As filed with the Securities and Exchange Commission on February 17, 1998.
Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
HENLEY HEALTHCARE, INC.
(Exact name of registrant as specified in its charter)
TEXAS 76-0335587
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
120 INDUSTRIAL BOULEVARD
SUGAR LAND, TEXAS 77478
(Address of Principal Executive Offices)
HENLEY HEALTHCARE, INC.
1996 INCENTIVE STOCK PLAN; AND
HENLEY HEALTHCARE, INC.
1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
(Full Title of the Plans)
Name, Address and Telephone Copy of Communications to:
Number of Agent for Service:
MICHAEL M. BARBOUR ROBERT G. REEDY
HENLEY HEALTHCARE, INC. PORTER & HEDGES, L.L.P.
120 INDUSTRIAL BOULEVARD 700 LOUISIANA STREET, SUITE 3500
SUGAR LAND, TEXAS 77478 HOUSTON, TEXAS 77002-2370
(281) 276-7000 (713) 226-0600
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED
AMOUNT TO OFFERING MAXIMUM AGGREGATE AMOUNT OF
TITLE OF SECURITIES TO BE REGISTERED BE REGISTERED PRICE PER SHARE(1) OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share 1,450,000 $5.5 $7,975,000 $2,353
====================================================================================================================
</TABLE>
(1) Pursuant to Rule 416(a), also registered hereunder is an indeterminate
number of shares of Common Stock issuable as a result of the
anti-dilution provisions of the Plans.
(2) Pursuant to Rule 457(c), the registration fee is calculated on the
basis of the average of the high and low sale prices for the Common
Stock on The Nasdaq SmallCap Market on February 13, 1998, $5.5.
Pursuant to Rule 457(h), the registration fee is calculated with
respect to the maximum number of the registrant's securities issuable
under the Plans.
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<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The contents of the following documents filed by Henley Healthcare,
Inc., a Texas corporation (the "Company" or "Registrant"), with the Securities
and Exchange Commission ("Commission") are incorporated into this registration
statement ("Registration Statement") by reference:
(i) the Company's annual report on Form 10-KSB for the year ended
December 31, 1996 (as filed on March 31, 1997), as amended by the
Company's Form 10-KSB/A (as filed on April 29, 1997);
(ii) the Company's quarterly reports on Form 10-QSB for the quarters
ended March 31, 1997 (as filed on May 15, 1997), June 30, 1997
(as filed on August 14, 1997), and September 30, 1997 (as filed
on November 14, 1997); and
(iii) the Company's Current Report on Form 8-K filed on October 15,
1997, as amended by the Form 8-K/A filed on December 15, 1997,
and Current Report on 8-K filed on October 24, 1997.
All documents filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), subsequent to the filing date of this Registration
Statement and prior to the filing of a post-effective amendment to this
Registration Statement which indicates that all securities offered have been
sold or which deregisters all securities then remaining unsold shall be deemed
to be incorporated by reference in this Registration Statement and to be a part
hereof from the date of filing such documents. The Company will provide without
charge to each participant in each of the Company's 1996 Incentive Stock Plan
and 1996 Non-Employee Director Stock Option Plan, upon written or oral request
of such person, a copy (without exhibits, unless such exhibits are specifically
incorporated by reference) of any or all of the documents incorporated by
reference pursuant to this Item 3.
ITEM 4. DESCRIPTION OF SECURITIES
Not Applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Not Applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Article 1302-7.06 of the Texas Miscellaneous Corporation Laws
Act, the articles of incorporation of a Texas corporation may provide that a
director of that corporation shall not be liable, or shall be liable only to the
extent provided in the articles of incorporation, to the corporation or its
shareholders for monetary damages for acts or omissions in the director's
capacity as a director, except that the articles of incorporation cannot provide
for the elimination or limitation of liability of a director to the extent that
the director is found liable for (i) a breach of the director's duty of loyalty
to the corporation or its shareholders, (ii) an act or omission not in good
faith that constitutes a breach of duty of the director to the corporation or an
act or omission that involves intentional misconduct or a knowing violation of
the law, (iii) any transaction from which the director received an improper
personal benefit, or (iv) an act or omission for which the liability of a
director is expressly provided by an applicable statute.
In accordance with Article 1302-7.06, Article Six of the Company's
Amended and Restated Articles of Incorporation eliminates a DIRECTOR'S liability
to the Company and its shareholders for monetary damages for an act or omission
in the director's capacity as a director, except that such provision does not
eliminate or limit a director's liability for: (1) a breach of a director's duty
of loyalty to the Company or its shareholders, (2) an act or omission not in
good faith or that involves intentional misconduct or a knowing violation of
law, (3) a transaction from which a director received an improper benefit,
whether or not the benefit resulted from an action taken within the scope of the
director's office, (4) an act or omission for which the liability of a director
is expressly provided for by statute, or (5) an act related to an unlawful
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payment of a dividend. Article Six of the Company's Amended and Restated
Articles of Incorporation further provides that if the Texas Miscellaneous
Corporation Laws Act or any other statute is amended to authorize corporate
action further eliminating or limiting the personal liability of directors, then
the liability of a director of the Company shall be eliminated or limited to the
full extent permitted by such statute, as so amended. If a director breaches any
fiduciary duty other than those listed in Article Six in performing his duties
as a director, neither the Company nor its shareholders could recover monetary
damages from the director; only equitable remedies, such as an action to enjoin
or rescind a transaction involving a breach of fiduciary duty, may be available.
To the extent certain claims against directors are limited to equitable
remedies, the provision in the Company's Amended and Restated Articles of
Incorporation may reduce the likelihood of derivative litigation and may
discourage shareholders or management from initiating litigation against
directors for breach of their fiduciary duties. Additionally, equitable remedies
may not be effective in many situations. If a shareholder's only remedy is to
enjoin the completion of the board of directors' action, such remedy would be
ineffective if the shareholder does not become aware of a transaction or event
until after it has been completed. In such a situation, it is possible that the
Company and its shareholders would have no effective remedy against the
directors.
In addition, Article 2.02-1 of the Texas Business Corporation Act
("TBCA") empowers the Company to indemnify present and former directors,
officers, employees, agents and other persons acting on the Company's behalf
against judgments, penalties (including excise and similar taxes), fines,
settlements and reasonable expenses (including court costs and attorneys' fees)
actually incurred by them in connection with a proceeding brought against them
in their respective present or former capacities as directors, officers,
employees or agents of the Company, or of any other entity in which they are or
were serving in such capacities at the Company's request. However, the TBCA
provides that unless a court of competent jurisdiction determines otherwise,
indemnification is available only if the person (1) acted in good faith, (2)
reasonably believed that he acted (a) in his official capacity, in a manner
which was in the Company's best interests, and (b) in other than in his official
capacity, in a manner which he reasonably believed was at least not opposed to
the Company's best interests, and (3) in the case of any criminal proceeding,
had no reasonable cause to believe his conduct was unlawful. Even if these three
elements are established, if a person is found liable to the Company, or liable
on the basis that he received an improper personal benefit, indemnification is
(i) limited to his reasonable expenses, and (ii) prohibited if he is found
liable for willful or intentional misconduct in performing his duties to the
Company.
The TBCA prescribes procedures which the Company must use in
determining whether a claim is indemnifiable under the statute; if so, whether
to authorize indemnification (unless it is made mandatory by articles of
incorporation, bylaws, director or shareholder resolution, or agreement); and
the reasonableness of any expenses for which indemnification is sought. Each of
these determinations must be made by (i) a majority vote of a quorum of
disinterested directors, (ii) if such quorum is unobtainable, then by a majority
vote of a special committee of disinterested directors appointed by a majority
vote of all directors, (iii) special legal counsel selected by the board of
directors or a committee of the board by vote as described in (i) or (ii), or if
such quorum is unobtainable or such committee cannot be established, then by a
majority vote of all directors, or (iv) a vote of disinterested shareholders.
The Company is obligated under Article 2.02-1 to indemnify a director
or officer against reasonable expenses incurred by him in connection with a
proceeding in which he is named defendant or respondent because he is or was a
director or officer if he has been wholly successful, on the merits or
otherwise, in the defense of the proceeding. Under Article 2.02-1, the Company
may (i) indemnify and advance expenses to an officer, employee, agent or other
person who are or were serving at the request of the Company as a director,
officer, partner venturer, proprietor, trustee, employee, agent or similar
functionary of another entity to the same extent that it may indemnify and
advance expenses to directors, (ii) indemnify and advance expenses to directors
and such other persons to such further extent, consistent with law, as may be
provided in the Company's articles of incorporation, bylaws, action of its board
of directors, or contract or as permitted by common law and (iii) purchase and
maintain insurance or another arrangement on behalf of directors and such other
persons against any liability asserted against him and incurred by him in such a
capacity or arising out of his status as such a person regardless of whether the
Company could indemnify him against such liability under the TBCA.
Article V of the Company's Amended and Restated Bylaws sets forth
specific provisions for indemnification of directors, officers, agents and other
persons which are substantially identical to the provisions of Article 2.02-1
described above. The Amended and Restated Bylaws provide for advance payment of
any expenses subject to authorization of the board of directors and a written
promise to repay the payment unless it is determined that he is entitled to
indemnification. Article V further provides that the rights to indemnification
are not exclusive of any other rights to which a person may be entitled by law,
bylaw, agreement, vote of shareholders or otherwise. Such rights to
indemnification by the Amended and Restated Bylaws shall continue after the
person has ceased to hold a position and shall inure to that person's heirs and
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<PAGE>
personal representatives. The Amended and Restated Bylaws also provide for
reports to the shareholders of the Company as to indemnification payments,
advance payments and insurance payments.
The above discussion of the Company's Amended and Restated Articles of
Incorporation and Amended and Restated Bylaws, as amended, and Texas statutes is
not intended to be exhaustive and is qualified in its entirety by such Articles,
Bylaws and statutes.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not Applicable.
ITEM 8. EXHIBITS
EXHIBIT
NO. DESCRIPTION
- ------------ --------------------------
4.1 1996 Incentive Stock Plan as Amended and Restated Effective as
of December 31, 1997 (filed herewith).
4.2 1996 Non-Employee Director Stock Option Plan as Amended and
Restated Effective as of December 31, 1997 (filed herewith).
5.1 Opinion of Porter & Hedges, L.L.P. with respect to legality of
securities (filed herewith).
23.1 Consent of Goldstein Golub Kessler & Company, P.C.
(filed herewith).
23.2 Consent of Porter & Hedges, L.L.P. (included in Exhibit 5.1).
24.1 Powers of Attorney (included on signature page).
ITEM 9. UNDERTAKINGS
(a) UNDERTAKING TO UPDATE
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement to:
(i) include any prospectus required by section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii)reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the
most recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information in the Registration Statement; and
(iii) include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by
the Registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial BONA FIDE offering thereof.
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<PAGE>
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) UNDERTAKING WITH RESPECT TO DOCUMENTS INCORPORATED BY REFERENCE
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d)
of the Exchange Act that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial BONA
FIDE offering thereof.
(c) UNDERTAKING WITH RESPECT TO INDEMNIFICATION
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
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<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Michael M. Barbour and Dan D. Sudduth,
and each of them, either of whom may act without joinder of the other, his true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all pre- and post-effective amendments and
supplements to this Registration Statement, and to file the same, or caused to
be filed the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, and each of them, or the substitute or substitutes
of either of them, may lawfully do or cause to be done by virtue hereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Sugar Land, State of Texas, on this 13th day of
February, 1998.
HENLEY HEALTHCARE, INC.
By:/s/ MICHAEL M. BARBOUR
Michael M. Barbour, President and
Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on this 13th day of February, 1998.
SIGNATURE TITLE
--------- -----
/s/ MICHAEL M. BARBOUR President, Chief Executive Officer and Director
---------------------------
Michael M. Barbour
/s/ DAN D. SUDDUTH Executive Vice President, Chief Financial
--------------------------- Officer and Director
Dan D. Sudduth
/s/ CHIKE J. OGBOENYIYA Vice President - Finance and Secretary
---------------------------
Chike J. Ogboenyiya
Medical Director, Director and Chairman of the
--------------------------- Board
Chadwick F. Smith
/s/ KENNETH W. DAVIDSON Director
---------------------------
Kenneth W. Davidson
/s/ ERNEST J. HENLEY, PH.D. Director
---------------------------
Ernest J. Henley, Ph.D.
Director
---------------------------
Pedro A. Rubio, M.D., Ph.D.
-6-
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION
- ------------ --------------------------
4.1 1996 Incentive Stock Plan as Amended and Restated Effective as
of December 31, 1997 (filed herewith).
4.2 1996 Non-Employee Director Stock Option Plan as Amended and
Restated Effective as of December 31, 1997 (filed herewith).
5.1 Opinion of Porter & Hedges, L.L.P. with respect to legality of
securities (filed herewith).
23.1 Consent of Goldstein Golub Kessler & Company, P.C.
(filed herewith).
23.2 Consent of Porter & Hedges, L.L.P. (included in Exhibit 5.1).
24.1 Powers of Attorney (included on signature page).
-7-
Exhibit 4.1
HENLEY HEALTHCARE, INC.
1996 INCENTIVE STOCK PLAN
AS AMENDED AND RESTATED EFFECTIVE
AS OF DECEMBER 31, 1997
1. PURPOSE OF THE PLAN. This Henley Healthcare, Inc. 1996 Incentive Stock Plan
is intended to provide a means through which the Company and its Subsidiaries
may attract able persons to enter into the employ of the Company or its
Subsidiaries and to promote the interests of the Company by providing the
employees and consultants of the Company or any Subsidiary corporation, who are
largely responsible for the management, growth and protection of the business of
the Company, with a proprietary interest in the Company, thereby strengthening
their concern for the welfare of the Company and their desire to remain in its
employ. A further purpose of the Plan is to provide such persons with additional
incentive and reward opportunities to enhance the profitable growth of the
Company.
The Plan was originally effective on January 15, 1996, and is hereby
amended and restated effective December 31, 1997.
2. DEFINITIONS. As used in the Plan, the following definitions apply to the
terms indicated below:
(a) "BOARD OF DIRECTORS" or "BOARD" shall mean the Board of Directors
of Henley Healthcare, Inc.
(b) "CASH BONUS" shall mean an award of a bonus payable in cash
pursuant to SECTION 11 hereof.
(c) "CAUSE," when used in connection with the termination of a
Participant's Employment, shall mean the termination of the Participant's
Employment by the Company by reason of (i) the conviction of the Participant by
a court of competent jurisdiction as to which no further appeal can be taken of
a crime involving moral turpitude; (ii) the proven commission by the Participant
of an act of fraud upon the Company; (iii) the willful and proven
misappropriation of any funds or property of the Company by the Participant;
(iv) the willful, continued and unreasonable failure by the Participant to
perform material duties assigned to him; (v) the knowing engagement by the
Participant in any direct, material conflict of interest with the Company
without compliance with the Company's conflict of interest policy, if any, then
in effect; (vi) the knowing engagement by the Participant, without the written
approval of the Board, in any activity which competes with the business of the
Company or which would result in a material injury to the business, reputation
of goodwill of the Company; or (vii) the knowing engagement in any activity
which would constitute a material violation of the provisions of the Company's
Policies and Procedures Manual, if any, then in effect.
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<PAGE>
(d) "CHANGE IN CONTROL" shall mean:
(i) a "change in control" of the Company, as that term is
contemplated in the federal securities laws; or
(ii) the occurrence of any of the following events:
(1) any Person becomes, after the effective date of
this Plan, the "beneficial owner" (as defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly,
of securities of the Company representing 20% or more of the
combined voting power of the Company's then outstanding
securities; provided, that the Board of Directors (as
constituted immediately prior to such person becoming such a
beneficial owner) may determine, in its sole discretion, that
a Change in Control has not occurred; and provided further,
that the acquisition of additional voting securities, after
the effective date of this Plan, by any Person who is, as of
the effective date of this Plan, the beneficial owner,
directly or indirectly, of 30% or more of the combined voting
power of the Company's then outstanding securities, shall not
constitute a "Change in Control" of the Company for purposes
of this SECTION 2(D);
(2) a majority of individuals who are nominated by
the Board of Directors for election to the Board of Directors
on any date, fail to be elected to the Board of Directors as a
direct or indirect result of any proxy fight or contested
election for positions on the Board of Directors; or
(3) the Board of Directors determines in its sole and
absolute discretion that there has been a change in control of
the Company.
(e) "CODE" shall mean the Internal Revenue Code of 1986, as amended
from time to time. Reference in the Plan to any Section of the Code shall be
deemed to include any amendments or successor provisions to any Section and any
treasury regulations thereunder.
(f) "COMMITTEE" shall mean a committee appointed by the Board
consisting of not less than two directors serving on the Board who fulfill the
"non-employee director" requirements of Rule 16b-3 under the Exchange Act and
the "outside director" requirements of Section 162(m) of the Code. Without
limitation, the Committee may be the Compensation Committee of the Board or such
other committee, provided that the requirements of the previous sentence are
satisfied. The Board shall have the power to fill vacancies on the Committee
arising by resignation, death, removal or otherwise. The Board, in its sole
discretion, may bifurcate the powers and duties of the Committee among one or
more separate committees, or retain all powers and duties of the Committee in a
single Committee. The members of the Committee shall serve at the discretion of
the Board.
(g) "COMMON STOCK" shall mean the Company's common stock, par value
$.01 per share.
(h) "COMPANY" shall mean Henley Healthcare, Inc., a Texas corporation,
and each of its Subsidiaries, and its successors.
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<PAGE>
(i) "CONSULTANT" shall mean any person who is engaged by the Company or
any Subsidiary to render consulting services and is compensated for such
services.
(j) "COVERED EMPLOYEE" shall mean a named executive officer who is one
of the group of covered employees as defined in Section 162(m) of the Code and
Treasury Regulation ss. 1.162-27(c) (or its successor).
(k) "DISABILITY" shall mean a permanent and total disability, as
defined in Section 22(e)(3) of the Code, of the Participant as determined by the
Committee in its discretion exercised in good faith.
(l) "EMPLOYEE" shall mean any person who is an employee of the Company
(or any Parent or Subsidiary) within the meaning of Section 3401(c) of the Code
and the applicable interpretive authority thereunder.
(m) "EMPLOYMENT" shall mean employment by the Company or any Parent or
Subsidiary, or by any corporation issuing or assuming an Incentive Award in any
transaction described in Section 424(a) of the Code, or by a parent corporation
or a subsidiary corporation of such corporation issuing or assuming such
Incentive Award, as the parent-subsidiary relationship shall be determined at
the time of the corporate action described in Section 424(a) of the Code. In
this regard, neither the transfer of a Participant from Employment by the
Company to Employment by any Parent or Subsidiary, nor the transfer of a
Participant from Employment by any Parent or Subsidiary to Employment by the
Company, shall be deemed to be a termination of Employment of the Participant.
The term "Employment" for purposes of the Plan will also include compensatory
services performed by a Consultant for the Company or any Parent or Subsidiary.
(n) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(o) "FAIR MARKET VALUE" of a share of Common Stock on any date shall be
(i) the closing sales price on the immediately preceding business day of a share
of Common Stock as reported on the principal securities exchange on which shares
of Common Stock are then listed or admitted to trading or (ii) if not so
reported, the average of the closing bid and asked prices for a share of Common
Stock on the immediately preceding business day as quoted on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") or (iii)
if not quoted on NASDAQ, the average of the closing bid and asked prices for a
share of Common Stock as quoted by the National Quotation Bureau's "Pink Sheets"
or the National Association of Securities Dealers' OTC Bulletin Board System. If
the price of a share of Common Stock shall not be so reported, the Fair Market
Value of a share of Common Stock shall be determined by the Committee in its
absolute discretion.
(p) "INCENTIVE AGREEMENT" shall mean a written agreement entered into
between the Company and the Participant setting forth the terms and conditions
pursuant to which an Incentive Award is granted under the Plan.
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<PAGE>
(q) "INCENTIVE AWARD" shall mean an Option, a share of Restricted
Stock, a Performance Award, a share of Phantom Stock, a Stock Bonus or Cash
Bonus granted pursuant to the terms of the Plan.
(r) "INCENTIVE STOCK OPTION" shall mean an Option which is an
"incentive stock option" within the meaning of Section 422 of the Code and which
is identified as an Incentive Stock Option in the Incentive Agreement by which
it is evidenced.
(s) "ISSUE DATE" shall mean the date established by the Committee on
which certificates representing shares of Restricted Stock shall be issued by
the Company pursuant to the terms of SECTION 7(D) hereof.
(t) "NON-QUALIFIED STOCK OPTION" shall mean an Option which is not an
Incentive Stock Option and which is identified as a Non-Qualified Stock Option
in the Incentive Agreement by which it is evidenced.
(u) "OPTION" shall mean an option to purchase shares of Common Stock of
the Company granted pursuant to SECTION 6 hereof. Each Option shall be
identified as either an Incentive Stock Option or a Non-Qualified Stock Option
in the Incentive Agreement by which it is evidenced.
(v) "PARENT" shall mean a "parent corporation" of the Company, whether
now or hereafter existing, as defined in Section 424(e) of the Code.
(w) "PARTICIPANT" shall mean an Employee or Consultant who is eligible
to participate in the Plan and to whom an Incentive Award is granted under the
Plan, and, upon his death, his successors, heirs, executors and administrators,
as the case may be, to the extent permitted hereby.
(x) "PERFORMANCE AWARD" shall mean an award payable in cash or Common
Stock, which award is granted pursuant to SECTION 8 hereof and subject to the
terms and conditions contained herein.
(y) "PERFORMANCE-BASED EXCEPTION" shall mean the performance-based
exception from the tax deductibility limitations of Section 162(m) of the Code,
as prescribed in Code ss. 162(m) and Treasury Regulation ss. 1.162-27(e) (or its
successor).
(z) "PERSON" shall mean a "person," as such term is used in Sections
13(d) and 14(d) of the Exchange Act, and the rules and regulations in effect
from time to time thereunder.
(aa) a share of "PHANTOM STOCK" shall represent the right to receive in
cash the Fair Market Value of a share of Common Stock of the Company, which
right is granted pursuant to SECTION 9 hereof and subject to the terms and
conditions contained herein.
(bb) "PLAN" shall mean the Henley Healthcare, Inc. 1996 Incentive Stock
Plan, as amended and restated effective December 31, 1997, and as it may be
further amended from time to time.
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(cc) a share of "RESTRICTED STOCK" shall mean a share of Common Stock
which is granted pursuant to the terms of SECTION 7 hereof and which is subject
to the restrictions set forth in SECTION 7(C) hereof for so long as such
restrictions continue to apply to such share.
(dd) "SECURITIES ACT" shall mean the Securities Act of 1933, as amended
from time to time.
(ee) "STOCK BONUS" shall mean a grant of a bonus payable in shares of
Common Stock pursuant to SECTION 10 hereof.
(ff) "SUBSIDIARY" shall mean any corporation in which at the pertinent
time the Company owns, directly or indirectly, stock vested with more than 50%
of the total combined voting power of all classes of stock of such corporations
within the meaning of Section 424(f) of the Code.
(gg) "VESTING DATE" shall mean the date established by the Committee on
which a share of Restricted Stock or Phantom Stock may vest.
3. STOCK SUBJECT TO THE PLAN.
(a) TYPES OF INCENTIVE AWARDS. Under the Plan, the Committee may grant
as Incentive Awards to Participants: (i) Options; (ii) shares of Restricted
Stock; (iii) Performance Awards; (iv) shares of Phantom Stock; (v) Stock
Bonuses; and (vi) Cash Bonuses.
(b) COMMON STOCK SUBJECT TO PLAN. The Committee may grant Options,
shares of Restricted Stock, Performance Awards, shares of Phantom Stock and
Stock Bonuses under the Plan with respect to a number of shares of Common Stock
that in the aggregate at any time does not exceed 1,200,000 shares of Common
Stock, subject to adjustment pursuant to SECTION 12 hereof. The grant of a Cash
Bonus shall not reduce the number of shares of Common Stock with respect to
which Options, shares of Restricted Stock, Performance Awards, shares of Phantom
Stock or Stock Bonuses may be granted pursuant to the Plan.
(c) MAXIMUM NUMBER OF SHARES TO BE GRANTED TO COVERED EMPLOYEE PER
YEAR. Unless the Committee designates that an Incentive Award is not intended to
comply with the Performance-Based Exception, the maximum number of shares of
Common Stock that may be subject to Incentive Awards granted to any one Covered
Employee during any calendar year shall be 500,000 shares of Common Stock,
subject to adjustment under SECTION 12 hereof. The limitation set forth in the
preceding sentence shall be applied in a manner which will permit compensation
generated in connection with the exercise of Options and the payment of
Performance Awards (or other Incentive Awards if applicable) to constitute
"qualified performance-based compensation" for purposes of Section 162(m) of the
Code, including, without limitation, counting against such maximum number of
shares, to the extent required under Section 162(m) of the Code, any shares
subject to Options that are canceled or repriced.
(d) EFFECT OF EXPIRATION, TERMINATION OR FORFEITURE ON GRANT SHARES. If
any outstanding Option expires, terminates or is canceled or forfeited for any
reason, the shares of Common Stock subject to the unexercised portion of such
Option shall again be available for grant
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under the Plan. If any shares of Restricted Stock or Phantom Stock, or any
shares of Common Stock granted as a Performance Award or a Stock Bonus are
forfeited, terminated or canceled for any reason, such shares shall again be
available for grant under the Plan. A payout of Phantom Stock or a Performance
Award in cash shall restore, on a one share for one share basis, the number of
shares of Common Stock reserved for issuance hereunder.
(e) SHARES OF COMMON STOCK. The Common Stock available for issuance or
transfer under the Plan shall be made available from shares now or hereafter (i)
held in the treasury of the Company, (ii) authorized but unissued shares, or
(iii) shares to be purchased or acquired by the Company. No fractional shares
shall be issued under the Plan; payment for fractional shares shall be made in
cash.
4. ADMINISTRATION OF THE PLAN.
(a) AUTHORITY OF THE COMMITTEE. Except as may be limited by law and
subject to the provisions herein, the Committee shall have full power to (i)
select Employees and Consultants to participate in the Plan; (ii) determine the
sizes, duration and types of Incentive Awards; (iii) determine the terms and
conditions of Incentive Awards and Incentive Agreements; (iv) determine whether
any shares subject to Incentive Awards will be subject to any restrictions on
transfer; (v) construe and interpret the Plan and any Incentive Agreement or
other agreement entered into under the Plan; and (vi) establish, amend, or waive
rules for the Plan's administration. Further, the Committee shall make all other
determinations which may be necessary or advisable for the administration of the
Plan.
(b) MEETINGS. The Committee shall designate a chairman from among its
members who shall preside at all of its meetings, and shall designate a
secretary, without regard to whether that person is a member of the Committee,
who shall keep the minutes of the proceedings and all records, documents, and
data pertaining to its administration of the Plan. Meetings shall be held at
such times and places as shall be determined by the Committee, and the Committee
may hold telephonic meetings. The Committee may take any action otherwise proper
under the Plan by the affirmative vote, taken with or without a meeting, of a
majority of its members. The Committee may authorize any one or more of their
members or any officer of the Company to execute and deliver documents on behalf
of the Committee.
(c) DECISIONS BINDING. All determinations and decisions made by the
Committee shall be made in its discretion pursuant to the provisions of the
Plan, and shall be final, conclusive and binding on all persons including the
Company, its shareholders, employees, Participants, and their estates and
beneficiaries. The Committee's determinations under the Plan and with respect to
any individual Incentive Award need not be uniform and may be made selectively
among Incentive Awards and Participants, whether or not such Incentive Awards
are similar or such Participants are similarly situated.
(d) EXPENSES OF COMMITTEE. The Committee may employ legal counsel,
including, without limitation, independent legal counsel and counsel regularly
employed by the Company, consultants and agents as the Committee may deem
appropriate for the administration of the Plan. The Committee may rely upon any
opinion or computation received from any such counsel, consultant or agent. All
expenses incurred by the Committee in interpreting and administering the
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Plan, including, without limitation, meeting expenses and professional fees,
shall be paid by the Company.
(e) MODIFICATION OF OUTSTANDING INCENTIVE AWARDS. The Committee may, in
its absolute discretion, (i) accelerate the date on which any Option granted
under the Plan becomes exercisable, (ii) extend the date on which any Option
ceases to be exercisable, (iii) accelerate the Vesting Date or Issue Date, or
waive any condition imposed pursuant to SECTION 7(B) hereof, with respect to any
share of Restricted Stock, and (iv) accelerate the Vesting Date or waive any
condition imposed pursuant to SECTION 9 hereof with respect to any share of
Phantom Stock.
(f) SURRENDER OF PREVIOUS INCENTIVE AWARDS. The Committee may, in its
absolute discretion, grant Incentive Awards to Participants on the condition
that such Participants surrender to the Committee for cancellation such other
Incentive Awards (including, without limitation, Incentive Awards with higher
exercise prices) as the Committee directs. Notwithstanding SECTION 3 hereof,
Incentive Awards granted on the condition precedent of surrender of outstanding
Incentive Awards shall not count against the limits set forth in SECTION 3until
such time as such Incentive Awards are surrendered.
(g) LEAVES OF ABSENCE. Except as provided in SECTION 6(E)(4) hereof,
whether an authorized leave of absence, or absence in military or government
service, shall constitute termination of Employment shall be determined by the
Committee in its discretion exercised in accordance with any applicable law.
(h) INDEMNIFICATION. Each person who is or was a member of the
Committee shall be indemnified by the Company against and from any damage, loss,
liability, cost and expense that may be imposed upon or reasonably incurred by
him in connection with or resulting from any claim, action, suit, or proceeding
to which he may be a party or in which he may be involved by reason of any
action taken or failure to act under the Plan, except for any such act or
omission constituting willful misconduct or gross negligence. Such person shall
be indemnified by the Company for all amounts paid by him in settlement thereof,
with the Company's approval, or paid by him in satisfaction of any judgment in
any such action, suit, or proceeding against him, provided he shall give the
Company an opportunity, at its own expense, to handle and defend the same before
he undertakes to handle and defend it on his own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification to
which such persons may be entitled under the Company's Articles of Incorporation
or Bylaws, as a matter of law, or otherwise, or any power that the Company may
have to indemnify them or hold them harmless.
5. ELIGIBILITY. The persons who shall be eligible to receive Incentive Awards
pursuant to the Plan shall be (a) those Employees who are largely responsible
for the management, growth and protection of the business of the Company or any
Subsidiary (including officers of the Company, whether or not they are directors
of the Company) and (b) any Consultant, as the Committee, in its absolute
discretion, shall select from time to time; PROVIDED, HOWEVER, Incentive Stock
Options may only be granted to Employees.
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6. OPTIONS. The Committee may grant Options pursuant to the Plan, which Options
shall be evidenced by Incentive Agreements in such form as the Committee shall
from time to time approve. Options shall also be subject to the following terms
and conditions:
(a) IDENTIFICATION OF OPTIONS. All Options granted under the Plan shall
be clearly identified in the Incentive Agreement evidencing such Options as
either Incentive Stock Options or as Non-Qualified Stock Options.
(b) EXERCISE PRICE. The exercise price of any Option granted under the
Plan shall be such price as the Committee shall determine on the date on which
such Option is granted; PROVIDED, that such price shall be not less than 100% of
the Fair Market Value of a share of Common Stock on the date on which such
Option is granted, subject to (i) the restrictions provided in SECTION 6(D)
hereof and (ii) the adjustments provided in SECTION 12 hereof.
(c) TERM AND EXERCISE OF OPTIONS.
(1) Each Option shall be exercisable on such date or dates,
during such period and for such number of shares of Common Stock as
shall be determined by the Committee on the day on which such Option is
granted and set forth in the Incentive Agreement evidencing the Option;
PROVIDED, HOWEVER, that (A) subject to the restrictions provided in
SECTION 6(D) hereof, no Option shall be exercisable after the
expiration of ten years from the date such Option was granted and (B)
no Option shall be exercisable until six months after the date of
grant; and, PROVIDED, FURTHER, that each Option shall be subject to
earlier termination, expiration or cancellation as provided in the Plan
or the Incentive Agreement.
(2) Each Option shall be exercisable in whole or in part with
respect to whole shares of Common Stock. The partial exercise of an
Option shall not cause the expiration, termination or cancellation of
the remaining portion thereof. Upon the partial exercise of an Option,
the Incentive Agreement evidencing such Option shall be returned to the
Participant exercising such Option together with the delivery of the
certificates described in SECTION 6(C)(5) hereof.
(3) An Option shall be exercised by delivering notice to the
Company's principal office, to the attention of its Secretary, no fewer
than five business days in advance of the effective date of the
proposed exercise. Such notice shall be accompanied by the Incentive
Agreement evidencing the Option, shall specify the number of shares of
Common Stock with respect to which the Option is being exercised and
the effective date of the proposed exercise, and shall be signed by the
Participant. The Participant may withdraw such notice at any time prior
to the close of business on the business day immediately preceding the
effective date of the proposed exercise, in which case such Incentive
Agreement shall be returned to the Participant. Payment for shares of
Common Stock purchased upon the exercise of an Option shall be made on
the effective date of such exercise either (i) in cash, by certified
check, bank cashier's check or wire transfer, (ii) subject to the
approval of the Committee, in shares of Common Stock owned by the
Participant and held for at least six months, as valued at their Fair
Market Value on the effective date of such exercise, (iii) subject to
the approval of the Committee, in the form of a "cashless exercise" (as
described below) or (iv) subject to the
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approval of the Committee, in any combination of the foregoing. Any
payment in shares of Common Stock shall be effected by the delivery of
such shares to the Secretary of the Company, duly endorsed in blank or
accompanied by stock powers duly executed in blank, together with any
other documents as the Secretary of the Company shall require from time
to time. The cashless exercise of an Option shall be pursuant to
procedures whereby the Participant by written notice, directs (i) an
immediate market sale or margin loan respecting all or a part of the
shares of Common Stock to which he is entitled upon exercise pursuant
to an extension of credit by the Company to the Participant in the
amount of the exercise price, (ii) the delivery of the shares of Common
Stock directly from the Company to a brokerage firm, and (iii) delivery
of the exercise price from the sale or the margin loan proceeds from
the brokerage firm directly to the Company.
(4) Any Option granted under the Plan may be exercised by a
broker-dealer acting on behalf of a Participant if (i) the
broker-dealer has received from the Participant or the Company a duly
endorsed Incentive Agreement evidencing such Option and instructions
signed by the Participant requesting the Company to deliver the shares
of Common Stock subject to such Option to the broker-dealer on behalf
of the Participant and specifying the account into which such shares
should be deposited, (ii) adequate provision has been made with respect
to the payment of any withholding taxes due upon such exercise, and
(iii) the broker-dealer and the Participant have otherwise complied
with Section 220.3(e)(4) of Regulation T, 12 CFR Part 220.
(5) Certificates for shares of Common Stock purchased upon the
exercise of an Option shall be issued in the name of the Participant
and delivered to the Participant as soon as practicable following the
effective date on which the Option is exercised; PROVIDED, HOWEVER,
that such delivery shall be effected for all purposes when a stock
transfer agent of the Company shall have deposited such certificates in
the United States mail, addressed to the Participant.
(6) During the lifetime of a Participant each Option granted
to him shall be exercisable only by him, a broker-dealer acting on
behalf of such Participant pursuant to SECTION 6(C)(4) hereof, or by
his legal guardian in the event of his Disability. No Option shall be
assignable or transferable otherwise than by will or by the laws of
descent and distribution.
(d) LIMITATIONS ON GRANT OF INCENTIVE STOCK OPTIONS.
(1) The aggregate Fair Market Value of shares of Common Stock
with respect to which "incentive stock options" (within the meaning of
Section 422 without regard to Section 422(d) of the Code) are
exercisable for the first time by a Participant during any calendar
year under the Plan (and any other stock option plan of the Company, or
of its Parent or any Subsidiary) shall not exceed $100,000. Such Fair
Market Value shall be determined as of the date on which each such
Incentive Stock Option is granted. If such aggregate Fair Market Value
of shares of Common Stock underlying such Incentive Stock Options
exceeds $100,000, then Incentive Stock Options granted hereunder to
such Participant shall, to the extent and in the order required by
regulations promulgated under the Code (or any other authority having
the force of such regulations), automatically be deemed
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to be Non-Qualified Stock Options, but all other terms and provisions
of such Incentive Stock Options shall remain unchanged. In the absence
of such regulations promulgated under the Code (and authority), or if
such regulations (or authority) require or permit a designation of the
options which shall cease to constitute Incentive Stock Options,
Incentive Stock Options shall, to the extent of such excess and in the
order in which they were granted, automatically be deemed to be
Non-Qualified Stock Options, but all other terms and provisions of such
Incentive Stock Options shall remain unchanged.
(2) No Incentive Stock Option may be granted to an individual
if, at the time of the proposed grant, such individual owns stock
possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or of its Parent or any
Subsidiary, unless (i) the exercise price of such Incentive Stock
Option is at least 110% of the Fair Market Value of a share of Common
Stock at the time such Incentive Stock Option is granted and (ii) such
Incentive Stock Option is not exercisable after the expiration of five
years from the date such Incentive Stock Option is granted.
(e) EFFECT OF TERMINATION OF EMPLOYMENT.
(1) If the Employment of a Participant with the Company shall
terminate for any reason other than Cause, Disability or the death of
the Participant (i) Options granted to such Participant, to the extent
that they were exercisable at the time of such termination, shall
remain exercisable until the expiration of one month after such
termination, on which date they shall expire, and (ii) Options granted
to such Participant, to the extent that they were not exercisable at
the time of such termination, shall expire at the close of business on
the date of such termination; PROVIDED, HOWEVER, that no Option shall
be exercisable after the expiration of its term.
(2) If the Employment of a Participant with the Company shall
terminate as a result of the Disability or the death of the
Participant, then (i) Options granted to such Participant, to the
extent that they were exercisable at the time of such termination,
shall remain exercisable until the expiration of one year after such
termination, on which date they shall expire, and (ii) Options granted
to such Participant, to the extent that they were not exercisable at
the time of such termination, shall expire at the close of business on
the date of such termination; PROVIDED, HOWEVER, that no Option shall
be exercisable after the expiration of its term.
(3) In the event of the termination of a Participant's
Employment for Cause, all outstanding Options granted to such
Participant shall expire, and shall not be exercisable, as of the
commencement of business on the date of such termination.
(4) A Participant's Employment with the Company shall be
deemed terminated if the Participant's leave of absence (including
military or such leave or other bona fide leave of absence) extends for
more than 90 days and the Participant's continued Employment with the
Company is not guaranteed by contract or statute.
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(f) ACCELERATION OF EXERCISE DATE UPON CHANGE IN CONTROL. Upon the
occurrence of a Change in Control, each Option granted under the Plan and
outstanding at such time shall become fully and immediately exercisable and
shall remain exercisable until its expiration, termination or cancellation
pursuant to the terms of the Plan.
7. RESTRICTED STOCK. The Committee may grant shares of Restricted Stock pursuant
to the Plan. Each grant of shares of Restricted Stock shall be evidenced by an
Incentive Agreement containing such terms and conditions as prescribed by the
Committee. Each grant of shares of Restricted Stock shall also be subject to the
following terms and conditions:
(a) ISSUE DATE AND VESTING DATE. At the time of the grant of shares of
Restricted Stock, the Committee shall establish an Issue Date or Issue Dates and
a Vesting Date or Vesting Dates with respect to such shares. The Committee may
divide such shares into classes and assign a different Issue Date and/or Vesting
Date for each class. Except as provided in SECTIONS 7(C) AND 7(F) hereof, upon
the occurrence of the Issue Date with respect to a share of Restricted Stock, a
share of Restricted Stock shall be issued in accordance with the provisions of
SECTION 7(D) hereof. Provided that all conditions to the vesting of a share of
Restricted Stock imposed pursuant to SECTION 7(B) hereof are satisfied, and
except as provided in SECTIONS 7(C) AND 7(F) hereof, upon the occurrence of the
Vesting Date with respect to a share of Restricted Stock, such share shall vest
and the restrictions of SECTION 7(C) hereof shall cease to apply to such share.
(b) CONDITIONS TO VESTING. At the time of the grant of shares of
Restricted Stock, the Committee may impose such restrictions or conditions, not
inconsistent with the provisions hereof, to the vesting of such shares as it, in
its absolute discretion, deems appropriate. By way of example and not by way of
limitation, the Committee may require, as a condition to the vesting of any
class or classes of shares of Restricted Stock, that (i) the Participant or the
Company achieve certain performance criteria, such criteria to be specified by
the Committee at the time of the grant of such shares and (ii) prohibiting an
election by the Participant under Section 83(b) of the Code.
(c) RESTRICTIONS ON TRANSFER PRIOR TO VESTING. Prior to the vesting of
a share of Restricted Stock, no transfer of a Participant's rights with respect
to such share, whether voluntary or involuntary, by operation of law or
otherwise, shall vest the transferee with any interest or right in or with
respect to such share, but immediately upon any attempt to transfer such rights,
such share, and all of the rights related thereto, shall be forfeited by the
Participant and the transfer shall be of no force or effect.
(d) ISSUANCE OF CERTIFICATES.
(1) Except as provided in SECTIONS 7(C) OR 7(F) hereof,
reasonably promptly after the Issue Date with respect to shares of
Restricted Stock, the Company shall cause to be issued a stock
certificate, registered in the name of the Participant to whom such
shares were granted, evidencing such shares; PROVIDED, that the Company
shall not cause to be issued such a stock certificates unless it has
received a stock power duly endorsed in blank with respect to such
shares. Each such stock certificate shall bear the following legend:
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THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES OF
STOCK REPRESENTED HEREBY ARE SUBJECT TO THE RESTRICTIONS,
TERMS AND CONDITIONS (INCLUDING FORFEITURE AND RESTRICTIONS
AGAINST TRANSFER) CONTAINED IN THE HENLEY HEALTHCARE, INC.
1996 INCENTIVE STOCK PLAN AND AN AGREEMENT ENTERED INTO
BETWEEN THE REGISTERED OWNER OF SUCH SHARES AND HENLEY
HEALTHCARE, INC. A COPY OF THE PLAN AND AGREEMENT IS ON FILE
IN THE OFFICE OF THE SECRETARY OF HENLEY HEALTHCARE, INC., 120
INDUSTRIAL BOULEVARD, SUGAR LAND, TEXAS 77478.
Such legend shall not be removed from the certificate evidencing such
shares until such shares vest pursuant to the terms hereof.
(2) Each certificate issued pursuant to SECTION 7(D)(1)
hereof, together with the stock powers relating to the shares of
Restricted Stock evidenced by such certificate, shall be held by the
Company. The Company shall issue to the Participant a receipt
evidencing the certificates held by it which are registered in the name
of the Participant.
(e) CONSEQUENCES UPON VESTING. Upon the vesting of a share of
Restricted Stock pursuant to the terms hereof and the Incentive Agreement, the
restrictions of SECTION 7(C) shall cease to apply to such share. Reasonably
promptly after a share of Restricted Stock vests, the Company shall cause to be
issued and delivered to the Participant to whom such shares were granted, a
certificate evidencing such share, free of the legend set forth in SECTION
7(D)(1) hereof, together with any other property of the Participant held by
Company pursuant to SECTION 12(A) hereof; PROVIDED, HOWEVER, that such delivery
shall be effected for all purposes when the Company shall have deposited such
certificate and other property in the United States mail, addressed to the
Participant.
(f) EFFECT OF TERMINATION OF EMPLOYMENT.
(1) If the Employment of a Participant with the Company shall
terminate for any reason other than Cause prior to the vesting of
shares of Restricted Stock granted to such Participant, a portion of
such shares, to the extent not forfeited or canceled on or prior to
such termination pursuant to any provision hereof, may vest on the date
of such termination. The portion referred to in the preceding sentence
shall be determined by the Committee and may be based on the
achievement of any conditions imposed by the Committee with respect to
such shares pursuant to SECTION 7(B) hereof. Such portion may equal
zero and shall be deemed zero unless otherwise specified by the
Committee or in the Participant's Incentive Agreement.
(2) In the event of the termination of a Participant's
Employment for Cause, all shares of Restricted Stock granted to such
Participant which have not vested as of the commencement of business on
the date of such termination shall immediately be forfeited.
(g) EFFECT OF CHANGE IN CONTROL. Upon the occurrence of a Change in
Control, (i) all shares of Restricted Stock which have been issued but are not
vested shall immediately be 100% vested and (ii) all shares of Restricted Stock
with respect to which the Issue Date had not previously occurred shall
immediately be issued and 100% vested.
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8. PERFORMANCE AWARDS. The Committee may grant Performance Awards pursuant to
the Plan. Each grant of Performance Awards shall be evidenced by an Incentive
Agreement containing such terms and conditions as prescribed by the Committee.
Each grant of Performance Awards shall also be subject to the following terms
and conditions:
(a) PERFORMANCE PERIOD AND PERFORMANCE AWARD.
(1) With respect to each grant of a Performance Award, the
Committee shall establish a performance period over which the
performance of the applicable Participant shall be measured.
(2) In determining the amount of the Performance Award to be
granted to a particular Participant, the Committee may take into
account such factors as the Participant's responsibility level and
growth potential, the amount of other Incentive Awards granted to such
Participant, and such other considerations as the Committee deems
appropriate in its discretion. Each Performance Award shall be subject
to a maximum value as established by the Committee at the time of grant
of such award; PROVIDED, HOWEVER, the maximum value that can be granted
or vest as a Performance Award to any one Covered Employee during any
calendar year is $2,000,000 as determined consistent with the
Performance-Based Exception.
(b) PERFORMANCE MEASURES. A Performance Award shall be awarded to a
Participant contingent upon future performance of the Company (or any
Subsidiary, division or department thereof) by or in which the Participant is
employed or responsible during the performance period. The Committee shall
establish, in writing, the performance measures applicable to such performance
within 90 days after the commencement of the performance period, to which such
measures relate, and at a time when the outcome of such performance measures are
substantially uncertain within the meaning of the Performance-Based Exception,
subject to such later revisions as the Committee may deem appropriate to reflect
significant unforeseen events or changes.
(c) PAYMENT. Upon the expiration of the performance period relating to
a Performance Award granted to a Participant, such Participant shall be entitled
to receive payment of an amount not exceeding the maximum value of the
Performance Award, based on the achievement of the performance measures for such
performance period, as determined by the Committee. The Committee shall certify
in writing prior to the payment of a Performance Award that the applicable
performance measures and any other material terms of the grant have been
satisfied. Subject to SECTION 3 hereof, payment of a Performance Award may be
made in cash, Common Stock or a combination thereof, as determined by the
Committee. Payment shall be made in a lump sum or in installments as prescribed
by the Committee. Any payment to be made in Common Stock shall be based on the
Fair Market Value of the Common Stock on the payment date.
(d) EFFECT OF TERMINATION OF EMPLOYMENT. If the Employment of a
Participant shall terminate for any reason prior to the expiration of the
applicable performance period, the Performance Awards relating to such
performance period shall immediately be forfeited as of the commencement of
business on the date of such termination, except as may be determined by the
Committee in its sole and absolute discretion, or as may be otherwise provided
in the Incentive Agreement evidencing such Performance Award.
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(e) EFFECT OF CHANGE IN CONTROL. Upon the occurrence of a Change in
Control, the Committee (as constituted immediately prior to such Change in
Control) shall determine, in its sole discretion, whether each Performance
Award, which have not theretofore satisfied the requisite performance measure or
for which the performance period has not expired, shall immediately be paid or
whether such Performance Award shall remain outstanding according to its
respective terms.
9. PHANTOM STOCK. The Committee may grant shares of Phantom Stock pursuant to
the Plan. Each grant of shares of Phantom Stock shall be evidenced by an
Incentive Agreement containing such terms and conditions as prescribed by the
Committee. Each grant of shares of Phantom Stock shall also be subject to the
following terms and conditions:
(a) VESTING DATE. At the time of the grant of shares of Phantom Stock,
the Committee shall establish a Vesting Date or Vesting Dates with respect to
such shares. The Committee may divide such shares into classes and assign a
different Vesting Date for each class. Provided that all conditions to the
vesting of a share of Phantom Stock imposed pursuant to SECTION 9(C) hereof are
satisfied, and except as provided in SECTION 9(D) hereof, upon the occurrence of
the Vesting Date with respect to a share of Phantom Stock, such share shall
vest.
(b) BENEFIT UPON VESTING. Upon the vesting of a share of Phantom Stock,
a Participant shall be entitled to receive in cash, within 90 days of the date
on which such share vests, an amount in cash in a lump sum equal to the sum of
(i) the Fair Market Value of a share of Common Stock on the date on which such
share of Phantom Stock vests and (ii) the aggregate amount of cash dividends
paid with respect to a share of Common Stock during the period commencing on the
date on which the share of Phantom Stock was granted and terminating on the date
on which such share vests.
(c) CONDITIONS TO VESTING. At the time of the grant of shares of
Phantom Stock, the Committee may impose such restrictions or conditions, not
inconsistent with the provisions hereof, to the vesting of such shares as it, in
its absolute discretion, deems appropriate. By way of example and not by way of
limitation, the Committee may require, as a condition to the vesting of any
class or classes of shares of Phantom Stock, that the Participant or the Company
achieve certain performance criteria, such criteria to be specified by the
Committee at the time of the grant of such shares.
(d) EFFECT OF TERMINATION OF EMPLOYMENT.
(1) If the Employment of a Participant with the Company shall
terminate for any reason other than Cause prior to the vesting of
shares of Phantom Stock granted to such Participant, a portion of such
shares, to the extent not forfeited or canceled on or prior to such
termination pursuant to any provision hereof, may vest on the date of
such termination. The portion referred to in the preceding sentence
shall be determined by the Committee and may be based on the
achievement of any conditions imposed by the Committee with respect to
such shares pursuant to SECTION 9(C) hereof. Such portion may equal
zero and shall be deemed zero unless otherwise specified by the
Committee or in the Participant's Incentive Agreement.
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(2) In the event of the termination of a Participant's
Employment for Cause, all shares of Phantom Stock granted to such
Participant which have not vested as of the date of such termination
shall immediately be forfeited.
(e) EFFECT OF CHANGE IN CONTROL. Upon the occurrence of a Change in
Control, all shares of Phantom Stock which have not theretofore vested shall
immediately be 100% vested.
10. STOCK BONUSES. The Committee may, in its absolute discretion, grant Stock
Bonuses in such amounts as it shall determine from time to time. A Stock Bonus
shall be paid at such time and subject to such conditions as the Committee shall
determine at the time of the grant of such Stock Bonus. Certificates for shares
of Common Stock granted as a Stock Bonus shall be issued in the name of the
Participant to whom such grant was made and delivered to such Participant as
soon as practicable after the date on which such Stock Bonus is required to be
paid.
11. CASH BONUSES. The Committee may, in its absolute discretion, grant to a
Participant, in connection with any grant of Restricted Stock or shares of
Common Stock granted as a Performance Award or Stock Bonus or at any time
thereafter, a cash bonus, payable promptly after the date on which the
Participant is required to recognize income for federal income tax purposes in
connection with such Restricted Stock, Performance Award or Stock Bonus, in such
amount as the Committee shall determine; PROVIDED, HOWEVER, that in no event
shall the amount of a Cash Bonus exceed the Fair Market Value of the related
shares of Restricted Stock or shares of Common Stock granted pursuant to a
Performance Award or Stock Bonus on such date. A Cash Bonus shall be subject to
such terms and conditions as the Committee shall determine at the time of its
grant.
12. ADJUSTMENT UPON CHANGES IN COMMON STOCK.
(a) OUTSTANDING RESTRICTED STOCK, PERFORMANCE AWARDS, AND PHANTOM
STOCK. Unless the Committee in its absolute discretion otherwise determines, if
a Participant receives any securities or other property (including dividends
paid in cash) as a result of any dividend, stock split recapitalization, merger,
consolidation, combination, exchange of shares or otherwise, with respect to a
share of Restricted Stock for which the Issue Date occurs prior to such event
but that has not vested as of the date of such event, such securities or other
property will not vest until such share of Restricted Stock vests and shall be
held by the Company pursuant to SECTION 7(D)(2) hereof as if such securities or
other property were unvested shares of Restricted Stock. The Committee may, in
its absolute discretion, adjust any grant of shares of Restricted Stock for
which the Issue Date has not occurred as of the date of the occurrence of any of
the following events, and any shares of Common Stock upon the grant of a
Performance Award or any grant of shares of Phantom Stock, to reflect any
dividend, stock split, recapitalization, merger, consolidation, combination,
exchange of shares or similar corporate change as the Committee may deem
appropriate to prevent the enlargement or dilution of rights of Participants
under the grant.
(b) STOCK SUBJECT TO PLAN, OUTSTANDING OPTIONS, INCREASE OR DECREASE IN
ISSUED SHARES WITHOUT CONSIDERATION. Subject to any required action by the
stockholders of the Company, in the event of any increase or decrease in the
number of issued shares of Common Stock resulting from a subdivision or
consolidation of shares of Common Stock or the payment of a stock dividend (but
only on the shares of Common Stock), or any other increase or decrease in the
number
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<PAGE>
of such shares effected without receipt of consideration by the Company, the
Committee shall proportionally adjust (i) the number of shares of Common Stock
for which Incentive Awards may be granted under the Plan and (ii) the number of
shares and the exercise price per share of Common Stock subject to each
outstanding Option.
(c) OUTSTANDING OPTIONS, CERTAIN MERGERS. Subject to any required
action by the stockholders of the Company, if the Company shall be the surviving
corporation in any merger or consolidation (except a merger or consolidation as
a result of which the holders of shares of Common Stock receive securities of
another corporation), each Option outstanding on the date of such merger or
consolidation shall entitle the Participant to acquire upon exercise the
securities which a holder of the number of shares of Common Stock subject to
such Option would have received in such merger or consolidation.
(d) OUTSTANDING OPTIONS, CERTAIN OTHER TRANSACTIONS. In the event of a
dissolution or liquidation of the Company, a sale of all or substantially all of
the Company's assets, a merger or consolidation involving the Company in which
the Company is not the surviving corporation or a merger or consolidation
involving the Company in which the Company is the surviving corporation but the
holders of shares of Common Stock receive securities of another corporation
and/or other property, including cash, the Committee shall, in its absolute
discretion, have the power to:
(1) cancel, effective immediately prior to the occurrence of
such event, each Option outstanding immediately prior to such event
(whether or not then exercisable), and, in full consideration of such
cancellation, pay to the Participant to whom such Option was granted an
amount in cash, for each share of Common Stock subject to such Option
equal to the excess of (A) the value, as determined by the Committee in
its absolute discretion, of the property (including cash) received by
the holder of a share of Common Stock as a result of such event over
(B) the exercise price of such Option; or
(2) provide for the exchange of each Option outstanding
immediately prior to such event (whether or not then exercisable) for
an option on some or all of the property and, incident thereto, make an
equitable adjustment as determined by the Committee in its absolute
discretion in the exercise price of the option, or the number of shares
or amount of property subject to the option or, if appropriate, provide
for a cash payment to the Participant to whom such Option was granted
in partial consideration for the exchange of the Option.
(e) OUTSTANDING OPTIONS, OTHER CHANGES. In the event of any change in
the capitalization of the Company or corporate change other than those
specifically referred to in SECTIONS 12(B), 12(C) OR 12(D) hereof, the Committee
may, in its absolute discretion, make such adjustments in the number and class
of shares subject to Options outstanding on the date on which such change occurs
and in the per share exercise price of each such Option as the Committee may
consider appropriate to prevent dilution or enlargement of rights.
(f) NO OTHER RIGHTS. Except as expressly provided in the Plan, no
Participant shall have any rights by reason of any subdivision or consolidation
of shares of stock of any class, the payment of any dividend, any increase or
decrease in the number of shares of stock of any class or any dissolution,
liquidation, merger or consolidation of the Company or any other corporation.
Except
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as expressly provided in the Plan, no issuance by the Company of shares of stock
of any class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number of shares of Common Stock subject to an Incentive Award or the exercise
price of any Option.
13. RIGHTS AS A STOCKHOLDER. No person shall have any rights as a stockholder
with respect to any shares of Common Stock covered by or relating to any
Incentive Award granted pursuant to this Plan until the date of the issuance of
a stock certificate with respect to such shares. Except as otherwise expressly
provided in SECTION 12 hereof, no adjustment to any Incentive Award shall be
made for dividends or other rights for which the record date occurs prior to the
date such stock certificate is issued.
14. NO SPECIAL EMPLOYMENT RIGHTS; NO RIGHT TO INCENTIVE AWARD. Nothing contained
in the Plan or any Incentive Award shall confer upon any Participant any right
with respect to the continuation of his Employment or interfere in any way with
the right of the Company, subject to the terms of any separate employment
agreement to the contrary, to terminate at any time such Employment or to
increase or decrease the compensation of the Participant from the rate in
existence at the time of the grant of an Incentive Award. No person shall have
any claim or right to receive an Incentive Award hereunder. The Committee's
granting of an Incentive Award to a Participant at any time shall neither
require the Committee to grant an Incentive Award to such Participant or any
other Participant or other person at any time nor preclude the Committee from
making subsequent grants to such Participant or any other Participant or other
person.
15. SECURITIES MATTERS.
(a) REGISTRATION OF COMMON STOCK. The Company shall be under no
obligation to effect the registration pursuant to the Securities Act of any
shares of Common Stock to be issued hereunder or to effect similar compliance
under any state laws. Notwithstanding anything herein to the contrary, the
Company shall not be obligated to cause to be issued or delivered any
certificates evidencing shares of Common Stock pursuant to the Plan unless and
until the Company is advised by its counsel that the issuance and delivery of
such certificates is in compliance with all applicable laws, regulations of
governmental authority and the requirements of any securities exchange on which
shares of Common Stock are traded. The Committee may require, as a condition of
the issuance and delivery of certificates evidencing shares of Common Stock
pursuant to the terms hereof, that the recipient of such shares make such
covenants, agreements and representations, and that such certificates bear such
legends, as the Committee, in its sole discretion, deems necessary or desirable.
(b) COMPLIANCE WITH APPLICABLE LAWS. The exercise of any Option granted
hereunder shall only be effective at such time as counsel to the Company shall
have determined that the issuance and delivery of shares of Common Stock
pursuant to such exercise is in compliance with all applicable laws, regulations
of governmental authorities and the requirements of any securities exchange on
which shares of Common Stock are traded. The Company may, in its sole
discretion, defer the effectiveness of any exercise of an Option granted
hereunder in order to allow the issuance of shares of Common Stock pursuant
thereto to be made pursuant to registration or an exemption from registration or
other methods for compliance available under federal or state securities laws.
The Company shall inform the Participant in writing of its decision to defer the
effectiveness of the
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<PAGE>
exercise of an Option granted hereunder. During the period that the
effectiveness of the exercise of an Option has been deferred, the Participant
may, by written notice, withdraw such exercise and obtain the refund of any
amount paid with respect thereto.
(c) RULE 16B-3. It is intended that the Plan and any grant of an
Incentive Award made to a person subject to Section 16 of the Exchange Act meet
all of the requirements of Rule 16b-3 promulgated thereunder. If any provision
of the Plan or any such Incentive Award would disqualify the Plan or such
Incentive Award under, or would otherwise not comply with, Rule 16b-3, such
provision or Incentive Award shall be construed or deemed amended to conform to
Rule 16b-3 to the extent permitted by applicable law and deemed advisable by the
Board of Directors.
16. QUALIFIED PERFORMANCE-BASED COMPENSATION. Unless otherwise determined by the
Committee with respect to any particular Incentive Award, it is intended that
the Plan comply fully with and meet all the requirements of Section 162(m) of
the Code so that (i) Options granted hereunder with an exercise price not less
than Fair Market Value of a share of Common Stock on the date of grant and (ii)
the payment of a Performance Award, shall qualify for the Performance-Based
Exception. If any provision of the Plan or an Incentive Award would disqualify
the Plan or would not otherwise permit the Plan or an Incentive Award to comply
with the Performance-Based Exception as so intended, such provision shall be
construed or deemed amended to conform to the requirements or provisions of the
Performance-Based Exception to the extent permitted by applicable law and deemed
advisable by the Committee; provided that no such construction or amendment
shall have an adverse effect on the economic value to a Participant of any
outstanding Incentive Award previously granted.
17. WITHHOLDING TAXES. Whenever shares of Common Stock are to be issued upon the
exercise of an Option, the occurrence of the Issue Date or Vesting Date with
respect to a share of Restricted Stock, the payment of a Performance Award in
shares of Common Stock or the payment of a Stock Bonus, the Company shall have
the right to require the Participant to remit to the Company in cash an amount
sufficient to satisfy federal, state and local withholding tax requirements, if
any, attributable to such exercise, occurrence or payment prior to the delivery
of any certificate or certificates for such shares. In addition, upon the grant
of a Cash Bonus, the payment of a Performance Award or the making of a payment
with respect to a share of Phantom Stock, the Company shall have the right to
withhold from any cash payment required to be made pursuant thereto an amount
sufficient to satisfy the federal, state and local withholding tax requirements,
if any, attributable to such exercise or grant.
18. TERMINATION AND AMENDMENT OF THE PLAN. The Board of Directors may at any
time suspend or terminate the Plan or revise or amend it in any respect
whatsoever, PROVIDED, HOWEVER, that without approval of the Company's
stockholders no revision or amendment shall (a) except as provided in SECTION 12
hereof, increase the number of shares of Common Stock hereunder that may be
issued under the Plan, (b) except as provided in SECTION 12 hereof, increase the
maximum number of shares of Common Stock that may be subject to an Incentive
Award, subject to Section 162(m) of the Code for any one Covered Employee for
any calendar year, (c) increase the maximum value of a Performance Award,
subject to Section 162(m) of the Code for any one Covered Employee for any
calendar year, (d) modify the requirements as to eligibility for participation
in the Plan, (e) extend the term of the Plan, or (f) decrease any authority
granted to the Committee under the Plan in
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<PAGE>
contravention of Rule 16b-3 under the Exchange Act. No termination, amendment,
or modification of the Plan shall adversely affect in any material way any
outstanding Incentive Award previously granted under the Plan, without the
written consent of such Participant or other designated holder of such Incentive
Award. In addition, to the extent that the Committee determines that (a) the
listing for qualification requirements of any national securities exchange or
quotation system on which the Company's Common Stock is then listed or quoted,
or (b) the Code (or regulations promulgated thereunder), require stockholder
approval in order to maintain compliance with such listing requirements or to
maintain any favorable tax advantages or qualifications, then the Plan shall not
be amended in such respect without approval of the Company's stockholders.
19. NO OBLIGATION TO EXERCISE. The grant to a Participant of an Option shall
impose no obligation upon such Participant to exercise such Option.
20. TRANSFERS UPON DEATH. Upon the death of a Participant, outstanding Incentive
Awards granted to such Participant may be exercised only by the executors or
administrators of the Participant's estate or by any person or persons who shall
have acquired such right to exercise by will or by the laws of descent and
distribution. No transfer by will or the laws of descent and distribution of any
Incentive Award, or the right to exercise any Incentive Award, shall be
effective to bind the Company unless the Committee shall have been furnished
with (a) written notice thereof and with a copy of the will and/or such evidence
as the Committee may deem necessary to establish the validity of the transfer
and (b) an agreement by the transferee to comply with all the terms and
conditions of the Incentive Award that are or would have been applicable to the
Participant and to be bound by the acknowledgments made by the Participant in
connection with the grant of the Incentive Award.
21. EXPENSES AND RECEIPTS. The expenses of the Plan shall be paid by the
Company. Any proceeds received by the Company in connection with any Incentive
Award will be used for general corporate purposes.
22. FAILURE TO COMPLY. In addition to the remedies of the Company elsewhere
provided for herein, failure by a Participant to comply with any of the terms
and conditions of the Plan or the agreement executed by such Participant
evidencing an Incentive Award, unless such failure is remedied by such
Participant within ten days after having been notified of such failure by the
Committee, shall be grounds for the cancellation and forfeiture of such
Incentive Award, in whole or in part, as the Committee, in its absolute
discretion, may determine.
23. GOVERNING LAW. The Plan shall be interpreted, construed and constructed in
accordance with the laws of the State of Texas, except as superseded by the laws
of the United States.
24. EFFECTIVE DATE AND TERM OF PLAN. The Plan was adopted by the Board of
Directors on January 15, 1996, subject to approval by the stockholders of the
Company which was obtained July 24, 1996. The Plan was amended and restated
effective December 31, 1997 with the approval of the Board of Directors. No
Incentive Award may be granted under the Plan after January 14, 2006.
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EXHIBIT 4.2
HENLEY HEALTHCARE, INC.
1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
AS AMENDED AND RESTATED EFFECTIVE
AS OF DECEMBER 31, 1997
1. PURPOSE OF THE PLAN. This Henley Healthcare, Inc. 1996 Non-Employee Director
Stock Option Plan, as amended and restated effective as of December 31, 1997
(the "PLAN") is adopted for the benefit of the directors of the Henley
Healthcare, Inc. (the "COMPANY") who, at the time of their service, are not
employees of the Company or any of its subsidiaries (the "NON-EMPLOYEE
DIRECTORS"), and is intended to advance the interests of the Company by
providing the Non-Employee Directors with additional incentive to serve the
Company by increasing their proprietary interest in the success of the Company.
2. ADMINISTRATION OF THE PLAN.
(a) COMPENSATION COMMITTEE. The Plan shall be administered by the
Compensation Committee, which Compensation Committee shall consist of not less
than two members of the Board of Directors of the Company (the "Board"). For the
purposes of this Plan, a majority of the members of the Compensation Committee
shall constitute a quorum for the transaction of business, and the vote of a
majority of those members present at any meeting shall decide any question
brought before that meeting. No member of the Compensation Committee shall be
liable for any act or omission of any other member of the Compensation Committee
or for any act or omission on his own part, including (without limitation) the
exercise of any power or discretion given to him under this Plan, except those
resulting from his own gross negligence or willful misconduct.
(b) AUTHORITY. The Compensation Committee shall have full authority to
administer the Plan, including authority to interpret and construe any provision
of the Plan and the terms of any option ("OPTION") or cash fee award ("CASH FEE
AWARD") granted under it and to adopt such rules and regulations for
administering the Plan as it may deem necessary. Decisions of the Compensation
Committee shall be final and binding on all parties. Notwithstanding the above,
the selection of Non-Employee Directors to whom Options are to be granted, the
number of shares subject to any Option, the exercise price of any Option and the
ten-year maximum term of any Option shall be as hereinafter provided, and the
Compensation Committee shall have no discretion as to such matters.
3. STOCK RESERVED FOR THE PLAN. The total number of shares of the Company's
common stock, par value $.01 per share (the "COMMON STOCK") with respect to
which Options may be granted under the Plan, shall not exceed the aggregate of
250,000 shares; PROVIDED, that the class and aggregate number of shares which
may be subject to the Options granted hereunder shall be subject to adjustment
in accordance with the provisions of Section 15 of this Plan. Such shares may be
treasury shares or authorized but unissued shares. The Company shall reserve for
issuance pursuant to this Plan such number of shares of Common Stock as may from
time to time be subject to Options granted hereunder. If any Option expires or
is canceled prior to its exercise in full, the shares
<PAGE>
theretofore subject to such Option may again be made subject to an Option under
the Plan. All Options granted under the Plan will constitute non-qualified
options ("NQO").
4. GRANT OF OPTIONS.
(a) NON-EMPLOYEE DIRECTORS ON THE EFFECTIVE DATE OF THIS PLAN: INITIAL
GRANT. Subject to the provisions of Section 18 hereof, there shall be granted to
each person who is a Non-Employee Director on January 15, 1996, i.e., the
original effective date of this Plan (an "EXISTING DIRECTOR") a one-time NQO to
purchase 25,000 shares of Common Stock at a per share exercise price equal to
the Fair Market Value (defined below) of a share of Common Stock on such date.
(b) NON-EMPLOYEE DIRECTORS ELECTED AFTER THE EFFECTIVE DATE OF THIS
PLAN: INITIAL GRANT. Subject to the provisions of Section 18 hereof, for so long
as this Plan is in effect and shares are available for the grant of NQOs
hereunder, each person who is elected as a Non-Employee Director of the Company
after the effective date of this Plan and who is (A) not an Existing Director,
(B) not appointed or elected to the Board in connection with or as a result of
the completion of a financing or acquisition transaction in which the
appointment or election of such person, or the execution of an agreement
obligating the parties thereto to vote in favor of the appointment or election
of such person, is a condition to the obligation of any party to the transaction
to complete the transaction and (C) not otherwise an employee of the Company or
any of the Company's subsidiaries (as defined in Section 424(f) of the Internal
Revenue Code of 1986, as amended (the "CODE") (a "NEW DIRECTOR") (Existing
Directors and New Directors are hereinafter sometimes referred to herein as
"ELIGIBLE DIRECTORS") shall be granted a one-time NQO to purchase 25,000 shares
of Common Stock at a per share exercise price equal to the Fair Market Value
(defined below) of a share of Common Stock on such date (subject to the
adjustments provided in Section 15 hereof). This Section 4(b) shall only apply
to a Non-Employee Director the first time he or she is elected a director of the
Company. Persons elected to be a director for a second or any subsequent term
shall be granted NQOs in accordance with Section 4(c) below.
(c) ANNUAL OPTION GRANT TO NON-EMPLOYEE DIRECTORS: SUBSEQUENT GRANT.
For so long as this Plan is in effect and there are shares available for the
grant of NQOs hereunder (beginning with those Eligible Directors reelected at
the Company's 1997 annual meeting of stockholders), each Eligible Director who
shall be reelected a Non-Employee Director for his or her second or any
subsequent term after the effective date of this Plan, shall be granted an NQO
to purchase 10,000 shares of Common Stock at a per share exercise price equal to
the Fair Market Value (defined below) of a share of Common Stock on such date
(subject to the adjustments provided in Section 15 hereof). This Section 4(c)
shall only apply to an Eligible Director on his or her second or any subsequent
election to the Company's Board of Directors.
(d) FAIR MARKET VALUE. For the purposes of this Section 4, the "FAIR
MARKET VALUE" as of any particular date shall mean (i) the closing sales price
on the immediately preceding business day of a share of Common Stock as reported
on the principal securities exchange on which shares of Common Stock are then
listed or admitted to trading or (ii) if not so reported, the average of the
closing bid and asked prices for a share of Common Stock on the immediately
preceding business day as quoted on the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") or (iii) if not quoted on NASDAQ,
the average of the closing bid and asked prices for
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<PAGE>
a share of Common Stock as quoted by the National Quotation Bureau's "Pink
Sheets" or the National Association of Securities Dealers' OTC Bulletin Board
System. If the price of a share of Common Stock shall not be so reported, the
Fair Market Value of a share of Common Stock shall be determined by the
Compensation Committee in its absolute discretion.
5. CASH FEE AWARDS. At the direction of the Board, the Company may pay cash fees
to Eligible Directors from time to time for serving on the Board and for
attendance at meetings of the Board or committees thereof (the "CASH FEE
AWARDS"). Each Eligible Director may elect on the date of each annual meeting of
stockholders, in a writing delivered to the Company's principal executive
offices at 120 Industrial Boulevard, Sugar Land, Texas 77478, to have his Cash
Fee Awards paid to him in shares of Common Stock, such number of shares of
Common Stock to be determined by dividing the amount of each Cash Fee Award by
the Fair Market Value (as defined in Section 4(d)) of a share of Common Stock on
the last day of the calendar month in which the Cash Fee Award is awarded. Such
election by an Eligible Director to have his Cash Fee Awards paid to him in
shares of Common Stock shall remain valid until the date of the next annual
meeting of stockholders, and if the Eligible Director does not make another
written election of conversion of Cash Fee Awards at that time, his Cash Fee
Awards for the next year shall be paid in cash.
6. OPTION AGREEMENT. Each NQO granted under the Plan shall be evidenced by an
agreement, in a form approved by the Compensation Committee, which shall be
subject to the terms and conditions of the Plan. Any agreement may contain such
other terms, provisions and conditions as may be determined by the Compensation
Committee and that are not inconsistent with the Plan.
7. VESTING AND TERM OF OPTIONS. Each NQO granted under this Plan shall vest in
full on the date of grant; PROVIDED, HOWEVER, that no NQO shall be exercisable
until the expiration of six (6) months after the date of grant, and PROVIDED,
FURTHER, that such NQO shall be subject to termination as provided in Section 9
hereof. Each option agreement shall provide that the NQO shall expire ten years
from the date of grant, unless sooner terminated pursuant to Section 9 hereof.
8. EXERCISE OF OPTIONS. NQOs shall be exercisable at any time after the
expiration of six (6) months from the date of grant, subject to termination as
provided in Section 9 hereof. NQOs shall be exercised by written notice to the
Company setting forth the number of shares with respect to which the NQO is
being exercised and specifying the address to which the certificates
representing such shares are to be mailed. Such notice shall be accompanied by
cash or certified check, bank draft, or postal or express money order payable to
the order of the Company, for an amount equal to the product obtained by
multiplying the exercise price of the NQO by the number of shares of Common
Stock with respect to which the NQO is then being exercised. As promptly as
practicable after receipt of such written notification and payment, the Company
shall deliver to the Eligible Director a certificate or certificates
representing the number of shares of Common Stock with respect to which such NQO
has been so exercised, issued in the Eligible Director's name; PROVIDED,
HOWEVER, that such delivery shall be deemed effected for all purposes when the
Company's transfer agent shall have deposited such certificates in the United
States mail, addressed to the Eligible Director, at the address specified
pursuant to this Section 8.
Any NQO granted under the Plan may be exercised by a broker-dealer
acting on behalf of an Eligible Director if (i) the broker-dealer has received
from the Eligible Director or the Company a
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<PAGE>
duly endorsed agreement evidencing such NQO and instructions signed by the
Eligible Director requesting the Company to deliver the shares of Common Stock
subject to such NQO to the broker-dealer on behalf of the Eligible Director and
specifying the account into which such shares should be deposited and (ii) the
broker-dealer and the Eligible Director have otherwise complied with Section
220.3(e)(4) of Regulation T, 12 CFR Part 220.
9. TERMINATION OF OPTIONS. Except as may be otherwise expressly provided in this
Plan or otherwise determined by the Compensation Committee in the Option
Agreement, each outstanding NQO, to the extent not previously exercised, shall
terminate on the earliest of the following:
(a) On the last day of the three-month period commencing on the date on
which the Eligible Director ceases to be a member of the Board for any reason
other than due to his death or permanent and total disability, during which
period the Eligible Director shall be entitled to exercise all NQOs held by him
when he ceased to be a member of the Board, to the extent that such NQOs could
have been exercised on such date; or
(b) On the last day of the 12-month period commencing on the date on
which the Eligible Director ceases to be a member of the Board due to his death
or his permanent and total disability (as defined in Section 22(e) of the Code),
during which period (i) the person to whom such NQOs are transferable by will or
by the laws of descent and distribution in event of the Eligible Director's
death or (ii) the Eligible Director (or his personal representative) in the
event of his permanent and total disability, as applicable, shall be entitled to
exercise all NQOs held by the Eligible Director on the date on which he ceased
to be a member of the Board, to the extent that such NQOs could have been
exercised on such date; or
(c) Ten years after the date of grant of such NQO.
10. ASSIGNABILITY OF OPTIONS. During the term of an NQO, the NQO shall not be
assignable or otherwise transferable except by will or by the laws of descent
and distribution. Each NQO shall be exercised during the Eligible Director's
lifetime only by the Eligible Director.
11. NO RIGHTS AS STOCKHOLDER. No Eligible Director shall have any rights as a
stockholder with respect to shares covered by an NQO until the date of issuance
of a stock certificate or certificates representing such shares. Except as
provided in Section 15 hereof, no adjustment for dividends or otherwise shall be
made if the record date therefor is prior to the date of issuance of
certificates representing shares of Common Stock purchased pursuant to exercise
of this NQO.
12. EXTRAORDINARY CORPORATE TRANSACTIONS. If the Company effects a merger,
consolidation, acquisition, separation, reorganization, liquidation or similar
transaction, the Company may substitute new options for the NQOs outstanding
under the Plan or a corporation other than the Company, including (without
limitation) a parent or subsidiary of the Company, may assume the Company's
duties as to NQOs outstanding under the Plan. Notwithstanding the foregoing or
the provisions of Section 14 hereof, in the event such corporation or parent or
subsidiary of the Company does not substitute new and substantially equivalent
option rights for, or assume, the NQOs then outstanding under the Plan, all such
outstanding NQOs shall be canceled, immediately prior to the effective date of
such extraordinary corporate transaction, and in full consideration of such
cancellation, the Eligible
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<PAGE>
Director to whom the NQO was granted shall be paid an amount in cash equal to
the excess of (i) the value, as determined by the Compensation Committee in its
absolute discretion, of the property (including cash) received by the holder of
a share of Common Stock as a result of such event less (ii) the exercise price
of the NQO. Except as otherwise expressly provided in this Plan, the issue by
the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, for cash or property, or for labor or services
either on direct sale or on the exercise of rights or warrants to subscribe
therefor, or on conversion of shares or obligations of the Company convertible
into such shares or other securities, shall not affect, and no adjustment by
reason thereof shall be made with respect to, the number or price of shares of
Common Stock then subject to outstanding NQOs.
13. INVESTMENT REPRESENTATIONS. If the shares issuable on exercise of an NQO are
not registered under the Securities Act of 1933, as amended (the "SECURITIES
ACT"), the Company may imprint on the certificate representing such shares the
following legend or any other legend that counsel for the Company considers
necessary or advisable to comply with the Securities Act:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT
UPON SUCH REGISTRATION OR UPON RECEIPT BY THE CORPORATION OF AN OPINION
OF COUNSEL, IN FORM AND SUBSTANCE SATISFACTORY TO THE CORPORATION, THAT
REGISTRATION IS NOT REQUIRED FOR SUCH SALE OR TRANSFER.
The Company may, but shall in no event be obligated to, register any securities
covered under this Plan pursuant to the Securities Act and, if any shares are so
registered, the Company may remove any legend on certificates representing such
shares. The Company shall not be obligated to take any other affirmative action
to cause the exercise of an NQO or the issuance of shares pursuant thereto to
comply with any law or regulation of any governmental authority.
14. AMENDMENT OR TERMINATION. The Board may amend, modify, revise or terminate
this Plan at any time and from time to time; provided, however, that without
approval of the Company's stockholders, no revision or amendment shall, except
as provided in Section 12 hereof, increase the number of shares of Common Stock
hereunder that may be issued under the Plan.
No termination, amendment, or modification of the Plan shall adversely
affect in any material way any outstanding NQO previously granted under the
Plan, without the written consent of the Eligible Director to whom it was
granted or other designated holder of such NQO.
In addition, to the extent that the Compensation Committee determines
that (a) the listing for qualification requirements of any national securities
exchange or quotation system on which the Company's Common Stock is then listed
or quoted, or (b) the Code (or regulations promulgated thereunder), require
stockholder approval in order to maintain compliance with such listing
requirements or to maintain any favorable tax advantages or qualifications, then
the Plan shall not be amended in such respect without approval of the Company's
stockholders.
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<PAGE>
15. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The existence of outstanding
NQOs shall not affect in any way the right or power of the Company or its
stockholders to make or authorize the dissolution or liquidation of the Company,
any sale or transfer of all or any part of the Company's assets or business, any
reorganization or other corporate act or proceeding, whether of a similar
character or otherwise, any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business, any merger or consolidation of the Company, or any issuance of bonds,
debentures, preferred or prior preference stock senior to or affecting the
Common Stock or the rights thereof; PROVIDED, HOWEVER, that if (a) the
outstanding shares of Common Stock of the Company shall be subdivided into a
greater number of shares or (b) the outstanding shares of Common Stock shall be
combined into a smaller number of shares thereof, then (x) the number of shares
of Common Stock available for the grant of NQOs under the Plan shall be
proportionally adjusted to equal the product obtained by multiplying such number
of available shares remaining by a fraction, the numerator of which is the
number of outstanding shares of Common Stock after giving effect to such
combination or subdivision and the denominator of which is that number of
outstanding shares of Common Stock prior to such combination or subdivision, (y)
the exercise price of any NQO then outstanding under the Plan shall be
proportionately adjusted to equal the product obtained by multiplying such
exercise price by a fraction, the numerator of which is the number of
outstanding shares of Common Stock prior to such combination or subdivision and
the denominator of which is that number of outstanding shares of Common Stock
after giving effect to such combination or subdivision, and (z) the number of
shares of Common Stock issuable on the exercise of any NQO then outstanding
under the Plan or thereafter granted under the Plan shall be proportionately
adjusted to equal the product obtained by multiplying such number of shares of
Common Stock by a fraction, the numerator of which is the number of outstanding
shares of Common Stock after giving effect to such combination or subdivision
and the denominator of which is that number of outstanding shares of Common
Stock prior to such combination or subdivision.
16. COMPLIANCE WITH OTHER LAWS AND REGULATIONS. The Plan, the grant and exercise
of NQOs thereunder, and the obligation of the Company to sell and deliver shares
acquirable on exercise of such NQOs, shall be subject to all applicable federal
and state laws, rules and regulations and to such approvals by any governmental
or regulatory agency or national securities exchange as may be required. The
Company shall not be required to sell or issue any shares on exercise of any NQO
if the issuance of such shares shall constitute a violation by the Eligible
Director or the Company of any provisions of any law or regulation of any
governmental authority. Each NQO granted under this Plan shall be subject to the
requirement that, if at any time the Board or the Compensation Committee shall
determine that (i) the listing, registration or qualification of the shares
subject thereto on any securities exchange or under any state or federal law of
the United States or of any other country or governmental subdivision thereof,
(ii) the consent or approval of any governmental regulatory body, or (iii) the
making of investment or other representations, are necessary or desirable in
connection with the issue or purchase of shares subject thereto, no such NQO may
be exercised in whole or in part unless such listing, registration,
qualification, consent, approval or representation shall have been effected or
obtained, free of any conditions not acceptable to the Compensation Committee.
Any determination in this connection by the Compensation Committee shall be
final, binding and conclusive.
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<PAGE>
17. INDEMNIFICATION OF COMPENSATION COMMITTEE AND BOARD OF DIRECTORS. The
Company shall, to the fullest extent permitted by law, indemnify, defend and
hold harmless any person who at any time is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding
(whether civil, criminal, administrative or investigative) in any way relating
to or arising out of this Plan (or any NQOs granted hereunder) by reason of the
fact that such person is or was at any time a member of the Compensation
Committee against judgments, fines, penalties, settlements and reasonable
expenses (including attorneys' fees) actually incurred by such person in
connection with such action, suit or proceeding, except to the extent that such
action, suit or proceeding results from such person's gross negligence or
intentional misconduct. This right of indemnification shall inure to the benefit
of the heirs, executors and administrators of each such person and is in
addition to all other rights to which such person may be entitled by virtue of
the bylaws of the Company or as a matter of law, contract or otherwise.
18. EFFECTIVE DATE OF THE PLAN. This Plan was originally effective on January
15, 1996. The Plan, as amended and restated, was approved by the Board to be
effective as of December 31, 1997. No NQO shall be granted pursuant to this Plan
on or after January 14, 2006.
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EXHIBIT 5.1
February 17, 1998
Henley Healthcare, Inc.
120 Industrial Boulevard
Sugar Land, Texas 77478
Re: HENLEY HEALTHCARE, INC. REGISTRATION STATEMENT ON FORM S-8;
1996 INCENTIVE STOCK PLAN AS AMENDED AND RESTATED EFFECTIVE AS OF
DECEMBER 31, 1997; AND 1996 NON-EMPLOYEE DIRECTOR STOCK OPTION
PLAN AS AMENDED AND RESTATED EFFECTIVE AS OF DECEMBER 31, 1997
Gentlemen:
We have acted as counsel to Henley Healthcare, Inc., a Texas
corporation (the "Company"), in connection with the preparation for filing with
the Securities and Exchange Commission of a Registration Statement on Form S-8
(the "Registration Statement") under the Securities Act of 1933, as amended. The
Registration Statement relates to an aggregate of 1,450,000 shares (the
"Shares") of the Company's common stock, par value $.01 per share (the "Common
Stock"), issuable pursuant to the Company's 1996 Incentive Stock Plan as Amended
and Restated Effective as of December 31, 1997, and 1996 Non-Employee Director
Stock Option Plan as Amended and Restated Effective as of December 31, 1997
(collectively, the "Plans").
We have examined the Plans and such corporate records, documents,
instruments and certificates of the Company, and have reviewed such questions of
law as we have deemed necessary, relevant or appropriate to enable us to render
the opinion expressed herein. In such examination, we have assumed without
independent investigation the authenticity of all documents submitted to us as
originals, the genuineness of all signatures, the legal capacity of all natural
persons, and the conformity of any documents submitted to us as copies to their
respective originals. As to certain questions of fact material to this opinion,
we have relied without independent investigation upon statements or certificates
of public officials and officers of the Company.
Based upon such examination and review, we are of the opinion that the
Shares have been duly and validly authorized and will, upon issuance and
delivery as contemplated by the Plans, be validly issued, fully paid and
nonassessable outstanding shares of Common Stock.
This Firm consents to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Porter & Hedges, L.L.P.
PORTER & HEDGES, L.L.P.
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated February 23, 1997 accompanying the
consolidated financial statements of Henley Healthcare, Inc. (the "Registrant")
and Subsidiary appearing in its Annual Report on Form 10-KSB, as amended, for
the year ended December 31, 1996 which is incorporated by reference in this
Registration Statement on Form S-8. We consent to the incorporation by reference
in the Registration Statement of the aforementioned report.
/s/ Goldstein Golub Kessler & Company, P.C.
GOLDSTEIN GOLUB KESSLER & COMPANY, P.C.
New York, New York
January 29, 1998
