UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
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American Shared Hospital Services
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than
AMERICAN SHARED HOSPITAL SERVICES |
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AMERICAN SHARED HOSPITAL SERVICES 601 Montgomery Street, Suite San Francisco, California 94111 NOTICE OF To be held on June TO THE SHAREHOLDERS OF AMERICAN SHARED HOSPITAL SERVICES: NOTICE IS HEREBY GIVEN that, pursuant to a call of the Board of the Directors (the “Board”), the
Daniel G. Kelly, Jr. Kathleen Miles Raymond C. Stachowiak Vicki L. Wilson
The Board knows of no matters, other than those set forth in paragraphs (1), (2), and (3) above, that will be presented for consideration at the Meeting. The Board has fixed the close of business on April WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING
Important Notice Regarding the Availability of Proxy Materials for Shareholder Meeting to Be Held on Tuesday, June25, 2024 at 9:00 a.m. Pacific Daylight Time The Proxy Statement, Proxy Card and Annual Report on Form 10-K are available at https://www.astproxyportal.com/ast/00186. AMERICAN SHARED HOSPITAL SERVICES 601 Montgomery Street, Suite San Francisco, California 94111 PROXY STATEMENT 2024 ANNUAL MEETING OF SHAREHOLDERS June 25, 2024INTRODUCTION 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 (the “Board”) for use at the The matters to be considered and voted upon at the Meeting will be:
Only shareholders of record at the close of business on April NOTICE OF ELECTRONIC AVAILABILITY OF PROXY STATEMENT AND ANNUAL REPORT As permitted by rules adopted by the Securities and Exchange Commission, we are making this Proxy Statement and our Annual Report available to stockholders electronically via the Internet. On or about April 29, 2024, we will mail to most of our shareholders a notice (the “Notice”) containing instructions on how to access this Proxy Statement and our Annual Report and to vote via the internet or by telephone. The Notice also contains instructions on how to request a printed copy of the proxy materials. In addition, you may elect to receive future proxy materials in printed form by mail or electronically by e-mail by following the instructions included in the Notice. If you have previously elected to receive our proxy materials electronically, you will continue to receive these materials via e-mail, unless you elect otherwise. 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 Solicitation of Proxies This proxy solicitation is being made by the Board of the Company. The expense of the solicitation will be paid by the Company. To the extent necessary to assure sufficient representation at the Meeting, proxies may be solicited by any appropriate means by directors, officers and employees of the Company Outstanding Securities The Board has fixed April
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1. | A shareholder may, with respect to the election of directors, (i) vote for the election of all |
2. | A shareholder may, with respect to the advisory vote on executive compensation, (i) vote for, or approve on an advisory basis, the compensation of our named executive |
3. | A shareholder may, with respect to the proposal to ratify the appointment of Moss Adam LLP as the Company’s Independent Registered Public Accounting Firm, (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 Common Shares held in street name on certain matters in the absence of instructions from the beneficial owner of the Common Shares. 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. Abstentions are included in the determination of the number of shares represented at the Meeting for purposes of determining whether a quorum is present.
The rules of the New York Stock Exchange (“NYSE”) determine whether proposals presented at shareholder meetings are routine or non-routine.non-routine matter. If a proposal is routine, a broker or other entity holding shares for ana beneficial owner in street name may vote for the proposal without receiving voting instructions from the beneficial owner under certain circumstances. If a proposal is non-routine, the broker or other entity may vote on the proposal only if the beneficial owner has provided voting instructions. A broker non-vote“broker non-vote” occurs when the broker or other entity is unable to vote on a proposal because the proposal is non-routine and the beneficial owner does not provide any voting instructions.
Under the NYSE rules, of the New York Stock Exchange, the election of directors in an uncontested election (Proposal 1), and the advisory vote on the compensation of our named executive compensationofficers (Proposal 2) are considered non-routine items. This means that brokers who do not receive voting instructions from their clients as to how to vote their clients’ shares for these proposals cannot exercise their discretionary authority to vote these clients’ shares for these proposals.proposals, in which case a broker non-vote will occur. Therefore, it is important that you instruct your broker as to how you wish to have your shares voted on these proposals, even if you wish to vote as recommended by the Board. The approval of the ratification of appointment of Independent Registered Accounting Firm (Proposal 3) is considered a “routine” matter under NYSE rules and therefore we do not expect any broker non-vote will occur.
Votes Required to Approve Each Proposal
A majority of the Common Shares outstandingentitled to vote on the Record Date must be represented in person or by proxy at the Meeting in order to constitute a quorum for the transaction of business.
Proposal 1: In the election of directors, the seven candidatesfour nominees receiving the highest number of votes will be elected directors of the Company.
Proposal 2: The compensation of our named executive officers will be approved, on a non-binding, advisory basis, by the affirmative vote of majority of the shares represented and voting (which shares voting affirmatively also constitute at least a majority of the required quorum). The outcome of the advisory vote on our executive compensation will not be binding on the Board. Therefore, there is no “required vote” on these resolutions. TheHowever, the Board, in the exercise of its fiduciary duties, will consider the outcome of the non-binding, advisory votes in determining how to proceed following such votes.
Proposal 3: The compensationapproval of our named executive officers will be approved, on an advisory basis, if the proposal receives the affirmative vote of a majority of the shares of common stock present in person or represented by proxy and entitled to vote on the proposal.
The proposal to ratify the appointment of Moss Adams LLP as the Company’s Independent Registered Public Accounting Firm requires for approval that athe affirmative vote of majority of thosethe shares represented and voting in person or by proxy vote FOR the proposal, provided that an affirmative vote(which shares voting affirmatively also representsconstitute at least a majority of the voting power required to constitute a quorum at the Meeting.quorum).
Provided that the quorum requirement is satisfied, (i) broker non-votes will have no effect on the outcome of the election of directors, (ii) votes withheld and votes against a director nominee have no legal effect for Proposal 1, and (iii) abstentions and broker non-votes will have no effect on determining whether the advisoryaffirmative vote on our executive compensation,constitutes a majority of the shares represented and (ii) abstentions would havevoting for Proposals 2 and 3. However, approval of Proposals 2 and 3 also require the effectaffirmative vote of a “No/Against vote”majority of the shares necessary to constitute a quorum, and therefore abstentions and broker non-votes could prevent the approval of these proposals because they do not count as affirmative votes, provided that no broker non-votes are expected for Proposal 3 on the advisory vote on our executive compensation, and the ratification of the appointment of the Company’s Independent Registered Public Accounting Firm. No broker non-votes are expected for the proposal on the ratification of the appointment of the Company’s Independent Registered Public Accounting Firm.
The Board has appointed Jacqueline Kretzu of American Stock Transfer & Trust Company, the registrar and transfer agent for the Common Shares, or her designee, as the Inspector of Elections forappointed by the Meeting. The Inspector of ElectionsBoard will determine the number of Common Shares represented in person or by proxy at the Meeting, whether a quorum exists, and 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 Meeting before the voting begins.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board of Directors
The Company’s current Amended and Restated Bylaws, as amended (the “Bylaws”) provide that there shall be no fewerless than fivefour nor more than nineseven directors. The number of directors currently is fixed at six until such timefour. Each of the seven nominatedcurrently serving directors have been elected at the 2016 Annual Meetingdate of Shareholders.this Proxy Statement is standing for re-election. There are currently no vacancies on the Board.
Board Leadership Structure
For many years our founder, Ernest A. Bates, M.D., has served as both Chairman and Chief Executive Officer (“CEO”) of the Company. In 2020, Dr. Bates retired as President and CEO of the Company but continued to serve as Executive Chairman through December 31, 2020 and Chairman through December 2021. Following Dr. Bates’ resignation as Chairman in December 2021, this position remained vacant until Raymond C. Stachowiak, then the Company’s CEO and a current director of the Board, was named Executive Chairman of the Board (the “Executive Chairman”) and resigned as CEO on March 7, 2023, with Peter Gaccione taking on the role of CEO in his place. At that time, the Board determined to bifurcate the Executive Chairman and CEO positions because Mr. Stachowiak retained significant executive duties, such as a number of direct reports, and strategic and operational responsibilities, as Mr. Gaccione transitions to his new role as Chief Executive Officer.
However, upon the passing of Peter Gaccione on April 10, 2024, Mr. Stachowiak returned to the role of CEO while retaining his position as Executive Chairman. The Board does not have a policy on whether the roles of Executive Chairman and CEO should be separate or combined but currently believes that Dr. Bates’ intimate knowledge of the Company’s business and customers, and his significant ownership of our common stock, closely align him withmost effective leadership structure for the interests of all of our constituencies and position him wellCompany is to lead the Board, whichcombine these responsibilities, particularly given Mr. Stachowiak’s previous experience in turn determines the Company’s overall direction. Since the Chairman and Chief Executive Officer positions are held by the same person, theboth positions. The Board has elected an independent, non-management director as the Lead Director to coordinate the activities of the other non-management directors and preside at their meetings. Mr. RuffleDaniel G. Kelly, Jr. currently serves as Lead Director. The Board believes that this structure provides effective and independent leadership and intends to continue to assess the characteristics and attributes of its leadership structure from time to time and may make additional changes as it deems appropriate.
Board’s
Board’s Role in Risk Oversight
Management, which is responsible for day-to-day risk management, continually monitors the material risks facing the Company, including strategic risks, operational risks, financial risks and legal and compliance risks. The Board is responsible for exercising oversight of management’s identification and management of, and planning for, those risks. The Board has delegated to certain committees oversight responsibility for those risks that are directly related to their area of focus. The responsibilities of the Board’s committees, and the areas of risk that they monitor, are described in detail in their charters. In summary, the Audit Committee oversees the preparation of the Company’sCompany's financial statements and the hiring and work of its independent auditors to mitigate the risk of non-compliance with the regulations of the Securities and Exchange Commission (the “SEC”) governing financial reporting. The Compensation Committee oversees the structure of the Company’s executive compensation program and has concluded that the program does not create a material risk that individuals will take excessive risks in order to impact their compensation. The Nominating and Corporate Governance Committee oversees Board organization, membership and structure, director and officer succession planning and corporate governance to promote compliance with the requirements of both state corporate laws and of securities regulators and stock exchanges. While management has the primary responsibility for identifying, assessing and managing risk, the ability of the Board to oversee management in this area is enhanced by the active participation of Dr. Bates as Chairman.
Nominees for Directors
The Board is proposing the persons named below for election to the Board. Each of the persons identified below will be nominated for election to serve until the next annual meeting of shareholders and until his successor shall be elected and have 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 is 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. Each of the nominees named below has notified the Board that, if elected, he is willingor she will agree to serve as a director.
Set forth below is certain information regarding each of the nominees.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF THE NOMINEES NAMED BELOW. PROPERLY EXECUTED PROXIES RETURNED TO THE COMPANY WILL BE VOTED “FOR” THE NOMINEES NAMED BELOW UNLESS OTHERWISE INSTRUCTED.
ERNEST A. BATES, M.D., founder of the Company, has served as Chairman of
KATHLEEN MILES was elected to the Board in December 2021. She currently serves as Chief Counsel, Public Finance of The PNC Financial Services Group, Inc., a position she has held since 2014. Ms. Miles has over 20 years of experience in public finance as both a lawyer and Chief Executive Officer since the incorporationa regulator. She earned a Bachelor's of the Company. A board-certified neurosurgeon, Dr. Bates is emeritus vice chairmanArts in Government from Radcliffe College of the Board of Trustees at Johns HopkinsHarvard University and serves on the Johns Hopkins Neurosurgery Advisory Board. He is an emeritus member of the board ata Juris Doctor from the University of Rochester, serves on the board of Shared Imaging, and also serves as a director for the Ernest A. Bates Foundation. Dr. Bates previously served on the California Commission for Jobs and Economic Growth and the Magistrate Judge Merit Selection Panel. From 1981 to 1987 he was a member of the Board of Governors of the California Community Colleges, and he served on the California High Speed Rail Authority from 1997 to 2003. Dr. Bates is a member of the Board of Overseers at the University of California, San Francisco,Virginia School of Nursing. HeLaw. Ms. Miles is a graduate of the School of Arts and Sciences of Johns Hopkins University, and he earned his medical degree at the University of Rochester School of Medicine and Dentistry. Dr. Bates is 7967 years old. Dr. Bates is the father of former Board member and current Company Vice President of Sales and Business Development, Ernest R. Bates.
DANIEL G. KELLY, JR., is a director nominee ofwas elected to the Company.Board in 2016. Mr. Kelly was a partner of Davis Polk &Wardwell& Wardwell LLP, an international law firm, from 1999 to 2015, co-founding its Silicon Valley office in 1999. During his time at Davis Polk, Mr. Kelly had an extensive corporate practice representing companies, private equity funds and financial institutions in a broad array of complex transactions, and also acted as a senior advisor to boards and special committees on numerous sensitive matters. Prior to joining Davis Polk, Mr. Kelly was a senior officer of a major investment banking firm, the chief legal officer of an NYSE-listed corporation and a partner involved in management of two other law firms. Mr. Kelly is a Trustee of Choate Rosemary Hall. Mr. Kelly received his B.A. in History from Yale University and his J.D. from Columbia University School of Law. Mr. Kelly is 64 years old.
DAVID A. LARSON, M.D., PhD, FACR, FASTRO, was elected to the Board in 2011. He is professor emeritus of Radiation Oncology at the University of California, San Francisco. Dr. Larson is also currently employed as a radiation oncology physician at the Washington Hospital Healthcare System Gamma Knife Program. He is an internationally recognized authority on brain tumors and on central nervous system and body radiosurgery, intensity modified radiotherapy, and highly conformal radiotherapy. He holds a PhD in High Energy Physics from the University of Chicago and an MD from the University of Miami School of Medicine. He completed his medical internship at the University of California, San Francisco and his radiation oncology residency training at Harvard Medical School, where he also served as attending physician and instructor. Dr. Larson has been a member of the UCSF academic faculty since 1986, leading to joint professorial appointments inBoard of Directors of Ares Capital Corporation, a specialty finance company listed on the Departments of Radiation Oncology and Neurosurgery. He has authored more than 200 scientific papers, reviews, and book chapters. He was elected by his peers to the presidency of numerous professional societies, including the American Society for Therapeutic Radiology and Oncology (ASTRO), the Northern California Radiation Oncology Society (NCROS), and the International Stereotactic Radiosurgery Society (ISRS). HeNasdaq Global Select Market. Mr. Kelly is a Fellow in the American College of Radiation Oncolgy (FACRO), the American College of Radiology (FACR), and the American Society for Radiology Oncology (FASTRO). He has been recognized as one of America’s top doctors every year since 1991. Dr. Larson is 7572 years old.
S. MERT OZYUREK was elected to the Board in 2011. He is currently the president of Ozyurek A.S., the preferred supplier of Elekta Gamma Knife systems to hospitals in Turkey, and EMKA, LLC, in the United States. After completing military service in the Turkish Air Force, he joined Ozyurek A.S., the family business as a sales manager for nine years before being appointed as the vice president in 1996. Mr. Ozyurek founded a marble export company in Turkey in 1995. He is a member partner in EWRS, LLC, the subsidiary that the Company developed for its operations in Turkey. He received a B.A. degree in Mining Engineering at Middle East Technical University in Ankara, Turkey. Mr. Ozyurek is 41 years old.
JOHN F. RUFFLE has been a director 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 is a trustee emeritus of Johns Hopkins University. From December 1996 to May 2009 he was a member of the board of trustees of certain mutual funds in the J.P. Morgan Family of mutual funds and certain investment funds managed by J.P. Morgan Investment Management, Inc. From March 2004 to January 2007, he was a director for Reckson Associates Realty Corp. Mr. Ruffle graduated from Johns Hopkins University, has an MBA in finance from Rutgers University, and is a former Certified Public Accountant. Mr. Ruffle is 79 years old.
RAYMOND C. STACHOWIAK joined the Board in 2009.2009 and was named the Company’s Executive Chairman in March 2023. He foundedalso currently serves as the Company’s CEO following the passing in April 24 of our former CEO, Mr. Gaccione. Mr. Stachowiak previously served as the Company’s CEO from October 2020 to March 2023 and served as the Company’s Interim President CEO from May 2020 to October 2020. Mr. Stachowiak previously served as President and Chief Executive Officer of Shared Imaging, a preferred independent provider of CT, MRI and PET/CT equipment and services, in 1994 with the purchase of the assets of Shared Imaging Partners, L.P. He served as president and CEO of Shared Imaging sincefrom its inception in December 1991 until his retirement in March 2013. In 2008, heMr. Stachowiak sold 50% of his interest in Shared Imaging to Lubar Equity Fund and remains its founder anda 50% owner. Heowner of Shared Imaging. Mr. Stachowiak is the sole owner of RCS Investments, Inc., and managerowner-manager of Stachowiak Equity Fund, both of which are private equity funds. Mr. Stachowiak received a B.S. in Business and an M.B.A. from Indiana University. He is also a director for Nano Gas Technologies, Inc. He received his undergraduate degree in Business from Indiana University in 1979Certified Public Accountant (inactive), Certified Internal Auditor (inactive) and received an MBA from Indiana University in 1985. Mr. Stachowiak previously obtained CPA (Certified Public Accountant), CPIM (Certificationholds a Certification in Production and Inventory Management) and CIA (Certified Internal Auditor) certifications.Management. Mr. Stachowiak is 5866 years old.
STANLEY S. TROTMAN, JR.,
VICKI L. WILSON was elected to the Board in 2021. She has been a directorserved as the Director, Finance and Administration and Chief Fiscal Officer, for the State of the CompanyIllinois Department of Transportation since 1996. He2022. From 2017 until 2022, she was the ManagingDeputy Director for Finance and Administration and Chief Fiscal Officer for the State of Illinois Department of Public Health. Ms. Wilson was the Director of Financial Control, Cook County Department of Homeland Security and Emergency Management from March 2017 to October 2017. Ms. Wilson has held numerous positions in finance, risk management and accounting in the public and private sectors, including with organizations and entities in healthcare. She earned a Bachelor’s of Arts in Mathematics from Wesleyan University, a Master’s in Business Administration from Harvard Business School and a Master’s in Public Health, Health Care Group at PaineWebber Incorporated since 1995 and retired in 2001, after the company was acquired by UBS Financial Services, Inc. in 2000. He is currently a director of Web MD Health Corp. Mr. Trotman received his undergraduate degreeAdministration, from Yale University in 1965 and obtained an MBA from Columbia Business School in 1967. Mr. TrotmanUniversity. Ms. Wilson is 7266 years old.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF THE NOMINEES NAMED ABOVE.
PROPERLY EXECUTED PROXIES RETURNED TO THE COMPANY WILL BE VOTED “FOR” THE NOMINEES NAMED ABOVE UNLESS OTHERWISE INSTRUCTED.
Meetings of the Board
The Board of the Company held four regular meetings during 2015.2023 and two special meetings. Each director attended at least 75% of the aggregate number of meetings of both the Board and of the Committees of the Board on which such director served during the year.
Shareholders may communicate with the Board by writing to: Four Embarcadero Center,to 601 Montgomery Street, Suite 3700,1112, San Francisco, CA 94111-4107, Attention: Ernest A. Bates, M.D. WeRaymond C. Stachowiak. Although the Company does not have a formal policy regarding attendance at the Company’s annual meeting, we encourage directors to attend our annual meeting and allmeeting. All directors attended the 2015 annual meeting2023 Annual Meeting of shareholdersShareholders (the “2023 Annual Meeting”) in person.person or virtually. All shareholder communications to directors are forwarded to them.
Committees of the Board and Director Independence
The Company has standing Compensation, Nominating and Corporate Governance and Audit Committees, each of which is described below. The Company is in compliance with The NYSE MKTAmerican Stock Exchange (“NYSE MKT”American”) enhanced board and board committee independence requirements that became fully applicable to the Company effective July 31, 2005.requirements. Mr. Kelly, Dr. Larson, Mr. Ruffle, Mr. StachowiakMs. Miles, and Mr. Trotman, Jr. areMs. Wilson were considered independent directors (or in the case of Mr. Kelly, an independent director nominee) under the NYSE MKTAmerican rules and Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”, and any rules promulgated thereunder, the “Exchange Act Rules”) during 2023. Furthermore, members of each of the Committeesstanding committees described above is comprised of independent directors.satisfy the independence requirements under applicable Exchange Act Rules and NYSE American rules. The only directors who arewere not independent during 2023 under NYSE MKTAmerican rules and Rule 10A-3 arethe applicable Exchange Act Rules were Dr. Bates, who was the Company’s CEO until May 4, 2020 and Executive Chairman through December 31, 2020 and Mr. Stachowiak, who is the Company’s Executive Chairman and Chief Executive Officer, and Mr. Ozyurek, who is not independent because during the most recent three years he served as an owner in an organization that has a business association with a subsidiary of the Company. See “Certain Relationships and Related Party Transactions — Related Party Transactions.” Officer.
Each of the Audit, Compensation and Nominating and Corporate Governance Committees has adopted a formal written charter. These charters, as well as our Code of ProfessionalBusiness Conduct and Ethics and our Corporate Governance Guidelines, are available on the Investor Relations section of our website atwww.ashs.com.at: www.ashs.com/investors/ and can be accessed through the “Corporate Governance” hyperlink under the “Investors” tab. You may also request a copy of these documents free of charge by writing our Corporate Secretary. We intend to post on our website any amendments to our Code of ProfessionalBusiness Conduct and Ethics, as well as any waivers for directors or executive officers (including our chief accounting officer and controller and anyone else performing similar functions) within fivefour (4) business days after the date of any amendment or waiver. The information on our website is not part of this proxy statement.Proxy Statement. The Company’s independent directors meet in executive session at least annually without management and the non-independent directors, as required by the NYSE MKTAmerican rules. The Lead Director presides at such meetings.
The Compensation Committee’s functions are to (i) establish compensation arrangements and incentive goals for executive officers, (ii) administer compensation plans, (iii) evaluate the performance of executive officers and award incentive compensation, (iv) adjust compensation arrangements as appropriate based upon performance, and (v) review and monitor management development and succession plans and activities. The Compensation Committee did not meet during 2015.met two times in 2023. The Compensation Committee meets on an as needed basis. The Compensation Committee during 20152023 consisted of Dr. Larson, Mr. RuffleKelly, Ms. Miles and Ms. Wilson. Mr. Trotman. Dr. LarsonKelly is Chair of the Compensation Committee.
The Compensation Committee is authorized to delegate its authority to a subcommittee when appropriate. It is authorized to hire independent compensation consultants and other professionals to assist in the design, formulation, analysis and implementation of compensation programs for the Company’s executive officers and other key employees. The Compensation Committee did not engage a compensation consultant during 2015. In determining or recommending the amount or form of executive officer compensation, the Compensation Committee also takes into considerationaccount the recommendations of its compensation consultant, if retained, as well as information received from the Company’s ChiefCEO and Executive Officer.Chairman. In doing so, however, the Compensation Committee customarily considers the comparative relationship of the recommended compensation to the compensation paid by other similarly situated companies, individual performance, tenure, internal comparability and the achievement of certain other operational and qualitative goals identified in the Company’s strategic plan.
The purpose of the Nominating and Corporate Governance Committee is to recommend candidates for election to the Board. The Nominating and Corporate Governance Committee met once during 2015.2023. In 2016,March 2024, the Nominating and Corporate Governance Committee recommended the nominations of Dr. Bates, Mr. Kelly, Dr. Larson, Mr. Ozyurek, Mr. Ruffle,Ms. Miles, Mr. Stachowiak and Mr. TrotmanMs. Wilson for election to the Board. During 2015, Dr. Larson, Mr. Ruffle, Mr. Stachowiak and Mr. Trotman served on2023, the Nominating and Corporate Governance Committee.Committee consisted of Mr. Trotman isKelly, Ms. Miles and Ms. Wilson. Ms. Miles served as the Chair of the Nominating and Corporate Governance Committee.
The purpose of the Audit Committee is to review the financial reporting and internal controls of the Company, to appoint the independent auditors, and to review the reports of such auditors. The Audit Committee held four meetings during 20152023. The Audit Committee during 2023 consisted of Mr. Ruffle, Mr. StachowiakKelly, Ms. Miles and Mr. Trotman. Mr. Ruffle isMs. Wilson. Ms. Wilson served as Chair of the Audit Committee. During fiscal 2015 the Audit Committee held eight meetings. For further information concerning the Audit Committee, refer to the “Audit Committee Report.” Mr. RuffleMs. Wilson is a “financial expert” and meets the applicable independence requirements of the NYSE MKTAmerican and Rule 10A-3 under the Securities Exchange Act.
Identifying and Evaluating Director Nominees
The Nominating and Corporate Governance Committee uses various methods to identify director nominees. The Nominating and Corporate Governance Committee assesses the appropriate size and composition of the Board and the particular needs of the Board based on whether any vacancies are expected due to retirement or otherwise. Candidates may come to the attention of the Nominating and Corporate Governance Committee through current boardBoard members, shareholders, or other sources. All candidates are evaluated based on a review of the individual’s qualifications, skills, independence and expertise.
To be eligible for consideration for the Board, any proposed candidate must be ethical, have proven judgment and experience, have professional skills and experience in dealing with complex problems that would be complementary to the needs of the Company, have demonstrated the ability to act independently, be willing to represent the interests of all shareholders and not just those of a particular interest, and be willing and able to devote sufficient time to fulfill the needs of a director of the Company.
The Company believes that gender and minority representation in the boardroom is a key aspect of attaining the diverse array of perspectives. In addition to evaluating directors’ qualifications, skills, independence and expertise, the Nominating and Corporate Governance Committee considers the gender, race, ethnicity, cultural background, and other diversity characteristics when making Board nomination decisions. Of the Board’s four directors, all of whom are being nominated for re-election to the Board, two directors are African American. In addition, two of the Board’s three standing committees are chaired by African American women. The Company believes that its commitment to create a diverse and inclusive culture is reflected in the diversity of its Board members and will continue to seek opportunities to advance its diversity efforts.
The Nominating and Corporate Governance Committee will consider director candidates submitted by shareholders to: Four Embarcadero Center,601 Montgomery Street, Suite 3700,1112, San Francisco, CA 94111-4107, Attention: Nominating and Corporate Governance Committee. Such recommendations should be accompanied by (i) evidence of the shareholder’s stock ownership over the last year, (ii) a statement that the shareholder is not a competitor of the Company, (iii) a resume and contact information for the director candidate, as well as a description of the candidate’s qualifications and (iv) a statement as to whether the candidate has expressed interest in serving as a director. The Nominating and Corporate Governance Committee follows the same process and uses the same criteria for evaluating candidates proposed by shareholders as it does for candidates proposed by other parties. The Nominating and Corporate Governance Committee will consider such candidacy and will advise the recommending shareholder of its final decision. A shareholder who wishes to nominate a person for director must provide the nomination in writing to our Corporate Secretary at the Company’s principal offices pursuant to the notice provisions in the Bylaws. Such notice must be received not less than 60 nor more than 90 days prior to the annual meetingAnnual Meeting or, if less than 70 days’ notice of the date of such meeting has been given, then within 10 business days following the earlier of 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.
Based on the process described above, the Nominating and Corporate Governance Committee recommended and the Board determined to nominate each of the incumbent directors for re-election and to nominate one new director at the Meeting. The Nominating and Corporate Governance Committee and the Board concluded that each of the incumbent directors should be nominated for re-election and the newly nominated director should be elected based on the experience, qualifications, attributes and skills identified in the biographical information contained in the ““Nominees”Nominees” section under ““Proposal No. 1: Election of Directors.” The Nominating and Corporate Governance Committee and the Board assessed several factors while considering the Company’s longstanding history of providing Gamma Knife and other medical services to hospitals and medical centers in the United States, and its anticipated growth in providing similar services internationally, as well as providing proton beam radiation therapy services in the United States. In particular, the Nominating and Corporate Governance Committee and the Board considered the following specific experiences, qualifications, attributes, skills and other factors:
• | The nominees all have extensive experience in leading and guiding business and professional organizations as both executive leaders and board members. | |
• | The nominees’ experiences reflect a range of occupations and industries, which provide diverse viewpoints in guiding the Company. Specifically, this includes financial services (Mr. Kelly, Ms. Miles, and Ms. Wilson), healthcare (Mr. Stachowiak), government and public policy (Mr. Kelly, Mr. Stachowiak and Ms. Wilson), international policy and development (Mr. Kelly and Mr. Stachowiak), and business development (all of the nominees). | |
• | The nominees have significant and substantive expertise in several areas that are applicable to the Board and its committees, including finance (all of the nominees), public company accounting and financial reporting (Mr. Kelly and Mr. Stachowiak), strategic planning (all of the nominees), operations management (Mr. Kelly, Mr. Stachowiak and Ms. Wilson) and corporate governance (all of the nominees). |
Director Compensation for Fiscal 20152023
The following table sets forth information regarding the compensation earned by or awarded to each non-employee director during 2023.
Name | Fees Earned or Paid in Cash (1) | Total | ||||||
Ernest A. Bates, M.D. (2) | $ | 50,000 | $ | 50,000 | ||||
Daniel G. Kelly, Jr. | $ | 50,000 | $ | 50,000 | ||||
Kathleen Miles | $ | 50,000 | $ | 50,000 | ||||
Vicki L. Wilson | $ | 50,000 | $ | 50,000 | ||||
(1) Consists of the 2015 Fiscal Year.annual retainer fees for service as members of the Company’s Board. Each non-employee director may choose to have the retainer paid in cash, or make an election to defer all or part of the retainer by converting it to a restricted stock unit award pursuant to the terms of the Company’s Deferral Election Program. No directors made an election to defer their 2023 retainer by converting such fee into a restricted stock unit award under the Company’s Incentive Compensation Plan. For further information concerning such deferral election, see the section below entitled “Deferral Election Program for Non-Employee Board Members”.
(2) Dr. Bates passed away on March 19, 2024.
 | | | | | | |||||||||||||||
| Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2)(3) | Option Awards ($)(4)(5) | All Other Compensation ($) | Total ($) | |||||||||||||||
| David A. Larson | 20,000 | 1,350 | 2,440 | 0 | 23,790 | |||||||||||||||
| S. Mert Ozyurek | 20,000 | 1,350 | 2,440 | 0 | 23,790 | |||||||||||||||
| John F. Ruffle | 20,000 | 1,350 | 2,440 | 0 | 23,790 | |||||||||||||||
| Raymond C. Stachowiak | 20,000 | 1,350 | 2,440 | 0 | 23,790 | |||||||||||||||
| Stanley S. Trotman | 20,000 | 1,350 | 2,440 | 0 | 23,790 | |||||||||||||||
Directors’ |
Directors’ Annual Retainer Fees
In 2015,2023, each non-employee director earned an annual retainer of $20,000.$50,000. Each director may choose to have the retainer paid in equal quarterly cash installments, or make an election prior to the beginning of the yearelect to defer all or part of the retainer by converting it to a restricted stock unit award pursuant to the terms of the Company’s Deferral Election Program, as discusseddescribed below. Non-employee directors also received reimbursement ofare reimbursed for the expenses incurred in attendingthey incur to attend Board meetings. No payment is made for attendance at meetings by any director who is a full time employee of the Company.
Deferral Election Program for Non-Employee Board Members
The Company provides a
Through its Deferral Election Program, for Non-Employee Board Members that is effective for compensation earned for Board service. The Deferral Election Program is designed to providethe Company provides each non-employee Board membersmember with the opportunity to defer all or a portion of the annual retainer fee they earnhe earns for service on the Board and Board committees by convertingcommittees. Such program allows each non-employee Board member to elect to convert all or a portion of such fee into a restricted stock unit award under the Company’s Incentive Compensation Plan. TheFor each continuing Board member the deferral election must be filed on or before December 31 of the calendar year preceding the calendar year for which the annual retainer fee is earned. TheFor each newly elected Board member, the deferral election must be filed within 30 days from the Board member’s commencement of Board service, and such election will apply to the portion of the retainer fee to be earned for the period of Board service measured from the first calendar quarter following the submission of the election to the Company.
For each continuing non-employee Board member, the number of restricted stock units to be issued as a result of the deferral election made by each Board member is determined fromby dividing the dollar amount subject to the non-employee director’s election by the closing market price of the Company’s common stock as of the first trading date in January of the calendar year in which the election is in effect. For each newly elected non-employee Board member, the number of restricted stock units to be issued as a result of the deferral election is determined by dividing the dollar amount subject to the non-employee director’s election by the closing market price of the Company’s common stock on the first trading date of the first calendar quarter following each election.the submission of the election to the Company. The issuance of the shares of the Company’s common stock that vest under the award is deferred until the Board member’s cessation of Board service. Other provisions in the program include pro-rata calculations for newly elected Board members, the terms
As of issuanceDecember 31, 2023, Mr. Kelly held deferred vested restricted stock unit awards covering 46,064 shares of the Company’s common stock upon cessationand none of Board service andthe other miscellaneous provisions.
Each non-employee director, with the exception of Mr. Ozyurek, made an election to defer their entire 2015 retainer by converting such fee into adirectors held deferred vested restricted stock unit award under the Company’s Incentive Compensation Plan covering 6,897 shares of the Company’s common stock.awards.
Directors’
Directors’ Equity Grants
Under the Automatic Grant Program of our Incentive Compensation Plan, each individual who first becomes a non-employee director will, at the time of his or her election to the board,Board, receive an initial equity award including an option grant to purchase a specified number of shares of our common stock and a restricted stock unit award covering an additional number of shares of our common stock, provided that such individual has not previously been in the employ of the Company or any of its parents or subsidiaries. The specific number of shares subject to thean initial equity award, if any, will be determined by the Compensation Committee of our Board, but will not exceed 10,000 shares for the option component or
3,000 shares for the restricted stock unit component. In addition, under this program, on the date of each Annual Shareholders Meeting,annual meeting of shareholders, each individual who will continue to serve as a non-employee director will automatically be granted an annual equity award including an option to purchase a specified number of shares of our common stock and a restricted stock unit award covering an additional number of shares of our common stock, provided such individual has served as a non-employee director for at least six months. The specific number of shares subject to thean annual equity award, if any, will be determined by the Compensation Committee, of our Board, but will not exceed 3,000 shares for the option component or 7501,000 shares for the restricted stock unit component. There will be no limit on the number of such annual awards any one eligible non-employee director may receive over his or her period of continued service on the Board, and non-employee directors who have previously been in the Company’s employ will be eligible to receive one or more such annual awards over their period of service on the Board. Each initial stock option and restricted stock unitequity award will vest in four equal annual installments upon the individual’s completion of each year of service. Each annual stock option and restricted stockequity award will vest in one installment upon the individual’s completion of one year of boardBoard service.
On the day
No equity awards were granted to non-employee directors in 2023. As of the 2015 annual meeting of shareholders, non-employee Board members Dr. Larson,December 31, 2023, Mr. Ozyurek, Mr. Ruffle, Mr. Stachowiak and Mr. Trotman each received an optionKelly held options to purchase 2,0008,000 shares of the Company’s common stock pursuant tothat were granted under the termsAutomatic Grant Program of the Company’s Incentive Compensation Plan. The exercise price of these awards was $2.58 per share, the fair market value of the Company’s common stock on that date. Each director also received a grant of 500Ms. Miles and Ms. Wilson were each granted 3,000 restricted stock units pursuant tounder the terms of the Incentive Compensation Plan.
On the day of the Meeting,Automatic Grant Program upon re-electiontheir election to the Board non-employee Board members will each receive an option to purchase 2,000 sharesin 2021. 1,500 of the Company’s common stock at an exercise price per share equal to the fair market value of the Company’s common stock on the date of the Meeting, and a grant of 500 restricted stock units pursuantgranted to each of Ms. Miles and Ms. Wilson are fully vested and the termsremainder of the Incentive Compensation Plan. A newly elected non-employee Board member will receive an option to purchase 5,000 shares of the Company’s common stock at an exercise price per share equal to the fair market value of the Company’s common stock on the date of the Meeting, and a grant of 500 restricted stock units pursuant to the terms of the Incentive Compensation Plan.vest in equal installments on December 28, 2024 and December 28, 2025.
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, 201626, 2024 of (i) each person known to the Company to own beneficially 5% or more of the Common Shares, (ii) each nominee for director of the Company, (iii) each executive officer, named in the Summary Compensation Table, and (iv) all directors and executive officers as a group. Except as otherwise indicated in the footnotes to the table or for shares of common stockCommon Shares held in brokerage accounts, which may from time to time, together with other securities held in those accounts, serve as collateral for margin loans made from such accounts, none of the shares reported as beneficially owned are currently pledged as security for any outstanding loan or indebtedness.
Common Shares Owned Beneficially | ||||||||
Name and Address of Beneficial Owner (1) | Amount and Nature of Beneficial Ownership (2) | Percent of Class (3) | ||||||
Directors and Named Executive Officers | ||||||||
Daniel G. Kelly, Jr. (4) | 57,664 | * | % | |||||
Kathleen Miles | 1,500 | * | % | |||||
Raymond C. Stachowiak (5) | 1,389,737 | 21.7 | % | |||||
Vicki L. Wilson | 1,500 | * | % | |||||
Craig K. Tagawa | 29,888 | * | % | |||||
All Current Directors & Executive Officers as a Group (6) | 1,484,289 | 23.0 | % | |||||
5% or More Shareholders: EAB Admin Trust (7) | 592,205 | 9.4 | % | |||||
John F. Ruffle (8) | 410,476 | 6.5 | % | |||||
| | | ||||||
| Common Shares Owned Beneficially | ||||||||
| Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership(2) | Percent of Class(3) | ||||||
| Directors and Named Executive Officers | ||||||||
| Ernest A. Bates, M.D.(1)(4) Chairman of the Board and Chief Executive Officer | 617,470 | 11.4 | % | |||||
| Daniel G. Kelly(1) | 100 | — | ||||||
| David A. Larson, M.D.(1)(5) | 67,834 | 1.3 | % | |||||
| S. Mert Ozyurek(1)(6) | 92,500 | 1.7 | % | |||||
| John F. Ruffle(1)(7) | 553,309 | 10.1 | % | |||||
| Raymond C. Stachowiak(1)(8) | 711,389 | 12.9 | % | |||||
| Stanley S. Trotman, Jr.(1)(9) | 346,508 | 6.4 | % | |||||
| Ernest R. Bates(1)(10) Vice President of Sales and Business Development | 39,329 | 0.7 | % | |||||
| Craig K. Tagawa(1)(11) Senior Vice President, Chief Operating and Financial Officer | 58,672 | 1.1 | % | |||||
| All Current Directors & Executive Officers as a Group (8 people)(12) | 2,487,011 | 42.4 | % | |||||
| 5% or More Shareholders None | ||||||||
* | Less than 1% |
(1) | Except as otherwise set forth below, the address of each |
(2) | Except as otherwise set forth below, each person directly or indirectly has sole voting and |
(3) | The percentages are calculated based on a total of |
(4) | Includes |
(5) | Includes |
(6) | Includes an aggregate of 134,742 common shares issuable upon exercise of stock options and vesting of restricted stock units within 60 days of April 26, 2024. |
| (7) | Includes 592,205 shares held by the EAB Admin Trust dated February 4, 2011, as amended. Kathryn McMorrow is the sole trustee of the trust and has the sole power to vote and dispose of the shares. These shares were beneficially owned by Ernest A. Bates, M.D. prior to his passing on March 19, 2024. |
(8) | The information with respect to Mr. Ruffle is based on Amendment No. 4 to the Schedule 13D filed by John Ruffle which disclosed that Mr. Ruffle has sole power to dispose of and sole power to vote 410,746 shares. The address for Mr. Ruffle is 603 Mountain Avenue, Apartment 231, New Providence, New Jersey 07974 |
PROPOSAL NO. 2
ADVISORY VOTE ON THE COMPANY’SCOMPANY’S EXECUTIVE COMPENSATION
Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in July 2010 (“Dodd-Frank”), we are providing our shareholders with the opportunity to vote to approve, on a non-binding, advisory basis, the compensation of our three senior executivesnamed executive officers (the “Named Executive Officers”) during 2023 as disclosed in this proxy statementProxy Statement in accordance with the compensation disclosure rules of the Securities and Exchange Commission.SEC. Shareholders are encouraged to read the “Compensation Discussion and Analysis”“Narrative Disclosure Regarding Compensation” section of this proxy statementProxy Statement for a more detailed discussion of how our compensation programs further the Company’s objectives.
At this meeting, the shareholders will be asked to vote, on a non-binding, advisory basis, on the following resolution:
“RESOLVED, that the shareholders approve the compensation paid to the Company’s Named Executive Officers as disclosed pursuant to Item 402 of Regulation S-KS‑K in the Narrative Disclosure Regarding Compensation, Discussion and Analysis, compensation tables and related narratives and other materials in this Proxy Statement.”
Our Board and Compensation Committee urge shareholders to endorse the compensation program for our executive officers by voting FOR the above resolution. The Board is committed to excellence in governance and recognizes that executive compensation is an important matter for our shareholders. The Board and the Compensation Committee believe that the Company’s executive officer compensation program, as described in the Narrative Disclosure Regarding Compensation Discussion and Analysis and other related sections of this proxy statement,Proxy Statement, is reasonable and effective in aligning the interests of the executive officers with both the short and long-term interests of the Company’s shareholders. We believe that our executive compensation program is designed to reward our Named Executive Officers for the achievement of short-term and long-term strategic and operational goals and the achievement of increased total shareholder value while at the same time avoiding the encouragement of unnecessary or excessive risk-taking. In particular, as described in detail in our “Compensation Discussion and Analysis”“Narrative Disclosure Regarding Compensation” below, our program has the following features.
In August 2020, Meridian provided the Board a compensation report based on a group of similar sized companies chosen by Meridian as comparable to the Company. Based in part on the data and recommendations in the Meridian report, the Compensation Committee adopted a variable compensation plan (“VCP”) for certain executives that went into effect on January 1, 2021, and was continued (with updated metrics) in 2023, as described in more detail below. The baseCompensation Committee expects to set executive compensation beginning in 2024 with an updated survey prepared by Meridian.
A substantial portion of Mr. Stachowiak’s compensation is comprised of restricted stock which the Compensation Committee believes is effective in further aligning him with the interests of shareholders. Mr. Stachowiak is also the Company’s largest shareholder. Mr. Stachowiak’s salary in 2023 was $275,000 which is unchanged from 2022.
In March 2023, Mr. Gaccione’s salary was increased from $275,000 to $325,000 in connection with his promotion from Chief Operating Office to Chief Executive Officer.
As part of our Chairmancontinued focus on variable compensation, Mr. Tagawa’s salary was reduced from $300,000 to $240,000 in April 2023.
Our directors and CEO has not been increased in ten years and that of the other Named Executive Officers has not been increased in nine years. Our Chairman and CEO reduced his salary by 10% in 2013, and such reduction remains in effect as of the date hereof.
None of the Named Executive Officers currently has an employment agreement containingor a guaranteed term of employment or providing for any change-in-control or other severance payments.agreement.
The vote on this resolution is not intended to address any specific element of compensation; rather, the vote relates to the compensation of our Named Executive Officers, as described in this proxy statementProxy Statement in accordance with the compensation disclosure rules of the Securities and Exchange Commission.SEC. This vote is advisory, which means that it is not binding on us, our Board or the Compensation Committee of our Board. However, the Compensation Committee and our Board value the views of our shareholders and expect to take into account the outcome of the vote when considering future compensation decisions for our Named Executive Officers.
Unless the Board modifies its policy on holding advisory votes on the compensation of our Named Executive Officers, the next advisory vote will occur at the 2025 annual meeting of shareholders (the “2025 Annual Meeting”).
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR”“FOR” THE ABOVE RESOLUTION TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.
PROPERLY EXECUTED PROXIES RETURNED TO THE COMPANY WILL BE VOTED “FOR” THE APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS UNLESS OTHERWISE INSTRUCTED.
COMPENSATION OF EXECUTIVE OFFICERS
Narrative Disclosure Regarding Compensation
The purpose of this Narrative Disclosure Regarding Compensation Discussion and Analysis
Introduction. It is our intent in this Compensation Discussion and Analysis to inform our shareholders of the policies and objectives underlying the compensation programs for our three(i) all individuals serving as principal executive officer or acting in a similar capacity in 2023 and (ii) each of its other two most highly compensated executive officers Dr. Ernest A. Bates, Chairmanwhose total compensation for 2023 was in excess of our Board$100,000 and our Chiefwho were serving as executive officers at the year end of 2023 (the “Named Executive Officer, Craig K. Tagawa, our Chief Financial Officer and Chief Operating Officer, and Ernest R. Bates, our Vice President of Sales and Business Development. Officers”).
The Compensation Committee of our Board administers the compensation programsprogram for our executive officersNamed Executive Officers with the objective of providing a competitive compensation package. However, we also believe that the compensation paid to our executive officersNamed Executive Officers should also be substantially dependent on our financial performance and the value created for our shareholders. For this reason, beginning in 2021 we instituted the VCP where our Named Executive Officers (other than Mr. Stachowiak) could earn bonuses based on the achievement of specific financial targets. Additionally, in 2023, we instituted a commission plan (the “Commission Plan”) where our Named Executive Officers (other than Mr. Stachowiak) could earn cash bonuses based on securing new business and extending existing client agreements. Under the Commission Plan, Named Executive Officers could receive a percentage of revenues for assisting in the signing of new clients and a set payment based on the length of extension for existing clients.
Highlights of Our 2023 Executive Compensation Committee also utilizes our compensation programs to provide meaningful incentives for the attainment of our short-term and long-term strategic objectives and thereby reward those executive officers who make a substantial contribution to the attainment of those objectives.Practices
• | Independent Committee. Our Compensation Committee is comprised solely of independent directors. |
• | No Guaranteed Salary Increases or Bonuses. None of our Named Executive Officers is guaranteed salary increases or bonuses for any year. |
• | Performance-Based Compensation. In 2023, pursuant to the VCP and the Commission Plan, the Named Executive Officers (other than Mr. Stachowiak) could earn bonuses only upon the achievement of specific financial and operational performance targets. |
• | Compensation Recoupment Policy. In 2023, we adopted an executive compensation recoupment policy, which mandates that we recuperate any erroneously-awarded incentive-based compensation resulting from designated accounting restatements. |
• | No Special Cash Severance Provisions. None of our Named Executive Officers has an employment agreement or a severance agreement. |
• | Equity Ownership. Our directors and executive officers as a group own approximately 21% (not including shares issuable upon exercise of stock options and vesting of restricted stock units within 60 days of April 26, 2024) of the issued and outstanding shares, which directly aligns their interests with that of the other shareholders. |
• | No Excise Tax Gross-ups. Our Named Executive Officers do not receive tax “gross-ups” in connection with severance or change-in-control arrangements or otherwise. |
• | No Pension Plans. None of our Named Executive Officers participates in any pension arrangements, defined benefit retirement plans, or nonqualified deferred compensation plans. None of our Named Executive Officers has supplemental executive retirement benefits. |
Compensation PolicyPhilosophy for Named Executive Officers.
We have designed the various elements comprising theseek to provide compensation packages offor our executive officersNamed Executive Officers to achieve the following objectives:
attract, retain, motivate and engage executives with superior leadership and management capabilities,
provide an overall level of compensation to each executive officerNamed Executive Officer which is externally competitive, internally equitable and performance-driven, and
ensure that total compensation levels areearned by our Named Executive Officers is reflective of our financial performance and provide the executive officeraligned with the opportunity to earn above-market total compensation for exceptional business performance.
Each executive officer’s compensation package typically consistsinterests of three elements: (i) a base salary, (ii) a cash bonus tied to our attainment of financial objectives or the individual officer’s personal performance, and (iii) long-term, stock-based incentive awards designed to align and strengthen the mutuality of interests between our executive officers and our shareholders. In determining the appropriate level for each element of such compensation, the Compensation Committee subjectively reviews and evaluates the level of performance of the Company and the executive’s level of individual performance and potential to contribute to the Company’s future growth, and seeks to set compensation at a level that is both reasonable and equitable based on that assessment. Consistent with our philosophy of emphasizing pay for performance, the total compensation packages are designed to pay above the target when the Company exceeds its goals and below the target when the Company does not achieve its goals.
Elements of Compensation. Each
In determining the appropriate level for each element of the three major elements comprising thesuch compensation, package for our executive officers (salary, bonus and equity) is designed to achieve one or more of our overall objectives in fashioning a competitive level of compensation, tying compensation to the attainment of one or more of our strategic business objectives and subjecting a substantial portion of the executive officer’s compensation to our financial success as measured in terms of our stock price performance. The manner in which the Compensation Committee has so structured each elementreviews and evaluates the level of performance of the Company and the Named Executive Officer’s level of individual performance and potential to contribute to the Company’s future growth, and seeks to set compensation may be explained as follows.at a level that is both reasonable and equitable based on that assessment. We also take into account our shareholders’ opinions on our executive compensation programs when determining whether to make any changes to our programs year over year.
Non-Binding, Advisory Vote on Executive Compensation. We conducted a non-binding, advisory vote on executive compensation at our 2023 Annual Meeting and will again conduct a vote in 2024. Approximately 90% of the votes cast on the advisory vote on executive compensation proposal at our 2023 Annual Meeting were in favor of our Named Executive Officer compensation program as disclosed in the 2023 proxy statement. While this vote was not binding on the Company, our Board or our Compensation Committee, we believe that it is important for our shareholders to have an opportunity to vote on this proposal as a means to express their views regarding our executive compensation philosophy, our compensation policies and programs, and our decisions regarding executive compensation, all as disclosed in our Proxy statement.
Executive Chairman Compensation. On March 24, 2023, the Compensation Committee approved an annual base salary of $275,000 for Mr. Stachowiak in connection with his service as the Company’s Executive Chairman in 2023. The Compensation Committee also approved a grant of 120,000 restricted stock units to Mr. Stachowiak with a grant date of March 28, 2023. The RSUs vested in four equal installments during 2023. Mr. Stachowiak does not participate in the VCP or the Commission Plan.
Base Salary. The Compensation Committee periodically reviews the base salary level of each executive officer. The base salarysalaries for the executive officers isare determined on the basis of their level of responsibility, experience and individual performance. Dr. Bates agreed to a pay reduction of 10% in 2013, which remained in effect
Variable Compensation Plan. The Company’s VCP provides an opportunity for the 2015 year.Named Executive Officers (other than Mr. Stachowiak) to earn additional compensation if through their efforts the Company achieved pre-established targets that would improve its financial performance and position it for future growth and profitability.
Cash Incentive Compensation.Commission Plan. BecauseMr. Gaccione and Mr. Tagawa were eligible to receive commission payments under the Commission Plan for their efforts in securing new clients and extension of existing client agreements.
The Compensation Committee believes thatcreated a grid of targets based on the significant interests which the executive officers have in our common stock provide them with a substantial incentive to contribute to our financial successBoard-approved Operating Plan for 2023 for each Named Executive Officer (other than Mr. Stachowiak) and the attainmentamount of our financialsupplemental compensation payable for achieving these in whole or in part. These targets covered new business origination, revenues, net income and EBITDA as well as goals for portions of the Compensation Committee does not typically implement annualbusiness that were under the personal guidance of these executives. The VCP also contains two “gates” that had to be achieved before any incentive compensation programswould be paid. These gates were based on projected net income and EBITDA under the Operating Plan. The bonuses would not be paid unless the gates would be achieved after deducting the amount of incentive compensation payable under the VCP. Any incentive compensation earned under the VCP is payable 75% in cash and 25% in restricted stock units, which vest in 6 months. The amount that could have been received under the VCP for them. From timethe Named Executive Officers (other than Mr. Stachowiak) ranged from 10% of base salary to time,50% of base salary for Mr. Gaccione and 6% of base salary to 31% of base salary for Mr. Tagawa, with the Compensation Committee awards cash bonusestarget amount for Mr. Gaccione being set at 40% of his base salary and the target amount for Mr. Tagawa being set at 25% of his base salary. Assuming the targets were met, the resulting total compensation of the Named Executive Officers would fall within the compensation ranges for comparable companies and positions in recognition of their personal performance. However, for fiscal 2015, no cash bonuses or commissions were awardedthe studies compiled by the Compensation Committee toCommittee’s outside independent compensation consultant in 2020. Because neither the Company’s executive officers.minimum EBITDA nor the minimum net income “gates” were achieved during 2023, there were no VCP payments awarded for the year. During 2023 Messrs. Gaccione and Tagawa received cash payments of $30,125 and $30,125, respectively, under the Commission Plan based on revenue generated on signing of new clients and a set payment based on the length of extension for existing clients.
Executive Equity Compensation. For many years stock option grants were the sole form of equity award granted to our executive officers, and we continue to use stock option grants to provide long-term incentives to our executive officers. However, our Our Incentive Compensation Plan provides us with flexibility in designing equity incentives in an environment where a numberand granting different types of companies have moved from traditional option grants to other stock or stock-based awards, such as stock appreciation rights, restricted stock and restricted stock units. Accordingly,equity awards. As described above, under the Incentive Compensation Plan, we have a broad arrayVCP, 25% of equity incentives to utilize for purposes of attracting and retaining the services of key individuals, including stock options, stock appreciation rights, restricted stock,earned bonus award is paid in restricted stock units and other stock-based awards.a portion of the compensation to our Executive Chairman is paid in restricted stock units. We continue to rely on equity incentives because we believe that suchequity incentives are necessary for us to remain competitive in the marketplace for executive talent and other key employees.
Despite the significance equity awards play in our compensation packages,
Because the Company is concerned aboutcognizant of the dilutive effect of equity awards on our shareholders; accordingly,shareholders, the Company is committed to using equity incentive awards prudently and within reasonable limits.
As a result of our measured approach to the use of equity incentive awards, as of April 15, 2016,26, 2024, of the 1,630,0002,580,000 shares of our common stock authorized for award under our Incentive Compensation Plan, 679,527approximately 744,000 shares remainedremain available for future award under the plan.
The Compensation Committee generally reviews and considers equity awards in connection with the annual review of the performance of our executive officers and other key employees. However, there may be variance from this practice when warranted by special circumstances. Each grant is designed to align the interests of the executive officer with those of the shareholders and to provide each individual with a significant incentive to manage the company from the perspective of an owner with an equity stake in the business. In past years, the equity awards have been in the form of stock options which generally vest and become exercisable in a series of installments over a five year service period, contingent upon the officer’s continued employment with us. Accordingly, each such option will provide a return to the executive officer only to the extent he remains employed with us during the vesting period, and then only if the fair market value of the underlying shares appreciates over the period between grant and exercise of the option. There were no options granted to Dr. Bates, Mr. Tagawa or Mr. Bates in 2015.
Market Timing of Equity Awards. The Compensation Committee does not engage in any market timing of the equity awards made to the executive officers or other award recipients. As indicated above, awards for existing executive officers and employees are considered in connection with the annual review process which typically occurs in the fourth quarter each year. There is no established practice of timing our awards in advance of the release of favorable financial results or adjusting the award date in connection with the release of unfavorable financial developments affecting our business. Equity awards for new hires other than executive officers are typically made at the next scheduled Compensation Committee meeting following the employee’s hire date. All stock option grants issued under our Incentive Compensation Plan have an exercise price per share no less than the fair market value per share on the grant date.
Executive Officer Perquisites. It is not our practice to provide our executive officers with any meaningful perquisites.
OtherHealth and Retirement Programs. Our executive officers are eligible to participate in our 401(k) plan and our flexible benefit plan on the same basis as all other regular U.S. employees.
Deferred CompensationExecutive Officer Perquisites and Other Programs. It is not our practice to provide our executive officers with any meaningful perquisites. We have not implemented any pension arrangements, defined benefit retirement arrangements, non-qualified deferred compensation programs for our executive officers or any supplemental executive retirement plans.plans for our executive officers.
Employment Agreements. None of the executive officers has an employment or severance agreement.
ComplianceCompensation Committee Processes
Role of Compensation Consultant
Pursuant to its charter, the Compensation Committee has the authority to retain the services of one or more external advisors, including compensation consultants, legal counsel, accounting, and other advisors, to assist it in performance of its duties and responsibilities. The Compensation Committee makes all determinations regarding the engagement, fees, and services of these external advisors, and any such external advisor reports directly to the Compensation Committee.
The Compensation Committee previously engaged Meridian to assist it in connection with Internal Revenue Code Section 162(m)its review, analysis, and determinations with respect to the compensation of our executive officers.
The Compensation Committee also received the advice of Meridian in 2020 in connection with designing compensation arrangements with Dr. Bates and Mr. Stachowiak in connection with their executive transition and the evaluation of the competitiveness of the Company’s compensation measured against an updated peer group.
The Compensation Committee may engage a compensation consultant or hire additional advisors at any time. All decisions regarding the compensation of our executive officers, however, are made by the Compensation Committee.
Use of Competitive Compensation Data.
We do not believe that it is appropriate to make compensation decisions, whether regarding base salaries or annual or long-term incentive compensation, upon any type of benchmarking to a peer or other representative group of companies. Instead, the Compensation Committee believes that information regarding the compensation practices at other companies are useful as a reference point for its compensation decisions.
Tax Considerations. Section 162(m) of the Internal Revenue Code disallows a tax deduction to publicly held companies for compensation paid to certain of their executive officers to the extent such compensation exceeds $1.0 million per covered officer in any year. ThePrior to the enactment of the Tax Cuts and Jobs Act of 2017 (the “TCJA”), this limitation appliesapplied only to compensation that is not considered to be performance-based under the terms of Code Section 162(m). The stock options which have been granted to date to, and our executive officers are intended to qualify as performance-based compensation.
Our Incentive Compensation Plan has beenwas structured with the objective of providing the Company with the opportunity to qualify one or more awards under the plan as performance-based compensation for purposes of Code Section 162(m). However, Code Section 162(m) requires that the material terms of performance goals pursuant to which performance-based awards under the Plan may become payable be disclosed to and approved by a majority of the Company’s shareholders every five years. The Company’s shareholders last approved the performance goals pursuant to which performance-based compensation may be paid under the Plan at the June 16, 2015 annual meeting of the shareholders.
Non-performance-based compensation paid to covered officers for 2015 did not exceed the $1.0 million limit per officer. However,Regardless, we believe that in establishing the cash and equity incentive compensation programs for our executive officers, the potential deductibility of the compensation payable under those programs should be only one of a number of relevant factors taken into consideration, and not the sole governing factor. For that reason, we may deem it appropriate to provide one or more executive officers with the opportunity to earn incentive compensation whether through cash bonuses under the Incentive Compensation Plan or through equity awards, which together with base salary in the aggregate may be in excess of the amount deductible by reason of Section 162(m) or other provisions of the Internal Revenue Code. We believe itthat is important to maintain cash and equity incentive compensation at the levels needed to attract and retain the executive officers essential to our success, even if all or part of that compensation may not be deductible by reason of the Section 162(m) limitation.deductible.
Advisory Vote on Executive Compensation. We conducted an advisory vote on executive compensation at our 2015 annual meeting of shareholders. While this vote was not binding on the Company, our Board or our Compensation Committee, we believe that it is important for our shareholders to have an opportunity to vote on this proposal as a means to express their views regarding our executive compensation philosophy, our compensation policies and programs, and our decisions regarding executive compensation, all as disclosed in our Proxy statement. Our Board and our Compensation Committee value the opinions of our shareholders and, to the extent there is any significant vote against the compensation of our named executive officers as disclosed in this proxy statement, we will consider our shareholders’ concerns and the Compensation Committee will evaluate whether any actions are necessary to address those concerns.
In addition to our non-binding, advisory vote on executive compensation, we are committed to ongoing engagement with our shareholders on executive compensation and corporate governance issues.
At
Compensation Recoupment Policy
On October 2, 2024, the 2015 annual meetingCompany adopted a Compensation Recoupment Policy that applies to all incentive-based compensation received by current and former executive officers. The policy complies with the requirements of shareholders, approximately 76%Section 811 of the votes cast onCompany Guide of NYSE American LLC and the advisory vote on executive compensation proposal werefinal clawback rules adopted by the Securities and Exchange Commission pursuant to Section 10-D and Rule 10D-1 of the Exchange Act. Pursuant to the policy, if the Company is required to prepare an accounting restatement of all or any portion of its financial statements due to the Company’s material noncompliance with any financial-reporting requirement under applicable U.S. federal securities laws, including any required accounting restatement to correct an error in favor of our named executive officer compensation as disclosedpreviously issued financial statements that is material to the previously issued financial statements, or that would result in a material misstatement if either corrected or left uncorrected in the proxy statement, and as a result our named executive officer compensation was approved. The Board and Compensation Committee reviewed these final vote results in the context of our overall compensation philosophy and programs, and based on the level of support, determined that no significant changes to our compensation policies and programs were necessary at this time. Nevertheless, as discussed in this Compensation Discussion and Analysis,current period (such restatement, an “Accounting Restatement”), the Compensation Committee doesof the Board will review any incentive-based compensation received by an executive officer of the Company during the three-year lookback period preceding the date on which the Company is required to make modifications periodicallyan Accounting Restatement. Any right of recoupment under the Compensation Recoupment Policy is in addition to ourany other remedy or means of recoupment the Company may have under law or under any applicable provisions in plans, agreements, awards, or other arrangements that contemplate the recoupment of compensation from an executive compensation programs to more closely align our executive compensation with the interests of our shareholders.officer.
Summary Compensation Table
The following table provides certain summary information concerning the compensation earned for services rendered in all capacities to the Company and its subsidiaries for the yearyears ended December 31, 20152023 and December 31, 2022 by the Company’s ChiefNamed Executive Officer, Chief Operating and Financial Officer, and Vice President of Sales and Business Development. No other individuals who would have been includable in such table on the basis of total compensation for fiscal 2015 but for the fact that they were no longer serving as executive officers at the end of fiscal 2015 are required to be included. The listed individuals are hereinafter referred to as the “named executive officers.”Officers.
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| Name and Principal Position | Year | Salary ($)(1) | Bonus | Option Awards ($)(2) | All Other Compensation ($)(3) | Total ($) | ||||||||||||||||||
| Ernest A. Bates, M.D., Chairman of the Board and Chief Executive Officer | 2015 | 434,304 | — | — | 22,840 | 457,144 | ||||||||||||||||||
| 2014 | 434,304 | — | 174,000 | 32,040 | 640,344 | |||||||||||||||||||
| Craig K. Tagawa, Chief Operating Officer and Chief Financial Officer | 2015 | 300,000 | — | — | 16,600 | 316,600 | ||||||||||||||||||
| 2014 | 300,000 | — | 189,000 | 12,460 | 501,460 | |||||||||||||||||||
| Ernest R. Bates, Vice President of Sales and Business Development | 2015 | 250,000 | — | — | 19,122 | 269,122 | ||||||||||||||||||
| 2014 | 250,000 | — | 141,750 | 16,956 | 408,706 | |||||||||||||||||||
Name and Principal Position | Year | Salary (1) | Bonus | Stock Awards (2) | Option Awards (3) | Nonequity Incentive Plan Compensation ($) | All Other Compensation (4) | Total ($) | |||||||||||||||||||||
Raymond C. Stachowiak, | 2023 | $ | 275,000 | -- | $ | 351,600 | -- | -- | $ | 626,600 | |||||||||||||||||||
Executive Chairman | 2022 | $ | 272,000 | $ | 288,000 | $ | 560,000 | ||||||||||||||||||||||
Peter M. Gaccione, | 2023 | $ | 315,385 | $ | 32,500 | $ | 81,315 | $ | 30,125 | $ | 13,214 | $ | 472,539 | ||||||||||||||||
Chief Executive Officer | 2022 | $ | 77,300 | -- | $ | 74,734 | $ | 40,000 | $ | 192,034 | |||||||||||||||||||
Craig K. Tagawa, | 2023 | $ | 258,462 | $ | 15,000 | $ | 30,125 | $ | 13,876 | $ | 317,463 | ||||||||||||||||||
President | 2022 | $ | 300,000 | -- | $ | 37,500 | -- | $ | 100,688 | $ | 12,924 | $ | 451,112 | ||||||||||||||||
(1) | Includes amounts deferred under the Company’s Retirement Plan for Employees of American Shared Hospital Services, a qualified plan under section 401(k) of the Internal Revenue Code. |
(2) | The |
(3) | The dollar amount reflects the grant date fair value of the option award granted under the Company’s Incentive Compensation Plan, computed in accordance with FASB ASC Topic 718. Assumptions used in the calculation of this amount are included in Note 8 to the Company’s audited financial statements for the fiscal year ended December 31, 2023 and included in the Company’s Annual Report on Form 10-K filed with the SEC on April 1, 2024. The option award granted to Mr. Gaccione in 2023 has an exercise price of $2.93 and were scheduled to vest in equal annual installments over a five-year period beginning on March 28, 2024, provided that Mr. Gaccione continues to provide services to the Company through each applicable vesting period. Following Mr. Gaccione’s death in April 2024, the unvested shares underlying Mr. Gaccione’s options expired. |
(4) | The amounts shown under All Other Compensation include matching contributions under the Company’s 401(k) plan, automobile and parking allowance, and premiums paid by the Company for long term disability coverage. |
Pay Versus Performance
The following table (our “Pay-for-Performance Table”) reports the compensation of our principal executive officer (“PEO”) and the average compensation of our other Named Executive Officers (for purposes of this “Pay Versus Performance” section, the “NEOs”) for the past two fiscal years as reported in our Summary Compensation Table. The information reported in the Pay-for-Performance Table is meant to reflect the relationship between the executive compensation that the Company actually paid and certain measures of the Company’s financial performance. For information regarding the Company’s pay-for-performance philosophy and how we align executive compensation with the Company’s financial performance, refer to our Narrative Disclosure Regarding Compensation. In accordance with the reduced disclosure requirements for smaller reporting companies, we have not included a tabular list of financial performance measures, a “Company-Selected Measure,” or executive compensation data for any peer group of the Company, and we have reported the required pay-versus-performance information for two instead of three years.
Year | Summary Compensation Table Total for PEO ($) (1) | Compensation Actually Paid to PEO ($) (3) | Average Summary Compensation Table Total for Non-PEO NEOs ($) (2) | Average Compensation Actually Paid to Non-PEO NEOs ($) (3) | Value of Initial Fixed $100 Investment Based On Total Shareholder Return ($) (4) | Net Income ($) (5) | ||||||||||||||||||
2023 | $ | 626,600 | $ | 565,400 | $ | 395,001 | $ | 366,522 | $ | 81 | $ | 610,000 | ||||||||||||
2022 | $ | 560,000 | $ | 574,400 | $ | 323,610 | $ | 320,012 | $ | 122 | $ | 1,328,000 | ||||||||||||
2021 | $ | 529,400 | $ | 524,900 | $ | 329,908 | $ | 299,815 | $ | 108 | $ | 194,000 | ||||||||||||
(1) | Raymond C. Stachowiak, our PEO, was our Executive Chairman for each of the years presented. |
(2) | During 2023, our non-PEO NEOs were Craig K. Tagawa and Peter Gaccione. During 2022, our non-PEO NEOs were Ernest R. Bates, Peter Gaccione and Craig K. Tagawa. During 2021, our non-PEO NEO’s were Ernest R. Bates and Craig K. Tagawa. |
(3) | Compensation “actually paid” is calculated in accordance with Item 402(v) of Regulation S-K. The table below sets forth each adjustment to the equity awards granted to our NEOs during each year presented in the table to calculate the compensation actually paid to our NEOs each year. Values reported in the table below are roundest to the nearest dollar. |
Adjustments to Equity Awards to Determine | PEO | Non-PEO NEOs | ||||||||||||||||||||||
Compensation “Actually Paid” | 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | ||||||||||||||||||
Average Summary Compensation Table Total | $ | 626,600 | $ | 560,000 | $ | 529,400 | $ | 395,001 | $ | 323,610 | $ | 329,908 | ||||||||||||
Minus amounts reported in the “Stock Awards” and "Option Awards" columns of the Summary Compensation Table. | $ | (351,600 | ) | $ | (288,000 | ) | $ | (329,400 | ) | $ | (64,408 | ) | $ | (49,911 | ) | $ | (37,500 | ) | ||||||
Plus fair value as of the end of the covered year of awards granted during the covered year that are outstanding and unvested as of the end of the covered year. | $ | 71,400 | $ | 40,658 | $ | 45,849 | $ | 7,407 | ||||||||||||||||
Plus fair value as of the vesting date for awards granted during the covered year that vested during the covered year. | $ | 219,000 | $ | 302,400 | $ | 324,900 | -- | — | ||||||||||||||||
Plus the change in fair value as of the vesting date (compared to as of the prior year end) of awards granted prior to the covered year that vested during the covered year. | — | — | — | $ | (4,729 | ) | $ | 464 | — | |||||||||||||||
Total Adjustments | (61,200 | ) | 14,400 | (4,500 | ) | $ | (28,479 | ) | $ | (3,598 | ) | $ | (30,093 | ) | ||||||||||
Compensation “Actually Paid” | $ | 565,400 | $ | 574,400 | $ | 524,900 | $ | 366,522 | $ | 320,012 | $ | 299,815 | ||||||||||||
(4) | The amounts shown above represent the Company’s cumulative total shareholder return (“TSR”) on an assumed investment of $100 in shares of our Common Stock over the indicated measurement period. Cumulative TSR is calculated by dividing (i) the sum of the cumulative amount of dividends on our Common Stock for the measurement period (if any), assuming dividend reinvestment, and the difference between the Company’s share price at the end and the beginning of the measurement period, by (ii) the Company’s share price at the beginning of the measurement period. |
(5) | The dollar amounts reported represent the amount of net income available to common shareholders reflected in the Company’s audited financial statements for the applicable year. |
Relationship Between “Compensation Actually Paid” and Performance
The following graphs address the relationship between the compensation “actually paid” by the Company to our NEOs as disclosed in the Pay-for-Performance table and the Company’s (i) cumulative total shareholder return, assuming an initial fixed investment of $100, and (ii) net income, in each case, for the years ended December 31, 2022 and 2023.
PEO and Average Non-PEO NEOs Compensation Actually Paid vs. Company TSR
PEO and Average Other NEOs Compensation Actually Paid vs. GAAP Net Income
Outstanding Equity Awards at Fiscal Year-End 20152023
The following table provides information concerning outstanding equity awards held by the named executive officersNamed Executive Officers as of December 31, 2015.2023.
Option Awards | Stock Awards | ||||||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#)(1) | Option Exercise Price ($) | Option Expiration Date | Equity Incentive Plan Awards: Number of Unearned Shares That Have Not Vested | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares That Have Not Vested ($)(4) | |||||||||||||||||||||||||||||||
Raymond C. Stachowiak | 2,000 | -- | $ | 3.03 | 6/20/26 | 30,000(2) | $ | 71,400 | |||||||||||||||||||||||||||||
| | | | | 2,000 | -- | $ | 2.68 | 6/13/25 | -- | -- | ||||||||||||||||||||||||||
| Option Awards | 2,000 | -- | $ | 3.90 | 6/26/24 | -- | -- | ||||||||||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#)(1) | Option Exercise Price ($) | Option Expiration Date | |||||||||||||||||||||||||||||||||
| Ernest A. Bates, M.D. | 30,000 | 120,000 | $ | 3.100 | December 29, 2019 | ||||||||||||||||||||||||||||||||
| -- | $ | -- | -- | ||||||||||||||||||||||||||||||||||
Peter M. Gaccione | 10,000 | 40,000 | $ | 2.72 | 9/06/29 | 13,655(3) | $ | 32,500 | |||||||||||||||||||||||||||||
| 50,000 | $ | 2.93 | 3/28/30 | $ | |||||||||||||||||||||||||||||||||
| Craig K. Tagawa | 30,000 | 120,000 | $ | 2.820 | December 29, 2021 | 6,303(3) | $ | 15,000 | |||||||||||||||||||||||||||||
| Ernest R. Bates | 22,500 | 90,000 | $ | 2.820 | December 29, 2021 | ||||||||||||||||||||||||||||||||
(1) The options granted to Mr. Gaccione were scheduled to vest in equal annual installments over a five-year period beginning on September 7, 2023 and March 28, 2024, provided that Mr. Gaccione continues to provide services to the Company through each applicable vesting period. Following Mr. Gaccione’s death in April 2024, the unvested shares underlying Mr. Gaccione’s options expired.
Grants
(2) Represents restricted stock units awarded under the Company’s Incentive Compensation Plan. These restricted stock units vested on January 1, 2024.
(3) Represents performance based restricted stock award unit awarded under the Company’s Incentive Compensation Plan based on the assumption that the Company would achieve target performance for the performance goals in 2023. Because neither the minimum EBITDA nor the minimum net income “gates” under the VCP were achieved during 2023, no restricted stock units were issued for 2023.
(4) Market value was determined by multiplying the number of Plan-Based Awards
There were no stock options, stock awards or non-equity incentive plan awards granted in 2015 to anyshares that have not vested by the closing market price of the named executive officers.our Common Stock on December 29, 2023.
Payments Upon Termination or Change in Control
Under our Incentive Compensation Plan, in the event a change in control occurs, each outstanding equity award will automatically accelerate in full, unless that award is assumed or replaced by the successor corporation or otherwise continued in effect.
The plan administrator has the discretion to structure one or more equity awards under the Incentive Compensation Plan so that those equity awards will vest in full either immediately upon a change in control or in the event the individual’s service with us or the successor entity is terminated (actually or constructively) within a designated period following a change in control transaction, whether or not those equity awards are to be assumed or otherwise continued in effect or replaced with a cash retention program. None of the named executive officers’ equity awards provide for such accelerated vesting upon a change of control.
Shares Authorized for Issuance Under Equity Compensation Plans
The following table provides information as of December 31, 20152023 with respect to shares of our common stock that may be issued under our existing equity compensation plan.
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| Plan Category | Number of shares to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price of outstanding options, warrants and rights | Number of shares remaining available for future issuance | Number of shares to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price of outstanding options, warrants and rights | Number of shares remaining available for future issuance | ||||||||||||||||||
| Equity compensation plans approved by security holders(1) | 792,833 | (2) | $ | 2.86 | (3) | 733,503 | (4) | 274,000 | (2) | $ | 2.80 | (3) | 935,000 | (4) | ||||||||||
| Equity compensation plans not approved by security holders | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||
| Total | 274,000 | 935,000 | ||||||||||||||||||||||
(1) | Consists of our Incentive Compensation Plan. |
(2) | Includes |
(3) | Calculated without taking into account |
(4) | Shares reserved for issuance under the Incentive Compensation Plan may be issued upon the exercise of stock options or stock appreciation rights, through direct stock issuances or pursuant to restricted stock units or other stock based awards that vest upon the attainment of prescribed performance milestones or the completion of designated service periods. |
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely upon a review
HEDGING POLICY
The Company’s Insider Trading Policy prohibits all members of reports filed under the Exchange Act and received by the Company on or after January 1, 2015, the Company believes that during fiscal 2015, directors,Board, officers and 10% shareholdersemployees of the Company filed all required reports withinfrom engaging in any hedging transactions (including transactions involving options, puts, calls, prepaid variable forward contracts, equity swaps, collars and exchange funds or other derivatives) that are designed to hedge or speculate on any change in the periods established by applicable rules, other than as previously disclosed.market value of the Company’s securities.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Compensation Committee Interlocks and Insider Participation
None.
Policies and Procedures
The Audit Committee of the Board is responsible for reviewing and approving allreviews related party transactions as such term is defined under Securities and Exchange Commission rules and regulations. While we do not have a formal written policy or procedure forItem 404(a) of Regulation S-K pursuant to the review, approval or ratification of related party transactions, the Audit Committee must review the material facts of any such transaction and approve that transaction.
To identify related party transactions, each year we submit and require our directors and officers to complete director and officer questionnaires identifying transactions with the Company in which the director or officer or their family members have a conflict of interest. The Company reviews the questionnaire for potential related party transactions. In addition, at any scheduled meetingcharter of the Audit Committee, management may recommend related party transactions to the committee, including the material terms of the proposed transactions, for its consideration.
In making its decision to approve or ratify a related party transaction, the Audit Committee will consider all relevant facts and circumstances available to the committee, including factors such as the aggregate value of the transaction, whether the terms of the related party transaction are no less favorable than terms generally available in an arms’ length transaction and the benefit of such transaction to us.
Related Party Transactions
During 2014, certain of the Company’s directors entered into transactions with the Company to provide financing to support its proton beam business. The Company believes that these transactions were on arms-length terms and that that third parties were not willing to provide financing on equal or better terms. Each transaction was reviewed and approved by non-participating members of the Board of Directors.
1. Common Stock Purchase Agreement
On June 11, 2014, the Company entered into a common stock purchase agreement (the “Purchase Agreement”) with three members of the Company’s Board of Directors: Messrs. Stachowiak, Ruffle, and Trotman, Jr. (the “Investors”), to sell, in a private offering, an aggregate of 650,000 shares of the Company’s common stock, no par value, at $2.43 per share (the closing price on the stock exchange), for gross proceeds of approximately $1.6 million. Mr. Stachowiak, Mr. Ruffle, and Mr. Trotman purchased 400,000, 200,000, and 50,000 shares of common stock, respectively, from the Company, at a purchase price of $972,000.00, $486,000.00 and $121,500.00, respectively. The private offering closed on June 12, 2014. The shares are restricted securities and may not be offered or sold absent registration under the Securities Act of 1933. Pursuant to the terms of the Purchase Agreement, the Company provided demand registration rights with respect to the shares, with certain limited exceptions, and pursuant to which the Company has registered certain shares of common stock on Form S-3 on June 12, 2015. Pursuant to the terms of the Purchase Agreement, the Company has also granted the Investors a one-year preemptive right to participate pro rata in future issuances of the Company’s common stock.
2. Note and Warrant Purchase Agreement
On October 22, 2014, the Company entered into a Note and Warrant Purchase Agreement (the “Note and Warrant Purchase Agreement”) with four members of the Company’s Board of Directors: Mr. Stachowiak, Mr. Ruffle, Mr. Ozyurek, and Dr. Larson (the “Note and Warrant Investors”), to issue an aggregate of $1,000,000 in principal amount of promissory notes (the “Notes”) and warrants (the “Warrants”) to purchase an aggregate of 200,000 shares of Common Stock. Mr. Stachowiak, Mr. Ruffle, Mr. Ozyurek, and Dr. Larson purchased Notes in the amount of $500,000, $250,000, $200,000, and $50,000, respectively, and warrants to purchase 100,000, 50,000, 40,000, and 10,000 shares of common stock, respectively. Each Note bears interest at a rate of 15.0% per annum and will mature on October 22, 2017. Interest only payments are due monthly with the option to prepay the outstanding principal on or after December 31, 2015. The Company is required
to prepay the outstanding principal within five days of the next milestone payment to Mevion Medical Systems, Inc, if that occurs prior to the maturity date. During 2015, the Company has paid an aggregate of $150,000 in interest and $0 in principal; the total outstanding principal amount of notes of $1,000,000 was paid-off on February 5, 2016.
The Warrants have an exercise price of $2.20 per share (the closing price on the stock exchange on the date prior to the issuance date) and became exercisable on October 22, 2015 and will expire on October 22, 2017. The Warrants contain typical anti-dilution provisions and registration rights for the underlying shares of common stock.
EWRS Turkey
The Company’s Gamma Knife and IGRT businesses in Turkey were operated through EWRS Turkey until its sale to Euromedic Cancer Treatment Centers BV (“Euromedic”) on June 10, 2014. Prior to the sale, 70% of EWRS Turkey was indirectly owned by GKF through GKF’s 70% ownership of EWRS LLC, and 30% of EWRS Turkey was owned by EMKA LLC (“EMKA”), which is owned and operated by Mert Ozyurek, a director of the Company. In June 2014, the Company and Mr. Ozyurek sold EWRS Turkey to Euromedic for approximately $6,000,000 in cash plus an earn-out provision over a two-year post-closing period. The Company and EMKA continued marketing initiatives post sale of EWRS Turkey through January 2015 in an effort to attain their earn-out milestones. EMKA directed these agreed upon marketing initiatives. The Company paid EMKA $47,330 in 2014 and $69,456 in 2015 for its 70% share of the expenses. Based on the earn-out provisions, earn-out milestones were not achieved by the Company and Mr. Ozyurek. During the Company’s and Mr. Ozyurek’s ownership of EWRS Turkey, EWRS Turkey had service and maintenance contracts for its two Gamma Knife units with Ozyurek A.S., a foreign company operated by Mr. Ozyurek. The Company believes all its transactions with Mr. Ozyurek are arm’s-length transactions.
AUDIT COMMITTEE REPORT
The following Report of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates the Report by reference therein.
Committee. The Audit Committee evaluates all such transactions and determines whether or not it serves the best interest of the Board consists of three directors, all of whom are ‘independent’ as defined inCorporation and its stockholders and whether the listing standards of the NYSE MKT. The primary purposes of the Audit Committee are to review the financial reporting and internal controls of the Company, to appoint an independent registered public accounting firm, to review the reports of such auditors, and to review annually the Audit Committee charter. During 2015, the Audit Committee held eight meetings. Mr. Ruffle is Chair of the Audit Committee.relationship should be continued or eliminated.
The Audit Committee reviewed and held discussions with management and the independent registered public accounting firm regarding the financial statements of the Company for the fiscal year ended December 31, 2015. The topics of these discussions included the quality of the Company’s internal controls, the audit plans, audit scope and identification of audit risks. In addition, the Committee received assurances that the independent registered public accounting firm reviewed and discussed with management the interim financial reports prior to each quarterly earnings announcement.
The Company’s independent registered public accounting firm provided a formal written statement that described all relationships between the auditors and the Company with respect to the auditors’ independence within the meaning of the federal securities laws administered by the Securities and Exchange Commission, and the Audit Committee satisfied itself as to the public accounting firm’s independence.
The Audit Committee discussed with the independent registered public accounting firm all matters required to be discussed by Statement on Auditing Standards No. 16, as amended, “Communication with Audit Committees” and, with and without the presence of management, reviewed and discussed the results of the independent registered public accounting firm’s examination of the Company’s financial statements. Management, being responsible for the Company’s financial statements, represented that the Company’s consolidated financial statements were prepared in accordance with generally accepted accounting principles. The independent registered public accounting firm are responsible for the examination of those statements.
Based on the Audit Committee’s discussions with management and the independent registered public accounting firm, and the Audit Committee’s review as described previously, the Audit Committee recommended to the Board that the Company’s audited financial statements be included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as filed with the Securities and Exchange Commission.
Submitted by the Audit Committee of the Board:John F. Ruffle (Chairman)Raymond C. StachowiakStanley S. Trotman, Jr.
PROPOSAL NO. 3
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Company’s consolidated financial statements for the years ended December 31, 2015, 20152023 and 20142022 have been audited by Moss Adams LLP. The Audit Committee has appointed Moss Adams LLP to be the Company’s Independent Registered Public Accounting Firm for the fiscal year ending December 31, 2016,2024, subject to shareholder ratification at the Meeting.
Representatives of Moss Adams LLP are expected to be present at the 2016 Annual Meeting of Shareholders to respond to appropriate questions and will be given an opportunity to make a statement, if they so desire.
The aggregate fees billed by Moss Adams LLP and their respective affiliates for professional services performed for 20152023 and 20142022 are as follows:
| | | | | | |||||||||||||||
| Audit Fees(1) | Audit- Related Fees(2) | Tax Fees(3) | All Other Fees(4) | Total Fees | ||||||||||||||||
| 2015 | $ | 288,750 | $ | 0 | $ | 104,000 | $ | 2,636 | $ | 395,386 | ||||||||||
| 2014 | $ | 150,943 | $ | 0 | $ | 99,700 | $ | 0 | $ | 250,643 | ||||||||||
Audit Fees (1) | Audit- Related Fees (2) | Tax Fees (3) | All Other Fees (4) | Total Fees | ||||||||||||||||
2023 | $ | 485,156 | $ | 5,250 | $ | 29,500 | $ | 10,556 | $ | 530,462 | ||||||||||
2022 | $ | 398,000 | $ | 0 | $ | 132,000 | $ | 0 | $ | 530,000 | ||||||||||
(1) | Audit Fees:Consists of fees billed for professional services rendered in connection with the audit of our consolidated financial statements and review of interim condensed consolidated financial statements included in our quarterly reports and services normally provided in connection with statutory and regulatory filings or engagements. |
(2) | Audit-Related Fees: Consists of fees |
(3) | Tax Fees: Consists of tax compliance and preparation and other tax services. |
(4) | All Other Fees: Consists of fees for all other services other than those reported above. |
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of the Independent Registered Public Accounting Firm
The Audit Committee pre-approves all audit and permissible non-audit services performed by the Company’s independent registered public accounting firm in order to assure that the provision of such services and related fees do not impair the independent registered public accounting firm’s independence. The independent registered public accounting firm must provide the Audit Committee with an engagement letter outlining the scope of the audit services proposed to be performed during the applicable calendar year and the proposed fees for such audit services. If agreed to by the Audit Committee, the engagement letter will be formally accepted by the Audit Committee as evidenced by the execution of the engagement letter by the Chair of the Audit Committee. The Audit Committee approves, if necessary, any changes in terms, conditions and fees resulting from changes in audit scope, Company structure or other matters. The Audit Committee may grant pre-approval for those permissible non-audit services that it believes are services that would not impair the independence of the independent registered public accounting firm. The Audit Committee may not grant approval for any services categorized as “Prohibited Non-Audit Services” by the Securities and Exchange Commission.SEC. Certain non-audit services have been pre-approved by the Audit Committee, and all other non-audit services must be separately approved by the Audit Committee.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF PROPOSAL NO. 3.
PROPERLY EXECUTED PROXIES RETURNED TO THE COMPANY WILL BE VOTED “FOR”“FOR” THE RATIFICATION OF THE APPOINTMENT OF MOSS ADAMS LLP AS THE COMPANY’SCOMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 20162024 UNLESS OTHERWISE INSTRUCTED.
AUDIT COMMITTEE REPORT
The following Report of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other filing of the Company under the Securities Act of 1933, as amended or the Securities Exchange Act of 1934, as amended except to the extent the Company specifically incorporates the Report by reference therein.
The Audit Committee of the Board consisted of three directors all of whom are ‘independent’ as defined in the listing standards of the NYSE American and Exchange Act Rules. As discussed elsewhere in this Proxy Statement, Mr. Daniel Kelly, Ms. Kathleen Miles, and Ms. Vicki L. Wilson composed the Audit Committee. The primary purposes of the Audit Committee are to review the financial reporting and internal controls of the Company, to appoint an independent registered public accounting firm, to review the reports of such auditors, and to review periodically the Audit Committee charter. During 2023, the Audit Committee held four meetings. Ms. Wilson was the Chair of the Audit Committee.
The Audit Committee reviewed and held discussions with management and the independent registered public accounting firm regarding the financial statements of the Company for the fiscal year ended December 31, 2023 and the matters required to be discussed under the applicable standards of the Public Company Accounting Oversight Board (“PCAOB”) and the SEC. The topics of these discussions included the quality of the Company’s internal controls, the audit plans, audit scope and identification of audit risks. In addition, representatives from the independent registered public accounting firm attend the Audit Committee meetings, and the Committee received assurances that the independent registered public accounting firm reviewed and discussed with management the interim financial reports prior to each quarterly earnings announcement.
The Company’s independent registered public accounting firm provided a formal written statement that described all relationships between the auditors and the Company with respect to the auditors’ independence within the meaning of the federal securities laws administered by the SEC, and the Audit Committee satisfied itself as to the public accounting firm’s independence. The Audit Committee received the written disclosures and the letter from the independent auditor required by the applicable requirements of the Public Company Accounting Oversight Board and the SEC regarding the independent auditor’s communications with the Audit Committee concerning independence and has discussed with the independent auditor the independent auditor’s independence.
The Audit Committee discussed with the independent registered public accounting firm all matters required to be discussed by Auditing Standard No. 16 or any successor standard, as amended, “Communications with Audit Committees” and, with and without the presence of management, reviewed and discussed the results of the independent registered public accounting firm’s examination of the Company’s financial statements. Management, being responsible for the Company’s financial statements, represented that the Company’s consolidated financial statements were prepared in accordance with generally accepted accounting principles. The independent registered public accounting firm is responsible for the examination of those statements.
Based on the Audit Committee’s discussions with management and the independent registered public accounting firm, and the Audit Committee’s review as described previously, the Audit Committee recommended to the Board that the Company’s audited financial statements be included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the SEC.
Submitted by the Audit Committee of the Board:
Vicki L. Wilson (Chair)
Daniel G. Kelly, Jr.
Kathleen Miles
SHAREHOLDER PROPOSALS
Shareholders who intend to have a proposal considered for inclusion in the Company’s proxy materials for presentation at the 20172025 Annual Meeting of Shareholders pursuant to Rule 14a-8 of the Exchange Act must submit the proposal to the Company no later than January 12, 2017. December 30, 2024.
Under the Company’s Amended and Restated Bylaws, in order for a shareholder proposal that is not included in the Company’s proxy materials to be properly brought before the annual meeting of shareholders, notice of the proposal must be received at the Company’s principal executive offices not less than 60 days nor more than 90 days prior to the scheduled date of the annual meeting.meeting, or, if less than 70 days’ notice of the date of such meeting has been given to shareholders, then not later than the close of business on the tenth day following the earlier of the first public disclosure of the meeting date and the mailing of the Company’s notice. A shareholder’s notice should provide a list of each proposal and 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.business; and other requirements set forth in the Company’s Bylaws.
In addition to the satisfying the foregoing advance notice requirements under the Company’s Bylaws, to comply with the universal proxy rules under the Exchange Act, shareholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act and that is postmarked or transmitted electronically to the Company no later than April 26, 2025.
ANNUAL REPORT
The Company’s 20152023 Annual Report, which includes financial statements, but which does not constitute a part of the proxy solicitation material, accompanies this proxy statement.Proxy Statement.
By Order of the BoardWillie R. BarnesCorporate Secretary
By Order of the Board | |
Alexis N. Wallace | |
Corporate Secretary | |
Dated: April 29, 2024 | |
San Francisco, California |
Dated: April 29, 2016San Francisco, California
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