UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY
STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant
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Filed by a party other than the Registrant
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Check the appropriate box:
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Preliminary proxy statement
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Confidential, for use of the Commission only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material pursuant to Sec. 240.14a-11 (c) or Sec. 240.14a-12
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PAINCARE HOLDINGS, INC.
(Name of Registrant as Specified in Its Charter)
(Name of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11:
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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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.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No:
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PAINCARE HOLDINGS, INC.
1030 NORTH ORANGE AVENUE
SUITE 105
ORLANDO, FL 32801
October 3, 2007
Dear Stockholder:
You are cordially invited to attend the
2007 Annual Meeting of Stockholders of PainCare Holdings, Inc., to be held on Friday, October 26, 2007 at 9:00 a.m., local time, at Grand Bohemian, 325 South Orange Avenue, Orlando, FL 32801.
The matters to be acted upon at the Annual Meeting, as well as other important information, are set forth in the accompanying Notice of Annual Meeting
and Proxy Statement which you are urged to review carefully.
Regardless of your plans for attending in person, it is important that your
shares be represented and voted at the Annual Meeting. Accordingly, you are requested to complete, sign, date and return the enclosed proxy card in the enclosed postage paid envelope. Signing this proxy will not prevent you from voting in person
should you be able to attend the meeting, but will assure that your vote is counted if, for any reason, you are unable to attend.
We hope
that you can attend the 2007 Annual Meeting of Stockholders. Your interest and support in the affairs of PainCare Holdings, Inc. are appreciated.
Sincerely,
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/s/ R
ANDY
L
UBINSKY
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Randy Lubinsky
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Chief Executive Officer
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YOUR VOTE IS IMPORTANT
Even if you plan to attend the meeting, please complete, sign, and return promptly the enclosed proxy in the envelope provided to ensure that your vote
will be counted. Instructions on voting by Internet, telephone or mail are shown on the Proxy Card. You may vote in person if you so desire even if you have previously sent in your proxy. If your shares are held in the name of a bank, brokerage firm
or other nominee, please contact the party responsible for your account and direct him or her to vote your shares on the enclosed card.
PAINCARE HOLDINGS, INC.
1030 NORTH ORANGE AVENUE, SUITE 105
ORLANDO, FL 32801
(407) 367-0944
NOTICE OF ANNUAL
MEETING OF STOCKHOLDERS
To Be Held October 26, 2007
To the Stockholders of PainCare Holdings, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of PainCare Holdings, Inc., a Florida corporation (the Company),
will be held at Grand Bohemian, 325 South Orange Avenue, Orlando, FL 32801 at 9:00 a.m., local time on October 26, 2007, for the following purposes:
1. To elect directors to each serve until the next Annual Meeting of Stockholders of the Company and until their successors have been duly elected and qualified;
2. To ratify the appointment of Brimmer, Burek & Keelan LLP as independent auditors for the Company for the year ending
December 31, 2007; and
3. To transact such other business as may properly come before the meeting or any adjournment
thereof.
Only stockholders of record at the close of business on October 3, 2007, are entitled to notice of and to vote at the
meeting, or any adjournment thereof. A complete list of such stockholders will be available for examination at the offices of the Company in Orlando, Florida for ten business days prior to the meeting.
Stockholders unable to attend the Annual Meeting in person are requested to read the enclosed Proxy Statement and then complete and deposit the Proxy
with the Companys transfer agent, American Stock Transfer & Trust Company, 59 Maiden Lane, New York, NY 10038 before the time of the Annual Meeting or adjournment thereof or with the chairman of the Annual Meeting, 1030 North Orange
Avenue, Suite 105, Orlando, FL 32801, prior to the commencement thereof. Instructions for voting by Internet or telephone are shown on the Proxy Card. Stockholders who received the Proxy through an intermediary must deliver the Proxy in accordance
with the instructions given by such intermediary. A Proxy may be revoked by a shareholder at any time before the effective exercise thereof.
Also enclosed are copies of the Companys Annual Report on Form 10-K for the year ended December 31, 2006, without exhibits, filed with the SEC on April 2, 2007, and our most recent Quarterly Report on Form 10-Q for the
quarter ended June 30, 2007, filed with the SEC on August 28, 2007.
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Orlando, Florida
October 3, 2007
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BY ORDER OF THE BOARD OF DIRECTORS
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/s/ R
ANDY
L
UBINSKY
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Randy Lubinsky,
Chief Executive Officer
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THE PROXY STATEMENT WHICH ACCOMPANIES THIS NOTICE OF ANNUAL MEETING OF STOCKHOLDERS CONTAINS
MATERIAL INFORMATION CONCERNING THE MATTERS TO BE CONSIDERED AT THE MEETING, AND SHOULD BE READ IN CONJUNCTION WITH THIS NOTICE.
PAINCARE HOLDINGS, INC.
1030 North Orange Avenue, Suite 105
Orlando, Florida 32801
(407) 367-0944
PROXY STATEMENT FOR
2007 ANNUAL MEETING OF STOCKHOLDERS
Annual Meeting.
This Proxy Statement is furnished in connection with the solicitation of proxies
by the Board of Directors of PainCare Holdings, Inc., a Florida corporation (the Company) for use at the Annual Meeting of Stockholders (the Annual Meeting) to be held at Grand Bohemian, 325 South Orange Avenue, Orlando, FL
32801, at 9:00 a.m., local time, on Friday, October 26, 2007, and at any adjournments thereof for the purpose of considering and voting upon the matters set forth in the accompanying Notice of Annual Meeting of Stockholders (the
Notice). This Proxy Statement and the accompanying form of proxy are first being mailed to stockholders of the Company (the Stockholders) on or about October 5, 2007. All costs of soliciting proxies will be borne by the
Company.
Proxy Card
. A Proxy Card is enclosed for use at the Annual Meeting. Proxies that are properly completed, signed and
received prior to the Annual Meeting will be voted in accordance with the instructions of the persons executing the same. Unless instructed to the contrary, the proxies will be voted FOR Proposal 1 and FOR Proposal 2 set forth in the Notice of the
Annual Meeting. If any other matters are properly presented to the Annual Meeting for action, it is intended that the person named in the enclosed Proxy Card and acting thereunder will vote in accordance with his best judgment on such matters. A
proxy may be revoked by a stockholder at any time before the effective exercise thereof by submitting a subsequently dated proxy or by appearing in person and voting at the Annual Meeting.
Voting by Telephone or Electronically
. If you are a registered stockholder (that is, if you hold your stock in certificate form), you may vote by
telephone, or electronically through the Internet, by following the instructions included with your Proxy Card. If your shares are held in street name, please check your Proxy Card or contact your broker or nominee to determine whether
you will be able to vote by telephone or electronically. The deadline for voting by telephone or electronically is 11:59 p.m., Eastern Standard Time, on October 25, 2007.
Record Dates.
With respect to all proposals, the close of business on October 3, 2007, has been fixed as the record date (Record
Date) for the determination of stockholders entitled to notice of and to vote at the Annual Meeting and any adjournment thereof. As of the Record Date, there were 67,648,717 shares issued and outstanding, all of which are entitled to vote.
Quorum.
The presence, in person or by proxy, of a majority of the outstanding shares of common stock on the Record Date, is
necessary to constitute a quorum at the Annual Meeting. If a quorum is not present or represented by proxy at the Annual Meeting, the stockholders present or represented by proxy at the Annual Meeting have the power to adjourn the Annual Meeting
from time to time, without notice other then an announcement at the Annual Meeting, until a quorum is present or represented by proxy. At any such adjourned Annual Meeting at which a quorum is present or represented by proxy, any business may be
transacted that might have been transacted at the original Annual Meeting.
Voting Requirements.
With respect to the election of
directors, votes may be cast in favor of or withheld. Directors are elected by a plurality of the votes cast at the Annual Meeting. Any other matter that may be submitted to a vote of the stockholders will be approved if the number of shares of
common stock voted in favor of the matter exceeds the number of shares voted against the matter.
1
Abstentions and Broker Non-Votes.
Abstentions and broker or nominee non-votes (shares
held by brokers or nominees as to which instructions have not been received from the beneficial owners or persons entitled to vote and the broker or nominee does not have discretionary voting power on a particular matter) will be treated as shares
that are present and entitled to vote for purposes of determining the presence of a quorum at the Annual Meeting, but will not be counted as votes cast for or against Proposal 1 and Proposal 2.
Default Voting.
All shares represented by properly executed proxies, unless such proxies have been previously revoked, will be voted at the Annual
Meeting in accordance with the directions set forth on such proxies. If no direction is indicated, the shares will be voted FOR THE ELECTION OF THE NOMINEES NAMED HEREIN AS DIRECTORS AND FOR THE RATIFICATION OF BRIMMER, BUREK & KEELAN LLP
AS THE COMPANYS INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007. IF ANY OTHER BUSINESS COMES BEFORE THE STOCKHOLDERS FOR A VOTE AT THE MEETING, THE SHARES WILL BE VOTED IN ACCORDANCE WITH THE DISCRETION OF
THE HOLDERS OF THE PROXY.
Tabulation of Votes.
All votes will be tabulated by the inspector of elections (the
Inspector) appointed for the Annual Meeting who will, for each proposal to be voted on, determine the number of shares outstanding, the number of shares entitled to vote, the number of shares represented at the Annual Meeting, the
existence of a quorum, and the authenticity, validity and effect of all proxies received by the Company. The Inspector will also separately tabulate affirmative and negative votes and broker non-votes, and determine the result for each
proposal.
Revocation of Proxy.
A shareholder that has given a proxy may revoke it before it is exercised, either in person, by mail
or by messenger, by submitting a later dated proxy card to the Assistant Controller, at 1030 North orange Avenue, Suite 105, Orlando, Florida 32801, at least 48 hours prior to the date of the annual meeting. If the proxy was voted via the Internet
or by telephone, the shareholder may revoke the proxy by entering a new vote via the Internet or telephone prior to the time that Internet and telephone voting closes. The shareholder giving the proxy may also revoke it by openly stating the
revocation at the meeting or by voting at the meeting in person. If you have instructed a broker to vote your shares, you must follow directions received from your broker to change those instructions. ANY ATTEMPTED REVOCATIONS NOT MEETING THE ABOVE
REQUIREMENTS WILL BE RULED INVALID.
ADDITIONAL MATERIALS
Included herewith please find a copy of the Companys Annual Report on Form 10-K for the year ended December 31, 2006, without exhibits, filed
with the SEC on April 2, 2007, and our most recent Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, filed with the SEC on August 28, 2007. These documents do not form any part of the material for solicitation of
proxies.
The Company will provide, without charge, a copy of the exhibits to its Form 10-K, upon written request to the Assistant
Controller of the Company, at 1030 North Orange Avenue, Suite 105, Orlando, FL 32801; fax number (407) 367-0950.
2
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth the number of shares of the common stock beneficially owned as of October 3, 2007, by (i) each person believed
by PainCare to be the beneficial owner of more than 5% of the common stock; (ii) each director; (iii) each executive officer; and (iv) all directors and executive officers as a group. Beneficial ownership by the stockholders has been
determined in accordance with the rules promulgated under Section 13(d) of the Securities Exchange Act of 1934, as amended. All shares of the common stock are owned both of record and beneficially, unless otherwise indicated. Unless otherwise
indicated, the address of each of the listed beneficial owners is c/o PainCare Holdings, Inc., 1030 North Orange Avenue, Suite 105, Orlando, Florida 32801.
The holders listed below will have sole voting power and investment power over the shares beneficially held by them. The table below includes common shares subject to options, warrants and convertible notes that may
be acquired within 60 days of October 3, 2007.
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Beneficial Ownership (1)
Name of Beneficial Owner
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Shares
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Percent
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Current
Position
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Merrill Reuter, M.D. (2)
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1,914,810
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2.8
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%
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Chairman of the Board, President-AOSF
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Randy Lubinsky (3) (11)
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3,351,970
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4.8
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%
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CEO and Director
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Mark Szporka (4) (11)
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3,299,871
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4.7
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%
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CFO and Director
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Ronald Riewold (5)
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2,350,000
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3.4
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%
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President and Director
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Jay Rosen, M.D. (6)
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455,000
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*
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Director
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Arthur J. Hudson (7) (11)
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600,000
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*
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Director
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Robert Fusco (8)
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150,000
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*
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Director
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Thomas J. Crane (9)
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59,000
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*
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Director
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Aldo F. Berti, M.D. (10)
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55,000
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*
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Director
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All officers, directors, and affiliates as a group (9 persons)
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12,235,651
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16.3
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%
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(1)
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Based on an aggregate of 67,648,717 shares of the Companys common stock outstanding as of October 3, 2007.
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(2)
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Includes the impact of the merger on January 1, 2001 between the Companys subsidiary, PainCare Acquisition Company I, Inc., and Advanced Orthopedics of South Florida,
Inc., of which Dr. Reuter was a stockholder, at which time a trust controlled by Dr. Reuter received 1,850,000 shares of common stock and $1,239,000 in convertible debentures, which were paid in full in February of 2004. Dr. Reuter
received 62,810 shares of common stock as partial consideration for the Companys purchase of 50% of his ownership interest in the Lake Worth Surgical Center in May of 2005. In addition, Pamela Reuter, Dr. Reuters wife, owns 2,000
shares of our common stock.
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(3)
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Includes options issued pursuant to the Companys stock option plans to acquire (i) 1,000,000 shares of common stock at $1.00 per share (ii) 900,000 shares of common
stock at $1.93 per share; and (iii) 100,000 shares of common stock at $3.08 per share and (iv) 175,000 shares of common stock at $4.00 per share.
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(4)
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Includes options issued pursuant to the Companys stock option plans to acquire (i) 1,000,000 shares of common at $1.00 per share (ii) 900,000 shares of common stock
at $1.93 per share; and (iii) 100,000 shares of common stock at $3.08 per share and (iv) 175,000 shares of common stock at $4.00 per share.
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(5)
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Includes options issued pursuant to the Companys stock option plans to acquire (i) 775,000 shares of common at $1.00 per share (ii) 475,000 shares of common
stock at $3.02 per share; (iii) 775,000 shares of common stock at $1.90 per share; and (iv) 175,000 shares of common stock at $4.00 per share
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(6)
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Includes plan options to acquire (i) 200,000 shares of common stock at $0.05 per share; and (ii) 25,000 shares of common stock at $2.97 per share.
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(7)
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Includes plan options to acquire (i) 70,000 shares of common stock at $0.70 per share; (ii) 25,000 shares of common stock at $2.40 per share; and (iii) 25,000 shares
of common stock at $2.97 per share.
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(8)
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Includes plan options to acquire (i) 70,000 shares of common stock at $0.70 per share; (ii) 25,000 shares of common stock at $2.40 per share and (iii) 25,000 shares
of common stock at $2.97 per share.
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(9)
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Includes plan options to acquire (i) 25,000 shares of common stock at $2.97 per share.
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(10)
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Includes plan options to acquire (i) 25,000 shares of common stock at $2.97 per share.
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(11)
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Includes plan options to acquire 150,000 shares of common stock at $2.25 per share, which were granted and fully vested in accordance with a personal guarantee provided by each
Messrs. Lubinsky, Szporka and Hudson with respect to the guarantee of a line of credit with Merrill Lynch Business Financial Services, Inc. This line of credit was subsequently closed in February of 2004.
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4
PROPOSAL 1
ELECTION OF DIRECTORS
Director Nominees
The Companys Board of Directors currently consists of nine members. The directors are elected annually by the stockholders of the Company. The
Bylaws of the Company provide that the Board of Directors will determine the number of directors. The stockholders will elect nine directors for the coming year. All of the nominees presently serve as directors of the Company. All of the
Companys current directors are standing for reelection. Should any nominee become unable or unwilling to accept nomination or election, the Board of Directors will either select a substitute nominee or will reduce the size of the Board. If you
have submitted a proxy and a substitute nominee is selected, the holders of the proxy will vote your shares FOR the election of the substitute nominee. The Board of Directors has no reason to believe that any nominee will be unable or unwilling to
serve if elected.
THE BOARD OF DIRECTORS HAS NOMINATED THE BELOW-REFERENCED DIRECTORS FOR ELECTION BY THE STOCKHOLDERS AND UNANIMOUSLY
RECOMMENDS A VOTE
FOR
THE ELECTION OF EACH OF THE NOMINEES LISTED BELOW.
The name and age of each nominee, his
principal occupation, and the period during which such person has served as a director is set forth below:
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Name of Nominee
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Age
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First Became a
Director of the Company
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Office Held
with Company
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Merrill Reuter, M.D.
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47
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2002
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Director and Chairman
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Randy Lubinsky
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54
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2002
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Director /CEO
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Mark Szporka
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51
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2002
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Director/CFO
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Ron Riewold
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60
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2002
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Director/President
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Jay Rosen, M.D.
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49
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2002
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Director
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Arthur J. Hudson (1)(2)
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56
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2002
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Director
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Robert Fusco (1)
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57
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2002
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Director
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Thomas J. Crane (1)(2)
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50
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2004
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Director
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Aldo F. Berti, M.D. (2)
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59
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2004
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Director
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(1)
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Member of Audit Committee.
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(2)
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Member of Compensation Committee.
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Merrill Reuter,
M.D.
is the Companys Chairman of the Board and is the President of Advanced Orthopaedics of South Florida, Inc. Dr. Reuter founded Advanced Orthopaedics of South Florida, Inc. in Lake Worth, Florida in 1992 and from that date until
the present has served as its President and Medical Director. He received a BS degree from Tulane University in 1982 and a Masters in Medical Science and a Medical Degree from Brown University in 1986. Dr. Reuter completed his General Surgical
Internship and Orthopedic Surgery Residency Training Program at the University of Texas Medical Branch in Galveston, Texas.
Randy
Lubinsky,
Chief Executive Officer and Director of the Company, joined the Company on August 1, 2000 and has over 25 years experience as a healthcare entrepreneur and investment banker. He has built businesses from the start-up phase in the
healthcare and real estate industries. Mr. Lubinsky received a BA degree in finance from Florida International University.
Mark
Szporka,
Chief Financial Officer and Director of the Company joined the Company on August 1, 2000 and has in excess of 25 years experience as an investment banker, chief financial officer and strategic planner. Mr. Szporka received a
MBA from the University of Michigan and a BBA from the University of Notre Dame. He is a Certified Public Accountant (non-active) in New York.
5
Ronald L. Riewold
is a Director and has been the Companys President since February 2003.
Previously Mr. Riewold served in various capacities for American Enterprise Solutions, Inc., a healthcare delivery system and internet utility located in Tampa, Florida, including consultant, Executive Vice President, President and Chief
Operating Officer. Mr. Riewold has a BA degree from Florida State University and a MBA from Temple University.
Jay L. Rosen,
M.D.
, was elected as a Director of the Company in 2000. Dr. Rosen has over 15 years experience as a healthcare entrepreneur. Since 1992, he has served as Chief Executive Officer and Executive Director of Tampa Bay Surgery Center, Inc., an
outpatient surgical facility that specializes in minimally invasive spinal surgery and pain management procedures in Tampa, Florida. Dr. Rosen is active in managing Seven Springs Surgery Center in New Port Richey, Florida. Dr. Rosen
received a BS degree from Fordham University and Medical Degree from Cetec University. He performed graduate medical research at Hahnemann University in Philadelphia and the Medical Center at SUNY at Stony Brook. Dr. Rosen is a Diplomat of the
American Board of Quality Assurance and Utilization Review Physicians. He currently serves on the Board of Directors for Tampa Bay Surgery Center, Inc., Tampa Bay Surgery Associates, Inc., Rehab One, Inc., Open MRI & Diagnostic Center,
Inc., Immuvac, Inc., and Intellicare, Inc.
Arthur J. Hudson
was elected as a Director of the Company in November 2002.
Mr. Hudson has been employed by Fidelitone, Inc., a full service inventory management, distribution and logistics company, since 1974, and currently serves as Fidelitones Senior Vice President of Corporate Development. Mr. Hudson is
a member of the board of directors of Fidelitone. He received a BS degree in economics from Colorado State University.
Robert Fusco
was elected as a Director of the Company in November 2002. Mr. Fusco has over twenty years experience in the healthcare industry and was involved in the building of Olsten Corporation into one of the largest home health and specialty
pharmaceutical distribution services companies in North America. Since March 2000 when Olsten Corporation was sold to Addecco Corporation, Mr. Fusco has been an independent consultant. Mr. Fusco received a BS degree from Manhattan College.
Thomas J. Crane
was elected as a Director of the Company in November 2004
.
Since January 1991, Mr. Crane has owned and
operated a specialized law practice located in Naples, Florida. Beginning in 2000, Mr. Crane formed, and currently acts as the Managing Director, of Cloverleaf Capital International, LLC, an investment banking firm focused on media, technology,
and health care. Mr. Crane sits on the Boards of Compass Knowledge Holdings, Inc. based in Ocoee, Florida, XTEL, Inc., a telecommunications network based in Miami, Florida, and Broadcast Entertainment Corporation, a radio station operator in
Texas, New Mexico, and California. Mr. Crane holds a JD from the University of Miami School of Law, Miami, Florida, a BA from Florida State University, Tallahassee, Florida and a Certificate of Languages from the University of Paris (Sorbonne),
Paris, France. Mr. Crane is licensed to practice law in the States of Florida and Texas.
Aldo F. Berti, M.D
was elected as a
Director of the Company in November 2004
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Since 1980, Dr. Berti has owned and provided physician and neurosurgical services to Aldo F. Berti, M.D. P.A. located in Miami, Florida. Dr. Berti is the Associate Director for Latin America
at the Gamma Knife Institute at Jackson Memorial Medical Center at the University of Miami School of Medicine. Dr. Berti is a Fellow at the American College of Surgeons and the American Academy of Pediatrics. Dr. Berti is affiliated with
the following hospitals: Cedars Medical Center, Miami, Florida; Jackson Memorial Medical Center -Gamma Knife Institute, Miami, Florida; North Shore Medical Center, Miami, Florida; Palm Springs Hospital, Miami, Florida; and South Miami Hospital,
Miami, Florida.
During the year ended December 31, 2006, the Board of Directors met 3 times. A quorum of directors participated in
all board meetings.
6
Annual Meeting Attendance
The Company encourages all Directors to attend the Annual Meeting of Stockholders either in person or by telephone. Last year, each Director attended the Annual Meeting, either in person or by telephone.
Committees of the Board of Directors
The Company
has established a standing Audit Committee and a Compensation Committee. The Company has not established a Nominating Committee.
Audit Committee
The Audit Committee retains and oversees the Companys independent accountants, reviews the
scope and results of the annual audit of the Companys consolidated financial statements, reviews nonaudit services provided to the Company by its independent accountants and monitors transactions among the Company and its affiliates, if any.
The Audit Committee currently consists of Mr. Fusco, the chairman of the Audit Committee, Mr. Hudson and Mr. Crane, who are all independent under American Stock Exchange and SEC rules. The Board of Directors has determined that
Mr. Fusco, chairman of the Audit Committee, is qualified as an Audit Committee Financial Expert. During the year ended December 31, 2006, the Audit Committee held 3 meetings at which all of the members of the Committee were present. The
Companys Board of Directors has adopted a written charter for the Audit Committee.
Compensation Committee
The Compensation Committee is responsible for supervising the Companys compensation policies, administering the employee incentive plans,
reviewing officers salaries and bonuses, approving significant changes in employee benefits and recommending to the Board such other forms of remuneration as it deems appropriate. The Compensation Committee currently consists of
Mr. Crane, the chairman of the Compensation Committee, Dr. Berti and Mr. Hudson, who are all independent. During the year ended December 31, 2006, the Compensation Committee held 1 meeting, at which all of the members of the
Committee were present.
American Stock Exchange Corporate Governance Rule Changes
The Company is required to comply with the corporate governance requirements of the American Stock Exchange. The American Stock Exchange rules require
that the Companys Board of Directors be comprised of a majority of independent directors, and that all members of the audit and compensation committees be independent. Presently, Mr. Rosen, Mr. Hudson, Mr. Fusco, Mr. Crane,
and Mr. Berti, who constitute a majority of the members of the board, are each independent under the rules of the American Stock Exchange.
7
Report of the Audit Committee of the Board of Directors
October 2, 2007
To the Board of Directors of PainCare Holdings, Inc.:
Management is responsible for the Companys financial reporting process, including its system of internal control, and for the
preparation of consolidated financial statements in accordance with generally accepted accounting principles. The Companys independent auditors are responsible for auditing those financial statements.
In performing our oversight duties we rely on managements representation that the financial statements have been prepared with integrity and
objectivity and in conformity with accounting principles generally accepted in the United States. We also rely on the representations of the independent auditors included in their report on the Companys financial statements.
Our oversight does not provide us with an independent basis to determine that management has maintained appropriate accounting and financial reporting
principles or policies, or appropriate internal controls and procedures. Furthermore, our contacts with management and the independent auditors do not assure that:
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the Companys financial statements are presented in accordance with generally accepted accounting principles,
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the audit of the Companys financial statements has been carried out in accordance with generally accepted auditing standards, or
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the Companys independent accountants are in fact independent.
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In connection with the inclusion of the audited financial statements in the Companys 2006 Annual Report on Form 10-K, the Audit Committee:
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reviewed and discussed the audited financial statements with management,
|
|
|
|
discussed with our independent auditors the materials required to be discussed by SAS 61,
|
|
|
|
reviewed the written disclosures and the letter from our independent auditors required by Independent Standards Board Standard No. 1 and discussed with our
independent auditors their independence, and
|
|
|
|
based on the foregoing review and discussion, recommended to the Board of Directors that the audited financial statements be included in the Companys 2006
Annual Report on Form 10-K.
|
By the Audit Committee of the Board of Directors of PainCare Holdings, Inc.
Robert Fusco
Arthur Hudson
Thomas Crane
Selection of Board Nominees
The independent members of the Companys Board of Directors select nominees for election as directors. The Board believes this process has worked
well thus far particularly since it has been the Boards practice to require unanimity of the independent Board members with respect to the selection of director nominees.
While no single factor is determinative, in order to have a Board with skills and attributes needed to function effectively, the following factors are
considered by the Board in the process of selecting nominees for election as directors by the Board or by the stockholders:
|
|
|
if not a Company employee, the ability to be an independent director;
|
|
|
|
educational background, work experience and business knowledge generally;
|
8
|
|
|
willingness and ability to dedicate the time and resources necessary for the diligent performance of the duties of a director of the Company;
|
|
|
|
professional experience that is relevant to the Companys business;
|
|
|
|
reputation in the business community;
|
|
|
|
previous service on boards, including public companies;
|
|
|
|
actual or potential conflicts of interest;
|
|
|
|
whether the person has any history of criminal convictions or violations of governmental rules and regulations; and
|
|
|
|
other criteria that are relevant to determining whether the person will function effectively as a director.
|
In determining whether to elect a director or to nominate any person for election by the stockholders, the Board assesses the appropriate size of the
Board of Directors, consistent with its Bylaws, and whether any vacancies on the Board are expected due to retirement or otherwise. If vacancies are anticipated, or otherwise arise, the Board will consider various potential candidates to fill each
vacancy. Candidates may come to the attention of the Board through a variety of sources, including from current members of the Board, stockholders, or other persons. The Board of Directors has not yet had the occasion to, but will, consider properly
submitted proposed nominations by stockholders who are not directors, officers, or employees of the Company on the same basis as candidates proposed by any other person. Stockholders can make proposals as provided below under the caption
Deadlines for Future Proposals of Stockholders.
Executive Compensation
Compensation Discussion and Analysis
Overview of Compensation Program
The Compensation Committee of the Board has responsibility for establishing, implementing
and continually monitoring adherence with the Companys compensation philosophy. The Compensation Committee ensures that the total compensation paid is fair, reasonable, and competitive. Generally, the types of compensation and benefits
provided to executive officers are similar to those provided to other executive officers.
Compensation Philosophy and Objectives
The Compensation Committee believes that the most effective executive compensation program is one that is designed to reward the
achievement of specific annual, long-term and strategic goals by the Company, and which aligns executives interests with those of the stockholders by rewarding performance above established goals, with the ultimate objective of improving
stockholder value. The Compensation Committee evaluates both performance and compensation to ensure that the Company maintains its ability to attract and retain superior employees in key positions and that compensation provided to key employees
remains competitive relative to the compensation paid to similarly situated executives of our peer companies. To that end, the Compensation Committee believes executive compensation packages provided by the Company to its executives, including the
named executive officers should include both cash and stock-based compensation that reward performance as measured against established goals.
Role of Executive Officers in Compensation Decisions
The Compensation Committee makes all compensation decisions for the
Chief Executive Officer and approves recommendations regarding equity awards to all elected officers of the Company. Decisions regarding the non-equity compensation of other executive officers are made by the Chief Executive Officer.
9
The Chief Executive Officer and the Compensation Committee review the performance of senior officers and
executive officers of subsidiaries. The conclusions reached and the recommendations based on these reviews, including with respect to salary adjustments and annual award amounts, are presented to the Compensation Committee; however, it is the
decision of the Chief Executive Officer to make final determination on all agreements with senior officers and executive officers of subsidiaries.
Setting Executive Compensation
Based on the foregoing objectives, the Compensation Committee has structured the
Companys annual and long-term incentive-based cash and non-cash executive compensation to motivate executives to achieve the business goals set by the Company and reward the executives for achieving such goals. In 2007, the Compensation
Committee engaged Hay Group, Inc., an independent global human resources consulting firm, to conduct a review of the CEOs base salary, total cash compensation and total direct compensation relative to a peer group of 13 companies approved by
the Compensation Committee. The Compensation Committee will use this information to make compensation decisions concerning the CEOs pay in 2007.
The Companys executive compensation policy is designed to enable the Company to attract, motivate and retain senior management by providing a competitive compensation opportunity based significantly on
performance. The objective is to provide fair and equitable compensation to senior management in a way that rewards management for reaching and exceeding objectives. The compensation policy links a significant portion of executive compensation to
the Companys performance, recognizes individual contribution as well as overall business results, and aligns executive and stockholder interests.
2006 Executive Compensation Components
For the fiscal year ended December 31, 2006, the
principal components of compensation for named executive officers were:
|
|
|
equity-based incentive compensation;
|
|
|
|
perquisites and other personal benefits.
|
Base Salary.
The Company provides named executive officers and other employees with base salary to compensate them for services rendered during the fiscal year. Base salary ranges for named executive officers are determined for
each executive based on his or her position and responsibility by using market data. During its review of base salaries for executives, the Compensation Committee primarily considers:
|
|
|
internal review of the executives compensation, both individually and relative to other executive officers; and
|
|
|
|
individual performance of the executive.
|
Salary levels are typically considered annually as part of the Companys performance review process as well as upon a promotion or other change in job responsibility.
Equity Based Awards Compensation.
All awards of stock options are made at or above the market price at the time of the award. Annual
awards of stock options to executives are made at the Compensation Committees regularly scheduled meeting.
Ownership
Guidelines
. To directly align the interests of executive officers with the interests of the stockholders, the Compensation Committee requires that each named executive officer maintain a minimum
10
ownership interest in the Company. The amount required to be retained varies depending upon the executives position. The guideline is a multiple of the
executives base salary. Further, the Compensation Committee requires that under certain conditions the Companys senior management hold for at least one year stock received upon the exercise of stock options.
Stock Option Program
. The Stock Option Program assists the Company to:
|
|
|
enhance the link between the creation of stockholder value and long-term executive incentive compensation;
|
|
|
|
provide an opportunity for increased equity ownership by executives; and
|
|
|
|
maintain competitive levels of total compensation.
|
Stock option award levels which are determined based on market data, vary among participants based on their positions within the Company. Options are awarded at the American Stock Exchanges closing price of the
Companys Common Stock on the date of the grant. In certain limited circumstances, the Compensation Committee may grant options to an executive at an exercise price in excess of the closing price of the Companys Common Stock on the grant
date.
The majority of the options granted by the Compensation Committee vest at a rate of 33% per year over the first three years of
the five-year option term. Vesting and exercise rights cease upon termination of employment, except in the case of death (subject to a ninety day limitation), disability or retirement. Prior to the exercise of an option, the holder has no rights as
a stockholder with respect to the shares subject to such option, including voting rights and the right to receive dividends or dividend equivalents.
Because all options have been granted at fair market value, any value which is ultimately realized by recipients through stock options is based entirely on the Companys performance, as perceived by investors in
the Companys Common Stock who establish the price for Common Stock on the open market.
Bonuses.
Fixed Bonus
. The Company pays to the CEO, Chief Financial Officer (CFO), and President a fixed bonus of $200,000 per year payable in four equal
quarterly installments.
Discretionary Bonus
. Every six months beginning on June 30, 2006 and continuing each December 31
and June 30 during their respective employment terms, the Compensation Committee shall conduct a review of the CEO, CFO, and Presidents performance of their respective duties. Based on the outcome of the review, the Compensation Committee
may award an additional bonus to the officer. The bonus shall not exceed 150% of the officers base salary during any calendar year.
Perquisites and Other Personal Benefits.
The Company provides the Chief Executive Officer, Chief Financial Officer, and the President with perquisites and other personal benefits that the Company and the Compensation Committee
believe are reasonable and consistent with its overall compensation program to better enable the Company to attract and retain superior employees for key positions. The Compensation Committee periodically reviews the levels of perquisites and other
personal benefits provided to named executive officers. The CEO, CFO, and President are provided a monthly automobile allowance (including insurance, gas and maintenance), participation in the plans and programs described above, a country club
membership at a country club of the employees choice, and a term life insurance policy in an amount of not less than $1,000,000. Attributed costs of the personal benefits described above for the named executive officers for the fiscal year
ended December 31, 2006, are included in column (f) of the Summary Compensation Table.
11
Tax and Accounting Implications.
Deductibility of Executive Compensation.
As part of its role, the Compensation Committee reviews and considers the deductibility of executive
compensation under Section 162(m) of the Internal Revenue Code, which provides that the Company may not deduct compensation of more than $1,000,000 that is paid to certain individuals. The Company believes that compensation paid under the
management incentive plans are generally fully deductible for federal income tax purposes. However, in certain situations, the Compensation Committee may approve compensation that will not meet these requirements in order to ensure competitive
levels of total compensation for its executive officers.
Accounting for Stock-Based Compensation.
Beginning on January 1,
2006, the Company began accounting for stock-based payments including its Stock Option Program in accordance with the requirements of FASB Statement 123(R).
Potential Payment upon Termination or Change of Control.
Information regarding applicable payments
under such agreements for the named executive officers is provided under the heading Potential Post-Employment Payments.
Summary Compensation Table
The table below summarizes the total compensation paid or earned by each of the named executive
officers for the calendar year ended December 31, 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
|
Option
Awards
($)(1)(2)
|
|
All Other
Compensation
($)
|
|
|
Total
($)
|
Randy Lubinsky
Chief Executive Officer
|
|
2006
|
|
$
|
320,000
|
|
$
|
200,000
|
(8)
|
|
$
|
364,544
|
|
$
|
43,626
|
(3)
|
|
$
|
928,170
|
Mark Szporka
Chief Financial Officer
|
|
2006
|
|
|
295,000
|
|
|
200,000
|
(8)
|
|
|
364,544
|
|
|
45,446
|
(4)
|
|
$
|
904,990
|
Ron Riewold
President
|
|
2006
|
|
|
295,000
|
|
|
200,000
|
(8)
|
|
|
628,423
|
|
|
35,857
|
(5)
|
|
$
|
1,159,280
|
Kathleen White
Executive Vice President, Operations
|
|
2006
|
|
|
148,000
|
|
|
10,000
|
(9)
|
|
|
39,637
|
|
|
16,872
|
(6)
|
|
$
|
214,509
|
Craig Coppedge
Controller
|
|
2006
|
|
|
115,000
|
|
|
20,000
|
(10)
|
|
|
17,596
|
|
|
15,085
|
(7)
|
|
$
|
167,681
|
(1)
|
The amounts in column (e) reflect the dollar amount recognized for financial statement reporting purposes for the fiscal year ended December 31, 2006, in accordance with
FAS123(R) of awards pursuant to the 2001 Stock Option Plan and thus include amounts from awards granted in and prior to 2006. Assumptions used in the calculation of this amount for fiscal years ended December 31, 2004, 2005, and 2006 are
included in footnote disclosure 1 to the Companys audited financial statements for the fiscal year ended December 31, 2006. Assumptions used in the calculation of this amount for fiscal year ended December 31, 2003, are included
under the heading Stock-Based Compensation Plans in the Accounting and Policies and Notes to Consolidated Financial Statements included in the Form 10-KA for fiscal year ended December 31, 2005, filed with the Securities and
Exchange Commission on December 20, 2006.
|
(2)
|
On May 20, 2006 the Company entered in an amendment to the CEO, CFO, and Presidents employment agreements. The employment agreements called for the officers to waive all
accrued bonuses earned up to December 31, 2005. As remuneration for the agreement all the options outstanding to these officers were immediately vested. In accordance with FAS 123(R) for awards that are modified the Company recorded additional
compensation expense of $912,560 for the immediate vesting of these options.
|
12
(3)
|
Mr. Lubinsky received the following items included in column heading (f)
|
|
|
|
Automobile lease payments
|
|
|
|
Automobile maintenance payments
|
|
|
|
Health insurance premium payments
|
|
|
|
Dental insurance premium payments
|
|
|
|
Life insurance premium payments
|
(4)
|
Mr. Szporka received the following items included in column heading (f)
|
|
|
|
Automobile allowance payments
|
|
|
|
Country Club dues payments
|
|
|
|
Health insurance premium payments
|
|
|
|
Dental insurance premium payments
|
|
|
|
Life insurance premium payments
|
(5)
|
Mr. Riewold received the following items included in column heading (f)
|
|
|
|
Automobile allowance payments
|
|
|
|
Health insurance premium payments
|
|
|
|
Dental insurance premium payments
|
|
|
|
Life insurance premium payments
|
(6)
|
Ms. White received the following items included in column heading (f)
|
|
|
|
Automobile allowance payments
|
|
|
|
Health insurance premium payments
|
|
|
|
Dental insurance premium payments
|
(7)
|
Mr. Coppedge received the following items included in column heading (f)
|
|
|
|
Health insurance premium payments
|
|
|
|
Dental insurance premium payments
|
(8)
|
The CEO, CFO, and President each received their contractually agreed upon fixed bonus during 2006. There was no discretionary bonus paid or accrued during the year.
|
(9)
|
Ms. White received a discretionary bonus during the year.
|
(10)
|
Mr. Coppedge received a discretionary bonus during the year.
|
The executives received the following percentages of each component of compensation to their total compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base
Salary
|
|
|
Bonuses
|
|
|
Equity
Awards
|
|
|
Perquisites
|
|
Randy Lubinsky
|
|
34
|
%
|
|
22
|
%
|
|
39
|
%
|
|
5
|
%
|
Mark Szporka
|
|
33
|
%
|
|
22
|
%
|
|
40
|
%
|
|
5
|
%
|
Ron Riewold
|
|
26
|
%
|
|
17
|
%
|
|
54
|
%
|
|
3
|
%
|
Kathleen White
|
|
69
|
%
|
|
5
|
%
|
|
18
|
%
|
|
8
|
%
|
Craig Coppedge
|
|
69
|
%
|
|
12
|
%
|
|
10
|
%
|
|
9
|
%
|
Approximately 39% of Mr. Lubinskys total compensation was in equity awards. This
includes the modification of Mr. Lubinskys outstanding option awards that occurred on May 20, 2006. The modification fully vested all of the outstanding options on that date. This caused an additional amount of compensation recorded
under FAS 123(R) of $276,189. The percentages above reflect the Compensation Committees intention to align Mr. Lubinskys total compensation with that of stockholders. Additionally, there was no discretionary bonus paid during 2006.
Mr. Lubinsky is an executive officer of the corporation.
Approximately 40% of Mr. Szporkas total compensation was in
equity awards. This includes the modification of Mr. Szporkas outstanding option awards that occurred on May 20, 2006. The modification fully vested all of the outstanding options on that date. This caused an additional amount of
compensation recorded under FAS 123(R) of $276,189. The percentages above reflect the Compensation Committees intention to align Mr. Szporkas total compensation with that of stockholders. Additionally, there was no discretionary
bonus paid during 2006. Mr. Szporka is an executive officer of the corporation.
13
Approximately 54% of Mr. Riewolds total compensation was in equity awards. This includes
the modification of Mr. Riewolds outstanding option awards that occurred on May 20, 2006. The modification fully vested all of the outstanding options on that date. This caused an additional amount of compensation recorded under FAS
123(R) of $360,182. The percentages above reflect the Compensation Committees intention to align Mr. Riewolds total compensation with that of stockholders. Additionally, there was no discretionary bonus paid during 2006.
Mr. Riewold is an executive officer of the corporation.
Approximately 69% of Ms. Whites total compensation was in salary.
Ms. White is not an executive officer of the corporation. However, she is responsible for the Companys operations. She has significant policy influence in the Companys operations and is, therefore, included as a named executive
officer for purposes of this disclosure.
Approximately 69% of Mr. Coppedges total compensation was in salary. Mr. Coppedge
is not an executive officer of the corporation. However, he is responsible for the Companys accounting function. He has significant policy influence in the Companys accounting policies and procedures and is, therefore, included as a
named executive officer for purposes of this disclosure.
Grants of Plan-Based Awards Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Grant date
|
|
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
|
|
Exercise
or Base
Price
of
Option
Awards
($/Sh)(1)
|
|
Closing
Price on
Grant
Date
($/Sh)
|
|
Grant Date
Fair Value
of Stock
Option
Awards
($)(2)
|
Kathleen White, Executive Vice President, Operations
|
|
5/19/2006
|
|
25,000
|
|
$
|
1.46
|
|
$
|
1.46
|
|
$
|
15,579
|
Craig Coppedge, Controller
|
|
3/21/2006
|
|
25,000
|
|
$
|
1.41
|
|
$
|
1.41
|
|
$
|
14,374
|
(1)
|
The options to Ms. White and Mr. Coppedge were issued at the market price on the grant date. The Company uses the Black Scholes valuation method to estimate the fair value
of option grants.
|
(2)
|
Option awards vested on the grant date.
|
14
Outstanding Equity Awards at December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
Name and Principal Position
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
Equity
Incentive
Plan Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
Randy Lubinsky
Chief Executive Officer
|
|
1,000,000
150,000
|
|
|
|
|
|
$
|
1.00
2.25
|
|
8/1/2007
6/4/2008
|
|
|
250,000
|
|
|
|
|
|
|
1.93
|
|
8/1/2013
|
|
|
50,000
|
|
|
|
|
|
|
1.93
|
|
8/1/2008
|
|
|
50,000
|
|
|
|
|
|
|
1.93
|
|
8/1/2009
|
|
|
50,000
|
|
|
|
|
|
|
1.93
|
|
8/1/2010
|
|
|
250,000
|
|
|
|
|
|
|
1.93
|
|
2/1/2011
|
|
|
250,000
|
|
|
|
|
|
|
1.93
|
|
8/1/2012
|
|
|
100,000
|
|
|
|
|
|
|
3.08
|
|
8/1/2009
|
|
|
175,000
|
|
|
|
|
|
|
4.00
|
|
8/1/2010
|
|
|
|
|
|
|
Mark Szporka
Chief Financial Officer
|
|
1,000,000
150,000
|
|
|
|
|
|
|
1.00
2.25
|
|
8/1/2007
6/4/2008
|
|
|
250,000
|
|
|
|
|
|
|
1.93
|
|
8/1/2013
|
|
|
50,000
|
|
|
|
|
|
|
1.93
|
|
8/1/2008
|
|
|
50,000
|
|
|
|
|
|
|
1.93
|
|
8/1/2009
|
|
|
50,000
|
|
|
|
|
|
|
1.93
|
|
8/1/2010
|
|
|
250,000
|
|
|
|
|
|
|
1.93
|
|
8/1/2011
|
|
|
250,000
|
|
|
|
|
|
|
1.93
|
|
8/1/2012
|
|
|
100,000
|
|
|
|
|
|
|
3.08
|
|
8/1/2009
|
|
|
175,000
|
|
|
|
|
|
|
4.00
|
|
8/1/2010
|
|
|
|
|
|
|
Ron Riewold
President
|
|
775,000
475,000
|
|
|
|
|
|
|
1.00
3.02
|
|
2/7/2008
2/7/2013
|
|
|
775,000
|
|
|
|
|
|
|
1.90
|
|
10/16/2013
|
|
|
175,000
|
|
|
|
|
|
|
4.00
|
|
8/1/2010
|
|
|
|
|
|
|
Kathleen White
Executive Vice President, Operations
|
|
25,000
27,500
|
|
|
|
|
|
|
4.81
4.01
|
|
4/1/2010
7/6/2010
|
|
|
15,000
|
|
|
|
|
|
|
3.25
|
|
4/1/2011
|
|
|
27,500
|
|
|
|
|
|
|
4.01
|
|
7/6/2011
|
|
|
25,000
|
|
|
|
|
|
|
1.46
|
|
5/19/2011
|
|
|
|
|
|
|
Craig Coppedge
Controller
|
|
10,000
60,000
|
|
|
|
|
|
|
2.64
2.97
|
|
3/17/2009
1/6/2010
|
|
|
60,000
|
|
|
|
|
|
|
2.97
|
|
1/6/2011
|
|
|
25,000
|
|
|
|
|
|
|
1.41
|
|
3/21/2011
|
Option Exercises and Stock Vested
None of the Companys named executive officers exercised any stock options during the fiscal year ended December 31, 2006.
15
Potential Post-Employment Payments
The following table shows the potential payments upon termination or a change of control of the Company for Randy Lubinsky, the Companys CEO. Per
Mr. Lubinskys employment agreement in a termination Not for Cause, for a period of one year and in the case of a termination For Cause for a period of two years, he is subject to a sixty mile non-competition and a
non-interference agreement. Mr. Lubinsky also has the right to voluntarily terminate employment under a change of control and will receive 2.9 times his annual salary as a severance payment.
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Benefits and
Payments Upon Separation
|
|
Voluntary
Termination
on 12/31/06
|
|
Involuntary
Not for Cause
Termination
on 12/31/06
|
|
For Cause
Termination
on 12/31/2006
|
|
Change in
Control
on 12/31/06
|
|
Disability
on 12/31/06
|
|
Death
on 12/31/06
|
Salary (1)
|
|
|
|
1,280,000
|
|
|
|
|
|
640,000
|
|
640,000
|
Stock Options (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonuses (3)
|
|
|
|
800,000
|
|
|
|
|
|
400,000
|
|
400,000
|
Health and life insurance (4)
|
|
|
|
66,036
|
|
|
|
66,036
|
|
66,036
|
|
|
Cash severance (5)
|
|
|
|
|
|
|
|
928,000
|
|
|
|
|
Accrued Vacation (6)
|
|
159,994
|
|
159,994
|
|
159,994
|
|
159,994
|
|
159,994
|
|
159,994
|
(1)
|
Reflects the lump sum payment due.
|
(2)
|
Since all options were fully vested on May 20, 2006 there is no additional compensation expense associated with option grants.
|
(3)
|
Reflects the Fixed Bonus only. No payments would be made under the Discretionary Bonus plan.
|
(4)
|
Reflects the estimated lump-sum present value of all future premiums which will be paid on behalf of Mr. Lubinsky under the employment agreement.
|
(5)
|
The cash severance amount is computed as 2.9 times the annual base salary.
|
(6)
|
Reflects the lump sum payment due.
|
The following table
shows the potential payments upon termination or a change of control of the Company for Mark Szporka, the Companys CFO. Per Mr. Szporkas employment agreement in a termination Not for Cause, for a period of one year and
in the case of a termination For Cause for a period of two years, he is subject to a sixty mile non-competition and a non-interference agreement. Mr. Szporka also has the right to voluntarily terminate employment under a change of
control and will receive 2.9 times his annual salary as a severance payment.
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Benefits and
Payments Upon Separation
|
|
Voluntary
Termination
on 12/31/06
|
|
Involuntary
Not for Cause
Termination
on 12/31/06
|
|
For Cause
Termination
12/31/2006
|
|
Change in
Control
on 12/31/06
|
|
Disability
on 12/31/06
|
|
Death
on 12/31/06
|
Salary (1)
|
|
|
|
1,180,000
|
|
|
|
|
|
590,000
|
|
590,000
|
Stock Options (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonuses (3)
|
|
|
|
800,000
|
|
|
|
|
|
400,000
|
|
400,000
|
Health and life insurance (4)
|
|
|
|
82,510
|
|
|
|
82,510
|
|
82,510
|
|
|
Cash severance (5)
|
|
|
|
|
|
|
|
855,500
|
|
|
|
|
Accrued Vacation (6)
|
|
147,503
|
|
147,503
|
|
147,503
|
|
147,503
|
|
147,503
|
|
147,503
|
(1)
|
Reflects the lump sum payment due.
|
(2)
|
Since all options were fully vested on May 20, 2006 there is no additional compensation expense associated with option grants.
|
(3)
|
Reflects the Fixed Bonus only. No payments would be made under the Discretionary Bonus plan.
|
(4)
|
Reflects the estimated lump-sum present value of all future premiums which will be paid on behalf of Mr. Szporka under the employment agreement.
|
(5)
|
The cash severance amount is computed as 2.9 times the annual base salary.
|
(6)
|
Reflects the lump sum payment due.
|
16
The following table shows the potential payments upon termination or a change of control of the Company
for Ron Riewold, the Companys President. Per Mr. Riewolds employment agreement in a termination Not for Cause, for a period of one year and in the case of a termination For Cause for a period of two years, he
is subject to a sixty mile non-competition and a non-interference agreement. Mr. Riewold also has the right to voluntarily terminate employment under a change of control and will receive 2.9 times his annual salary as a severance payment.
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Benefits and
Payments Upon Separation
|
|
Voluntary
on
12/31/06
|
|
Involuntary
Not for
Cause
Termination
on
12/31/06
|
|
For Cause
Termination
on
12/31/2006
|
|
Change in
Control
on
12/31/06
|
|
Disability
on
12/31/06
|
|
Death
on
12/31/06
|
Salary (1)
|
|
|
|
1,180,000
|
|
|
|
|
|
590,000
|
|
590,000
|
Stock Options (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonuses (3)
|
|
|
|
800,000
|
|
|
|
|
|
400,000
|
|
400,000
|
Health and life insurance (4)
|
|
|
|
82,510
|
|
|
|
82,510
|
|
82,510
|
|
|
Cash severance (5)
|
|
|
|
|
|
|
|
855,500
|
|
|
|
|
Accrued Vacation (6)
|
|
147,503
|
|
147,503
|
|
147,503
|
|
147,503
|
|
147,503
|
|
147,503
|
(1)
|
Reflects the lump sum payment due.
|
(2)
|
Since all options were fully vested on May 20, 2006 there is no additional compensation expense associated with option grants.
|
(3)
|
Reflects the Fixed Bonus only. No payments would be made under the Discretionary Bonus plan.
|
(4)
|
Reflects the estimated lump-sum present value of all future premiums which will be paid on behalf of Mr. Riewold under the employment agreement.
|
(5)
|
The cash severance amount is computed as 2.9 times the annual base salary.
|
(6)
|
Reflects the lump sum payment due.
|
Neither
Mr. Coppedge nor Ms. White are currently the subject of provisions allowing for post-employment payments.
Cash Compensation
Paid to Board Members
For calendar year ended December 31, 2006, members of the Board who are not employees of the Company are
entitled to receive an annual cash retainer of $5,000. Each Director who serves on the Audit Committee and Compensation Committee receive $5,000 and $2,500, respectively. Directors who are employees of the Company receive no compensation for their
service as directors.
Stock Option Program
Each non-employee Director received a stock option grant of 30,000 shares issued at the money on June 20, 2006. Until an option is exercised, shares subject to options cannot be voted. Options issued were
immediately vested.
17
Director Summary Compensation Table
The Company uses a combination of cash and stock-based incentive compensation to attract and retain qualified candidates to serve on the Board. In setting
director compensation, the Company considers the amount of time that Directors expend in fulfilling their duties to the Company as well as the skill-level required by the Company of members of the Board.
|
|
|
|
|
|
|
|
|
Name (1)(2)
|
|
Fees
Earned
or Paid
in Cash
($)
|
|
Option
Awards
($)(3)
|
|
All Other
Compensation
($)
|
|
Total
($)
|
Jay Rosen, M.D.
|
|
5,000
|
|
18,011
|
|
|
|
23,011
|
Arthur J. Hudson
|
|
20,000
|
|
18,011
|
|
|
|
38,011
|
Robert Fusco
|
|
12,953
|
|
18,011
|
|
|
|
30,964
|
Thomas J. Crane
|
|
20,000
|
|
18,011
|
|
|
|
38,011
|
Aldo F. Berti
|
|
10,821
|
|
18,011
|
|
|
|
28,832
|
(1)
|
Merrill Reuter is not included as he is an employee of one of the PainCare subsidiaries and thus receives no compensation for his services as a director.
|
(2)
|
Ron Riewold, Randy Lubinsky, and Mark Szporka are excluded as they are employees of the Company and thus receive no compensation for their services as directors. The compensation
received by them is included in the Summary Compensation Table on page 81 of this report.
|
(3)
|
Reflects the dollar amount recognized for financial statement reporting purposes for the year ended December 31, 2006 in accordance with FAS 123(R). As of December 31,
2006, each Director had the following number of options outstanding: Jay Rosen: 55,000; Arthur Hudson: 400,000; Robert Fusco: 150,000; Thomas Crane: 55,000; Aldo F. Berti: 55,000.
|
Employment Agreements
Randy
Lubinsky, CEO
. Mr. Lubinsky serves as Chief Executive Officer of the Company for a term expiring on December 31, 2010. The principal terms of Mr. Lubinskys employment agreement, as amended, are as follows: (i) an annual
salary of $320,000, which may be increased from time to time at the discretion of the board of directors; (ii) stock options to purchase 175,000 (exercisable at $4.00 per share) shares of the Companys common stock; (iii) health and
dental insurance coverage; (iv) term life insurance; (v) an annual bonus of $200,000, plus a discretionary bonus up to 150% of salary and (vi) such other benefits as the Company may provide for its officers in the future.
Mark Szporka, CFO
. Mr. Szporka serves as Chief Financial Officer for the Company for a term expiring on December 31, 2010. The
principal terms of Mr. Szporkas current employment agreement, as amended, are as follows: (i) an annual salary of $295,000, which may be increased from time to time at the discretion of the board of directors; (ii) stock options
to purchase 175,000 (exercisable at $4.00 per share) shares of the Companys common stock; (iii) health and dental insurance coverage; (iv) term life insurance; (v) an annual bonus of $200,000, plus a discretionary bonus up to
150% of salary and (vi) such other benefits as the Company may provide for its officers in the future.
Ronald Riewold,
President
. Mr. Riewold serves as President for the Company for a term expiring on December 31, 2010. The principal terms of Mr. Riewolds current employment agreement, as amended, are as follows: (i) an annual salary of
$295,000, which may be increased from time to time at the discretion of the board of directors; (ii) stock options to purchase 175,000 (exercisable at $4.00 per share) shares of the Companys common stock; (iii) health and dental
insurance coverage; (iv) term life insurance; (v) an annual bonus of $200,000, plus a discretionary bonus up to 150% of salary and (vi) such other benefits as the Company may provide for its officers in the future.
18
Merrill Reuter, M.D.
Advanced Orthopaedics of South Florida II, Inc. (AOSF), a
wholly-owned subsidiary of the Company, entered into an employment agreement with Merrill Reuter, M.D. to serve as its President and Medical Director for an initial term expiring on December 31, 2009. This employment agreement was amended
during 2004, which extended the term through December 31, 2011. The principal terms of Dr. Reuters amended employment agreement are as follows: (i) an annual salary of $300,000 during fiscal year 2004, $500,000 during fiscal
year 2005 and $750,000 per year for each year thereafter; (ii) stock options to purchase shares of the Companys common stock as approved by the stock option committee of the Company; and (iii) health and disability insurance
coverage. In the event that AOSF terminates the agreement Without Cause or Dr. Reuter terminates the agreement For Cause, Dr. Reuter will receive a lump sum severance payment of $1,000,000.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Companys directors and executive officers, and persons who own more than 10% of the Companys common stock, to file with the Securities and Exchange
Commission initial reports of ownerships and reports of changes in ownership, and to furnish the Company with copies of all Section 16(a) reports they file. To the Companys knowledge, based solely on review of the copies of such reports
and written statements from officers and directors furnished to the Company, all Section 16(a) filing requirements applicable to its officers, directors and beneficial owners of more than 10% of our common stock were complied with during the
year.
19
Performance Graph
The following graph shows the change in our cumulative total stockholders return from July 17, 2002, the effective date of our merger with HelpMate Robotics, Inc., through the end of our fiscal year ending
December 31, 2006, based upon the market price of our common stock, compared with the cumulative total return on the American Stock Exchange and AMEX Health Products and Services Index. The graph assumes a total initial investment of $100 as of
July 17, 2002, and shows a Total Return that assumes reinvestment of dividends, if any, and is based on market capitalization at the beginning of each period for each period. The performance on the following graph is not necessarily
indicative of future stock price performance.
20
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee has selected Brimmer,
Burek & Keelan LLP (Brimmer) to serve as the Companys independent accountants for the year ending December 31, 2007. Brimmer was engaged on May 4, 2007, by the Company to be the Companys independent
accountant for the year ended December 31, 2007, and continues to serve as the Companys principal accountant. A representative of Brimmer is expected to be present at the 2007 Annual Meeting and will have an opportunity to make a
statement if he or she so desires. The representative also is expected to be available to respond to appropriate questions from stockholders.
Change in
Principal Accountant in May 2007
On May 7, 2007, the Company terminated its engagement of BKHM, P.A. (BKHM) as the
independent registered public accounting firm responsible for auditing the Companys financial statements. The termination was approved by the Companys Audit Committee.
BKHMs report on the Companys financial statements for the past two years 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, with the exception that BKHMs Audit Report dated March 28, 2007, contains an explanatory note regarding uncertainty involving certain debt obligations
of the Company which are currently in default, and concludes that the potential significance of an adverse conclusion to said issues raises substantial doubt about the Companys ability to continue as a going concern.
During the Companys two most recent fiscal years and any subsequent interim period preceding the termination of BKHM, the Company did not have any
disagreements with BKHM on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of BKHM, would have caused it to make reference to
the subject matter of the disagreements in connection with its report. Similarly, other than as is set forth below, none of the reportable events described under Item 304(a)(1)(v) of Regulation S-K occurred during the time that BKHM was engaged
as the Companys principal accountant and none of BKHMs audit reports on the Companys consolidated financial statements contained any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty,
audit scope or accounting principles.
In a Report on Internal Control Over Financial Reporting dated March 28, 2007 (the 2007
Report), and a Report on Internal Control Over Financial Reporting dated May 12, 2006 (the 2006 Report), BKHM advised the Company of certain internal control deficiencies that it considered to be, in the aggregate, material
weaknesses, including:
Material Weaknesses listed in the 2007 Report
* There is a lack of adequate segregation of duties in field locations in the purchasing and disbursement functions
and, in certain field locations, for cash receipts. In addition, Company management noted a lack of compliance with established procedures regarding approval of invoices. In most locations, the Company attempted to segregate responsibilities;
however, because of a lack of financial staff or the existence of related parties, there are inherent limitations in achieving proper segregation of duties.
* The Company did not have appropriate controls to timely identify all transactions with related parties.
* There are deficiencies in the operation of the Companys policies and procedures associated
with a lack of access controls and adequate backup and security of certain critical computerized financial systems. These systems include billing, payroll, accounts payable, general ledger and electronic spreadsheets used in
21
the compilation and presentation of the Companys financial information. Although there are manual controls designed to identify material errors, these
systems identified affect a significant number of account balances and disclosures.
* There are
deficiencies in the Companys controls around authorization, reconciliation and safeguarding of assets. The deficiencies specifically related to a lack of a physical inventory, errors in the reconciliation of the subsidiary ledger to the
general ledger and approval of fixed asset purchases.
* There are deficiencies in the Companys
control structure surrounding bad debts, contractual allowances and accounts receivable reserve estimates. The Company did not have appropriate controls designed and implemented to ensure validity, completeness and accuracy of contractual
adjustments. In addition, the Company did not have a formalized and structured process to ensure reserves were properly estimated.
* There are deficiencies in the Companys internal control structure surrounding payroll. These deficiencies relate to lack of full compliance with established procedures regarding subsidiary to general ledger
reconciliation, controls over changes to employee withholding, payroll cut-off and approval of timecards.
* There is a material weakness in the process related to the proper accounting for complex and non-routine transactions. These control weaknesses were the result of the following: (i) SFAS 123(R)Management
identified inappropriate accounting treatment for the adoption of Statement of Financial Accounting Standards No. 123(R),
Share-Based Payment
(SFAS 123(R)), which resulted in a misclassification of stock-based compensation
during the quarters ended March 31, 2006, June 30, 2006 and September 30, 2006. These inappropriate classifications will lead to the restatement of those financial statements; and (ii) GoodwillAs the result of the
year-end audit, an error was discovered in the calculation of goodwill impairment, which resulted in a $5.1 million adjustment to the financial statements. The error was a result of not applying the present value to the terminal value in the
calculation of fair value, which was utilized in the calculation of goodwill impairment.
* There is
a deficiency in the accuracy of the month-end close process. This deficiency is specifically related to second party review of journal entries, appropriate cut-off of accounts payable and consolidation of field location financial statements.
* The Companys management did not have adequate technical expertise with respect to income tax
accounting and tax compliance to effectively oversee these areas. This lack of adequate technical expertise resulted in a $1.1 million audit adjustment to remove an undefined, unattributable tax liability.
* There is a material weakness in the entity level controls relating to the control environment, for the following
reasons: (i) the Company did not have formal training, employee acknowledgement and periodic reconfirmation of the Code of Conduct; (ii) the Companys Whistle Blower program was lacking in relation to the receipt, retention and
treatment of complaints received by the issuer regarding accounting, internal accounting controls or auditing matters; (iii) the Companys Whistle Blower program was also lacking regarding confidential, anonymous submission of employees of
the issuer of concerns regarding questionable accounting or auditing matters.
* The Companys
management did not have a control structure in place to properly monitor and analyze the subsidiaries 401(k) plans for compliance with applicable laws and regulations.
Material Weaknesses Listed in the 2006 Report
* The Company was not able to prepare its financial statements without material misstatements because of an inadequate control over the process for the identification and implementation of the
proper accounting for complex and non-routine transactions. Transactions that were misstated included the following: (i) the accounting used for term notes and certain freestanding and embedded derivates related to
financing transactions; (ii) the application of purchase accounting used in connection with physician
22
practice and surgery center acquisitions, including the values recorded for tangible and intangible assets, goodwill, recording deferred taxes, and measuring
the value of shares issued; and (iii) accounting for the Companys existing stock option plans, including the use of variable accounting for employee option grants and the use of fair value accounting for non-employee option grants.
* There is a lack of adequate segregation of duties in field locations in the purchasing and
disbursement function, and in certain field locations for cash receipts and payroll. In addition, management noted a lack of compliance with established procedures regarding approval of invoices.
* The Company did not have appropriate controls to timely identify, analyze, record, and properly disclose all
transactions with related parties.
* There are deficiencies in controls over the operation of
critical financial systems, including billing, payroll, accounts payable, general ledger, and electronic spreadsheets used in the compilation and presentation of the Companys financial information.
* There is a deficiency in the timeliness and accuracy of the monthly close process, which is specifically related
to accuracy and review of key account reconciliations, analysis of changes in debt/capital leases, appropriate support and second party review of journal entries, and consolidation of field location financial statements.
* There are deficiencies in controls with respect to income tax accounting and tax compliance, as the Company did
not have adequate technical expertise to effectively oversee these areas. This resulted in errors in the Companys accounting for income taxes, including inappropriate accounting for deferred taxes, errors in the calculation of the current
income tax accruals, and in the preparation of fully compliant tax returns.
BKHM indicated in the 2007 Report and the 2006 Report that
they considered these deficiencies to be material weaknesses as that term is defined under standards established by the Public Company Accounting Oversight Board (United States). A material weakness is a significant deficiency or combination of
significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by employees in the normal course of their work.
The Companys Audit Committee has discussed the foregoing material weaknesses with BKHM. In an effort to address the material weaknesses the Company has implemented a number of changes in the Companys internal controls over financial
reporting and has identified a number of additional changes that it intends to implement in 2007. The Company has authorized BKHM to respond fully to any inquiries of Brimmer concerning said matters.
Other than as is set forth below, neither the Company nor anyone on behalf of the Company consulted Brimmer during the two most recent fiscal years and
any subsequent interim period prior to engaging Brimmer, regarding either: (i) the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the
Companys financial statements; or (ii) any matter that was either the subject of a disagreement (as defined in paragraph (a)(1)(iv) and the related instructions of Item 304 of Regulation S-K) or reportable event (as described in
paragraph (a)(1)(v) of Item 304 of Regulation S-K).
In late 2005 Brimmer was engaged by the Company to (i) review the
Companys stock option plans (the Plans) to determine if the Plans were variable stock option plans for periods prior to and ending with December 31, 2005; and (ii) to review certain agreements entered into by the Company
in certain financing transaction and to determine if the warrants issued in connection with said financing transactions (the Warrants) were financial derivatives requiring the Company to account for the Warrants as liabilities in the
Companys financial statements. Brimmer concluded that the Plans were variable employee stock option plans for the periods in question, and that the Warrants were financial derivatives requiring the Company to account for the Warrants as
liabilities in the Companys financial statements. BKHM was consulted regarding the foregoing issues and concurred with the conclusions of Brimmer.
23
Change in Principal Accountant in November 2005
Effective as of November 16, 2005, the resignation of Tschopp, Whitcomb & Orr, P.A. as the Companys principal accountant was accepted
by the Companys Audit Committee. During Tschopp, Whitcomb & Orr, P.A.s retention as the Companys principal accountant, there were no disagreements with Tschopp, Whitcomb & Orr, P.A. on any matter of accounting
principle or practice, financial statement disclosure, or auditing scope or procedure which, is not resolved to Tschopp, Whitcomb & Orr, P.A.s satisfaction, would have caused them to make reference to the subject matter of the
disagreement in connection with their reports. Similarly, none of the reportable events described under Item 304(a)(1)(v) of Regulation S-K occurred during the time that Tschopp, Whitcomb & Orr, P.A. was engaged as the Companys
principal accountant. None of Tschopp, Whitcomb & Orr, P.A.s audit reports on the Companys consolidated financial statements contained any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to
uncertainty, audit scope or accounting principles.
During the years ended December 31, 2004 and 2003 and through November 16,
2005, the Company did not, nor did anyone acting on its behalf, consult with BKHM regarding the application of accounting principles to a specified transaction, either completed or proposed, the type of audit opinion that might be rendered on the
Companys financial statements, or any reportable events described under Items 304(a)(2)(ii) of Regulation S-K.
Audit Fees
The aggregate fees billed by the Companys principal accountant for professional services rendered for the audit of the Companys annual
financial statements on Form 10-K and the review of the financial statements on Form 10-Q for the fiscal years ended December 31, 2005 and December 31, 2006 were $92,400 and $566,108, respectively.
Audit Related Fees
The aggregate fees billed for
audit related services by the Companys principal accountant for the fiscal years ended December 31, 2005 and December 31, 2006 were approximately $159,346 and $182,831, respectively. Audit related services include due diligence in
connection with acquisitions, consultation on accounting and internal control matters and audits in connection with proposed or consummated acquisitions.
Tax Fees
The aggregate fees billed for tax compliance, tax advice and tax planning rendered by the Companys principal
accountant for the fiscal years ended December 31, 2005 and December 31, 2006 were $42,780 and $0, respectively. The services comprising these fees include tax consulting and submitting tax returns.
All Other Fees
The aggregate fees billed for all
other professional services rendered by the Companys principal accountant for the fiscal years ended December 31, 2005 and December 31, 2006 were $0.
Pre-Approval Policies
The Audit Committee approved 100% of the fees paid to the principal accountant
for audit-related, tax and other fees. The Audit Committee pre-approves all non-audit services to be performed by the auditor in accordance with the Audit Committee Charter. The percentage of hours expended on the principal accountants
engagement to audit the Companys financial statements for the most recent year that were attributed to work performed by persons other than the principal accountants full-time, permanent employees was 0%.
24
COST OF SOLICITATION
The Company will bear the cost of the solicitation of proxies from its stockholders. In addition to the use of mail, proxies may be solicited by directors, officers and regular employees of the Company in person or by
telephone or other means of communication. The directors, officers and employees of the Company will not be compensated additionally for the solicitation, but may be reimbursed for out-of-pocket expenses in connection with this solicitation.
Arrangements are also being made with brokerage houses and any other custodians, nominees and fiduciaries for the forwarding of solicitation material to the beneficial owners of the Company, and the Company will reimburse such brokers, custodians,
nominees and fiduciaries for their reasonable out-of-pocket expenses. The Company may also retain the services of a solicitation firm to aid in the solicitation of proxies. If it does so, the Company will pay the fees and expenses of such firm.
DEADLINE FOR FUTURE PROPOSALS OF STOCKHOLDERS
Proposals of stockholders of the Company which are intended to be presented by such stockholders at the 2008 Annual Meeting must be received by the Company no later than June 7, 2008 in order to have them
included in the proxy statement and form of proxy relating to that meeting.
The Companys by-laws require a stockholder to give
advance notice of any business, including the nomination of candidates for the Board of Directors that the stockholder wishes to bring before a meeting of the stockholders of the Company. In general, for business to be brought before an annual
meeting by a stockholder, written notice of the stockholder proposal or nomination must be received by the Assistant Controller of the Company not less than 90 days nor more than 120 days before the meeting, or if the Company gives less than 40 days
notice of the meeting date, written notice of the stockholder proposal or nomination must be received within ten days after the meeting date is announced. With respect to stockholder proposals, the stockholders notice to the Assistant
Controller must contain a brief description of the business to be brought before the meeting and the reasons for conducting such business at the meeting, as well as such other information set forth in the Companys by-laws or required by law.
With respect to the nomination of a candidate for the Board of Directors by a stockholder, the stockholders notice to the Assistant Controller of the Company must contain certain information set forth in the Companys by-laws about both
the nominee and the stockholder making the nominations.
If a stockholder desires to have a proposal included in the Companys proxy
materials for the Annual Meeting of Stockholders and desires to have such proposal brought before the same Annual Meeting, the stockholder must comply with the both sets of procedures described in the two immediately preceding paragraphs. Any
required notices should be sent to PainCare Holdings, Inc. 1030 North Orange Avenue, Suite 105, Orlando, FL 32801, Attention Assistant Controller.
COMMUNICATIONS WITH THE BOARD OF DIRECTORS
Stockholders wishing to communicate with the
Companys Board as a whole or with certain directors, including committee chairpersons or the Chairman of the Board, individually, may do so by writing the Assistant Controller at the Companys headquarters at 1030 North Orange Avenue,
Suite 105, Orlando, Florida 32801. Each stockholder communication should include an indication of the submitting stockholders status as a stockholder of the Company and eligibility to submit such communication. Each such communication will be
received for handling by the Assistant Controller, who will maintain originals of each communication received and provide copies to (i) the Chairman and (ii) any other appropriate committee(s) or director(s) based on the expressed desire
of the communicating stockholder and content of the subject communication. The Assistant Controller also will coordinate with the Chairman to facilitate a response, if it is believed that a response is appropriate or necessary, to each communication
received. The Board, or a designated committee of the Board,
25
will review all stockholder communications received on a periodic basis. The Board reserves the right to revise this policy in the event that this process is
abused, becomes unworkable or otherwise does not efficiently serve the purpose of the policy.
DELIVERY OF DOCUMENTS TO STOCKHOLDERS
SHARING AN ADDRESS
The Securities and Exchange Commission has adopted rules that permit companies and intermediaries such as brokers
to satisfy delivery requirements for proxy statements with respect to multiple stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process of householding potentially
provides extra convenience for stockholders and cost savings for companies. The Company and some brokers household proxy materials, delivering a single proxy statement to multiple stockholders sharing an address unless contrary instructions have
been received from the affected stockholders. Once you have received notice from your broker or us that they or we will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your
consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement, or if you are receiving multiple copies of the proxy statement and wish to receive only one, please notify your
broker if your shares are held in a brokerage account or us if you hold registered shares. You can notify us by sending a written request to the Assistant Controller of the Company, at 1030 North Orange Avenue, Suite 105, Orlando, FL 32801.
CONFLICTS OF INTEREST
Except as described above, with respect to certain employment agreements, stock option grants and directors fees, we currently have no transactions nor are there any proposed with our officers, directors, 5% or greater shareholders,
and affiliates. Conflicts of interest could arise in the negotiation of the terms of any transaction between us and our shareholders, officers, directors or affiliates. We have no plans or arrangements, including the hiring of an independent third
party, for the resolution of disputes between us and such persons, if they arise. Our business and financial condition could be adversely affected should such individuals choose to place their own interests before ours. No assurance can be given
that conflicts of interest will not cause us to lose potential opportunities, profits, or management attention. Our Board of Directors has adopted a policy regarding transactions between us and any of our officers, directors, or affiliates,
including loan transactions, requiring that all such transactions be approved by a majority of the independent and disinterested members of our Board of Directors and that all such transactions be for a bona fide business purpose and be entered into
on terms at least as favorable to us as could be obtained from unaffiliated independent third parties. All ongoing relationships with any of our officers, directors or affiliates are in compliance with our policy. However, if any other matter is
properly presented, it is the intention of the persons named in the enclosed proxy to vote in accordance with their best judgment on such matters.
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BY ORDER OF THE BOARD OF DIRECTORS
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/s/ R
ANDY
L
UBINSKY
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Randy Lubinsky,
Chief Executive Officer
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October 3, 2007
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Orlando, Florida
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26
DEFINITIVE PROXY
PAINCARE HOLDINGS, INC.
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 26, 2007
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PAINCARE HOLDINGS, INC. THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE CHOICES SPECIFIED BELOW.
The undersigned stockholder of PainCare Holdings, Inc. (the Company) hereby appoints Mark Szporka, the true and lawful attorney, agent and proxy of the
undersigned with full power of substitution for and in the name of the undersigned, to vote all the shares of common stock of the Company at the Annual Meeting of Stockholders of the Company to be held at the Grand Bohemian, 325 South Orange Avenue,
Orlando, Florida 32801 on Friday, October 26, 2007 at 9:00 a.m., and any and all adjournments thereof, with all of the powers which the undersigned would possess if personally present, for the following purposes:
(Continued and to be signed on the reverse side)
ANNUAL MEETING OF STOCKHOLDERS OF
PAINCARE HOLDINGS, INC.
October 26, 2007
Please date, sign and mail
your
proxy card in the
envelope provided as soon
as possible.
¯
Please detach along perforated line and mail in the envelope provided.
¯
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20930300000000000000 7
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102607
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PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK
AS SHOWN HERE
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FOR
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AGAINST
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ABSTAIN
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1. To elect nine Directors.
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2. To ratify the appointment of Brimmer, Burek & Keelan, LLP as independent auditors for the Company for the year ending
December 31, 2007.
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NOMINEES:
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¨
FOR ALL NOMINEES
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O
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Randy Lubinsky
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3. To transact such other business as may properly come before the meeting or any Adjournment thereof.
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Mark Szporka
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WITHHOLD AUTHORITY
FOR ALL NOMINEES
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O
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Merrill Reuter, M.D.
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Ronald Riewold
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This Proxy will be voted for the choices specified. If no choice is specified for Items 1 through 3, this Proxy will be voted
for
those items.
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O
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Jay L. Rosen, M.D.
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¨
FOR ALL
EXCEPT
(See instructions below)
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O
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Arthur J. Hudson
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Robert Fusco
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The undersigned hereby acknowledges receipt of the Notice of Annual Meeting and Proxy Statement dated October 26, 2007.
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Thomas J. Crane
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Aldo F. Berti, M.D.
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PLEASE MARK, SIGN AND DATE THIS PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE
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INSTRUCTION: To withhold authority to
vote for any individual nominee(s), mark
FOR ALL EXCEPT
and fill in the circle next to each nominee you wish to withhold, as shown here:
·
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To change the address on your account, please check the box at right and indicate your new address in the
address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method.
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Signature of Stockholder
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Date:
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Signature of Stockholder
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Date:
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Note:
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Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney,
trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized
person.
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ANNUAL MEETING OF STOCKHOLDERS OF
PAINCARE HOLDINGS, INC.
October 26, 2007
PROXY VOTING INSTRUCTIONS
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MAIL
- Date, sign and mail your proxy card in the envelope provided as soon as possible.
- OR -
TELEPHONE
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Call toll-free
1-800-PROXIES
(1-800-776-9437) from any touch-tone telephone and follow the instructions. Have
your proxy card available when you call.
- OR -
INTERNET
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Access
www.voteproxy.com
and follow the
on-screen instructions. Have your proxy card available when you access the web page.
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COMPANY NUMBER
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ACCOUNT NUMBER
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You may enter your voting
instructions at 1-800-PROXIES or www.voteproxy.com up until 11:59 PM Eastern Time the day before the cut-off or meeting date.
¯
Please detach along perforated line and mail in the
envelope provided
IF
you are not voting via telephone or the Internet.
¯
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20930300000000000000 7
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102607
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PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK
AS SHOWN HERE
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x
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FOR
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AGAINST
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ABSTAIN
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1. To elect nine Directors.
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2. To ratify the appointment of Brimmer, Burek & Keelan, LLP as independent auditors for the Company for the year ending
December 31, 2007.
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¨
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¨
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¨
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NOMINEES:
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¨
FOR ALL NOMINEES
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O
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Randy Lubinsky
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3. To transact such other business as may properly come before the meeting or any Adjournment thereof.
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¨
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¨
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¨
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O
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Mark Szporka
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¨
WITHHOLD AUTHORITY
FOR ALL NOMINEES
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O
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Merrill Reuter, M.D.
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O
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Ronald Riewold
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This Proxy will be voted for the choices specified. If no choice is specified for Items 1 through 3, this Proxy will be voted
for
those items.
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O
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Jay L. Rosen, M.D.
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¨
FOR ALL
EXCEPT
(See instructions below)
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O
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Arthur J. Hudson
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O
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Robert Fusco
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The undersigned hereby acknowledges receipt of the Notice of Annual Meeting and Proxy Statement dated October 26, 2007.
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O
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Thomas J. Crane
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O
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Aldo F. Berti, M.D.
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PLEASE MARK, SIGN AND DATE THIS PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE
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INSTRUCTION: To withhold authority to
vote for any individual nominee(s), mark
FOR ALL EXCEPT
and fill in the circle next to each nominee you wish to withhold, as shown here:
·
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To change the address on your account, please check the box at right and indicate your new address in the
address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method.
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¨
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Signature of Stockholder
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Date:
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Signature of Stockholder
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Date:
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Note:
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Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney,
trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized
person.
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