<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, For Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
American Shared Hospital Services
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
Not applicable.
(2) Aggregate number of securities to which transactions applies:
Not applicable.
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement no.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
AMERICAN SHARED HOSPITAL SERVICES
FOUR EMBARCADERO CENTER, SUITE 3620
SAN FRANCISCO, CALIFORNIA 94111-4155
------------------------
NOTICE OF 1999 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 21, 1999
TO THE SHAREHOLDERS OF AMERICAN SHARED HOSPITAL SERVICES:
NOTICE IS HEREBY GIVEN that, pursuant to a call of the Board of Directors,
the 1999 Annual Meeting (the "Meeting") of Shareholders of American Shared
Hospital Services, a California corporation (the "Company"), will be held at One
Embarcadero Center (corner of Sacramento and Battery Streets), Skydeck -- 41st
Floor, San Francisco, CA 94111 at 10:00 am (Pacific time), on Friday, May 21,
1999 to consider and to act upon the following matters, all as set forth in the
Proxy Statement.
1. AMENDMENT OF BY-LAWS. To approve an amendment to Article IV,
Section 1 of the Company's By-laws to provide that the number of Directors
constituting the Board shall be no less than five and no more than nine.
Currently, the Company's Board is comprised of no less than seven and no
more than thirteen Directors.
2. ELECTION OF DIRECTORS. To elect the following five nominees to the
Board of Directors to serve until the next Annual Meeting of Shareholders
and until their successors are elected and have qualified.
Ernest A. Bates, M.D. Stanley S. Trotman, Jr.
Willie R. Barnes Charles B. Wilson, M.D.
John F. Ruffle
3. OTHER BUSINESS. To transact such other business and to consider and
take action upon any and all matters that may properly come before the
Annual Meeting and any and all adjournments thereof.
The Board of Directors knows of no matters, other than those set forth in
paragraphs (1) and (2) above, that will be presented for consideration at the
Annual Meeting.
The Board of Directors has fixed the close of business on March 24, 1999 as
the Record Date for the determination of shareholders entitled to vote at the
Annual Meeting.
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE
DATE, SIGN AND MAIL THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED AS PROMPTLY AS
POSSIBLE. THE PROXY IS REVOCABLE AND WILL NOT AFFECT YOUR RIGHT TO VOTE IN
PERSON IF YOU ATTEND THE MEETING. IN ORDER TO FACILITATE THE PROVISION OF
ADEQUATE ACCOMMODATIONS, PLEASE INDICATE ON THE PROXY WHETHER YOU PLAN TO ATTEND
THE MEETING IN PERSON.
By Order of the Board of Directors
/s/ WILLIE R. BARNES
Willie R. Barnes
Corporate Secretary
Dated: April 23, 1999
San Francisco, California
<PAGE> 3
AMERICAN SHARED HOSPITAL SERVICES
FOUR EMBARCADERO CENTER, SUITE 3620
SAN FRANCISCO, CALIFORNIA 94111-4155
------------------------
PROXY STATEMENT
1999 ANNUAL MEETING OF SHAREHOLDERS
MAY 21, 1999
------------------------
INTRODUCTION
This Proxy Statement is being furnished to shareholders of American Shared
Hospital Services, a California corporation (the "Company"), in connection with
the solicitation of proxies by the Company's Board of Directors for use at the
1999 Annual Meeting of Shareholders scheduled to be held on Friday, May 21, 1999
and at any adjournment or adjournments thereof (the "Meeting"). It is
anticipated that this Proxy Statement and the Proxy will first be sent to
shareholders on or about April 23, 1999.
The matters to be considered and voted upon at the Meeting will be:
1. AMENDMENT OF BY-LAWS. To approve an amendment to Article IV,
Section 1 of the Company's By-laws to provide that the number of Directors
constituting the Board shall be no less than five and no more than nine.
Currently, the Company's Board is comprised of no less than seven and no
more than thirteen Directors.
2. To elect five persons to the Board of Directors to serve until the
next Annual Meeting of Shareholders and until their successors are elected
and have qualified.
3. To transact such other business as may properly be brought before
the Meeting and any and all adjournments thereof.
Only shareholders of record at the close of business on March 24, 1999 (the
"Record Date") are entitled to notice of and to vote at the Meeting.
REVOCABILITY OF PROXIES
A proxy for use at the Meeting is enclosed. Any shareholder who executes
and delivers such proxy may revoke it at any time prior to its use by filing
with the Secretary of the Company either written instructions revoking such
proxy or a duly executed proxy bearing a later date. Written notice of the death
of the person executing a proxy, before the vote is counted, is tantamount to
revocation of such proxy. A proxy may also be revoked by attending the Meeting
and voting in person.
SOLICITATION OF PROXIES
This proxy solicitation is being made by the Board of Directors of the
Company. The expense of the solicitation will be paid by the Company. To the
extent necessary to assure sufficient representation at the Annual Meeting,
proxies may be solicited by any appropriate means by directors, officers,
regular employees of the Company and the stock transfer agent for the Common
Shares, who will not receive any additional compensation therefor. The Company
will request that banks, brokers and other fiduciaries solicit their customers
who own beneficially the Common Shares listed of record in names of nominees
and, although there is no formal arrangement to do so, the Company will
reimburse such persons the reasonable expenses of such solicitation. In
addition, the Company may pay for and utilize the services of individuals or
companies not regularly employed by the Company in connection with the
solicitation of proxies, if the Board of Directors of the Company determines
that this is advisable.
<PAGE> 4
OUTSTANDING SECURITIES
The Board of Directors has fixed March 24, 1999 as the Record Date for the
determination of shareholders entitled to notice of, and to vote at, the
Meeting. At the close of business on the Record Date, there were outstanding and
entitled to vote 3,972,372 Common Shares. The Common Shares are the only class
of securities entitled to vote at the Meeting.
VOTE REQUIRED AND VOTING PROCEDURES
Each holder of Common Shares will be entitled to one vote, in person or by
proxy, for each share standing in its name on the books of the Company as of the
Record Date for the Meeting on each of the matters duly presented for vote at
the Meeting, except as indicated below in connection with the election of
directors.
In connection with the election of directors, shares are permitted to be
voted cumulatively, if (i) a shareholder present at the Annual Meeting has given
notice at the Annual Meeting, prior to the voting, of such shareholder's
intention to vote its shares cumulatively and (ii) the names of the candidates
for whom such shareholder desires to cumulate votes have been placed in
nomination prior to the voting. If a shareholder has given such notice, all
shareholders may cumulate their votes for candidates in nomination. Cumulative
voting allows a shareholder to give one nominee as many votes as is equal to the
number of directors to be elected, multiplied by the number of shares owned by
such shareholder or to distribute votes on the same principle between two or
more nominees. Discretionary authority to cumulate votes is hereby solicited by
the Board of Directors.
All outstanding shares of the Company's Common Stock represented by
properly executed and unrevoked proxies received in time for the Meeting will be
voted. A shareholder may, with respect to the proposal to amend the By-laws (i)
vote for the proposal, (ii) vote against the proposal, or (iii) abstain. A
shareholder may, with respect to the election of directors (i) vote for the
election of all five nominees named herein as directors, (ii) withhold authority
to vote for all such director nominees or (iii) vote for the election of all
such director nominees other than any nominee(s) with respect to whom the
shareholder withholds authority to vote by so indicating in the appropriate
space on the proxy. Withholding authority to vote for a director nominee will
not prevent such director nominee from being elected.
A proxy submitted by a shareholder may indicate that all or a portion of
the shares represented by such proxy are not being voted by such shareholder
with respect to a particular matter. This could occur, for example, when a
broker is not permitted to vote stock held in street name on certain matters in
the absence of instructions from the beneficial owner of the stock. The shares
subject to any such proxy which are not being voted with respect to a particular
matter (the "non-voted shares") will be considered shares not present and
entitled to vote on such matter, although such shares may be considered present
and entitled to vote for other purposes and will count for purposes of
determining the presence of a quorum. In the proposal to amend the By-laws,
non-voted shares will have the effect of a vote against the proposal. In the
election of directors, the five nominees receiving the highest number of votes
of shares of Common Stock represented in person or by proxy at the Meeting and
entitled to vote on such matter will be elected directors of the Company.
Accordingly, non-voted shares will not affect the outcome of the election of
directors.
In connection with the solicitation by the Board of Directors of proxies
for use at the Annual Meeting, the Board of Directors has designated Ernest A.
Bates, M.D. and Richard Magary as proxies. Common Shares represented by properly
executed proxies will be voted at the Annual Meeting in accordance with the
instructions specified thereon. If no instructions are specified, the Common
Shares represented by any properly executed proxy will be voted FOR approval of
the proposed By-laws amendment changing the minimum and maximum number of
directors, and FOR the election of the five nominees for the Board of Directors
named herein.
The Board of Directors is not aware of any matters that will come before
the Annual Meeting other than as described above. However, if such matters are
presented, the named proxies will, in the absence of instructions to the
contrary, vote such proxies in accordance with the judgment of such named
proxies with respect to any such other matter properly coming before the Annual
Meeting.
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<PAGE> 5
A majority of the Common Shares outstanding on the Record Date must be
represented in person or by proxy at the Annual Meeting in order to constitute a
quorum for the transaction of business. The proposal to amend the By-laws to
change the minimum and maximum authorized number of Directors must be approved
by the vote of the holders of a majority of the outstanding shares. In the
election of directors, the five candidates receiving the highest number of votes
will be elected directors of the Company.
The Board of Directors has appointed Geraldine Zarbo of American Stock
Transfer & Trust Company, the registrar and transfer agent for the Common
Shares, or her designee, as the Inspector of Elections for the Annual Meeting.
The Inspector of Elections will determine the number of Common Shares
represented in person or by proxy at the Annual Meeting, whether a quorum
exists, the authenticity, validity and effect of proxies and will receive and
count the votes. The election of directors will not be by ballot unless a
shareholder demands election by ballot at the Annual Meeting before the voting
begins.
PROPOSAL NO. 1
AMENDMENT OF BY-LAWS
The Board has approved an amendment to the By-laws to reduce the number of
Directors constituting the entire Board to a minimum of five and a maximum of
nine. Currently, the By-laws provide for a Board comprised of seven to thirteen
members. Under California law, if the minimum and maximum number of Directors is
proposed to be changed, the approving vote of the holders of a majority of the
Company's outstanding shares must be obtained. THE BOARD OF DIRECTORS RECOMMENDS
THAT YOU VOTE "FOR" THIS AMENDMENT.
For several years, the Company's Board has had seven members. This was
appropriate in light of the scope of the Company's business. However, following
the sale of the Company's imaging business in November 1998, American Shared
became a much smaller company. Prior to the sale, the Company provided magnetic
resonance imaging, computed axial tomography, ultrasound, nuclear medicine and
cardiac catheterization laboratory services to approximately 190 customers in 22
states. These businesses provided approximately 88%, 94% and 95% of the
Company's revenues for the years ending December 31, 1998, 1997 and 1996,
respectively.
At present, American Shared provides stereotactic radiosurgery services to
five major medical centers in three states through its 81% interest in GK
Financing, LLC. This business provided only 6 - 10% of the Company's revenues on
an annualized basis prior to the sale of the imaging division. The Company's
current business requires less capital and debt, as well as a substantially
smaller staff, than the Company's business prior to the sale of the imaging
division. For example, following the sale, the Company's debt and other
liabilities have been reduced by approximately $27.1 million. Its staff, which
prior to the Company's imaging business sale was approximately 340 people, is
expected to be reduced to 10 by the end of April 1999.
In light of these significant reductions, the Board considers it prudent
and appropriate to reduce its size to five Directors. Accordingly, the Board has
nominated five persons to serve for the next year, and has accepted the
resignation or decision not to stand for re-election by two of its former
members. In order to avoid having vacancies, the Board believes it appropriate
to re-set the range of the full Board to 5 to 9 from its current range of 7 to
13. (A copy of the relevant text of Article IV, Section 1 of the By-laws in its
current form and as proposed to be amended is attached as Exhibit A). A Board of
five members is sufficient to oversee the Company's current operations and will
save meeting fees and travel costs. As the Company's business grows, the Board
will be able to consider adding additional members (up to nine). The Board
believes that this change is appropriate and in the best interest of the Company
and its shareholders.
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PROPOSAL NO. 2
ELECTION OF DIRECTORS
BOARD OF DIRECTORS
If the proposed amendment to the Company's By-laws, as described above, is
approved by shareholders at the Meeting, the Company's By-laws will provide that
there shall be not fewer than five nor more than nine directors and the exact
number shall be fixed from time to time by a resolution of the Board Directors.
If the proposed By-law amendment is approved at the Meeting, the directors
nominated for election at the Meeting intend to set the exact number of
Directors at five by a resolution at an Organizational Meeting of the Board of
Directors to be held immediately following the Meeting. If the proposed By-law
amendment is not approved, the Board will have two vacancies and the Directors
will consider appropriate persons to fill such vacancies and will operate in the
interim with such vacancies.
The Board of Directors is proposing the persons named below for election to
the Board of Directors. Each of the persons identified below will be nominated
for election to serve until the next Annual Meeting of Shareholders and until
their successors shall be elected and qualified. Votes will be cast pursuant to
the enclosed proxy in such a way as to effect the election of each of the
persons named below or as many of them as possible under applicable voting
rules. If a nominee shall be unable or unwilling to accept nomination for
election as a director, it is intended that the proxy holders will vote for the
election of such substitute nominee, if any, as shall be designated by the Board
of Directors. Each of the nominees named below has notified the Board of
Directors that, if elected, he is willing to serve as a Director.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINEES
NAMED BELOW. PROXIES RETURNED TO THE COMPANY WILL BE VOTED "FOR" THE NOMINEES
NAMED BELOW UNLESS OTHERWISE INSTRUCTED.
Set forth below is certain information regarding each of the nominees.
ERNEST A. BATES, M.D. has been a director, the Chairman of the Board and
Chief Executive Officer of the Company since it was incorporated in 1983. He
founded the Company's predecessor limited partnership in 1980. Dr. Bates is a
graduate of Johns Hopkins University and of the University of Rochester School
of Medicine. He is currently an Assistant Clinical Professor of Neurosurgery at
the University of California Medical Center at San Francisco, and a member of
the Boards of Trustees of Johns Hopkins University and of the University of
Rochester, a Director of the Industrial Policy Advisory Committee of the
Engineering Research Center (CISST) at Johns Hopkins University, a Member of the
State of California High Speed Rail Authority, and a Member of the Board of
Directors of Salzburg Seminar. Dr. Bates is 62 years old.
WILLIE R. BARNES has been a director and Corporate Secretary of the Company
since 1984. He has been a partner in the law firm of Musick Peeler & Garrett
since June 1992. He is a Director of Franchise Finance Corporation of America.
Mr. Barnes is 66 years old.
JOHN F. RUFFLE has been a director of the Company since 1995. He retired in
1993 as Vice-Chairman of the Board and a Director of J.P. Morgan & Co.
Incorporated and Morgan Guaranty Trust Co. of New York. He also is a Director of
Bethlehem Steel Corporation; a member of the Boards of Managers of North Moore
Fund, LLC and JP Morgan Global Emerging Markets Fund, LLC; a Trustee of JPM
Series Trust II; a Director of Trident Corp.; a Director of The Wackenhut
Corporation; a Director of Wackenhut Corrections Corp; and a Trustee of the
Johns Hopkins University. He is a graduate of Johns Hopkins University, with an
MBA in finance from Rutgers University, and is a Certified Public Accountant.
Mr. Ruffle is 61 years old.
STANLEY S. TROTMAN, JR., has been a director of the Company since 1996. He
has been a Managing Director with the Health Care Group of PaineWebber, an
investment banking firm, since 1995 following the consolidation of Kidder,
Peabody, also an investment banking firm, with PaineWebber. He had previously
co-directed Kidder, Peabody's Health Care Group since April 1990. Formerly he
had been head of the Health Care Group at Drexel Burnham Lambert, Inc. where he
had been employed for approximately 22 years. He
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received his undergraduate degree from Yale University in 1965 and holds an MBA
from Columbia Business School in 1967. Mr. Trotman is 55 years old.
CHARLES B. WILSON, M.D. most recently has been a director of the Company
since 1993. He also was a director of the Company from March 1984 until March
1989. He has been a Professor of Neurosurgery at the University of California
Medical Center, San Francisco, since 1968. From 1968 until April 1994, and from
March 1996 until July 1997, Dr. Wilson also held the position of Chairman of the
University's Department of Neurosurgery. He also is a Senior Research Fellow of
The Institute for the Future in Menlo Park, California. Dr. Wilson is 69 years
old.
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors of the Company held five meetings during 1998. All
Directors attended at least 75% of the aggregate number of meetings of both the
Board of Directors and of the Committees of the Board on which such Director
served during the year.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has standing Audit, Compensation, Stock Option and Nominating
Committees, each of which is described below.
Members of the Audit Committee include Mr. Ruffle and Mr. Trotman. The
purpose of the Audit Committee is to review the financial records of the
Company, to recommend to the Board of Directors the appointment of independent
auditors and to review the reports of such auditors. During 1998, the Audit
Committee held one meeting.
Members of the Compensation Committee include Mr. Barnes and Dr. Wilson.
The function of the Compensation Committee is to recommend to the Board of
Directors the compensation of the Company's executive officers. The Compensation
Committee did not meet during 1998.
Members of the Stock Option Committee include Dr. Bates and Mr. Ruffle. The
purpose of the Stock Option Committee is to administer the Company's 1984 Stock
Option Plan and 1995 Stock Option Plan, and to determine recipients of awards
pursuant to such plans and the terms of such awards. No member of the Stock
Option Committee received a discretionary grant or award under an option plan of
the Company while serving on such committee or during the year preceding such
service. There were no meetings of the Stock Option Committee during 1998.
Members of the Nominating Committee include Mr. Trotman and Mr. Ruffle. The
purpose of the Nominating Committee is to recommend candidates for election to
the Board of Directors. The Nominating Committee held one meeting during 1998. A
shareholder who wishes to nominate a person for Director must provide the
nomination in writing to the Secretary at the Company's principal offices
pursuant to the notice provisions in the By-laws. Such notice must be received
not less than 60 nor more than 90 days prior to the Annual Meeting or, if less
than 70 days' notice of the date of such meeting has been given, then within 10
business days following the first public disclosure of the meeting date or the
mailing of the Company's notice. Any such notice must contain information
regarding the nominee and the proponent. Details concerning the nature of such
information are available without charge from the Company.
DIRECTOR COMPENSATION
During 1998 and 1997, non-employee directors were scheduled to receive an
annual retainer fee of $5,000 each per year. The non-employee directors agreed
to defer payment of their 1998 and 1997 retainer fees until late 1998 (or, at
the director's option, until early 1999), to assist the Company with its cash
flow. Such payments were made in December 1998 and in January 1999. Non-employee
directors also received in 1998 and 1997 $1,000 for attendance in person at each
regular and special meeting of the Board of Directors. In addition, non-employee
directors are entitled to receive an automatic grant of Options from the
Company's 1995 Stock Option Plan on the date of the Company's Annual Shareholder
Meeting each year, to acquire up to 4,000 shares annually of the Company's
common stock at the market price on the date of grant, until a
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Director has options for a total of 12,000 shares in all Company plans. There
were no such grants of Options to non-employee directors during 1998.
Additionally, non-employee directors who were members of a committee of the
Board of Directors were entitled to receive $200 for attendance in personal at
each committee meeting. Non-employee directors are not entitled to any fee for
Board of Directors or committee meetings held by conference telephone at which
they are not present in person. Of the five Board meetings held during 1998, two
were regular or special meetings which directors attended in person, and three
were special meetings which were held by conference telephone. Non-employee
directors also received reimbursement of expenses incurred in attending
meetings. No payment is made for attendance at meetings by any director who is
an employee of the Company.
Non-employee directors will continue in 1999 to receive a $5,000 Annual
Retainer fee, $1,000 for attendance in person at each regular and special
meeting of the Board of Directors, and $200 for attendance in person at each
committee meeting, as well as an automatic grant of Options from the Company's
1995 Stock Option Plan, to acquire up to 4,000 common shares annually, on the
date of the Company's Annual Shareholder Meeting, of the Company's common stock
at the market price on date of grant, until a Director has options for a total
of 12,000 shares in all Company plans.
CERTAIN ADDITIONAL INFORMATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Shares as of March 15, 1999, of (i) each
person known to the Company to own beneficially 5% or more of the Common Shares,
(ii) each director of the Company, (iii) the chief executive officer and each
other executive officer named in the Summary Compensation Table, and (iv) all
directors and executive officers as a group.
<TABLE>
<CAPTION>
COMMON SHARES OWNED BENEFICIALLY
---------------------------------------------
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(2) PERCENT OF CLASS(5)
------------------------------------ ----------------------- -------------------
<S> <C> <C>
Total Number of Shares................................... 5,828,345(3) 100.0%
Ernest A. Bates, M.D. (1)................................ 2,306,070(4) 42.2%
Willie R. Barnes(1)...................................... 11,000(4) *
John F. Ruffle(1)........................................ 88,711(4) 2.2%
Stanley S. Trotman, Jr. (1).............................. 130,095(4) 3.3%
Charles B. Wilson, M.D. (1).............................. 12,000(4) *
Craig K. Tagawa(1)....................................... 117,600(4) 2.9%
Senior Vice President Chief Financial Officer
Richard Magary(1)........................................ 78,300(4) 1.9%
Senior Vice President -- Administration
Gregory Pape(1).......................................... 65,000(4) 1.6%
Senior Vice President -- Sales and Marketing
All Directors & Executive Officers as a Group (8
persons)............................................... 2,808,776(4) 49.0%
</TABLE>
- ---------------
* Less than 1%
(1) The address of each such individual is c/o American Shared Hospital
Services, Four Embarcadero Center, Suite 3620, San Francisco, California
94111-4155.
(2) Each person directly or indirectly has sole voting and investment power with
respect to the shares listed under this column as being owned by such
person.
(3) Represents the aggregate of issued and outstanding Common Shares plus Common
Shares that all persons or groups of persons are entitled to acquire upon
the exercise of options or warrants within 60 days after March 15, 1999.
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(4) Includes shares underlying options that are currently exercisable or which
will become exercisable within 60 days following March 15, 1999: Dr. Bates,
1,495,000 shares; Mr. Barnes, 10,000 shares, Mr. Ruffle, 12,000 shares; Mr.
Trotman, 9,333 shares; Dr. Wilson, 12,000 shares; Mr. Magary, 55,000 shares;
Mr. Tagawa, 105,000 shares; Mr. Pape, 65,000 shares; and Directors and
Executive Officers as a group, 1,763,333 shares.
(5) Shares that any person or group of persons is entitled to acquire upon the
exercise of options or warrants within 60 days after March 15, 1999, are
treated as issued and outstanding for the purpose of computing the percent
of the class owned by such person or group of persons but not for the
purpose of computing the percent of the class owned by any other person.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the compensation paid by the Company for the
fiscal years ending December 31, 1996, December 31, 1997 and December 31, 1998
and paid in those years for services rendered in all capacities during 1995,
1996 and 1997, respectively, to the Chief Executive Officer and each executive
officer other than the Chief Executive Officer who served as an officer at
December 31, 1998 and earned cash compensation of $100,000 or more during 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------------
OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS(2) COMPENSATION(3)
--------------------------- ---- --------- -------- ---------------
<S> <C> <C> <C> <C>
Ernest A. Bates, M.D. ....................... 1998 $299,864 $300,000 --
Chairman of the Board, 1997 $267,994 -- --
Chief Executive Officer 1996 $223,412 -- --
Craig K. Tagawa.............................. 1998 $229,212 $165,000 --
Senior Vice President, 1997 $216,000(4) -- --
Chief Financial Officer 1996 $165,747 -- --
Richard Magary............................... 1998 $137,679 $ 25,000 --
Senior Vice President, 1997 $118,813 -- --
Administration 1996 $ 99,780 -- --
Gregory Pape................................. 1998 $311,035 -- --
Senior Vice President 1997 $292,650(5) -- --
Sales and Marketing 1996 $278,895(6) -- --
</TABLE>
- ---------------
(1) Each amount under this column includes amounts accrued in 1996, 1997, and
1998, that would have been paid to such persons in such years, except that
such amounts were instead deferred pursuant to the Retirement Plan for
Employees of American Shared Hospital Services and CuraCare, a defined
contribution plan and ASHS' Flexible Benefit Plan, a defined contribution
plan. Both plans are available to employees of the Company generally.
(2) Each of these individuals was awarded a special bonus for his role in the
successful sale of the Company's diagnostic imaging business in 1998. The
Company's Board of Directors approved these bonuses in February 1999, and
such bonuses were paid thereafter, for services which were performed during
1998.
(3) The Company has determined that, with respect to the executive officers
named in the Summary Compensation Table, the aggregate amount of other
benefits does not exceed the lesser of $50,000 or 10% of the total annual
salary and bonus reported in the Summary Compensation Table as paid to such
executive officer in the relevant year.
(4) Includes sales commissions of approximately $45,000 earned and paid in 1997.
(5) Includes sales commissions of approximately $92,000 earned in 1996 and paid
in 1997 and approximately $58,000 earned and paid in 1997.
(6) Includes sales commissions of approximately $82,000, earned in 1995 and paid
in 1996, and $107,000 earned and paid in 1996.
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LONG TERM COMPENSATION AWARDS
The "Long Term Compensation Awards" Table has been omitted because no long
term compensation awards were made during the relevant years to the Company's
executive officers named in the Summary Compensation Table.
OPTION GRANTS IN LAST FISCAL YEAR
The "Option Grants in the Last Fiscal Year" Table has been omitted because
no options were granted during 1998 to the Company's executive officers named in
the Summary Compensation Table.
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
The "Long-term Incentive Plan Awards" ("LTIP Awards") table has been
omitted because no LTIP Awards were made during 1998 to the Company's executive
officers named in the Summary Compensation Table.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth the number of shares acquired on exercise of
stock options and the aggregate gains realized upon exercise of such options
during 1998, by the Company's executive officers named in the Summary
Compensation Table. The following table also sets forth the number of shares
underlying exercisable and unexercisable options held by such executive officers
on December 31,1998.
1984 AND 1995 STOCK OPTION PLANS
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ernest A. Bates, M.D. .... -- -- 1,495,000 -- $1,760,363 --
Craig K. Tagawa........... -- -- 105,000 -- $ 0 --
Richard Magary............ -- -- 55,000 -- $ 0 --
Gregory Pape.............. -- -- 65,000 -- $ 0 --
</TABLE>
- ---------------
(1) This amount is calculated by multiplying the number of Common Shares
underlying the options at December 31,1998 by the market price per Common
Share on such date less the option exercise price.
EMPLOYMENT AGREEMENTS
The Company had no employment contracts with its directors or executive
officers named in the Summary Compensation Table in 1998.
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
The following Report of the Board of Directors shall not be deemed
incorporated by reference by any general statement incorporating by reference
this Proxy Statement into any filing under the Securities Act or under the
Exchange Act, except to the extent that the Company specifically incorporates
this information by reference, and shall not otherwise be deemed filed under
such Acts.
This Report of the Board of Directors describes the Company's method of
compensating its executive officers, and describes the basis on which 1998
compensation was paid to such executive officers, including those named in the
Summary Compensation Table.
8
<PAGE> 11
The Board of Directors determined that compensation paid in 1998 by the
Company to its Chief Executive Officer and other executive officers would be
based on policies in effect in recent prior years. As a result, it was
unnecessary for the Compensation Committee to meet, and it did not meet, during
1998.
The Company's compensation program seeks to establish compensation that is
competitive in both the healthcare industry and among entrepreneurial,
growth-oriented companies in order to attract and retain high quality employees.
Compensation is linked to each employee's level of responsibility and personal
achievements with respect to operational and financial goals established by the
Chief Executive Officer and the Board of Directors. Depending on the individual
officer's area of responsibility, such goals may include new business and
revenue acquisition, operating expense reduction and control, operating
efficiencies, etc. In addition, the compensation system seeks to develop and
encourage employee ownership of the Company's stock through stock options.
The primary component of executive compensation for the Company in 1998 was
base salary, except in the case of the Chief Operating and Financial Officer
(who also is CEO of the Company's Gamma Knife subsidiary) and in the case of the
Senior Vice President -- Sales and Marketing where sales commissions were a
substantial component of compensation and are included under "salary" in the
table above. Discretionary bonuses may be paid, based on a formula, if financial
and other results of the individual executive's area of responsibility meet or
exceed financial and operational targets established at the beginning of the
fiscal year. No bonuses have been paid by the Company during the last three
fiscal years, except in the case of bonuses paid pursuant to pre-established
formulae based on goals and targets of a specific business and except for
special bonuses paid for the successful completion of the sale of the Company's
diagnostic imaging business.
Base salary was established for the Chief Executive Officer and other
executive officers with the assistance of an outside consulting firm in 1991.
Such compensation was designed to fall in the mid-range for the relevant
executive position or compensation paid by a group of entrepreneurial,
growth-oriented companies believed by the Company to be comparable in their
stage of development and business condition, based on information provided by
the independent compensation consulting organization. The companies surveyed
were not identical to those reflected in the performance graph set forth in the
Proxy Statement. During the period 1991 - 1995 the compensation of most of the
Company's senior executives, including those listed in the Summary Compensation
Table, was reduced by 5 to 10% for various periods of time. In 1996, the base
salary of the Chief Financial Officer was increased from $150,000 to $165,000
and he became eligible for bonus payments based on goals and targets of the
Gamma Knife business. During 1997 the compensation structure of the Company's
Senior Vice President -- Sales & Marketing was changed, to increase base salary
from $85,000 per year to $200,000 per year, while the sales commission rate paid
to that executive officer was significantly reduced. In June 1997, base salary
paid to the Chief Executive Officer was increased from approximately $233,000
per year to $300,000 per year, and salary paid to the Senior Vice President --
Administration was increased from approximately $93,500 per year to $130,000 per
year. Until such increases, neither officer had received a base salary increase
for over five years, and had received base salary reductions during the
1991 - 1995 period as described above.
In addition to base compensation, the Company has used grants of stock
options to retain senior executives and to motivate them to improve long-term
stock market performance. The number of options granted in the past was
determined by reference to the level of responsibility of the particular
executive in the Company and such executive's proposed role in the Company's
future operations. In addition, during 1995 the Shareholders approved a grant of
options to acquire 1,495,000 Common Shares at an initial exercise price of $0.01
per share to the Company's Chairman and Chief Executive Officer, in
consideration of his continued service to the Company and his personal guarantee
of $6,500,000 of indebtedness of the Company.
BOARD OF DIRECTORS
<TABLE>
<S> <C>
Ernest A. Bates, M.D. Chairman Stanley S. Trotman, Jr.
Willie R. Barnes Charles B. Wilson, M.D.
John F. Ruffle
</TABLE>
9
<PAGE> 12
CERTAIN RELATIONSHIPS AND RELATED TRANSLATIONS
On October 6, 1995, the Company entered into an Option Agreement with its
Chairman and Chief Executive Officer. Under the Option Agreement, Dr. Bates was
granted a ten-year option to purchase 1,495,000 Common Shares for an initial
exercise price of $0.01 per share, in partial consideration of his personal
guarantee of $6,500,000 of indebtedness of the Company.
Willie R. Barnes, the Secretary and a director of the Company, is a partner
in the law firm of Musick, Peeler & Garrett. That law firm performed legal
services for the Company in 1998. The management of the Company is of the
opinion that the fees paid to Mr. Barnes' law firm are comparable to those fees
that would have been paid for comparable legal services from a law firm not
affiliated with the Company. Mr. Barnes served during 1998 on the Compensation
Committee of the Board of Directors.
Stanley S. Trotman, Jr., a director of the Company, is a Managing Partner
of PaineWebber, Incorporated, an investment banking firm. That firm performed
services for the Company during 1998 and early 1999 in connection with the
Company's sale of its diagnostic imaging business, which was completed in
November 1998. PaineWebber also has continued to advise the Company with respect
to the uses of proceeds from the sale and other strategic matters regarding the
future direction of the Company. The management of the Company is of the opinion
that the Company's fee arrangements with PaineWebber are comparable to the fees
charged for comparable investment banking services by firms not affiliated with
the Company.
COMPLIANCE WITH SECTION 16(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934
Reports filed under the Exchange Act and received by the Company on or
after January 1, 1998, indicate that during 1998 directors, officers and 10%
shareholders of the Company filed all required reports within the periods
established by applicable rules, except that one report required upon leaving
office in November 1998 was not filed by the Company's former Senior Vice
President -- Operations. The Company understands that the required report will
be filed during April 1999.
10
<PAGE> 13
PERFORMANCE GRAPH, TOTAL RETURN TO SHAREHOLDERS
The following graph and table compare cumulative total shareholder return
on the Company's Common Shares with the cumulative total return of the Standard
& Poor's 500 Stock Index and a group of peer companies in the diagnostic imaging
industry during the five years ended December 31, 1998.
<TABLE>
<CAPTION>
American Shared S&P 500 Peer
Hspt Serv Index Group
<S> <C> <C> <C>
Dec 93 100.00 100.00 100.00
Dec 94 19.05 101.32 114.40
Dec 95 49.98 139.40 176.54
Dec 96 69.03 171.40 335.56
Dec 97 66.67 228.59 377.37
Dec 98 45.26 293.91 131.71
</TABLE>
INDEPENDENT AUDITORS
The Company's consolidated financial statements for the year ended December
31, 1998 have been audited by Grant Thornton LLP. The Board of Directors intends
to appoint Grant Thornton LLP to be the Company's independent auditors for the
fiscal year ending December 31, 1999. From 1983 through the fiscal year ended
December 31, 1997, the Company's consolidated financial statements were audited
by Ernst & Young, LLP or its predecessor.
The Company on December 14, 1998 engaged Grant Thornton, LLP as its
independent accountant to audit the Company's financial statements for the year
ended December 31, 1998. The Company and Grant Thornton, LLP had a long
established relationship as Grant Thornton has served as the Company's tax
advisor since 1990.
In light of its engagement of Grant Thornton, the Company will no longer
engage Ernst & Young, LLP ("E&Y"), to audit the Company's financial statements.
E&Y had served as the Company's auditor since 1983. In recognition of the
Company's previously reported defaults under its credit facilities and equipment
leases, E&Y had included a "going concern" qualification in its report on the
Company's financial statements in each year since 1990. The Company did not know
at the time it engaged Grant Thornton, LLP as its independent accountant whether
its auditor's report for the year ended December 31, 1998 would contain such a
qualification.
The decision to change accountants was referred by the Audit Committee to
the full Board of Directors. The Board of Directors approved the decision to
change independent accountants. An important motivating factor in the Board's
decision was to reduce the Company's audit expenses following the completion of
its financial restructuring, the sale of its imaging business on November 13,
1998, and the significantly reduced scope of the Company's operations.
11
<PAGE> 14
The Company during its two most recent fiscal years and any subsequent
interim period preceding its change of independent accountant did not have any
disagreements with the former accountant on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure.
Representatives of Grant Thornton LLP are expected to be present at the
Annual Meeting to respond to appropriate questions and will be given an
opportunity to make a statement if they so desire.
SHAREHOLDER PROPOSALS
Under certain circumstances, shareholders are entitled to present proposals
at shareholders meetings. To be eligible for inclusion in the Proxy Statement
for the Company's next Annual Meeting of Shareholders, a shareholder proposal
must be received at the Company's principal executive offices prior to February
23, 2000. A Shareholder's notice should list each proposal and contain a brief
description of the business to be brought before the meeting; the name and
address of the shareholder proposing such business; the number of shares held by
the shareholder; and any material interest of the shareholder in the business.
ANNUAL REPORT
The Company's 1998 Annual Report, which includes financial statements, but
which does not constitute a part of the proxy solicitation material, accompanies
this proxy statement.
By Order of the Board of Directors
/s/ WILLIE R. BARNES
Willie R. Barnes
Corporate Secretary
Dated: April 23, 1999
San Francisco, California
12
<PAGE> 15
Exhibit A-1
Current Form of By-laws, Article IV, Section 1
Section 1. Number of Directors. (a) The authorized number of directors
shall depend upon the number of shareholders. If there is only one shareholder,
then there will only be one director. Whenever there is more than one
shareholder, then there will be no less than seven nor more than thirteen
directors. The exact number of directors shall be fixed from time to time,
within the limits specified in this subdivision, by an amendment of subdivision
(b) of this section adopted by the Board of Directors.
(b) The exact number of directors shall be one (1) until changed as
provided in subdivision (a) of this section. Notwithstanding the preceding
sentence, at all times while there is one (1) shareholder of the corporation,
said shareholder, may without amending these bylaws determine that there shall
be seven (7) directors. Said shareholder may elect the aforementioned seven (7)
directors by noticing a meeting of the shareholders of the corporation.
(c) The maximum or minimum authorized number of directors may only be
changed by an amendment of this section approved by the vote or written consent
of a majority of the shareholders; provided, however, that an amendment reducing
the minimum number to a number less than 5 shall not be adopted if the votes
cast against its adoption at a meeting (or the shares not consenting in the case
of action by written consent) exceed 16-2/3% of such outstanding shares; and
provided, further, that in no case shall the stated maximum authorized number of
directors exceed two times the stated minimum number of authorized directors
minus one.
<PAGE> 16
Exhibit A-2
Proposed Form of By-laws, Article IV, Section 1
Section 1. Number of Directors. (a) The authorized number of directors
shall depend upon the number of shareholders. If there is only one shareholder,
then there will only be one director. Whenever there is more than one
shareholder, then there will be no less than five nor more than nine directors.
The exact number of directors shall be fixed from time to time, within the
limits specified in this subdivision, by an amendment of subdivision (b) of this
section adopted by the Board of Directors.
(b) The exact number of directors shall be one (1) until changed as
provided in subdivision (a) of this section. Notwithstanding the preceding
sentence, at all times while there is one (1) shareholder of the corporation,
said shareholder may, without amending these Bylaws, determine that there shall
be five (5) directors. Said shareholder may elect the aforementioned five (5)
directors by noticing a meeting of the shareholders of the corporation.
(c) The maximum or minimum authorized number of directors may only be
changed by an amendment of this section approved by the vote or written consent
of a majority of the shareholders; provided, however, that an amendment reducing
the minimum number to a number less than 5 shall not be adopted if the votes
cast against its adoption at a meeting (or the shares not consenting in the case
of action by written consent) exceed 16-2/3% of such outstanding shares; and
provided, further, that in no case shall the stated maximum authorized number of
directors exceed two times the stated minimum number of authorized directors
minus one.
<PAGE> 17
AMERICAN SHARED HOSPITAL SERVICES
For the Annual Meeting of Shareholders to be held May 21, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF AN AMENDMENT TO
THE COMPANY'S BY-LAWS TO CHANGE THE MINIMUM AND MAXIMUM NUMBER OF DIRECTORS, AND
"FOR" THE ELECTION OF THE PERSONS NOMINATED FOR ELECTION TO THE BOARD OF
DIRECTORS. YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE
BOXES. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. IF NO
DIRECTION IS MADE, IT WILL BE VOTED "FOR" THE BY-LAWS AMENDMENT AND, SUBJECT TO
THE PROXYHOLDER'S DISCRETIONARY AUTHORITY TO CUMULATE VOTES, "FOR" THE ELECTION
OF THE PERSONS NOMINATED ON THE REVERSE SIDE, AND WILL HAVE THE EFFECT OF
WITHHOLDING DISCRETIONARY AUTHORITY TO CUMULATE VOTES. ABSTENTIONS AND NON-VOTED
SHARES WILL BE EQUIVALENT TO A VOTE AGAINST THE BYLAWS AMENDMENT. THE BOARD OF
DIRECTORS IS NOT AWARE OF ANY OTHER MATTERS THAT WILL COME BEFORE THE ANNUAL
MEETING, OTHER THAN THOSE DESCRIBED IN THIS PROXY. HOWEVER, IF SUCH MATTERS ARE
PRESENTED, THE NAMED PROXIES WILL, IN THE ABSENCE OF INSTRUCTIONS TO THE
CONTRARY, VOTE SUCH PROXIES IN ACCORDANCE WITH THE JUDGMENT OF SUCH NAMED
PROXIES WITH RESPECT TO ANY SUCH OTHER MATTER PROPERLY COMING BEFORE THE
MEETING. THIS PROXY MAY BE REVOKED PRIOR TO ITS EXERCISE BY FILING WITH THE
SECRETARY OF THE COMPANY AN INSTRUMENT IN WRITING REVOKING THIS PROXY OR A DULY
EXECUTED PROXY BEARING A LATER DATE. THIS PROXY ALSO MAY BE REVOKED BY
ATTENDANCE AT THE MEETING AND ELECTION TO VOTE IN PERSON.
(continued, and to be signed on the other side)
<PAGE> 18
[X] PLEASE MARK YOUR VOTE AS IN THIS EXAMPLE
This proxy when properly executed will be voted in the manner directed
herein and in the discretion of the proxy holders on all other matters coming
before the meeting. If no direction is made, this proxy will be voted FOR
Proposal NO. 1 and FOR the election of directors nominated herein.
The Board of Directors recommends a vote FOR approval of the By-laws
amendment and FOR election of the directors nominated herein.
1. AMENDMENT OF LAW-LAWS. Approval of an amendment to Article IV, Section 1
of the By-laws to fix the number of directors between five and nine.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. ELECTION OF DIRECTORS. To elect five of the persons named below to the
Board of Directors to serve until the 2000 Annual Meeting of
Shareholders and until their successors are elected and have qualified.
[ ] FOR all nominees (except as indicated to the contrary below).
[ ] WITHHOLD AUTHORITY to vote for all nominees.
(Instruction: To withhold authority for any individual nominee(s), write
that nominee's name(s) in the space below.)
--------------------------------------------------------
NOMINEES: Ernest A. Bates, M.D.
Willie R. Barnes
John F. Ruffle
Stanley S. Trotman, Jr.
Charles B. Wilson, M.D.
[ ] I PLAN TO ATTEND THE MEETING IN PERSON.
The undersigned hereby ratifies and confirms all that said attorneys and
proxies, or any of them, or their substitutes, shall lawfully do or cause to be
done by virtue hereof, and hereby revokes any and all proxies heretofore given
by the undersigned to vote at the Meeting. The undersigned acknowledges receipt
of the Notice of the Annual Meeting and the Proxy Statement accompanying such
Notice.
<PAGE> 19
PLEASE MARK, DATE AND SIGN AS YOUR NAME APPEARS ABOVE AND RETURN IN THE ENCLOSED
ENVELOPE.
Signature Date
------------------------------ ---------------
Signature Date
------------------------------ ---------------
Signature, if held jointly
NOTE: Please date this proxy and sign as your name(s) appear(s) on this
document. Joint owners should each sign personally. Corporate proxies should be
signed by an authorized officer. Executors, administrators, trustees, etc.
should give their full titles.
