PROXY STATEMENT
PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|X| 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>
120 Industrial Boulevard, Sugar Land, Texas 77478-3128-- 281-276-7000
A Worldwide Leader in
---------------------
[HENLEY HEALTHCARE LOGO]
---------------------
Pain Management
July 28, 2000
NOTICE OF THE 2000
ANNUAL MEETING OF SHAREHOLDERS
The annual meeting of shareholders of Henley Healthcare, Inc. will be held
on Tuesday, August 29, 2000, 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. Election of seven directors to serve until the next annual meeting
of shareholders;
2. Approval of an amendment to our Articles of Incorporation to change
our name to "ePainRx Inc.";
3. Approval of the elimination of our obligations to issue shares of
common stock upon conversion of the Series D shares or to redeem
shares of Series D convertible preferred stock when shares of common
stock are issued on conversion of the Series D shares and the
exercise of related warrants in excess of limitations set by the
Nasdaq SmallCap rules;
4. 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 22,500,000 to 60,000,000; and
5. 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,
/s/ JAMES L. STURGEON
James L. Sturgeon
EXECUTIVE VICE PRESIDENT-FINANCE AND
CHIEF ACCOUNTING 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 annual meeting of
shareholders to be held on Tuesday, August 29, 2000, 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
July 28, 2000.
WHO IS ENTITLED TO VOTE? ____________________________
Shareholders owning our common stock on June 20, 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 June 20, 2000, there were 7,866,802 shares of common stock outstanding.
WHAT AM I VOTING ON? ________________________________
You will be asked to elect nominees to serve on the Board of Directors, to
approve an amendment to our charter to change our name to "ePainRx Inc.," to
approve the elimination of certain of our obligations related to possible future
issuances of common stock in excess of Nasdaq limitations, 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, Michael M.
Barbour and James L. Sturgeon, will vote in accordance with their best judgment.
2
<PAGE>
HOW DOES THE BOARD OF DIRECTORS
RECOMMEND I VOTE ON THE PROPOSALS? _________________
The Board recommends a vote FOR each of the nominees, FOR the name change,
FOR the approval of the elimination of certain of our obligations related to
possible future issuances of common stock in excess of Nasdaq limitations, 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 persons nominated for election as directors, for the
name change to "ePainRx Inc.," 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, 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.
3
<PAGE>
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM? _________
The director nominees will be elected by a plurality of the votes cast at the
annual meeting. The charter amendments to be considered at the meeting require
the affirmative vote of the holders of two-thirds of the outstanding shares of
our common stock. In a plurality vote, abstentions are not considered a vote
cast and will not affect the outcome. All other matters 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 oustanding shares, however, 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 amendments, 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
future annual meetings by following the rules of the Securities and Exchange
Commission. We must receive proposals intended for inclusion in next year's
proxy statement and proxy card 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.
4
<PAGE>
--------------------------------------------------------------------------------
ITEM 1 -- ELECTION OF DIRECTORS
--------------------------------------------------------------------------------
NOMINEES____________________________________________________________________
The board of directors was increased from six to seven members. Seven
directors will be elected at the annual meeting. Directors will serve until the
next annual meeting or until their earlier resignation or removal. If any
nominee is not available for election, proxies will be voted for another person
nominated by the Board of Directors or the size of the Board of Directors will
be reduced. Three members of the Board of Directors elected at last year's
annual meeting are standing for election this year.
The nominees are:
--------------------------------------------------------------------------------
MICHAEL M. BARBOUR
DIRECTOR SINCE 1991
AGE 55
--------------------------------------------------------------------------------
Mr. Barbour has severed as our President and Chief Executive Officer since
May 1991. He has over 32 years of experience in the healthcare field. Before
forming Lasermedics, Inc., our predecessor, he was the President of The Houston
Laser Institute, from January 1987 to April 1991, which he founded to train
doctors in the medical and surgical use of lasers. From April 1984 to January
1987, he was President of Surgimedics, a Houston, Texas, manufacturer and
distributor of medical products. He graduated from the University of Houston in
1967 with a B.B.A. in marketing.
--------------------------------------------------------------------------------
PEDRO A. RUBIO, M.D., PH.D.
DIRECTOR SINCE JANUARY 1996
AGE 55
--------------------------------------------------------------------------------
Dr. Rubio has been a director since January 1996. He is currently a Clinical
Associate Professor of Surgery at the University of Texas Health Science Center
in Houston. He served as World President of the International college of
Surgeons in 1995, and was Chairman of the Department of Surgery at the
Columbia/HCA Medical Center Hospital in Houston from 1976 to 1994, when he
became Chairman Emeritus. Dr. Rubio is a member of the European Academy of
Sciences, the Mexican Academy of Medical Sciences and the Academia Mexicana de
Cirugia. He is a diplomat of eleven American and Mexican medical boards and
holds sub-specialty certifications in two fields. He holds the degrees of
Bachelor of Science, Master of Science in
5
<PAGE>
surgical Technology, Doctor of Philosophy in Biomedical technology and Doctor of
Medicine and Surgery. He is Chairman of the Board and Medical Director of the
National Association of Preferred Providers. He is also a widely published
author, as well as a medical legal consultant, mediator and arbitrator.
--------------------------------------------------------------------------------
KENNETH W. DAVIDSON
DIRECTOR SINCE 1996
AGE 53
--------------------------------------------------------------------------------
Mr. Davidson has been a director since April 1996. He has also been
President, Chief Executive Officer and Chairman of the Board of Maxxim Medical,
Inc. since November 1986, and a director since 1982. For more information about
his relationship with Maxxim, see the section below entitled "Certain
Relationships and Related Transactions." He is a director of Encore Orthopedics,
Inc., a designer and manufacturer of implantable orthopedic devices, Bovie
Medical Inc., a designer and manufacturer of electrical surgical equipment and
Florida Bank of Pinellas, all of which are publicly traded companies. Mr.
Davidson is also a director of Relda, Inc., a privately held manufacturing
company and is a Trustee of AORN Foundation.
--------------------------------------------------------------------------------
WALTER CUNNINGHAM, COLONEL, USMCR, RETIRED
DIRECTOR NOMINEE
AGE 68
--------------------------------------------------------------------------------
Walter Cunningham holds a Masters of Science degree in physics from the
University of California at Los Angeles and is a graduate of the Advanced
Management Program at the Harvard Graduate School of Business. He has forty-five
years of management experience, including serving as President of Hydrotech
Development Company, an offshore engineering company, and as Senior Vice
President and Director of 3D International, an international architectural and
engineering concern. He has founded and served as the managing general partner
of venture capital pools, The Genesis Fund and UNCO Ventures S.B.I.C. Col.
Cunningham began his career in the United States Marine Corps, and he holds the
present rank of Col. USMCR-Retired. In eight years with NASA, Cunningham was
NASA's second civilian astronaut and flew on the first manned flight of the
Apollo Program. Currently, he is host of LIFT-OFF TO LOGIC, a radio talk show.
6
<PAGE>
--------------------------------------------------------------------------------
J. TERRY MANNING
DIRECTOR NOMINEE
AGE 52
--------------------------------------------------------------------------------
Mr. Manning is a certified public accountant with thirty years of business
and executive management experience. He received his BBA in Accounting from the
University of Notre Dame in 1970. He is a retired partner of BDO Seidman, LLP,
an accounting and consulting firm. At BDO Seidman, he has held several
management positions, including serving as a member of the firm's board of
directors. He also served as BDO Seidman's Vice Chairman of Finance and
Administration, as managing partner of their Richmond, Virginia office, as
National Director of Strategic Planning, as National Director of Human
Resources, and as a member of the firm's Accounting and Auditing Editorial
Board. He also served as one of BDO Seidman's Regional SEC Directors. Mr.
Manning is also a former member of AICPA's committee on SEC Regulations.
--------------------------------------------------------------------------------
GABRIEL L. SHAHEEN
DIRECTOR NOMINEE
AGE 46
--------------------------------------------------------------------------------
Mr. Shaheen is President and CEO of GLS Capital Ventures, LLC and a principal
of Nxstar Ventures, LLC, companies that provided advisory services to financial
services companies. Mr. Shaheen has over 20 years experience in the insurance
industry, serving in a number of capacities with Lincoln National Corporation.
Certain positions include serving as president and chief executive officer of
Lincoln National Life Insurance Company from January 1998 to December 1999 and
managing director of Lincoln UK, which provided Lincoln National's life, pension
and unit trust operations in the United Kingdom, from November 1996 to January
1998. Mr. Shaheen also served in various capacities, including President and
CEO of Lincoln RE, a health reinsurer, from August 1982 to November 1996. Mr.
Shaheen received his B.A. from the University of Michigan in 1976 and his
Masters Degree in Actuarial Science in 1977.
7
<PAGE>
--------------------------------------------------------------------------------
JAMES L. STURGEON
DIRECTOR NOMINEE
AGE 49
--------------------------------------------------------------------------------
Mr. Sturgeon joined the Company in March 2000 as Director of Finance and was
elected Executive Vice President-Finance and Chief Accounting Officer in April
2000. From 1998 to February 2000, Mr. Sturgeon served as Executive Vice
President- Commercial Banking at Compass Bank, Houston. Mr. Sturgeon has twenty
five years of commercial banking experience working primarily with middle market
companies. From 1993 through 1997, he was Executive Vice President-Corporate
Financial Services for Comerica Bank-Texas. Mr. Sturgeon serves on the Boards of
Directors of several civic and charitable organizations. Mr. Sturgeon received a
B.B.A. degree from the University of Houston in 1973 and an M.B.A. degree from
Southern Methodist University in 1977.
BOARD COMMITTEES AND MEETING ATTENDANCE _____________________________________
During 1999, the Board of Directors had two committees, the Audit and
Compensation Committees. These committees report their actions to the full Board
at its next regular meeting.
The Board of Directors does not currently have a nominating committee.
Committee membership and the functions of those committees are described below.
During 1999, the Board of Directors held nine meetings. All directors
attended at least 75% of the total meetings of the Board and the committees on
which they serve.
The current members of the Audit Committee are Chadwick F. Smith, MD and
Kenneth W. Davidson; however, Mr. Smith is not standing for re-election at the
annual meeting. Our board of directors intends to appoint three independent
directors to the committee following the annual meeting. The committee met one
time during 1999.
The current members of the Compensation Committee are Pedro A. Rubio, MD,
Ph.D and Ernest D. Henley, Ph.D; however, Dr. Henley is not standing for
re-election at the annual meeting. The committee met one time during 1999.
8
<PAGE>
AUDIT COMMITTEE _____________________________________
The Board of Directors has adopted a written charter for the audit committee,
a copy of which is attached hereto as Appendix A and is incorporated herein by
reference. The three independent members will be appointed to the committee
following the annual meeting. Set forth below is a brief description of the
functions of the audit committee:
o Examines the activities of our independent auditors to determine whether
their activities are reasonably designed to assure the soundness of
accounting and financial procedures.
o Reviews our accounting policies and the objectivity of our financial
reporting.
o Considers annually the qualifications of our independent auditors and the
scope of their audit and makes recommendations to the Board as to their
selection.
COMPENSATION COMMITTEE ______________________________
o Reviews and determines the salaries for senior executive officers and key
officers and employees who participate in various incentive compensation
plans.
o Approves the granting of stock options, including the number of shares
subject to and the exercise price of, each stock option granted under our
various stock option plans.
o Reviews personnel compensation policies, benefit programs, and any major
changes to such policies and programs, as well as administering them.
9
<PAGE>
COMPENSATION OF DIRECTORS __________________________________________________
DIRECTORS' EQUITY COMPENSATION PLANS ________________
Effective January 15, 1996, the Board of Directors adopted the following
plans which were approved by our shareholders in July 1996:
<TABLE>
<CAPTION>
AGGREGATE AMOUNT
OF COMMON STOCK TYPES OF AWARDS AMOUNT
NAME OF PLAN ELIGIBLE PARTICIPANTS ISSUABLE (1) ISSUABLE UNDER PLAN OF AWARD
------------------------- ------------------------- ------------------ --------------------------- --------------------------
<S> <C> <C> <C> <C>
1996 Incentive Stock Plan Officers, Employees, 1,200,000 Options, Restricted Determined by
Consultants and Stock, Phantom Stock, Compensation
Employee Directors Common Stock, Cash Committee
Bonus
1996 Non-Employee Non-Employee Directors 250,000 Non-Qualified Stock Option for 25,000 shares
Directors Stock Option Options (2) upon initial election;
Plan option for 10,000 shares
upon re-election
</TABLE>
------------------
(1) On February 17, 1998, we filed a registration statement on Form S-8 covering
all of the shares issuable under both plans with the Securities and Exchange
Commission.
(2) The Company may also pay a cash fee to non-employee directors for serving on
and attending meetings of the Board of Directors. The Board of Directors
sets the amount of such fees from time to time. During 1999, our
non-employee directors were not paid for attendance at meetings of the Board
of Directors.
1999 TOTAL DIRECTOR COMPENSATION ____________________
The following table shows all components of 1999 director compensation:
<TABLE>
<CAPTION>
STOCK OPTIONS (1)
------------------------------------------------------
1996-NON-EMPLOYEE DIRECTORS
CASH COMPENSATION 1996 INCENTIVE STOCK
TYPE OF DIRECTOR PER MEETING STOCK PLAN (2) OPTION PLAN
---------------------------------- ----------------- -------------- ---------------------------
<S> <C> <C> <C>
Employee Directors ------ ------ ------
Non-employee Directors ------ ------ 10,000
</TABLE>
(1) Amounts shown are the maximum number of shares of common stock acquirable
under each option.
(2) On June 26, 2000, options to purchase 150,000 shares of common stock were
issued to each of Messrs. Barbour and Sturgeon, both of which are standing
for election to the Board of Directors.
10
<PAGE>
EXECUTIVE OFFICERS __________________________________________________________
Our executive officers serve at the pleasure of the Board of Directors and
are subject to annual appointment by the Board of Directors at its first meeting
after the annual meeting of shareholders.
All of our executive officers are listed in the following table:
NAME AGE POSITION
---- --- --------
Michael M. Barbour 55 Director, President and Chief Executive Officer
James L. Sturgeon 49 Executive Vice President-Finance and Chief Accounting
Officer
SUMMARY OF EXECUTIVE COMPENSATION ___________________
The following table provides information concerning compensation paid or
accrued during the fiscal years ended December 31, 1999, 1998 and 1997 to our
three highest paid executive officers, Messrs. Barbour and Sudduth. During 1999,
1998 and 1997, no other executive officers received compensation which exceeded
$100,000. We have no current employment agreements with our executive officers.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
-----------------------------------------------------------------------------------------------------------------------------------
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------------------------- -------------
SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS (#)
------------------------------------------------- ---- --------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Michael M. Barbour 1999 $178,460 $26,180 -- 11,666
PRESIDENT AND CHIEF EXECUTIVE OFFICER 1998 $147,200 $50,000 -- 11,666
1997 $160,000 $40,000 -- 3,333
Dan D. Sudduth 1999 $157,480 $15,950 -- 11,666
CHIEF FINANCIAL OFFICER (1) 1998 $138,000 $30,000 -- 11,666
1997 $134,811 -- -- 3,333
</TABLE>
(1) Mr. Sudduth retired from his position as Executive Vice President and Chief
Financial Officer in February 2000. Mr. Sudduth is not standing for
re-election to the board.
11
<PAGE>
During 1999, no stock options were granted to Messrs. Barbour and Sudduth.
On June 26, 2000, each of Messrs. Barbour and Sturgeon were granted immediately
exercisable options to purchase 150,000 shares of common stock which have an
exercise price of $2.67 per share. The following table provides certain
information about option exercises during 1999 by Messrs. Barbour and Sudduth:
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES DURING 1999 AND YEAR END OPTION VALUES
----------------------------------------------------------------------------------------------------------------------------------
SHARES NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
ACQUIRED ON VALUE UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT FISCAL
NAME EXERCISE REALIZED FISCAL YEAR END (#) YEAR END REALIZED ($) (1)
---------------------- ----------- -------- --------------------------------- --------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael M. Barbour -- -- 250,000 10,000 -- --
Dan D. Sudduth -- -- 60,000 10,000 -- --
</TABLE>
(1) Calculated by multiplying the number of shares underlying outstanding
in-the-money options by the difference between the last sales price of the
common stock on December 31, 1999 ($1.72 per share) and the exercise prices,
which range between $1.75 and $7.88 per share. Options are in-the-money if
the fair market value of the underlying common stock exceeds the exercise
price of the option.
VOTING AGREEMENTS REGARDING ELECTION ________________
Under the terms of a purchase agreement between us and Maxxim Medical, Inc.
dated April 30, 1996, we acquired certain assets and assumed certain liabilities
of the Henley Healthcare Division of Maxxim. Dr. Smith, Mr. Barbour and Maxxim
entered into a voting agreement related to the purchase agreement under which
Dr. Smith and Mr. Barbour agreed to vote their shares of common stock for a
designee of Maxxim until certain specified conditions are met. Under the voting
agreement, Mr. Davidson was designated by Maxxim to be its designee and was
named as one of our directors effective May 1, 1996. Mr. Davidson is nominated
for re-election at the annual meeting.
12
<PAGE>
SECURITIES OWNERSHIP OF MANAGEMENT ______________
The following table contains information about the number and percentage of
shares of common stock beneficially owned on June 27, 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
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF BENEFICIAL
BENEFICIAL OWNER (1) OWNERSHIP (2) PERCENT OF CLASS
------------------------------------------------------ ------------------------------- ----------------
<S> <C> <C>
Maxxim Medical, Inc.
10300 49th Street North
Clearwater, FL 33762 2,134,500 (3) 29.4%
Chadwick F. Smith, MD (10)
1127 Wilshire Blvd.
Los Angeles, California 90017 540,666 (4) 7.4%
Michael M. Barbour 641,748 (5) 8.8%
Pedro A. Rubio, MD, Ph.D. 239,128 (6) 3.3%
Dan D. Sudduth (10) 158,511 (7) 2.2%
Ernest J. Henley, Ph.D. (10) 55,000 (8) *
Kenneth W. Davidson
10300 49th Street North
Clearwater, FL 33762 30,000 (8) *
James L. Sturgeon 162,250 (11) 2.2%
Walter Cunningham (12) -- *
J. Terry Manning (12) -- *
Gabriel L. Shaheen (12) -- *
All Executive Officers and Directors as a
Group (10 persons) 1,827,303 25.2%
</TABLE>
-------------------
* Less than 1.0% of outstanding shares
13
<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) In addition to holding 1,025,000 shares of common stock, Maxxim is the
holder of the Maxxim Note, which is currently convertible into 1,500,000
shares of common stock (subject to adjustment). See "Certain
Relationships and Related Transactions."
(4) Includes 245,000 shares issuable upon exercise of currently exercisable
options.
(5) Includes 390,000 shares issuable upon exercise of currently exercisable
options, of which 150,000 were issued to Mr. Barbour at the June 26, 2000
Board of Directors meeting.
(6) Includes 88,333 shares issuable upon exercise of currently exercisable
options.
(7) Includes 75,000 shares issuable upon exercise of currently exercisable
options or warrants.
(8) The 55,000 and 30,000 shares listed for each of Dr. Henley and Mr.
Davidson, respectively, consist entirely of warrants and/or options
exercisable as of the date hereof and do not include the 2,525,000 shares
beneficially owned by Maxxim Medical, Inc., of which Dr. Henley and Mr.
Davidson are directors. Dr. Henley and Mr. Davidson disclaim beneficial
ownership of all shares owned by Maxxim.
(9) Includes 1,667 shares issuable upon exercise of currently exercisable
options.
(10) Messrs. Smith, Sudduth and Henley are not standing for re-election to the
board.
(11) Includes 150,000 shares issuable upon exercise of currently exercisable
options which were issued to Mr. Sturgeon at the June 26, 2000 Board of
Directors meeting.
(12) Each will receive options to purchase 25,000 shares of common stock upon
election to the Board of Directors.
SECTION 16(A) --BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE ________________________________
Based on our records, we believe that in 1999 all of our directors, officers
and principal shareholders complied with all Securities and Exchange Commission
reporting requirements applicable to them.
14
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION _______________________________
The current members of the Compensation Committee are Ernest D. Henley, MD,
Ph.D and Pedro A. Rubio, MD, Ph.D; however, Dr. Henley is not standing for
re-election at the annual meeting. Dr. Henley is currently employed by Maxxim
and provides consulting services for us from time to time. See "Certain
Relationships and Related Transactions."
COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION ______________________________
The Compensation Committee is comprised of outside directors whose role is to
recommend to the board of directors the compensation to be paid to our officers
and key employees and the compensation of the board of directors. In addition,
except as otherwise provided in any specific plan adopted by the board of
directors, the committee is responsible for administration of executive
compensation plans, stock option plans, including the 1996 Stock Incentive Plan,
and other forms of direct or indirect compensation of officers and key
employees. Presently, Michael M. Barbour, our President and Chief Executive
Officer and James L. Sturgeon, our Executive Vice President-Finance and Chief
Accounting Officer, are paid an annual salary of $178,460 and $157,800,
respectively. See "Executive Compensation."
Ernest D. Henley, M.D., Ph.D.
Pedro A. Rubio, M.D., Ph.D.
15
<PAGE>
PERFORMANCE GRAPH ___________________________________
The following graph illustrates the yearly percentage change in the
cumulative shareholder return on our common stock, compared with the cumulative
total return on the Nasdaq Stock Market (U.S. Companies) Index and an index of
peer companies selected by us, for the five years ended December 31, 1999. The
comparison assumes $100 was invested in our common stock and each of the
foregoing indices and, where applicable, assumes reinvestment of dividends.
Included in our 1999 peer group are the following companies: Rehabilicare, Inc.;
IOMED, Inc.; Dynatronics Corporation; Zevex International, Inc.; and Cybex
International, Inc.
HENLEY STOCK PRICE VS. NASDAQ AND PEER GROUP
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
VALUE OF INVESTMENT OF $100 ON DECEMBER 31, 1995
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
FISCAL YEAR ENDED
----------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
Nasdaq .............. 100 122 149 208 387
Peer Group .......... 100 102 143 82 109
Henley Healthcare,
Inc. ............... 100 144 156 69 55
16
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CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS ____________________________
On April 30, 1996, we signed an agreement with Maxxim, under which we
purchased certain assets and assumed certain liabilities for a purchase price of
approximately $13.5 million. The purchase price was paid by the issuance of our
convertible subordinated promissory note in the principal amount of $7 million,
with the balance of the purchase price paid in cash provided through bank
financing. Mr. Davidson and Dr. Henley are currently employed by Maxxim, with
Mr. Davidson serving as Chairman of the Board, Chief Executive Officer and
President and Dr. Henley serving as a director and consultant. Dr. Henley's
consulting agreement, which was entered into in 1987, was acquired in the
transaction with Maxxim. The agreement included a monthly consulting fee of
$5,833 and terminated on October 31, 1997.
In 1999, Dr. Henley, performed consulting services for us on an as-needed
basis for a monthly fee of $1,750. Dr. Henley continues to perform consulting
services for us from time to time under this arrangement. Dr. Henley is not
standing for re-election to the Board of Directors.
In connection with the April 1996 agreement with Maxxim, we issued Maxxim a
convertible subordinated promissory note in the principal amount of $7 million.
Effective May 1, 2000, we amended the subordinated note with respect to certain
interest payments and mandatory redemption provisions. The note is due and
payable on May 1, 2003 with interest payable semi- annually on November 1 and
May 1 of each year and calculated at a rate equal to 2 percent per year and
increasing at a rate of 2 percent per year. The amendment provides that such
interest installments which were due on May 1 and November 1, 2000 are deferred
until May 1, 2001. The note is secured by a second lien on substantially all of
our assets. We may redeem all or any portion of the outstanding principal amount
of the note at redemption prices ranging from 104 percent to 110 percent of the
principal amount being redeemed, depending upon when the redemption occurs. In
addition, the note is subject to mandatory redemption in annual principal
installments of $l.4 million beginning on May 1, 1999 at premiums starting at 7
percent and decreasing by 1 percent each year. The amendment provides that all
past due mandatory principal redemption payments and redemption payments payable
on May 1, 2000 are deferred until May 1, 2001. We are also required to redeem 40
percent of the note upon the completion of a public offering. The note was
originally convertible into common stock at a conversion price of $3 per share.
However, the conversion price was lowered to $2 per share during September 1997
in connection with certain amendments to our credit facilities with Comerica
Bank at that time. Upon any default under the note, the conversion price will be
automatically adjusted to an amount equal to the lesser of the conversion price
then in effect or 80 percent of the average market price for our common stock
for the 30 trading days immediately before the default. The conversion price is
also subject to adjustment upon the occurrence of certain events, including
issuances of common stock for less than the conversion price, to provide
antidilution protection.
In addition to the compensation earned by the named executive officers, Steve
Barbour, brother of Michael M. Barbour, our Chief Executive Officer, received
$87,718 in compensation during 1999 as sales manager.
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<PAGE>
INDEPENDENT AUDITORS _____________________________
Arthur Andersen LLP has served as our independent auditors since October
1997. We have not proposed any formal action to be taken at the annual meeting
concerning the continued employment of Arthur Andersen.
Representatives of Arthur Andersen plan to attend the annual meeting and will
be available to answer appropriate questions. Its representatives will be able
to make a statement at the meeting if they wish, but we do not expect them to do
so.
Before October 1997, Goldstein Golub Kessler & Company, P.C., certified
public accountants, served as our independent auditors. During 1997, the audit
committee of the Board of Directors considered several independent public
accounting firms for possible selection as our auditors for 1997, including
(30K. After this review, Arthur Andersen was selected as our independent
auditors for 1997. Management had no disagreement with (30K on any material
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure. GGK's report on the financial statements for the
year ended December 31, 1996 did not contain an adverse opinion or a disclaimer
of opinion and was not qualified or modified as to uncertainty, audit scope or
accounting principles.
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--------------------------------------------------------------------------------
ITEM 2 -- APPROVAL OF AN AMENDMENT TO
OUR ARTICLES OF INCORPORATION TO CHANGE
OUR NAME TO "EPAINRX INC."
--------------------------------------------------------------------------------
NAME CHANGE _________________________________________________________________
On June 26, 2000, the board of directors approved an amendment to our
Articles of Incorporation to change our name from Henley Healthcare, Inc. to
"ePainRx Inc.," declaring its advisability and directing that the proposed
amendment be submitted to the shareholders at the next annual meeting.
The amendment reflects our new e-commerce strategy and the board's desire to
communicate the direction of our business.
If approved, Article One of our Articles of Incorporation will be amended to
read as follows: The name of the corporation is ePainRx Inc. (the
"Corporation").
VOTE REQUIRED _______________________________________________________________
Holders of two-thirds of the outstanding common stock entitled to vote at the
annual meeting must affirmatively vote to approve the amendment to our Articles
of Incorporation to change our name to "ePainRx Inc." Our Board of Directors
recommends that you vote FOR this item of business.
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--------------------------------------------------------------------------------
ITEM 3 -- APPROVAL OF THE ELIMINATION
OF OUR REDEMPTION OBLIGATIONS RELATED
TO POSSIBLE FUTURE ISSUANCES OF COMMON
STOCK IN EXCESS OF NASDAQ LIMITATIONS
--------------------------------------------------------------------------------
THE SERIES C PRIVATE PLACEMENT ______________________________________________
On May 23, 2000, we sold 2,500 shares of Series D Convertible Preferred
Stock, convertible into shares of common stock for an aggregate purchase price
of $2,500,000 to The Endeavour Capital Fund S.A., Esquire Trade & Invest, Inc.,
and Celeste Trust Reg in a private placement. In connection with the acquisition
of the Series D shares, we also issued to the purchasers warrants to acquire
200,000 shares of common stock.
An additional 1,000 Series D 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.
The sale of the additional 1,000 Series D shares will not occur until the
later of:
o 60 days after the effective date of registration statement covering the
resale of the common stock issuable upon conversion of the Series D shares
and exercise of the related warrants, or
o 10 days after we deliver the notice.
The Series D shares were sold through Union Atlantic LC and Unit 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 D shareholders may not
convert their preferred shares or exercise their related warrants into more than
1,450,788 shares of common stock.
Under the terms of an agreement with the Series D shareholders, we have
agreed to seek your approval at the annual meeting for the issuances of the full
amount of shares of common stock issuable upon conversion of the Series D 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
1,450,788 shares of common stock in connection with the placement of the Series
D 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 the annual
meeting, the holders of the Series D 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 D 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 D
shares not convertible into common shares as a result of these Nasdaq
limitations.
SUMMARY OF SERIES D PREFERRED STOCK TERMS ___________________________________
DIVIDENDS ___________________________________________
The Series D shares bear a 6% cumulative dividend payable to the holders of
the Series D shares on the date of each conversion into shares of common stock.
The dividends shall be payable in cash or in common stock at our option.
VOTING RIGHTS _______________________________________
The Series D 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 D shares is required for a particular matter,
the Series D shareholder will be entitled to vote on that matter.
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<PAGE>
LIQUIDATION PREFERENCE ______________________________
If we liquidate, dissolve or wind up our operations, the Series D shareholder
and the holders of any other classes of stock that rank equal to or higher than
Series D 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 D
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.
REDEMPTION __________________________________________
The Series D shares may be redeemed under certain circumstances. The Series D
shareholder may require us to redeem the Series D shares if:
o the number of shares reserved for issuance upon conversion falls below
certain thresholds; or
o we notify the Series D shareholder that we will not issue any common stock
upon conversion of its Series D shares.
At any time we may redeem the Series D shares instead of allowing a
conversion of the shares and issuing common stock. The redemption price is
determined by a formula in the Series D Statement of Designation which includes
a premium over the face value of the shares.
We must also redeem any Series D 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 D 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 D shares;
o lower than any class or series of stock created in the future that, by its
terms, ranks higher than the Series D shares; and
o lower than the Series A preferred stock, the Series B preferred stock, the
Series C Preferred Stock and any other class or series of stock created in
the future.
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<PAGE>
CONVERSION __________________________________________
The Series D shares are convertible into common stock at the lesser of:
o 105% of the average closing bid price for our common stock as reported by
Bloomberg L.P. for the 10 consecutive trading days immediately proceeding
the initial issuance of the Series D shares.
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 fifteenth day prior to the
conversion date for such conversion and ending on such conversion date.
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 D shares and the related warrants
on or before June 22, 2000.
We filed a registration statement on June 16, 2000 with respect to the Series
D Shares, which was declared effective on July 5, 2000.
NO SHORT SALES ______________________________________
The Series D 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 D shares.
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<PAGE>
EFFECT OF CONVERSION OF PREFERRED
STOCK AND RELATED WARRANT ON YOU ___________________________________________
When the Series D shareholders convert their shares of preferred stock and
exercise their related warrants, we will issue the amount of common stock
required by the Series D 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 D
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 D 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 D 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 D shares and exercise of the
related warrants; and
o whether we opt to pay cash to the Series D shareholders in lieu of issuing
additional shares of common stock.
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<PAGE>
USE OF PROCEEDS AND CERTAIN RELATIONSHIPS ___________________________________
USE OF PROCEEDS _____________________________________
We received net proceeds of approximately $2,475,000 from the Series D
private placement, which we used:
o to pay approximately $200,000 owed to Endeavor Capital Fund S.A. for the
loan provided by it prior to the private placement; and
o to pay approximately $1,400,000 of certain indebtedness owed to Comerica
Bank-Texas, N.A.; and
We used the remaining $875,000 for general working capital purposes.
INTERESTS OF CERTAIN PERSONS ________________________
Due to a contractual limitation in the Series D documents limiting its
ownership at any one time to 9.99%, none of the purchasers of the Series D
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 1,413,470 shares
of common stock, representing 19.48% of our outstanding shares.
VOTE REQUIRED ___________________________________
A majority of the shares cast at the annual 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 4 -- 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 22,500,000 to
60,000,000, consisting of 50,000,000 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 20,000,000 shares of common stock and
2,500,000 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 37,500,000 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 annual 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 60,000,000. 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
50,000,000, and the par value of each such share is One Cent ($.01).
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.
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<PAGE>
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 March 31, 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, 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.
27
<PAGE>
APPENDIX A
AUDIT COMMITTEE CHARTER
FOR HENLEY HEALTHCARE INC
JUNE 12, 2000
The Board of Directors shall appoint an Audit Committee of the Board of
Directors consisting of at least three outside Directors, designating one as
Chairman of the Audit Committee. Each member of the Audit Committee shall meet
the independence and experience requirements of NASDAQ. All members shall be
independent of management and free from any relationship that would interfere
with the exercise of independent judgment as an Audit Committee member, as
determined by the Board of Directors in its business judgment. All Committee
members shall be financially literate, or shall become financially literate
within a reasonable period of time after appointment to the Committee. At least
one member shall have accounting or related financial management expertise.
In fulfilling their responsibilities hereunder, it is recognized that
members of the Committee are not necessarily accountants or auditors or experts
in the fields of accounting or auditing. As such, the Committee and its members
are not providing any expert or special assurances as to the Company's financial
statements or any professional certification as to the independent auditor's
work. Each member of the Audit Committee shall be entitled to rely upon the
integrity of those it receives information from and the accuracy of the
financial and other information provided to the Committee, absent actual
knowledge to the contrary.
In carrying out its oversight responsibilities, the Audit Committee will:
1) Review and recommend to the Board of Directors the independent
accountants to be selected to audit the annual financial statements and review
the quarterly financial statements of the Company.
2) In exercising its oversight responsibilities for the external audit
function, the Audit Committee will:
a) Review and approve the scope of the external audit.
b) Review and approve fees paid to the independent accountants.
c) Ensure the independent accountants deliver to the Audit Committee
annually a formal written statement delineating all relationships between
the independent accountants and the Company and addressing at least the
matters set forth in Independence Standards Board Standard No. 1 and
discuss with the independent accountants any relationships or services
disclosed in such statement that may impact the objectivity and
independence of the Company's independent accountants and recommend that
the Board of Directors take appropriate action in response to this
statement to satisfy itself of the independent accountants' independence.
<PAGE>
d) Obtain from the independent accountants assurance that the audit
was conducted in a manner consistent with the procedures in Section l0A of
the Securities Exchange Act of 1934, as amended.
e) Request the independent accountants to confirm that they are
accountable to the Board of Directors and the Audit Committee and that
they will provide the Audit Committee with timely analyses of significant
financial reporting and internal control issues.
f) Review with management and the independent accountants the
Company's internal controls, including computerized information system
controls and security.
g) Meet with the Company's independent accountants in executive
session to discuss any matters the Audit Committee or the independent
accountants believe should be discussed privately.
h) Review with management significant risks and exposures identified
by the independent accountants and discuss with management the steps
necessary to manage such risks.
i) Review with management and/or the independent accountants as
appropriate:
(i) any difficulties the independent accountants encountered
while conducting audits, including any restrictions on the scope of
their work or on their access to required information;
(ii) the Company's annual financial statements and related
footnotes;
(iii) the independent accountants audit of and report on the
financial statements;
(iv) the qualitative judgments about the appropriateness and
acceptability of accounting principles, financial disclosures,
account adjustments, and underlying estimates;
(v) any significant difficulties or disputes with management
encountered during the course of the audit;
(vi) any other matters about the audit procedures or findings
that Generally Accepted Accounting Standards (GAAS) require the
auditors to discuss with the Audit Committee.
2
<PAGE>
(vii) any legal and regulatory matters that may have a
material effect on the Company's financial statements, operations,
compliance policies and programs.
3) Report Audit Committee actions to the full Board of Directors and make
appropriate recommendations, including whether the audited financial statements
should be included in the Company's Annual Report on Form 10-K.
4) Review and approve requests for any significant management consulting
engagements to be performed by the independent accountants.
5) Maintain open communications with the independent accountants,
management and the Board of Directors.
6) Conduct or authorize investigations into matters within its scope of
responsibility in its sole discretion, and retain independent counsel,
accountants or other experts to assist in the conduct of any such
investigations, if the Audit Committee deems appropriate.
7) Meet at least one time each year in person and at least three
additional times per year by teleconference, or more frequently as circumstances
require. A majority of the Audit Committee will constitute a quorum for any
meetings, whether in person or by teleconference. The Chair of the Audit
Committee may call an Audit Committee meeting whenever deemed necessary. The
Chair of the Audit Committee should develop, in consultation with management
when appropriate, the Audit Committee meeting agenda. The Audit Committee may
ask members of management or others to attend meetings and may request any
information it deems relevant from management.
8) Prepare all reports, including the report required by the Securities
and Exchange Commission to be included in the Company's annual Proxy Statement
and take any other actions required of the Audit Committee by law, applicable
regulations, or as requested by the Board of Directors.
9) Review and reassess the adequacy of the Audit Committee's Charter
annually.
3
<PAGE>
HENLEY HEALTHCARE, INC.
THE BOARD OF DIRECTORS SOLICITS THIS PROXY FOR THE
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 29, 2000
The undersigned shareholder of Henley Healthcare, Inc. (the
PROXY "Company") hereby appoints Michael M. Barbour and James L.
FOR Sturgeon, or either of them, the true and lawful attorneys,
ANNUAL agents and proxies of the undersigned, each with full power of
MEETING substitution, to vote on behalf of the undersigned at the Annual
OF Meeting of Shareholders of the Company to be held at the
SHAREHOLDERS Company's office at 120 Industrial Boulevard, Sugar Land, Texas,
77478, on Tuesday, August 29, 2000, at 10:00 a.m., Houston Time,
AUGUST 29, 2000 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. THE ELECTION OF DIRECTORS
|_| FOR the election of Michael M. Barbour, Dr. Pedro
A. Rubio, Kenneth W. Davidson, James L. Sturgeon,
Walter Cunningham, J. Terry Manning, and Gabriel
L. Shaheen, as directors.
|_| WITHHOLD AUTHORITY to vote on ALL nominees for
director listed above.
|_| WITHHOLD AUTHORITY to vote ONLY for the nominee or
nominees, written on the line provided below:
__________________________________________________
2. APPROVAL OF THE AMENDMENT TO OUR ARTICLES OF INCORPORATION
TO CHANGE OUR NAME FROM HENLEY HEALTHCARE, INC. TO "EPAINRX
INC."
|_| FOR the amendment to our Articles of Incorporation
to change our name from Henley Healthcare, Inc. to
"ePainRx Inc."
|_| AGAINST the amendment to our Articles of
Incorporation to change our name from Henley
Healthcare, Inc. to "ePainRx Inc."
|_| ABSTAIN from voting on the amendment to our
Articles of Incorporation to change our name from
Henley Healthcare, Inc. to "ePainRx Inc."
3. APPROVAL OF THE ELIMINATION OF OUR REDEMPTION OBLIGATIONS
RELATED TO POSSIBLE FUTURE ISSUANCES OF COMMON STOCK IN
EXCESS OF NASDAQ LIMITATIONS
|_| FOR the elimination of our obligations to issue
shares of common stock upon conversion of the
Series D shares or to redeem shares of Series D
convertible preferred stock when shares of common
stock are issued on conversion of the Series D
shares and the exercise of related warrants in
excess of Nasdaq limitations.
<PAGE>
|_| AGAINST elimination of our obligations to issue
shares of common stock upon conversion of the
Series D shares or to redeem shares of Series D
convertible preferred stock when shares of common
stock are issued on conversion of the Series D
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 D shares or to redeem
shares of Series D convertible preferred stock
when shares of common stock are issued on
conversion of the Series D shares and the exercise
of related warrants in excess of Nasdaq
limitations.
4. APPROVAL OF AMENDMENT TO OUR ARTICLES OF INCORPORATION TO
INCREASE THE NUMBER OF SHARES OF CAPITAL STOCK THAT WE ARE
ENTITLED TO ISSUE FROM 22,500,000 TO 60,000,000.
|_| FOR the amendment to our Articles of Incorporation
to increase our authorized capital stock to
60,000,000.
|_| AGAINST the amendment to our Articles of
Incorporation to increase our authorized capital
stock to 60,000,000.
|_| ABSTAIN from voting on the amendment to our
Articles of Incorporation to increase our
authorized capital stock to 60,000,000.
5. 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 the
FOR manner directed herein by the undersigned shareholder. If no
ANNUAL direction is made, this Proxy will be voted FOR the election of
MEETING the nominees above, FOR the amendment to the Articles of
OF Incorporation to change the our name to "ePainRx Inc.," FOR
SHAREHOLDERS the future issuance of common stock in excess of the Nasdaq
limitations, FOR the amendment to the Articles of Incorporation
AUGUST 29, 2000 to 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 ____________________, 2000
______________________________________
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
