AMERICAN SHARED HOSPITAL SERVICES — Proxy Solicitation & Information Statement 2000

Apr 25, 2000

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: [ ] Preliminary Proxy Statement [ ] Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2) [X] 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: (2) Aggregate number of securities to which transactions applies: (3) Per unit price or other underlying value of transaction computed 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: 2 AMERICAN SHARED HOSPITAL SERVICES TWO EMBARCADERO CENTER, SUITE 2370 SAN FRANCISCO, CALIFORNIA 94111-3823 ------------------------ NOTICE OF 2000 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 19, 2000 TO THE SHAREHOLDERS OF AMERICAN SHARED HOSPITAL SERVICES: NOTICE IS HEREBY GIVEN that, pursuant to a call of the Board of Directors, the 2000 Annual Meeting (the "Meeting") of Shareholders of American Shared Hospital Services, a California corporation (the "Company"), will be held at the Park Hyatt Hotel, 333 Battery Street (corner of Clay), San Francisco, California 94111 at 10:00 am (Pacific time), on Friday, May 19, 2000 to consider and to act upon the following matters, all as set forth in the Proxy Statement. 1. 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 2. RATIFICATION OF INDEPENDENT ACCOUNTANTS. To ratify the appointment of Moss Adams LLP as the Company's independent accountants for the year ending December 31, 2000. 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 31, 2000 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 20, 2000 San Francisco, California 3 AMERICAN SHARED HOSPITAL SERVICES TWO EMBARCADERO CENTER, SUITE 2370 SAN FRANCISCO, CALIFORNIA 94111-3823 ------------------------ PROXY STATEMENT ------------------------ 2000 ANNUAL MEETING OF SHAREHOLDERS MAY 19, 2000 ------------------------ 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 2000 Annual Meeting of Shareholders scheduled to be held on Friday, May 19, 2000 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 26, 2000. The matters to be considered and voted upon at the Meeting will be: 1. 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. 2. To ratify the appointment of Moss Adams LLP as the Company's independent accountants for the year ending December 31, 2000. 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 31, 2000 (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. OUTSTANDING SECURITIES The Board of Directors has fixed March 31, 2000 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, 4 there were outstanding and entitled to vote 3,810,042 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 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 shareholder may, with respect to the proposal to ratify the appointment of the Company's independent accountants, (i) vote for the ratification, (ii) vote against the ratification, or (iii) abstain. 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 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. Non-voted shares also will not affect the outcome of the proposal to ratify the appointment of independent accountants. 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 the election of the five nominees for the Board of Directors named herein, and FOR the proposal to ratify the appointment of the Company's independent auditors. 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. 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. In the election of directors, the five candidates receiving the highest number of votes will be elected directors of the Company. 2 5 The proposal to ratify the appointment of the Company's independent auditors requires that a majority of those voting in person or by proxy vote FOR the proposal, in order for the proposal to be approved. 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 ELECTION OF DIRECTORS BOARD OF DIRECTORS The Company's Bylaws provide that there shall be no less than five nor more than nine directors and that the exact number shall be fixed from time to time by a Resolution of the Board of Directors. The number of directors currently is fixed at five. 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 The 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 The Johns Hopkins University and of the University of Rochester, a Director of the Industrial Policy Advisory Committee of the Engineering Research Center (CISST) at The 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 63 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 67 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 The Johns Hopkins University, with an MBA in finance from Rutgers University, and is a Certified Public Accountant. Mr. Ruffle is 62 years old. 3 6 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 Incorporated, 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 received his undergraduate degree from Yale University in 1965 and holds an MBA from Columbia Business School in 1967. Mr. Trotman is 56 years old. CHARLES B. WILSON, M.D. 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 held the position of Chairman of the University's Department of Neurosurgery. He also is a Director of The Institute for the Future in Menlo Park, California. Dr. Wilson is 70 years old. MEETINGS OF THE BOARD OF DIRECTORS The Board of Directors of the Company held six meetings during 1999. 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, except that Dr. Wilson attended three of six Board of Directors meetings and all meetings of the Committees on which he 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. All Directors serve on each standing Committee, except that Dr. Bates does not serve on the Audit Committee. 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 1999, the Audit Committee held two meetings. Mr. Ruffle is Chair of the Audit Committee. 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 1999. Mr. Trotman is Chair of the Compensation Committee. 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 1999. Mr. Ruffle is Chair of the Stock Option Committee. The purpose of the Nominating Committee is to recommend candidates for election to the Board of Directors. The Nominating Committee held one meeting during 1999. Mr. Trotman is Chair of the Nominating Committee. 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 In 1999, non-employee directors were paid an annual retainer of $5,000 and $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 4 7 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 Director has options for a total of 12,000 shares in all Company plans. There were two (2) such grants totaling 4,667 options to non-employee directors during 1999. Additionally, non-employee directors who were members of a committee of the Board of Directors were entitled to receive $100 for attendance in person 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 six Board meetings held during 1999, five were regular or special meetings that directors attended in person, and one was a special meeting which was 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 receive in 2000 a $10,000 annual retainer fee, payable quarterly; $1,000 for attendance in person at each regular and special meeting of the Board of Directors; and $100 for attendance in person at each committee meeting. Each current non-employee director already holds options for a total of 12,000 shares of the Company's common stock, so no additional automatic grants to such Directors, as described in the preceding paragraph, are expected to be made during 2000. 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 April 15, 2000, 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.

• --------------- * Less than 1% (1) The address of each such individual is c/o American Shared Hospital Services, Two Embarcadero Center, Suite 2370, San Francisco, California 94111-3823. (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 April 15, 2000. 5 8 (4) Includes shares underlying options that are currently exercisable or which will become exercisable within 60 days following April 15, 2000: Dr. Bates, 1,495,000 shares; Mr. Barnes, 12,000 shares, Mr. Ruffle, 12,000 shares; Mr. Trotman, 12,000 shares; Dr. Wilson, 12,000 shares; Mr. Magary, 60,000 shares; Mr. Tagawa, 125,000 shares; Mr. Pape, 65,000 shares; and Directors and Executive Officers as a group, 1,793,000 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 April 15, 2000, 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, 1997, December 31, 1998 and December 31, 1999 and paid in those years for services rendered in all capacities during 1996, 1997 and 1998, respectively, to the Chief Executive Officer and each executive officer other than the Chief Executive Officer who served as an officer at December 31, 1999 and earned cash compensation of $100,000 or more during 1999. SUMMARY COMPENSATION TABLE

• --------------- (1) Each amount under this column includes amounts accrued in 1997, 1998, and 1999, 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 in September 1999 with respect to Mr. Magary), 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 $44,000 earned and paid in 1999. (5) Includes sales commissions of approximately $52,500 earned and paid in 1998. (6) Includes sales commissions of approximately $45,000 earned and paid in 1997. (7) Includes sales commissions of approximately $25,000 earned and paid in 1999. 6 9 (8) Includes sales commissions of approximately $4,600 earned in 1997 and paid in 1998, and approximately $63,000 earned and paid in 1998. (9) Includes sales commissions of approximately $92,000 earned in 1996 and paid in 1997 and approximately $58,000 earned and paid in 1997. 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 following table sets forth stock options granted in 1999 to each of the Company's executive officers named in the Summary Compensation Table. The table also sets forth the hypothetical gains that would exist for the options at the end of their ten-year terms, assuming compounded rates of stock appreciation of 5% and 10%. The actual future value of the options will depend on the market value of the Company's Common Stock.

• --------------- (1) These amounts, based on assumed annually compounded appreciation rates of 5% and 10% as prescribed by Securities and Exchange Commission rules, are not intended to forecast possible future appreciation, if any, of the Company's stock price. The Company did not use an alternative formula for a grant date valuation of the options as it is not aware of any formula which will determine with reasonable accuracy a present value based on future unknown or volatile factors. (2) All such options were granted pursuant to the Company's 1995 Stock Option Plan and have an exercise price equal to the closing market price of a share of the Company's Common Stock on the American Stock Exchange on the respective grant date. 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 1999 to the Company's executive officers named in the Summary Compensation Table. 7 10 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 1999, 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 31,1999. 1984 AND 1995 STOCK OPTION PLANS AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES

• --------------- (1) This amount is calculated by multiplying the number of Common Shares underlying the options at December 31,1999 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 1999. 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 1999 compensation was paid to such executive officers, including those named in the Summary Compensation Table. The Board of Directors determined that compensation paid in 1999 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 1999. 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 1999 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. 8 11 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 such bonuses have been paid by the Company during the last three fiscal years. In 1999 the Board of Directors awarded special bonuses to Ernest A. Bates, M.D., Craig K. Tagawa and Richard Magary to recognize their key roles in the successful completion of the sale of the Company's diagnostic imaging business during 1998. 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 of 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 -- Corporate Development 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

CERTAIN RELATIONSHIPS AND RELATED TRANSLATIONS 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. Mr. Trotman served on and was Chair of the Compensation Committee of the Board of Directors during 1999. 9 12 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, 1999, indicate that during 1999 directors, officers and 10% shareholders of the Company filed all required reports within the periods established by applicable rules. 10 13 PERFORMANCE GRAPH, TOTAL RETURN TO SHAREHOLDERS The following graphs and tables compare cumulative total shareholder return on the Company's Common Shares ("ASHS total return") (i) with the cumulative total return of the Standard & Poor's 500 Stock Index ("S&P500") and with a group of peer companies in the diagnostic imaging industry, and (ii) with the cumulative total return of the S&P500 and with the Standard & Poors SmallCap 600 Stock Index ("S&P SmallCap600"), in each case during the five years ended December 31, 1999. The Company has determined that the comparison of ASHS total return with that of companies in the diagnostic imaging industry no longer is meaningful as it was in the past, because the Company sold its diagnostic imaging business in November 1998. Accordingly, such comparison is presented for the last time herein. The Company further believes that it is more meaningful now and in the future to compare the ASHS total return with that of the S&P SmallCap600. Accordingly, that comparison is presented for the first time herein, and the Company expects that it will continue to use such comparison in the future. PERFORMANCE GRAPH

PERFORMANCE GRAPH

11 14 INDEPENDENT AUDITORS The Company's consolidated financial statements for the year ended December 31, 1999 have been audited by Moss Adams LLP. The Board of Directors has appointed Moss Adams LLP to be the Company's independent auditors for the fiscal year ending December 31, 2000, subject to Shareholder ratification at the Meeting (see Proposal No. 2). The Company's consolidated financial statements for the year ended December 31, 1998 were audited by Grant Thornton LLP. The Company and Grant Thornton LLP had a long established relationship as Grant Thornton had served as the Company's tax advisor since 1990. On December 31, 1999 the local Grant Thornton office that provided accounting and tax services for the Company was sold to Moss Adams LLP, an accounting and consulting firm. 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. In light of its engagement of Grant Thornton (and, subsequently, of Moss Adams LLP as described above), 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 from E&Y to Grant Thornton LLP 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. The Company during its two most recent fiscal years and any subsequent interim period preceding its changes of independent accountant did not have any disagreements with the former accountants on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure. Representatives of Moss Adams 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 19, 2001. 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. 12 15 ANNUAL REPORT The Company's 1999 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 20, 2000 San Francisco, California 13 16 AMERICAN SHARED HOSPITAL SERVICES For the Annual Meeting of Shareholders to be held May 19, 2000 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS THE UNDERSIGNED HEREBY NOMINATE(S), CONSTITUTE(S) AND APPOINT(S) ERNEST A. BATES, M.D. AND RICHARD MAGARY, AND EACH OF THEM, ATTORNEYS, AGENTS, AND PROXIES OF THE UNDERSIGNED, WITH FULL POWERS OF SUBSTITUTION TO EACH, TO ATTEND AND TO ACT AS PROXY OR PROXIES OF THE UNDERSIGNED AT THE ANNUAL MEETING OF SHAREHOLDERS OF AMERICAN SHARED HOSPITAL SERVICES TO BE HELD ON MAY 19, 2000 AT 10:00 AM PACIFIC TIME AT THE PARK HYATT HOTEL, 333 BATTERY STREET, SAN FRANCISCO, CALIFORNIA, OR ANY ADJOURNMENTS THEREOF, AND TO VOTE AS SPECIFIED HEREIN THE NUMBER OF SHARES THAT THE UNDERSIGNED, IF PERSONALLY PRESENT, WOULD BE ENTITLED TO VOTE. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE FIVE PERSONS NOMINATED FOR ELECTION TO THE BOARD OF DIRECTORS AND "FOR" THE RATIFICATION OF MOSS ADAMS LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR 2000. 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, 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 AND "FOR" THE RATIFICATION OF INDEPENDENT ACCOUNTANTS. 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) 17 [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 the election of directors nominated herein, and FOR Proposal No. 2. The Board of Directors recommends a vote FOR election of the directors nominated herein and FOR the ratification of independent accountants. 1. ELECTION OF DIRECTORS. To elect five of the persons named below to the Board of Directors to serve until the 2001 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. 2. RATIFICATION OF INDEPENDENT ACCOUNTANTS. To ratify the appointment of Moss Adams LLP as the Company's independent accountants for the year ended December 31, 2000. [ ] FOR [ ] AGAINST [ ] ABSTAIN [ ] 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. 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.