PROXY STATEMENT
PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
HENLEY HEALTHCARE, INC.
(Name of Registrant as specified in its Charter)
HENLEY HEALTHCARE, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which the transaction
applies: NOT APPLICABLE
(2) Aggregate number of securities to which the transaction
applies: NOT APPLICABLE
(3) Per unit price or other underlying value of the transaction
computed pursuant to Exchange Act Rule 0-11: NOT APPLICABLE
(4) Proposed maximum aggregate value of the transaction: NOT
APPLICABLE
|_| Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing:
(1) Amount previously paid: NOT APPLICABLE
(2) Form, Schedule or Registration Statement Number: NOT APPLICABLE
(3) Filing Party: NOT APPLICABLE
(4) Date Filed: NOT APPLICABLE
<PAGE>
[HENLEY HEALTHCARE LETTERHEAD]
JAMES L. STURGEON
Chief Financial Officer
December __, 2000
Dear Shareholder,
On behalf of our entire Board of Directors, I cordially invite you to
attend a special meeting of our shareholders on Friday, January 12, 2001.
A notice of the meeting and Proxy Statement follow. You will also find
enclosed your proxy voting card and the 1999 Annual Report. Your vote is
important. Please take a moment now to complete, sign and date the enclosed
proxy voting card and return it in the postage-paid envelope we have provided.
I look forward to seeing you on January 12 and addressing your questions
and comments.
Sincerely,
James L. Sturgeon
<PAGE>
[HENLEY HEALTHCARE LETTERHEAD]
December __, 2000
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
The annual meeting of shareholders of Henley Healthcare, Inc. will be held
on Friday, January 12, 2001, at 10:00 a.m., at our corporate office located at
120 Industrial Boulevard, Sugar Land, Texas to consider and take action on the
following matters:
1. Approval of the elimination of our obligations to redeem shares of
Series E convertible preferred stock when shares of common stock are
issued on conversion of the Series E shares and the exercise of
related warrants in excess of limitations set by the Nasdaq SmallCap
rules;
2. Approval of the issuance of shares of common stock on conversion of
the Series F shares and the exercise of related warrants in excess
of limitations set by the Nasdaq SmallCap rules;
3. Approval of an amendment to our Articles of Incorporation to
increase the number of shares of capital stock that we are entitled
to issue from 60,000,000 to 100,000,000; and
4. Transaction of any other business that is properly raised at the
meeting.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE MATTERS.
Sincerely,
James L. Sturgeon
CHIEF FINANCIAL OFFICER
<PAGE>
HENLEY HEALTHCARE, INC.
120 Industrial Boulevard
Sugar Land, Texas 77478-3128
PROXY STATEMENT
------------------------------------------------------------------------------
ANNUAL MEETING
INFORMATION
This proxy statement contains information related to our special meeting
of shareholders to be held on Friday, January 12, 2001, beginning at 10 a.m., at
our corporate office located at 120 Industrial Boulevard, Sugar Land, Texas, and
at any postponements or adjournments of the meeting. The proxy statement was
prepared under the direction of our Board of Directors to solicit your proxy for
use at the annual meeting. It is first being mailed to shareholders on or about
December __, 2000.
WHO IS ENTITLED TO VOTE?
Shareholders owning our common stock on December 4, 2000, the record date,
are entitled to vote at the annual meeting, or any postponement or adjournment
of the meeting. Each shareholder has one vote per share on all matters to be
voted on. On December 4, 2000, there were _______ shares of common stock
outstanding.
WHAT AM I VOTING ON?
You will be asked to approve the elimination of certain of our obligations
related to possible future issuances of common stock in excess of Nasdaq
limitations with respect to the Series E transaction and the Series F
transaction, and to approve an amendment to our charter to increase our
authorized capital stock. We are not aware of any other matters to be presented
for action at the meeting. If any other matter requiring your vote should arise,
your proxy holders, Dr. Pedro A. Rubio and James L. Sturgeon, will vote in
accordance with their best judgment.
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<PAGE>
HOW DOES THE BOARD OF DIRECTORS
RECOMMEND I VOTE ON THE PROPOSALS?
The Board recommends a vote FOR the approval of the elimination of certain
of our obligations related to possible future issuances of common stock in
excess of Nasdaq limitations with respect to the Series E and Series F
transaction, and FOR the increase to the number of shares of authorized capital
stock that we are entitled to issue.
HOW DO I VOTE?
Sign and date the proxy card you receive and return it in the prepaid
envelope. If you sign your proxy card, but do not mark your choices, your proxy
holders will vote for the approval of the elimination of certain of our
obligations related to possible future issuances of common stock in excess of
the Nasdaq limitations with respect to the Series E and Series F transaction,
and for the increase to the number of shares of capital stock that we are
entitled to issue.
CAN I REVOKE MY PROXY?
You can revoke your proxy card at any time before it is exercised. To do
so you must:
o give written notice of revocation to the Corporate Secretary at the
address listed on the front page of this proxy statement;
o submit another properly signed proxy card with a more recent date;
or
o vote in person at the meeting.
WHAT IS A QUORUM?
A "quorum" is the presence at the meeting, in person or by proxy, of the
holders of the majority of the outstanding shares. There must be a quorum for
the meeting to be held. Abstentions are counted for purposes of determining the
presence or absence of a quorum. Shares held by brokers in street name and for
which the beneficial owners have withheld the discretion to vote from brokers
are called "broker non-votes." They are not counted to determine if a quorum is
present and are not considered a vote cast under Texas law.
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<PAGE>
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?
The charter amendment to be considered at the meeting requires the
affirmative vote of the holders of two-thirds of our outstanding shares of
common stock. All other maters to be considered at the meeting require the
affirmative vote of a majority of the votes cast. In a majority vote and a vote
of outstanding shares, express abstentions will have the effect of a vote
against a particular matter. Broker non-votes will have the effect of a vote
against the charter amendment, but will not affect the outcome of any other
matters presented at the annual meeting because they are not considered a vote
cast under Texas law.
WHO WILL COUNT THE VOTE?
The Inspector of the Election appointed by us will be present to tabulate
the votes cast by proxy or in person at the annual meeting.
WHAT ARE THE DEADLINES FOR SHAREHOLDER
PROPOSALS FOR NEXT YEAR'S ANNUAL MEETING?
You may submit proposals on matters appropriate for shareholder action at
our annual meetings by following the rules of the Securities and Exchange
Commission. We must receive proposals intended for inclusion in our annual proxy
statement and proxy card for the 2001 Annual Meeting no later than March 30,
2001.
If you want to present a proposal from the floor at the next annual
meeting, we must receive notice of your proposal no earlier than May 1, 2001,
but no later than June 15, 2001. All proposals and notifications should be
addressed to the Corporate Secretary at the address listed on the front of this
proxy statement.
HOW MUCH DID THIS PROXY SOLICITATION COST?
We have engaged a shareholder solicitation service to solicit proxies for
us and anticipate fees of approximately $5,000. We will also reimburse banks,
brokerage firms and other institutions, nominees, custodians and fiduciaries for
their reasonable expenses for sending proxy materials to beneficial owners and
obtaining their voting instructions. Our directors, officers and regular
employees and those of our subsidiaries may solicit proxies personally or by
telephone or facsimile without additional compensation.
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<PAGE>
SECURITIES OWNERSHIP OF MANAGEMENT
The following table contains information about the number and percentage
of shares of common stock beneficially owned on November 29, 2000, by:
o any person or group known by us to beneficially own 5 percent or
more of our common stock;
o each executive officer;
o each director, and
o all executive officers and directors as a group
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER (1) BENEFICIAL OWNERSHIP (2) OF CLASS
-------------------------------------- ------------------------ ---------
Endeavour Capital Investment Fund S.A.
Cumberland House
#27 Cumberland Street
Nassau, New Providence, The
Bahamas 1,527,108 (3) 9.9%
Esquire Trade & Finance Inc.
c/o Trident Chambers
P.O. Box 2154
6342 Baar Switzerland 1,324,384 (4) 8.67%
Celeste Trust Reg.
c/o Trevisa-Trevland-Anstalt
Landstrasse8
Furstentuns 9496
Balzeis, Liechtenstein 797,334 (5) 5.22%
Maxxim Medical, Inc.
10300 49th Street North
Clearwater, FL 33762 1,733,953 (6) 11.34%
Michael M. Barbour
2935 Highland Lakes
Missouri City, Texas 77459 218,448 (7) 1.43%
Pedro A. Rubio, MD, Ph.D 239,128 (8) 1.56%
James L. Sturgeon 162,000 (9) 1.06%
Walter Cunningham 9,407 *
J. Terry Manning 9,407 *
Gabriel L. Shaheen 9,407 *
All Executive Officers and Directors as a
Group (5 persons) 429,349 2.81%
____________
* Less than 1.0% of outstanding shares
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<PAGE>
NOTES TO BENEFICIAL OWNERSHIP TABLE ON PREVIOUS PAN
(1) Unless otherwise specified, the address of each beneficial owner is Henley
Healthcare, Inc., 120 Industrial Boulevard, Sugar Land, Texas 77478.
(2) Except as otherwise indicated, all shares are beneficially owned, and the
sole investment and voting power is held, by the person named. This table
is based on information supplied by the officers, directors and principal
shareholders and reporting forms, if any, filed with the Securities and
Exchange Commission on behalf of such persons. A person is deemed to
beneficially own shares of common stock underlying options, warrants or
other convertible securities if the stock can be acquired by such person
within sixty days of the date hereof.
(3) Includes 1,527,108 shares issuable upon conversion of currently
convertible securities. Due to contractual limitation in the documents,
its ownership is limited at any one time to 9.99% of the outstanding
common stock.
(4) Includes 1,324,384 shares issuable upon conversion or exercise of
currently convertible securities and exercisable warrants. Due to
contractual limitation in the documents, its ownership is limited at any
one time to 9.99% of the outstanding common stock.
(5) Includes 797,334 shares issuable upon conversion or exercise of currently
convertible securities and exercisable warrants. Due to contractual
limitation in the documents, its ownership is limited at any one time to
9.99% of the outstanding common stock.
(6) In addition to holding 449,500 shares of common stock, Maxxim is the
holder of the Maxxim Note, which is currently convertible into 1,284,455
shares of common stock (subject to adjustment).
(7) Mr. Barbour resigned from the Company effective September 1, 2000.
(8) Includes 75,000 shares issuable upon exercise of currently exercisable
options or warrants.
(9) Includes 150,000 shares issuable upon exercise of currently exercisable
options.
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<PAGE>
ITEM 1 -- APPROVAL OF THE ELIMINATION OF OUR
REDEMPTION OBLIGATIONS RELATED TO POSSIBLE
FUTURE ISSUANCES OF COMMON STOCK IN EXCESS
OF NASDAQ LIMITATIONS WITH RESPECT TO
SERIES E SECURITIES PURCHASE AGREEMENT
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THE SERIES E PRIVATE PLACEMENT
On November 22, 2000, we sold 1,500 shares of Series E Convertible
Preferred Stock, convertible into shares of common stock for an aggregate
purchase price of $1,500,000 to The Endeavour Capital Investment Fund S.A.,
Esquire Trade & Finance, Inc., and Celeste Trust Reg in a private placement. In
connection with the acquisition of the Series E shares, we also issued to the
purchasers warrants to acquire 1,595,745 shares of common stock.
An additional 1,000 Series E shares for a purchase price of $1,000,000
will be paid by the purchasers upon notice by us to the escrow agent specifying
an additional closing date. We will also issue warrants to purchase shares of
common stock in an amount equal 50% of the number of shares of Common Stock
issuable upon conversion of the remaining 1,000 Series E Shares assuming a fixed
conversion price.
The sale of the additional 1,000 Series E shares will not occur until the
later of:
o 21 days after the effective date of registration statement covering
the resale of the common stock issuable upon conversion of the
Series E shares and exercise of the related warrants, or
o 10 days after we deliver the notice.
The Series E shares were sold through Union Atlantic LC and Union Atlantic
Capital L.C.
SUMMARY OF NASDAQ LIMITATIONS
Under the Nasdaq SmallCap Market rules, we may not list or issue shares in
excess of 20% of our outstanding common stock until we obtain your approval.
Therefore, until we receive your approval, the Series E shareholders may not
convert their preferred shares or exercise their related warrants into more than
_______ shares of common stock.
Under the terms of an agreement with the Series E shareholders, we have
agreed to seek your approval at this meeting for the issuances of the full
amount of shares of common stock issuable upon conversion of the Series E and
the exercise of the related warrants to eliminate this limitation imposed by The
Nasdaq SmallCap Market rules.
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<PAGE>
CONSEQUENCES IF WE DO NOT OBTAIN YOUR APPROVAL
If we do not obtain your approval, we will be prohibited under the terms
of our listing agreement with the Nasdaq from issuing more than approximately
_______ shares of common stock in connection with the placement of the Series E
shares and related warrants. This number of shares is slightly less than 20% of
the shares of common stock outstanding on the record date, excluding any shares
held in treasury. If we do not obtain your approval at this meeting, the holders
of the Series E shares have the option of:
o converting their shares at a conversion price equal to the average
closing bid price of the common stock for any 3 trading days, as
chosen by the holder of the Series E Shares, during the 60 days
prior to such conversion to the extent of the Nasdaq limitations, or
o requiring us to redeem at a premium for cash any portion of the
Series E shares not convertible into common shares as a result of
these Nasdaq limitations.
SUMMARY OF SERIES E PREFERRED STOCK TERMS
DIVIDENDS
The Series E shares bear an 8% cumulative dividend payable to the holders
of the Series E shares quarterly in arrears. The dividends shall be payable in
cash or in common stock at our option.
VOTING RIGHTS
The Series E shareholder has no voting power whatsoever, except as
otherwise provided by Texas law. This means that whenever the vote of a
particular class of stock that includes the Series E shares is required for a
particular matter, the Series E shareholder will be entitled to vote on that
matter.
LIQUIDATION PREFERENCE
If we liquidate, dissolve or wind up our operations, the Series E
shareholder and the holders of any other classes of stock that rank equal to or
higher than Series E shares will receive a distribution equal to the stated
value of their shares, plus any accrued and unpaid dividends. If our assets at
the time of liquidation are not sufficient to satisfy the liquidation value of
the Series E shares and the other preferred classes of stock, then the holder of
those securities will each receive their pro- rata portion of our assets legally
available for distribution at that time.
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<PAGE>
REDEMPTION
The Series E shares may be redeemed under certain circumstances. The
Series E shareholder may require us to redeem the Series E shares if:
o the number of shares reserved for issuance upon conversion falls
below certain thresholds; or
o we notify the Series E shareholder that we will not issue any common
stock upon conversion of its Series E shares.
We may redeem the Series E in the event we maintain a conversion price for
a period of at least 10 consecutive trading days. The redemption price is
determined by a formula in the Series E Statement of Designation which includes
a premium over the face value of the shares.
We must also redeem any Series E shares that cannot be converted into
common stock due to Nasdaq limitations. See the section above entitled
"Consequences If We Do No Obtain Your Approval."
RANKING
For purposes of distribution of assets upon our liquidation, dissolution
or winding up, the Series E shares rank:
o higher than the common stock;
o higher than any class or series of stock created in the future that,
by its terms, ranks lower than the Series E shares;
o lower than any class or series of stock created in the future that,
by its terms, ranks higher than the Series E shares; and
o lower than the Series A preferred stock, the Series B preferred
stock, the Series C Preferred Stock, the Series D Preferred Stock
and any other class or series of stock created in the future.
CONVERSION
The Series E shares are convertible into common stock at the lesser of:
o closing bid price for our common stock as reported by Bloomberg L.P.
for the trading day immediately proceeding the initial issuance of
the Series E shares. The closing bid price on November 21, 2000 was
$.47.
o the amount obtained by multiplying .8 by the average closing bid
price for our common stock as reported by Bloomberg L.P. for the
lowest three trading days during the period beginning on the
twenty-second day prior to the conversion date for such conversion
and ending on such conversion date.
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<PAGE>
REGISTRATION RIGHTS
We agreed to prepare and file a registration statement with the SEC to
register at least 200% of the number of shares of common stock issuable at the
time of filing on the conversion of the Series E shares and the related warrants
on or before December 22, 2000.
NO SHORT SALES
The Series E shareholder has agreed not take any action intended to
increase or decrease the trading price of the common stock during any period
when this type of activity could affect the conversion price of the Series E
shares.
EFFECT OF CONVERSION OF PREFERRED
STOCK AND RELATED WARRANT ON YOU
When the Series E shareholders convert their shares of preferred stock and
exercise their related warrants, we will issue the amount of common stock
required by the Series E Statement of Designation and the warrants. The issuance
of common stock on the conversion of the preferred stock and exercise of the
related warrants will have no effect on your rights or privileges as common
shareholders, other than reducing your voting power and economic benefit in
proportion to the percentage of the outstanding common shares you own at the
time of the issuances. Before conversion of their preferred shares, the Series E
shareholders will have a higher liquidation preference if we dissolve or
liquidate.
The exact number of shares of common stock issuable on conversion of the
Series E shares cannot currently be determined, but the amount of any issuances
will vary inversely with the market price of the common stock. Your economic
benefits and voting power may be diluted by issuances of common stock on
conversion of the Series E shares and exercise of the related warrants to an
extent that depends on:
o the future market price of the common stock;
o the timing of the conversions of Series E shares and exercise of the
related warrants; and
o whether we opt to pay cash in lieu of additional shares of issuing
common stock.
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<PAGE>
USE OF PROCEEDS AND CERTAIN RELATIONSHIPS
USE OF PROCEEDS
We received net proceeds of approximately $1,489,000 from the Series E
private placement, which we used to pay approximately $700,000 of certain
indebtedness owed to Comerica Bank-Texas, N.A.
We used the remaining $789,000 for general working capital purposes,
including, purchasing materials to produce existing products and the MicroLight
830, if and when approved by the FDA.
INTERESTS OF CERTAIN PERSONS
Due to a contractual limitation in the Series E documents limiting its
ownership at any one time to 9.99%, none of the purchasers of the Series E
shares held 10 percent or more of our common stock, nor is it an affiliate of
any of our directors, executive officers or 10 percent shareholders.
CERTAIN VOTING AND STANDOFF AGREEMENTS
We have received shareholder voting agreements from some of our directors
and all of our executive officers directing all shares of common stock owned by
them to be voted for the approval of this item of business. As of the record
date these directors and executive officers have the power to vote ______ shares
of common stock, representing ___% of our outstanding shares.
VOTE REQUIRED
A majority of the shares cast at this meeting must affirmatively vote to
approve the elimination of our redemption obligations related to the possible
issuance of common stock in excess of the Nasdaq limitation. Our Board of
Directors recommends that you vote FOR this item of business.
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<PAGE>
ITEM 2 -- APPROVAL OF THE ISSUANCE OF SHARES
OF COMMON STOCK IN EXCESS OF NASDAQ
LIMITATIONS WITH RESPECT TO PRIVATE EQUITY
CREDIT AGREEMENT
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THE SERIES F PRIVATE PLACEMENT
On November 20, 2000, we entered into a Private Equity Credit Agreement
with The Endeavour Capital Investment Fund S.A., Esquire Trade & Finance, Inc.,
and Celeste Trust Reg. The investors have agreed to purchase up to $7,500,000 of
our Series F Convertible Preferred Stock when called for by us. The purchase
price per share is $1,000. We have agreed to call for a minimum of $1,000,000
from the purchasers, or we will be liable for a significant penalty. The maximum
amount that may be called by us at each closing is limited to 15% of the total
dollar volume of our common stock in the preceding thirty day period.
We will also issue warrants to purchase shares of common stock in an
amount equal 50% of the number of shares of Common Stock issuable upon
conversion of the Series F shares to be purchased assuming a fixed conversion
price.
The sale of Series F shares will not occur until the later of:
o after the effective date of registration statement covering the
resale of the common stock issuable upon conversion of the Series F
shares and exercise of the related warrants, or
o 10 days after we deliver the notice.
The Series F shares will be sold through Union Atlantic LC and Union
Atlantic Capital L.C.
SUMMARY OF NASDAQ LIMITATIONS
Under the Nasdaq SmallCap Market rules, we may not list or issue shares in
excess of 20% of our outstanding common stock until we obtain your approval.
Therefore, until we receive your approval, we may not call upon the Purchasers
to acquire Series F shares and related warrants which are convertible or
exercisable into more than _______ shares of common stock.
Under the terms of an agreement with the Series F shareholders, we have
agreed to seek your approval at this meeting for the issuances of the full
amount of shares of common stock issuable upon conversion of the Series F and
the exercise of the related warrants to eliminate this limitation imposed by The
Nasdaq SmallCap Market rules.
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<PAGE>
CONSEQUENCES IF WE DO NOT OBTAIN YOUR APPROVAL
If we do not obtain your approval, we will be prohibited under the terms
of our listing agreement with the Nasdaq from issuing more than approximately
_______ shares of common stock in connection with the placement of the Series F
shares and related warrants. This number of shares is slightly less than 20% of
the shares of common stock outstanding on the record date, excluding any shares
held in treasury. If we do not obtain your approval at this meeting, we can only
call upon the equity line of credit to the extent the shares of common stock
issuable upon conversion of the Series F shares do not exceed 20% of our
outstanding common stock. In addition, for any Series F Shares purchased, the
holders will have the option of:
o converting their shares at a conversion price equal to the average
closing bid price of the common stock for any 3 trading days, as
chosen by the holder of the Series F Shares, during the 60 days
prior to such conversion to the extent of the Nasdaq limitations, or
o requiring us to redeem at a premium for cash any portion of the
Series F shares not convertible into common shares as a result of
these Nasdaq limitations.
SUMMARY OF SERIES F PREFERRED STOCK TERMS
DIVIDENDS
The Series F shares bear an 8% cumulative dividend payable to the holders
of the Series F shares quarterly in arrears. The dividends shall be payable in
cash or in common stock at our option.
VOTING RIGHTS
The Series F shareholder has no voting power whatsoever, except as
otherwise provided by Texas law. This means that whenever the vote of a
particular class of stock that includes the Series F shares is required for a
particular matter, the Series F shareholder will be entitled to vote on that
matter.
LIQUIDATION PREFERENCE
If we liquidate, dissolve or wind up our operations, the Series F
shareholder and the holders of any other classes of stock that rank equal to or
higher than Series F shares will receive a distribution equal to the stated
value of their shares, plus any accrued and unpaid dividends. If our assets at
the time of liquidation are not sufficient to satisfy the liquidation value of
the Series F shares and the other preferred classes of stock, then the holder of
those securities will each receive their pro- rata portion of our assets legally
available for distribution at that time.
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<PAGE>
REDEMPTION
The Series F shares may be redeemed under certain circumstances. The
Series F shareholder may require us to redeem the Series F shares if:
o the number of shares reserved for issuance upon conversion falls
below certain thresholds; or
o we notify the Series F shareholder that we will not issue any common
stock upon conversion of its Series F shares.
We may redeem the Series F in the event we maintain a conversion price for
a period of at least 10 consecutive trading days. The redemption price is
determined by a formula in the Series F Statement of Designation which includes
a premium over the face value of the shares.
We must also redeem any Series F shares that cannot be converted into
common stock due to Nasdaq limitations. See the section above entitled
"Consequences If We Do No Obtain Your Approval."
RANKING
For purposes of distribution of assets upon our liquidation, dissolution
or winding up, the Series F shares rank:
o higher than the common stock;
o higher than any class or series of stock created in the future that,
by its terms, ranks lower than the Series F shares;
o lower than any class or series of stock created in the future that,
by its terms, ranks higher than the Series F shares; and
o lower than the Series A preferred stock, the Series B preferred
stock, the Series C Preferred Stock, the Series D Preferred Stock,
the Series E Preferred Stock and any other class or series of stock
created in the future.
CONVERSION
The Series F shares are convertible into common stock at the lesser of:
o closing bid price for our common stock as reported by Bloomberg L.P.
for the trading day immediately proceeding the closing date of an
issuance of the Series F shares.
o the amount obtained by multiplying .85 by the average closing bid
price for our common stock as reported by Bloomberg L.P. for the
lowest three trading days during the period beginning on the
twenty-second day prior to the conversion date for such conversion
and ending on such conversion date.
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REGISTRATION RIGHTS
We agreed to prepare and file a registration statement with the SEC to
register at least 200% of the number of shares of common stock issuable at the
time of filing on the conversion of the Series F shares and the related warrants
on or before January 19, 2001.
EFFECT OF CONVERSION OF PREFERRED
STOCK AND RELATED WARRANT ON YOU
When the Series F shareholders convert their shares of preferred stock and
exercise their related warrants, we will issue the amount of common stock
required by the Series F Statement of Designation and the warrants. The issuance
of common stock on the conversion of the preferred stock and exercise of the
related warrants will have no effect on your rights or privileges as common
shareholders, other than reducing your voting power and economic benefit in
proportion to the percentage of the outstanding common shares you own at the
time of the issuances. Before conversion of their preferred shares, the Series E
shareholders will have a higher liquidation preference if we dissolve or
liquidate.
The exact number of shares of common stock issuable on conversion of the
Series F shares cannot currently be determined, but the amount of any issuances
will vary inversely with the market price of the common stock. Your economic
benefits and voting power may be diluted by issuances of common stock on
conversion of the Series F shares and exercise of the related warrants to an
extent that depends on:
o the future market price of the common stock;
o the timing of the conversions of Series F shares and exercise of the
related warrants; and
o whether we opt to pay cash in lieu of additional shares of issuing
common stock.
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USE OF PROCEEDS AND CERTAIN RELATIONSHIPS
USE OF PROCEEDS
We intend to use any proceeds from the sale of Series F shares to pay
certain indebtedness owed to Comerica Bank-Texas, N.A. and for general working
capital purposes.
INTERESTS OF CERTAIN PERSONS
Due to a contractual limitation in the Series F documents limiting its
ownership at any one time to 9.99%, none of the purchasers of the Series F
shares held 10 percent or more of our common stock, nor is it an affiliate of
any of our directors, executive officers or 10 percent shareholders.
CERTAIN VOTING AND STANDOFF AGREEMENTS
We have received shareholder voting agreements from some of our directors
and all of our executive officers directing all shares of common stock owned by
them to be voted for the approval of this item of business. As of the record
date these directors and executive officers have the power to vote ______ shares
of common stock, representing ___% of our outstanding shares.
VOTE REQUIRED
A majority of the shares cast at this meeting must affirmatively vote to
approve the elimination of our redemption obligations related to the possible
issuance of common stock in excess of the Nasdaq limitation. Our Board of
Directors recommends that you vote FOR this item of business.
16
<PAGE>
ITEM 3 -- APPROVAL OF AN AMENDMENT
TO OUR ARTICLES OF INCORPORATION
TO INCREASE AUTHORIZED CAPITAL STOCK
------------------------------------------------------------------------------
AUTHORIZED CAPITAL STOCK
We are asking you to approve an amendment to our Articles of Incorporation
to increase the authorized number of shares of capital stock from 60,000,000 to
100,000,000, consisting of 90,000,000 shares of common stock and 10,000,000
shares of preferred stock. Our Articles of Incorporation currently provide for
two classes of stock, consisting of 50,000,000 shares of common stock and
10,000,000 shares of preferred stock.
The proposed amendment will authorize sufficient additional shares of
common stock to provide us with the flexibility to make such issuances as may be
necessary in order for us to complete acquisitions or other corporate
transactions and to issue shares in connection with the conversion of
outstanding shares of convertible preferred stock, options and warrants.
The proposed amendment to our Articles of Incorporation, authorizing an
additional 40,000,000 shares of capital stock, would facilitate our ability to
accomplish these goals and other business and financial objectives in the future
without the necessity of delaying such activities for further shareholder
approval, except as may be required in particular cases by our charter,
applicable law or the rules of any stock exchange or other system on which our
securities may then be listed.
The amendment was approved by the board of directors declaring its
advisability and directing that the proposed amendment be submitted to the
shareholders at the next meeting.
ARTICLES OF INCORPORATION
If approved, the first paragraph of Article Four of our Articles of
Incorporation will be amended to read as follows:
The Corporation shall have the authority to issue two classes of shares,
to be designated respectively, "Preferred Stock" and "Common Stock." The total
number of shares which the Corporation is authorized to issue is 100,000,000.
The number of Preferred shares authorized is 10,000,000 and the par value of
each such share is Ten Cents ($.10). The number of Common shares authorized is
90,000,000, and the par value of each such share is One Cent ($.01).
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VOTE REQUIRED
Holders of two thirds of our outstanding common stock entitled to vote at
the annual meeting must affirmatively vote to approve the amendment to our
Articles of Incorporation to increase our authorized capital stock. Our Board of
Directors recommends that you vote FOR this item of business.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
We incorporate by reference the following documents into this proxy
statement:
1. Annual Report on Form 10-KSBA for the year ended December 31, 1999.
2. Quarterly Report on Form 10-Q for the quarter ended September 30,
2000.
The Annual Report on Form 10-KSBA for the year ended December 31, 1999 has
been mailed to each shareholder entitled to vote at the annual meeting.
Individual investors may request our Form 10-KSBA, any Form 10-Q and other
information by calling (281) 276-7000 or write to us at: Henley Healthcare,
Inc., 120 Industrial Boulevard, Sugar Land, Texas 77478.
AVAILABLE INFORMATION
We are subject to the information requirements of the Securities Exchange
Act of 1934 and are required to file reports, proxy statements and other
information with the SEC. The reports, proxy statements and other information
that we file may be inspected and copies at the public reference facilities
maintained by the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC Regional Offices located at Seven World
Trade Center, New York, New York 10048 and Citicorp Center, 500 West Madison
Street, Chicago, Illinois 60621-2511, or on the SEC's Internet website at
HTTP://WWW.SEC.GOV. You may obtain copies of these materials by mail from the
Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates.
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HENLEY HEALTHCARE, INC.
THE BOARD OF DIRECTORS SOLICITS THIS PROXY FOR THE
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 12, 2001
PROXY The undersigned shareholder of Henley Healthcare, Inc.
FOR (the "Company") hereby appoints Dr. Pedro A. Rubio and James
SPECIAL L. Sturgeon, or either of them, the true and lawful
MEETING attorneys, agents and proxies of the undersigned, each with
OF full power of substitution, to vote on behalf of the
SHAREHOLDERS undersigned at the Special Meeting of Shareholders of the
Company to be held at the Company's office at 120 Industrial
JANUARY 12, 2001 Boulevard, Sugar Land, Texas, 77478, on Friday, January 12,
2001, at 10:00 a.m., Houston Time, and at any adjournments
of the meeting, all of the shares of the Company's common
stock in the name of the undersigned or which the
undersigned may be entitled to vote.
1. APPROVAL OF THE ELIMINATION OF OUR REDEMPTION OBLIGATIONS RELATED TO
POSSIBLE FUTURE ISSUANCES OF COMMON STOCK IN EXCESS OF NASDAQ LIMITATIONS
WITH RESPECT TO SERIES E SHARES
[ ] FOR the elimination of our obligations to issue shares of
common stock upon conversion of the Series E shares or to
redeem shares of Series E convertible preferred stock when
shares of common stock are issued on conversion of the Series
E shares and the exercise of related warrants in excess of
Nasdaq limitations.
[ ] AGAINST elimination of our obligations to issue shares of
common stock upon conversion of the Series E shares or to
redeem shares of Series E convertible preferred stock when
shares of common stock are issued on conversion of the Series
E shares and the exercise of related warrants in excess of
Nasdaq limitations.
[ ] ABSTAIN from voting on the elimination of our obligations to
issue shares of common stock upon conversion of the Series E
shares or to redeem shares of Series E convertible preferred
stock when shares of common stock are issued on conversion of
the Series E shares and the exercise of related warrants in
excess of Nasdaq limitations.
2. APPROVAL OF THE ISSUANCE OF SHARES OF COMMON STOCK ON CONVERSION OF THE
SERIES F SHARES AND THE EXERCISE OF RELATED WARRANTS IN EXCESS OF
LIMITATIONS SET BY THE NASDAQ SMALLCAP RULES
[ ] FOR the issuance of shares of common stock on conversion of
the Series F shares and the exercise of related warrants in
excess of limitations set by the Nasdaq SmallCap rules.
[ ] AGAINST the issuance of shares of common stock on conversion
of the Series F shares and the exercise of related warrants in
excess of limitations set by the Nasdaq SmallCap rules.
[ ] ABSTAIN from voting on the issuance of shares of common stock
on conversion of the Series F shares and the exercise of
related warrants in excess of limitations set by the Nasdaq
SmallCap rules.
<PAGE>
3. APPROVAL OF AMENDMENT TO OUR ARTICLES OF INCORPORATION TO INCREASE THE
NUMBER OF SHARES OF CAPITAL STOCK THAT WE ARE ENTITLED TO ISSUE FROM
60,000,000 TO 100,000,000.
[ ] FOR the amendment to our Articles of Incorporation to increase
our authorized capital stock to 100,000,000.
[ ] AGAINST the amendment to our Articles of Incorporation to
increase our authorized capital stock to 100,000,000.
[ ] ABSTAIN from voting on the amendment to our Articles of
Incorporation to increase our authorized capital stock to
100,000,000.
4. In their discretion, upon such other matters as may properly come before the
meeting; hereby revoking any proxy or proxies heretofore given by the
undersigned.
(THIS PROXY MUST BE DATED AND SIGNED ON THE REVERSE SIDE.)
<PAGE>
(CONTINUED FROM OTHER SIDE)
PROXY This Proxy, when properly executed, will be voted in
FOR the manner directed herein by the undersigned shareholder.
SPECIAL If no direction is made, this Proxy will be voted FOR with
MEETING respect to the Series E transaction, FOR the future issuance
OF of common stock in excess of Nasdaq limitations with respect
SHAREHOLDERS to the Series F transaction FOR the future issuance of
common stock in excess of the Nasdaq limitations, FOR the
JANUARY 12, 2001 amendment to the Articles of Incorporation increase our
authorized capital, and in accordance with the discretion of
the persons designated above with respect to any other
business properly before the meeting.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders and the Proxy Statement furnished herewith.
Dated ____________________, 200_
______________________________________
Shareholder's Signature
______________________________________
Signature if held jointly
Signature should agree with name
printed hereon. If Stock is held in
the name of more than one person, EACH
joint owner should sign. Executors,
administrators, trustees, guardians
and attorneys should indicate the
capacity in which they sign. Attorneys
should submit powers of attorney.
PLEASE MARK, SIGN, DATE AND RETURN IN THE ENVELOPE ENCLOSED
