 “Long-Term Incentive Bonus” shall mean the bonus to which the
Participant may become entitled with respect to a particular Earn-Out Period on
the basis of the Corporation’s attainment of the specific Performance Milestones
the Plan Administrator has established for that Earn-Out Period.

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     3.13 1934 Act shall mean the Securities Exchange of 1934, as amended.
     3.14 Maximum Bonus Amount shall mean the maximum dollar amount of the
Long-Term Incentive Bonus which a Participant may earn for any one Earn-Out
Period. Such Maximum Bonus Amount shall be determined by the Plan Administrator
within the first ninety (90) days of the Earn-Out Period, but in no event shall
such amount exceed the dollar amount determined by multiplying the number of
calendar years comprising the Earn-Out Period by Two Hundred Fifty Thousand
Dollars ($250,000). For any pro-rated Long-Term Incentive Bonus which becomes
payable under the Plan, the Pro-Rated Maximum Bonus Amount shall be determined
by multiplying the Maximum Bonus Amount for the Earn-Out Period to which that
bonus relates by a fraction, the numerator of which is the number of days the
Participant continued in Employee status during that Earn-Out Period and the
denominator of which is the total number of days in the calendar years
comprising such Earn-Out Period.
     3.15 “Participant” shall mean each Eligible Employee who participates in
the Plan.
     3.16 “Performance Milestones” shall mean one or more of the following
performance goals as to which the Plan Administrator may designate specific
objectives to be attained by the Corporation for a particular Earn-Out Period:
(1) return on total shareholder equity; (2) earnings per share of Common Stock;
(3) net income or operating income (before or after taxes); (4) earnings before
interest, taxes, depreciation and amortization; (5) earnings before interest,
taxes, depreciation, amortization and charges for stock-based compensation,
(6) sales or revenue targets; (7) return on assets, capital or investment;
(8) cash flow; (9) market share; (10) cost reduction goals; (11) budget
comparisons; (12) measures of customer satisfaction; (13) any combination of, or
a specified increase in, any of the foregoing; (14) the formation of joint
ventures or the completion of other corporate transactions intended to enhance
the Corporation’s revenue or profitability or enhance its customer base. In
addition, such performance goals may be based upon the attainment of specified
levels of the Corporation’s performance under one or more of the measures
described above relative to the performance of other entities and may also be
based on the performance of any of the Corporation’s business units or divisions
or any Parent or Subsidiary.
     3.17 “Retirement” shall mean the Participant’s termination of Employee
status (other than a Termination for Cause) on or after (i) his or her
attainment of age sixty five (65) or (ii) his or her attainment of age
fifty-five (55) and completion of at least fifteen (15) years of Employee
status.
     3.18 “Termination for Cause" shall mean the Corporation’s termination of
the Participant’s status as an Employee for one or more of the following
reasons: (i) the Participant’s failure to correct deficiencies in his or her
level of performance within a reasonable period of time following the
identification of those deficiencies by the Board (in the case of the Chief
Executive Officer) or by the Corporation’s Chief Executive Officer (in the case
of any other Participant), (ii) the Participant’s habitual neglect of his or her
duties or his or her repeated absenteeism, excessive tardiness or continued
failure to follow established rules and procedures for the Corporation’s
employees, (iii) the Participant’s commission of any act of fraud or

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embezzlement, (iv) any unauthorized use or disclosure by the Participant of
material confidential information or trade secrets of the Corporation, (v) a
material breach by the Participant of any of his or her fiduciary obligations as
an officer of the Corporation or (vi) the Participant’s intentional and knowing
participation in the preparation or release of false or materially misleading
financial statements relating to the Corporation’s operations and financial
condition or his or her intentional and knowing submission of any false or
erroneous certification required of the Participant under the Sarbanes-Oxley Act
of 2002 or any securities exchange on which shares of the Common Stock are at
the time listed for trading or (vii) any other intentional misconduct by the
Participant adversely affecting the business or affairs of the Corporation in a
material manner. The foregoing definition shall not in any way preclude or
restrict the right of the Corporation to discharge or dismiss any Participant or
other Employee for any other acts or omissions, but such other acts or omissions
shall not be deemed, for purposes of the Plan, to constitute grounds for
Termination for Cause.
     3.19 “Valuation Date” shall mean any date as of which the balance credited
to each of the Participant’s Deferral Subaccounts is to be determined. If the
date in question is coincident with a date on which the U.S. financial markets
are open for business, then the Valuation Date shall be that same date;
otherwise, the Valuation Date shall be first date immediately preceding the date
in question on which the U.S. financial markets are open for business.
ARTICLE IV
PARTICIPATION
     4.01 Eligibility Rules. The Plan Administrator shall have absolute
discretion in selecting the Eligible Employees who are to participate in each
Earn-Out Period implemented under the Plan. The Participants for each Earn-Out
Period shall be selected not later than the ninetieth (90th) day after the start
date of that Earn-Out Period.
     4.02 Cessation of Participation. The Plan Administrator shall have complete
discretion to exclude one or more individuals from Participant status for one or
more subsequent Earn-Out Periods implemented under the Plan. If any individual
is excluded from Participant status for one or more Earn-Out Periods, then such
individual shall not be entitled to any Long-Term Incentive Bonus for those
Earn-Out Periods. However, such individual shall continue to have the right,
during his or her period of continued Employee status, to direct the
hypothetical investment of any Deferral Subaccounts maintained on his or her
behalf pursuant to the provisions of Article VI.

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ARTICLE V
LONG-TERM INCENTIVE BONUSES
     5.01 Establishment of Earn-Out Period and Bonus Potential. The Plan
Administrator shall have complete discretion to implement one or more Earn-Out
Periods under the Plan in accordance with the following parameters:
     (i) Each Earn-Out Period shall be coincidental with a period of not less
than one (1) or more than five (5) consecutive calendar years. The Plan
Administrator shall, within the first ninety (90) days of the Earn-Out Period,
designate the actual number of calendar years which shall comprise that Earn-Out
Period.
     (ii) The Plan Administrator shall, within the first ninety (90) days of
each Earn-Out Period, establish the specific performance goals and objectives
which must be attained for that Earn-Out Period based on one or more of the
Performance Milestones. For each specific performance objective, the Plan
Administrator shall establish threshold, target and maximum levels of
attainment. With respect to any performance objective which is to be calculated
in a manner which deviates from generally acceptable accounting standards, the
Plan Administrator shall specify the deviations at the time the performance
objective is set.
     (iii) The Plan Administrator shall also, within the first ninety (90) days
of the Earn-Out Period, establish for each Participant the formula for
calculating the Long-Term Incentive Bonus to which he or she may become entitled
for that Earn-Out Period based on the level at which each Performance Milestone
is actually attained. Accordingly, for each Performance Milestone, the formula
shall designate a threshold, target and above-target dollar contribution to the
Participant’s Long-Term Incentive Bonus, with the actual dollar amount of such
contribution to be based on the actual level of attainment of each performance
objective. The various levels of contribution designated for each performance
objective may be tied to percentages or multiples of the average of the annual
rates of base salary in effect for the Participant at the start of each calendar
year within the applicable Earn-Out Period.
     5.02 Service Requirement. A Participant shall not become entitled to a
Long-Term Incentive Bonus for a particular Earn-Out Period unless the
Participant continues in Service through the completion of that Earn-Out Period
or the Participant ceases Service in that Earn-Out Period by reason of
Retirement or Involuntary Termination (other than Termination for Cause);
provided, however, that a Participant whose Employee status terminates by reason
of Retirement or Involuntary Termination prior to the completion of the Earn-Out
Period shall only be entitled to a pro-rated Long Term Incentive Bonus for that
period determined in accordance

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with Section 5.06. Should the Participant cease Service for any other reason
prior the completion of the Earn-Out Period, then he or she shall not be
entitled to any Long-Term Incentive Bonus for that Earn-Out Period.
     5.03 Determination of Individual Bonus Amount. The following provisions
shall govern the determination of the Long-Term Incentive Bonus for each
Participant who continues Employee status through the completion of the Earn-Out
Period or is otherwise entitled to a pro-rated bonus for such Earn-Out Period
pursuant to the provisions of Section 5.02:
     (i) As soon as administratively practicable following the completion of the
Earn-Out Period, the Plan Administrator shall, on the basis of the Corporation’s
audited financial statements for the fiscal years included within that Earn-Out
Period, determine the actual level of attainment for each performance objective
designated for that Earn-Out Period and shall then measure that level of
attainment against the threshold level, the target level and the above-target
level of attainment established for that performance objective.

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     (ii) In making such determination and measurement, the Plan Administrator
shall exclude the following items, as calculated and determined in accordance
with generally accepted accounting principles, but only to the extent those
items were designated as potential adjustments to the performance objectives at
the time those objective were established for the Earn-Out Period: all
extraordinary, unusual or non-recurring items of gain, loss or expense; all
items of gain, loss or expense related to (a) the disposal of a business or
discontinued operations or (b) the operations of any business acquired by
Corporation during the Earn-Out Period; all accruals for reorganization and
restructuring cost and expenses; and all items of gain, loss or expense
attributable to changes in tax laws and regulations, accounting principles or
other applicable laws or regulations.
     (iii) The Plan Administrator shall certify in writing the actual level of
attainment of each such performance objective, as adjusted for the items
specified in subparagraph (ii) above. Based on such certification and
measurement, the Plan Administrator shall then determine the Long-Term Incentive
Bonus for each Participant by aggregating the dollar amounts earned for each
Performance Milestone based on the actual level of attainment of that particular
milestone. To the extent the actual level of attainment for any Performance
Milestone is at a point between two of the levels established by the Plan
Administrator, the dollar amount of the portion of each Long-Term Incentive
Bonus tied to that Performance Milestone shall be pro-rated between the two
points on a straight-line basis. The Long-Term Incentive Bonus so calculated
shall be subject to the pro-ration provisions of Section 5.05 for certain
Participants who ceased Service prior to the completion of that Performance
Period. In no event, however, shall any Long-Term Incentive Bonus be earned with
respect to a particular Performance Milestone if the actual level of attainment
of that Performance Milestone is below the threshold level set for that
milestone. By way of illustration, if the actual level of attainment for one of
two performance objectives is at the threshold level established by the Plan
Administrator and the actual level of attainment for the second performance
objective is at the target level, then the Long-Term Incentive Bonus will be at
the threshold dollar level set for the first performance objective and at the
target dollar level set for the other objective.
     (iii) The Plan Administrator shall have complete and absolute discretion to
reduce the Long-Term Incentive Bonus determined for one or more Participants in
accordance with the foregoing provisions of this Section 5.03; provided,
however, that no such reduction shall result in an increase to the Long-Term
Incentive Bonus of any other Participant or Participants. In no event shall the
Long-Term Incentive Bonus for any Participant exceed the Maximum Bonus Amount
for the Earn-Out Period or, for a Participant entitled to only a pro-rated
Long-Term Incentive Bonus under Section 5.05, the Pro-Rated Maximum Bonus
Amount.

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     5.04 Pro-Rated Award. A Participant whose Employee status terminates prior
to the completion of the Earn-Out Period by reason of Retirement or Involuntary
Termination shall be entitled to a pro-rated Long-Term Incentive Bonus in a
dollar amount determined by multiplying (i) the actual Long-Term Incentive Bonus
to which he or she would have been entitled under Section 5.03 had he or she
continued in Employee status through the last day of the applicable Earn-Out
Period by (ii) fraction, the numerator of which is the number of days such
Participant remained in Employee status during the Earn-Out Period and the
denominator of which is the total number of days in that Earn-Out Period. The
Participant’s pro-rated Long-Term Incentive Bonus for the Earn-Out Period shall
be the lesser of (i) the dollar amount so calculated or (ii) the Pro-Rated
Maximum Bonus Amount for that Earn-Out Period.
     5.05 Change in Control Pro-Ration. Should a Change in Control transaction
be consummated more than six (6) months after the start of the Earn-Out Period
but before the date that period was originally scheduled to be completed, then
the Earn-Out Period shall terminate upon the consummation of the Change in
Control, and the following procedures shall govern the calculation of the
pro-rated Long-Term Incentive Bonuses to become payable in connection therewith:
     First, the dollar amount of each Participant’s Long-Term Incentive Bonus
shall be calculated by assuming that each performance objective established for
the Earn-Out Period will be attained at the target level.
     Then, the Long-Term Incentive Bonus so calculated shall, for each
Participant who continued in Employee status through the date of such Change in
Control, be multiplied by a fraction, the numerator of which is the number of
days such Participant remained in Employee status during the portion of the
Earn-Out Period ending with the Change in Control and the denominator of which
is the total number of days for which that Earn-Out Period was originally
scheduled to last. The Participant’s pro-rated Long-Term Incentive Bonus for the
Earn-Out Period shall be the lesser of (i) the dollar amount so calculated or
(ii) the Pro-Rated Maximum Bonus Amount calculated for that Earn-Out Period on
the basis of the total number of days for which that Earn-Out Period was
originally scheduled to last.
     Finally, the Long-Term Incentive Bonus of each Participant whose Employee
status was terminated by reason of Retirement or Involuntary Termination during
the Earn-Out Period in which such Change in Control occurred shall be calculated
by multiplying the Long-Term Incentive Bonus calculated for him or her under the
first step above by a fraction, the numerator of which is the number of days
such Participant completed in Employee status during that Earn-Out Period and
the denominator of which is the total number of days for which that Earn-Out
Period was originally scheduled to last. The Participant’s pro-rated Long-Term
Incentive Bonus for the Earn-Out Period shall

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be the lesser of (i) the dollar amount so calculated or (ii) the Pro-Rated
Maximum Bonus Amount calculated for that Earn-Out Period on the basis of the
total number of days for which that Earn-Out Period was originally scheduled to
last.
     No Long-Term Incentive Bonuses shall be earned or otherwise become payable
with respect to any Earn-Out Period in which a Change in Control is consummated,
if such consummation occurs within the first six (6) months of that Earn-Out
Period.
ARTICLE VI
PAYMENT OR DEFERRAL OF LONG-TERM INCENTIVE BONUSES
     6.01 Payment. The following provisions shall govern the payment of each
Long-Term Incentive Bonus to which a Participant becomes entitled under the
Plan:
     A. Except to the extent the Participant has filed a timely Deferral
Election, the Long-Term Incentive Bonus to which the Participant becomes
entitled for a particular Earn-Out Period shall be paid to him or her in a lump
sum on March 15 of the calendar year following the calendar year in which that
Earn-Out Period ends or (to the extent applicable) on the thirtieth (30th) day
following the consummation of the Change in Control, unless in either instance
it is not administratively practical to complete the requisite calculations
under Article V prior to such date. In such event payment shall be deferred but
shall be made no later than December 31 of the calendar year following the
calendar year in which the Earn-Out Period ends or (with respect to an Earn-Out
Period ending with the Change in Control) the later of (i) the end of the
calendar year in which such Change in Control is consummated or (ii) the
fifteenth (15th) day of the third calendar month following the consummation of
the Change in Control.
     B. A Participant may make a Deferral Election with respect to all or part
of any Long-Term Incentive Bonus to which he or she may become entitled under
the Plan. However, only one Deferral Election may be made per Long-Term
Incentive Bonus. The Deferral Election must be made by filing an appropriate
election form with the Plan Administrator or its designate in accordance with
the following requirements:
     (i) An individual who is selected as a Participant for an Earn-Out Period
on or before date the performance objectives for that Earn-Out Period are
established by the Plan Administrator may file the Deferral Election with
respect to all or part of any Long-Term Incentive Bonus earned for that period
at any time while such individual remains in Employee status up until the final
six (6) months of that Earn-Out Period. The Deferral Election must specify a
payment date or payment event for the deferred portion in accordance with the
events listed below or may specify that payment is to occur upon the earliest or
the latest of any of those events:
     - a specified date which is at least twelve (12) months later than the last
day of the applicable Earn-Out Period,

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     - the Participant’s separation from service (as determined in accordance
with the criteria established under Code Section 409A and the applicable
Treasury Regulations thereunder) at any time following the conclusion of the
applicable Earn-Out Period, or
     - the closing of a Change in Control at any time following the conclusion
of the applicable Earn-Out Period.
     (ii) A Participant who does not otherwise qualify for a Deferral Election
under subparagraph (i) above may file a Deferral Election with respect to all or
part of any Long-Term Incentive Bonus, provided such election is filed at least
twelve (12) months prior to the last day of the Earn-Out Period to which that
Long-Term Incentive Bonus relates. In no event, however, shall such election
become effective or otherwise have any force or applicability until the
expiration of the twelve (12)-month period measured from the date such election
is filed with the Plan Administrator or its designate, and such election shall
accordingly become null and void should a Change in Control be consummated
within that twelve (12)-month period. The Deferral Election must specify a
payment date for the deferred portion which is at least five (5) years later
than the March 15 date on which the Long-Term Incentive Bonus would have
otherwise become payable in the absence of such Deferral Election or any Change
in Control.
     6.02 Deferral Account. If a Participant makes a timely Deferral Election
under Section 6.01 with respect to all or part of his or her Long-Term Incentive
Bonus, then a Deferral Subaccount shall be established for the Participant and
credited with the dollar amount of the portion of the Long-Term Incentive Bonus
subject to that Deferral Election, as and when that bonus would have otherwise
become due and payable to the Participant in the absence of such Deferral
Election. The Participant shall at all times be fully vested in the balance
credited to each of his or her Deferral Subaccounts, as adjusted periodically
for investment earnings, gains and losses pursuant to Article VII. Distribution
of each Deferral Subaccount shall be made or commence on the payment date or
payment event specified in the Deferral Election made with respect to the
Long-Term Incentive Bonus credited to that subaccount or as soon as
administratively practicable thereafter, but in no event later than December 31
of the calendar year in which that payment date or event occurs or (if later)
the fifteenth (15th) day of the third calendar month following such specified
payment date or event. The distribution shall be made in a lump sum payment,
unless the Participant designates an installment distribution over a period not
to exceed five (5) years in his or her Deferral Election with respect to that
Deferral Subaccount.
     6.03 Distribution Upon Death or Disability. The following provisions shall
govern the distribution of benefits under the Plan in the event the Participant
with one or more Deferred Subaccounts under the Plan should die while in
Employee status or at any time

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thereafter, or become Disabled following cessation of Employee status, while
there is an outstanding balance credited to those subaccounts and shall
supersede any provision to the contrary in Section 6.02.
     A. The undistributed portion shall be paid in a lump sum to the Participant
or (in the event of the Participant’s death) to his or her designated
beneficiary(ies) under the Plan. Such payment shall be made as soon as
administratively practical following the Participant’s death or Disability, but
in no event later than December 31 of the calendar year in which Participant
dies or becomes Disable or (if later) the fifteenth (15th) day of the third
calendar month following the date of his or her death or Disability.
     B. The Participant may designate one or more such beneficiaries, or may
revoke his or her existing beneficiary designation and make a new designation,
by filing a properly completed beneficiary designation in accordance with the
procedures established by the Plan Administrator or its designate. Should the
Participant die without a valid beneficiary designation in effect or after the
death of his or her designated beneficiary(ies), then any amounts due him or her
under the Plan shall be paid to the personal representative of his or her
estate.
     6.04 Valuation. The amount to be distributed from any Deferral Subaccount
pursuant to this Article VI shall be determined on the basis of the balance
credited to that subaccount as of the most recent practicable Valuation Date (as
determined by the Plan Administrator or its designate) preceding the date of the
actual distribution.
     6.05 Installment Distribution. To the extent the Participant elects an
installment distribution in his or her Deferral Election with respect to a
particular Deferral Subaccount, that subaccount shall be paid in a series of
annual installments over the designated period. The amount of each annual
installment shall be determined by dividing the balance credited to that
subaccount on the Valuation Date immediately prior to the installment by the
number of remaining installments (including the current installment).
     6.06 Withholding Taxes. The Participant shall be responsible for the
satisfaction of all federal, state and local income, employment and other
payroll taxes (including FICA taxes) which are required to be withheld on his or
her Long-Term Incentive Bonus, and such taxes shall accordingly be paid, as and
when they become due under applicable law, through the Corporation’s withholding
of those taxes from the wages and earnings payable to the Participant or by any
other means acceptable to the Corporation.
ARTICLE VII
INVESTMENT RETURN
     7.01 Investment Return. Each of the Participant’s Deferral Subaccounts
shall be adjusted periodically to reflect the earnings, gains and losses equal
to the actual investment experience realized for the period by one or more of
the investment funds selected by the

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Participant from the investment alternatives identified in Appendix I. At the
time a Long-Term Incentive Bonus is initially credited to the Participant’s
Deferral Subaccount, that bonus shall be automatically deemed invested in the
     Fund and shall continue to be deemed so invested until the Participant
reallocates the balance of that subaccount to one or more other investment funds
pursuant to the provisions of Section 7.02. On each day on which the U.S.
financial markets are open, each of the Participant’s Deferral Subaccounts shall
be adjusted to reflect the investment earnings, gains or losses those
subaccounts would have actually realized had they been invested on that day in
the selected investment funds.
     7.02 Reallocation of Account Balances Between Funds. A Participant may
elect at any time to reallocate (in such percentages as the Plan Administrator
shall authorize) part or all of the balance of one or more of his or her
Deferral Subaccounts among the available investment alternatives. Accordingly, a
separate reallocation may be made as to each such subaccount. Each designated
reallocation shall be effected as soon as reasonably practicable after the new
allocations are filed by the Participant in accordance with procedures
established by the Plan Administrator or its designate.
     7.03 Account Value. The value of each of the Participant’s Deferral
Subaccounts on any Valuation Date in question shall be equal to the balance
credited to that subaccount as of the close of business on that date, including
the appropriate adjustments for (i) any deferred Long-Term Incentive Bonus or
investment gains or earnings credited to such subaccount as of such date and
(ii) any investment losses charged against the subaccount as of such date.
     7.04 Statement of Accounts. Following the close of each calendar quarter,
each Participant shall receive a written statement of the value of his or her
Deferral Subaccounts as of the last Valuation Date in that quarter.
     7.05 No Required Investment. Although the investment return on a
Participant’s Account is to be measured by the actual gains, earnings and losses
realized by one or more of the investment alternatives selected by the
Participant pursuant to this Article VII, the Corporation shall not be under any
obligation to make the selected investments, and the investment experience shall
only be tracked as debits or credits to the Participant’s book accounts over the
deferral period. To the extent the Corporation should elect to make any actual
investments, the Corporation shall be the sole and exclusive owner of those
investments, and no Participant shall have any right, title or interest in or to
those investments.
ARTICLE VIII
MISCELLANEOUS
     8.01 Plan Effective Date. The Plan shall become effective immediately upon
approval by the Corporation’s shareholders at the 2006 Annual Shareholders
Meeting. In the event of such shareholder approval, the first Earn-Out Period
may commence with the 2007 or any subsequent calendar year.

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     8.02 Deferred Commencement Date. Notwithstanding any provision to the
contrary in the Plan, no distribution which becomes due and payable from the
Participant’s Deferral Subaccounts by reason of his or her termination of
Employee status shall be made to that Participant prior to the earlier of
(i) the expiration of the six (6)-month period measured from the date of his or
her “separation from service” (as determined in accordance with the criteria
established under Code Section 409A and the applicable Treasury Regulations
thereunder) or (ii) the date of his or her death, if the Participant is deemed
at the time of such separation from service to be a “key employee” within the
meaning of that term under Code Section 416(i) and such delayed commencement is
otherwise required in order to avoid a prohibited distribution under Code
Section 409A(a)(2). Upon the expiration of the applicable Code
Section 409A(a)(2) deferral period, all payments deferred pursuant to this
Section 8.02 shall be paid in a lump sum to the Participant, and any remaining
payments shall be made on their scheduled payment dates.
     8.03 Benefits Not Funded. The obligation to pay the vested balance of each
Participant’s Account hereunder shall at all times be an unfunded and unsecured
obligation of the Corporation. Except to the extent the Corporation may in its
sole discretion elect to implement a grantor trust to hold funds for the payment
of any benefits which become due and payable hereunder, the Corporation shall
not have any obligation to establish any trust, escrow arrangement or other
fiduciary relationship for the purpose of segregating funds for the payment of
the balances credited to the outstanding Accounts under the Plan, nor shall the
Corporation be under any obligation to invest any portion of its general assets
in mutual funds, stocks, bonds, securities or other similar investments in order
to accumulate funds for the satisfaction of its respective obligations under the
Plan. The Participant (or his or her beneficiary) shall look solely and
exclusively first to the general assets of the Corporation for the payment of
the Account maintained on the Participant’s behalf under the Plan. Payments from
any grantor trust established by the Corporation under the Plan shall be made as
and when benefits become payable to Participants in accordance with the
distribution provisions of Article VI of the Plan.
     8.04 No Employment Right. Neither the action of the Corporation in
establishing or maintaining the Plan, nor any action taken under the Plan by the
Plan Administrator, nor any provision of the Plan itself shall be construed so
as to grant any person the right to remain in the employ or service of the
Corporation for any period of specific duration, and the Participant shall at
all times remain an Employee at will and may accordingly be discharged at any
time, with or without cause and with or without advance notice of such
discharge.
     8.05 Amendment/Termination. The Board may at any time amend the provisions
of the Plan to any extent and in any manner the Board shall deem advisable, and
such amendment shall become effective at the time of such Board action, subject
to any shareholder approval requirements under Code Section 162(m) or any other
applicable law or regulation or the listing regulations of any securities
exchange (or the Nasdaq National Market) on which the Corporation’s common stock
is at the time traded. Without limiting the generality of the foregoing, the
Board may amend the Plan to impose such restrictions upon the timing, filing and
effectiveness of Deferral Elections, the investment procedures and investment
alternatives available under Article VII and the distribution provisions of
Article VI which the Board deems

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appropriate or advisable in order to avoid the current income taxation of
amounts deferred under the Plan which might otherwise occur as a result of
changes to the tax laws and regulations governing deferred compensation
arrangements such as the Plan and may also, in such event, cease further
deferrals under the Plan. The Board may also at any time terminate the Plan in
whole or in part. Except for such modifications, limitations or restrictions as
may otherwise be required to avoid current income taxation or other adverse tax
consequences to Participants as a result of changes to the tax laws and
regulations applicable to the Plan, no such plan amendment or plan termination
authorized by the Board shall adversely affect the benefits of Participants
accrued to date under the Plan or otherwise reduce the then outstanding balances
credited to their Deferral Subaccounts or otherwise adversely affect the
distribution provisions in effect for those subaccounts, and all amounts
deferred prior to the date of any such plan amendment or termination shall,
subject to the foregoing exception, continue to become due and payable in
accordance with the distribution provisions of Article VI as in effect
immediately prior to such amendment or termination.
     8.06 Applicable Law. The deferral provisions of Article VI and VII of the
Plan are intended to constitute an unfunded deferred compensation arrangement
for a select group of management and other highly compensated persons, and all
rights thereunder shall be construed, administered and governed in all respects
in accordance with the provisions of the Employee Retirement Income Security Act
of 1974 (as amended from time to time) applicable to such an arrangement and, to
the extent not pre-empted thereby, by the laws of the State of California
without resort to its conflict-of-laws provisions. All other provisions of the
Plan shall also be construed, administered and governed by the laws of the State
of California without resort to its conflict-of-laws provisions. If any
provision of this Plan shall be held by a court of competent jurisdiction to be
invalid or unenforceable, the remaining provisions of the Plan shall continue in
full force and effect.
     8.07 Satisfaction of Claims. Any payment made to a Participant or his or
her legal representative or beneficiary in accordance with the terms of this
Plan shall to the extent thereof be in full satisfaction of all claims with
respect to that payment which such person may have against the Plan, the Plan
Administrator (or its designate) or the Corporation, any of whom may require the
Participant or his or her legal representative or beneficiary, as a condition
precedent to such payment, to execute a receipt and release in such form as
shall be determined by the Plan Administrator.
     8.08 Alienation of Benefits. No person entitled to benefits under the Plan
shall have any right to transfer, assign, alienate, pledge, hypothecate or
otherwise encumber his or her interest in such benefits prior to actual receipt
of those benefits. The benefits payable under the Plan shall not, prior to
actual payment, be subject to seizure or sequestration for the payment of any
debts, judgments, alimony or separate maintenance owed by a Participant or any
other person and shall not, to the maximum extent permitted by law, be
transferable by operation of law in the event of the bankruptcy or insolvency of
the Participant or any other person.
     8.09 Successors and Assigns. The obligation of the Corporation to make the
payments required hereunder shall be binding upon the successors and assigns of
the Corporation, whether by merger, consolidation, acquisition or other
reorganization. Except for

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such modifications, limitations or restrictions as may otherwise be required to
avoid current income taxation or other adverse tax consequences to Participants
as a result of changes to the tax laws and regulations applicable to the Plan,
no amendment or termination of the Plan by any such successor or assign shall
adversely affect or otherwise impair the rights of Participants to receive
benefit payments hereunder, to the extent attributable to amounts accrued or
deferred prior to the date of such amendment or termination, in accordance with
the applicable vesting and distribution provisions of Article VI as in effect
immediately prior to such amendment or termination.
ARTICLE IX
BENEFIT CLAIMS
     9.01 Claims Procedure. No application is required for the payment of
benefits under the Plan. However, if any Participant (or beneficiary) believes
he or she is entitled to a benefit from the Plan which differs from the benefit
determined by the Administrative Committee, then such individual may file a
written claim for benefits with the Plan Administrator. Each claim shall be
acted upon and approved or disapproved within ninety (90) days following receipt
by the Plan Administrator.
     9.02 Denial of Benefits. In the event any claim for benefits is denied, in
whole or in part, the Plan Administrator shall notify the claimant in writing of
such denial and of his or her right to a review by the Plan Administrator and
shall set forth, in a manner calculated to be understood by the claimant,
specific reasons for such denial, specific references to pertinent provisions of
the Plan on which the denial is based, a description of any additional material
or information necessary to perfect the claim, an explanation of why such
material or information is necessary, and an explanation of the review
procedure.
     9.03 Review.
     A. Any person whose claim for benefits is denied in whole or in part may
appeal to the Plan Administrator for a full and fair review of the decision by
submitting to the Plan Administrator, within ninety (90) days after receiving
written notice from the Plan Administrator of such denial, a written statement:
     (i) requesting a review by the Plan Administrator of his or her claim for
benefits;
     (ii) setting forth all of the grounds upon which the request for review is
based and any facts in support thereof; and
     (iii) setting forth any issues or comments which the claimant deems
pertinent to his or her claim.

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     B. The Plan Administrator shall act upon each such appeal within sixty
(60) days after receipt of the claimant’s request for review by the Plan
Administrator, unless special circumstances require an extension of time for
processing. If such an extension is required, written notice of the extension
shall be furnished to the claimant within the initial sixty (60)-day period, and
a decision shall be rendered as soon as possible, but not later than one hundred
twenty (120) days after receipt of the initial request for review. The Plan
Administrator shall make a full and fair review of each such appeal and any
written materials submitted by the claimant or the Participating Employer in
connection therewith and may require the Participating Employer or the claimant
to submit such additional facts, documents or other evidence as the Plan
Administrator may, in its sole discretion, deem necessary or advisable in making
such a review. On the basis of its review, the Plan Administrator shall make an
independent determination of the claimant’s eligibility for benefits under the
Plan. The decision of the Plan Administrator on any benefit claim shall be final
and conclusive upon all persons.
     C. Should the Plan Administrator deny an appeal in whole or in part, the
Plan Administrator shall give written notice of such decision to the claimant,
setting forth in a manner calculated to be understood by the claimant the
specific reasons for such denial and specific reference to the pertinent Plan
provisions on which the decision was based. Such notice shall also include a
statement that the claimant has a right to bring a civil action under Section
502(a) of the Employee Retirement Income Security Act of 1974 (as amended from
time to time).

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APPENDIX I
LIST OF INVESTMENT FUND ALTERNATIVES
     The investment fund alternatives for the 2005 Plan Year shall be the same
as the investment funds available for such year for salary deferral
contributions made under the American Shared Hospital Services 401(k) Savings
Plan.