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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NO. 0-27506
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COHR INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 95-4559155
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION)
21540 PLUMMER STREET, CHATSWORTH, CALIFORNIA 91311-4103
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (818) 773-2647
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
As of February 11, 1999 there were outstanding 6,433,189 shares of the
Registrant's Common Stock, par value $0.01, which is the only class of common
stock of the Registrant.
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COHR INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
FOR THE NINE MONTHS ENDED DECEMBER 31, 1998
<TABLE>
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PAGE
NUMBER
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item Consolidated Financial Statements: Consolidated Balance 4
1. Sheets as of December 31, 1998 (unaudited) and March 31,
1998........................................................
Consolidated (unaudited) Statements of Operations for the 5
three months ended December 31, 1998 and 1997 and the nine
months ended December 31, 1998 and 1997.....................
Consolidated (unaudited) Statements of Cash Flows for the 6
nine months ended December 31, 1998 and 1997................
Notes to Consolidated Financial Statements.................. 8
Item Management's Discussion and Analysis of Financial Condition 10
2. and Results of Operations...................................
PART II. OTHER INFORMATION
Item Legal Proceedings........................................... 15
1.
Item Other Information........................................... 16
5.
Item Exhibits and Reports on Form 8-K............................ 17
6.
</TABLE>
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FORWARD-LOOKING STATEMENTS
Statements in this Form 10-Q that are not historical facts are hereby
identified as "forward-looking statements" for the purposes of the safe harbor
provided by Section 21E of the Securities Exchange Act of 1934, as amended and
Section 27A of the Securities Act of 1933, as amended. COHR Inc. ("COHR" or the
"Company") cautions readers that such "forward-looking statements," including,
without limitation, those relating to the Company's future business prospects,
revenues, working capital, liquidity, capital needs, income/(loss) and
operations, wherever they may appear in this document or in other statements
attributable to the Company, are necessarily estimates reflecting the best
judgment of the Company's management and involve a number of risks and
uncertainties that could cause actual results to differ materially from those
suggested by the "forward-looking statements." Such "forward-looking statements"
should, therefore, be considered in light of various important factors
("Cautionary Statements"), including those set forth from time to time in the
Company's reports and registration statements filed with the Securities and
Exchange Commission (the "SEC").
These "forward-looking statements" are found at various places throughout
this document. In addition, forward-looking statements generally can be
identified by the use of forward-looking terminology such as "may," "will,"
"expect," "should," "intend," "estimate," "anticipate," "believe," or "continue"
or the negative thereof or variations thereon or similar terminology. Moreover,
the Company, through its senior management or persons acting on its behalf, may
from time to time make "forward-looking statements" about the matters described
herein or other matters concerning the Company and such statements are subject
to the qualifications set forth herein and in the Cautionary Statements. The
Company disclaims any intent and undertakes no obligation to update publicly or
revise "forward-looking statements."
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PART I. FINANCIAL INFORMATION
COHR INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ITEM 1. FINANCIAL STATEMENTS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1998 1998
------------ ---------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $11,769 $14,026
Accounts receivable, net of allowance for doubtful
accounts of $3,199 (December 31) and $4,232 (March
31).................................................... 13,390 16,946
Inventory................................................. 4,567 6,891
Prepaid expenses and other................................ 736 716
Income tax refund receivable.............................. 5,671 8,391
------- -------
Total current assets.............................. 36,133 46,970
Equipment and improvements, net of accumulated depreciation
of $6,518 (December 31) and $5,416 (March 31)............. 5,127 6,804
Intangible assets, net of accumulated amortization of $419
(December 31) and $261 (March 31)......................... 2,501 2,615
Other assets................................................ 381 195
------- -------
Total............................................. $44,142 $56,584
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable............................................. $ $ 40
Accounts payable.......................................... 2,759 6,183
Accrued expenses.......................................... 12,389 11,174
Deferred revenue.......................................... 243 734
Current portion of long-term debt......................... 358 649
------- -------
Total current liabilities......................... 15,749 18,780
Long-term debt.............................................. 278 498
Other long-term liabilities................................. 193 136
SHAREHOLDERS' EQUITY
Preferred Stock, $.01 par value; 2,000,000 shares
authorized; no shares issued and outstanding...........
Common Stock, $.01 par value; 20,000,000 shares
authorized; 6,433,189 shares issued and outstanding.... 887 887
Additional paid in capital................................ 55,153 55,153
Accumulated deficit....................................... (28,118) (18,870)
------- -------
Total shareholders' equity........................ 27,922 37,170
------- -------
Total............................................. $44,142 $56,584
======= =======
</TABLE>
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COHR INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------- -------------------
1998 1997 1998 1997
------- -------- ------- --------
<S> <C> <C> <C> <C>
Revenues.......................................... $22,864 $ 24,422 $74,175 $ 75,197
Direct operating expenses......................... 17,550 20,607 57,061 55,757
------- -------- ------- --------
Gross margin...................................... 5,314 3,815 17,114 19,440
Selling, general and administrative expenses...... 7,162 13,268 23,446 30,580
Special charges................................... 1,432 4,115 3,444 4,115
------- -------- ------- --------
Operating loss.................................... (3,280) (13,568) (9,776) (15,255)
Interest income, net.............................. 153 234 528 771
------- -------- ------- --------
Loss before income tax benefit.................... (3,127) (13,334) (9,248) (14,484)
Income tax benefit................................ (2,679) (3,075)
------- -------- ------- --------
Net loss.......................................... $(3,127) $(10,655) $(9,248) $(11,409)
======= ======== ======= ========
Net loss per common share -- Basic and Diluted.... $ (0.49) $ (1.66) $ (1.44) $ (1.77)
======= ======== ======= ========
Number of shares used to compute net loss per
common share.................................... 6,433 6,433 6,433 6,429
======= ======== ======= ========
</TABLE>
5
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COHR INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31,
-------------------
1998 1997
------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(9,248) $(11,409)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation and amortization.......................... 1,128 1,578
Special charges........................................ 2,740
Provision for doubtful accounts........................ 530 4,328
Deferred income tax asset -- current portion........... 1,895
Other, net............................................. (109)
Changes in assets and liabilities, net of effect of
acquisitions of certain assets:
(Increase) decrease in:
Accounts receivable.................................. 2,112 2,183
Inventory............................................ 2,809 (834)
Prepaid expense and other............................ (20) 531
Income tax refund receivable......................... 2,720 (8,679)
Other assets......................................... (192) 1,628
Increase (decrease) in:
Accounts payable..................................... (3,424) 1,687
Accrued expenses..................................... (285) 4,264
Deferred revenue..................................... (491) (2,738)
------- --------
Total adjustments................................. 7,518 5,843
------- --------
Net cash used in operating activities.................. (1,730) (5,566)
------- --------
Cash flows from investing activities:
Capital expenditures...................................... (173) (1,894)
Proceeds from sale of fixed assets........................ 56
Payment for business acquisitions......................... (44) (1,262)
Sale of investments....................................... 4,500
------- --------
Net cash (used in) provided by investing activities.... (161) 1,344
------- --------
Cash flows from financing activities:
Repayments of long-term debt and notes payable............ (366) (2,241)
------- --------
Net decrease in cash and cash equivalents................... (2,257) (6,463)
Cash and cash equivalents, beginning of period.............. 14,026 22,948
------- --------
Cash and cash equivalents, end of period.................... $11,769 $ 16,485
======= ========
Supplemental disclosures of cash flow information -- Cash
paid during the period for:
Income taxes........................................... $ $ 3,720
======= ========
Interest............................................... $ 27 $ 135
======= ========
Details of businesses or assets acquired at fair value are
as follows:
Current assets............................................ $ $ 526
Equipment................................................. 196
</TABLE>
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<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31,
-------------------
1998 1997
------- --------
<S> <C> <C>
Goodwill and other intangibles............................ 44 1,065
------- --------
44 1,787
------- --------
Liabilities assumed....................................... 525
------- --------
Net cash paid for acquisitions............................ $ 44 $ 1,262
======= ========
</TABLE>
7
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COHR INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
In the opinion of management, the accompanying consolidated financial
statements include all adjustments necessary for a fair presentation of the
financial position of COHR Inc. ("COHR") and subsidiaries (collectively, the
"Company"), and the results of its operations and its cash flows for the interim
periods presented. Although COHR believes that the disclosures in these
consolidated financial statements are adequate to make the information presented
not misleading, certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. Results of operations for
the interim periods are not necessarily indicative of results to be expected for
any other interim period or for the full year.
The consolidated financial statements for the three months and nine months
ended December 31, 1998 and 1997 are unaudited and should be read in conjunction
with the audited consolidated financial statements and notes thereto included in
COHR's Annual Report on Form 10-K for the year ended March 31, 1998.
On February 17, 1998, the Company disclosed that it had restated its
financial statements for the fiscal year ended March 31, 1997 and for the first
two quarters of the fiscal year ended March 31, 1998 ("the Restatement"). All
references herein to the financial statements for such periods refer to such
financial statements as restated. These restatements related primarily to
management's determination that certain equipment and software sales were
prematurely recorded and that certain liabilities and reserves were understated.
Consolidation of Subsidiaries -- The Company's financial statements include
the activity of all of its wholly owned subsidiaries over which the Company has
direct or indirect unilateral and perpetual control. All intercompany
transactions have been eliminated in consolidation.
2. SPECIAL CHARGES
The Company recorded special charges of $3.4 million for the nine months
ended December 31, 1998. Included in the $3.4 million total were the disposition
costs and write-down of certain assets related to operations abandoned or to be
closed, financial advisory services and severance costs for those officers and
employees who were terminated or removed from office by the Company and so
notified during the nine months ended December 31, 1998.
3. INCOME TAXES
On December 31, 1998, the Company had net operating loss carryforwards
("NOLs") of approximately $8.8 million for federal income tax purposes and $4.6
million for state income tax purposes. The NOLs will expire in 2013 and 2003,
respectively. Assuming the Company has sufficient taxable income, the NOLs could
be of significant value to the Company, because generally the NOLs could be used
to offset future taxable income. However, the Company has undergone two
"ownership changes" within the meaning of Section 382 of the Internal Revenue
Code on January 8, 1998 and on December 24, 1998. As such, the Company's
utilization of the NOL carryforwards listed above, including the NOLs incurred
through December 24, 1998, generally will be limited to an annual amount equal
to the product of (a) the fair market value of the Company's stock immediately
before the ownership change and (b) the applicable long-term tax-exempt rate
published by the Internal Revenue Service at the time of the ownership change.
Such annual limitation is approximately $1.5 million.
Generally, an ownership change occurs whenever there is a greater than
50-percentage point change in ownership (based on the value of stock owned) of
the stock of the loss corporation owned by one or more "five percent
shareholders" (as defined by the applicable federal income tax regulations) over
the lowest percentage
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ownership of the stock of the loss corporation owned by such shareholders at any
time during the testing period: generally, a three-year period ending on the day
of the ownership change.
4. BUSINESS SEGMENTS (UNAUDITED)
The Company currently provides services to the health care industry through
two principal business segments. The COHR MasterPlan segment provides equipment
servicing and sales to hospitals and other health care providers. The Purchase
Connection segment consists primarily of a group purchasing organization that
negotiates pricing for its membership with manufacturers and distributors. Other
services in the Purchase Connection segment include providing on-site security,
management consulting, employee-benefits insurance brokerage, medical
credentials verification and insurance claims-management software to hospitals,
integrated health systems and alternate site providers. Effective December 1,
1998, the management consulting and medical credentials verification division
was contributed to a limited liability corporation in consideration of a 40%
membership interest therein. General corporate expenses are classified as
Corporate. Identifiable assets are those used in the Company's operations in
each segment as estimated by management based upon factors such as revenue
generated, number of personnel and space occupied by each segment. Information
concerning the Company's business segments for the periods ended December 31,
1998 and 1997 is as follows:
<TABLE>
<CAPTION>
EQUIPMENT PURCHASING
SERVICES SERVICES CORPORATE TOTAL
--------- ---------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
For the three months ended December 31, 1998
Revenues............................................ $18,042 $ 4,822 $ 22,864
Operating income (loss)............................. (454) 2,023 $ (4,849) (3,280)
Interest income, net................................ 153 153
Identifiable assets................................. 27,368 4,414 12,360 44,142
Depreciation and amortization....................... 190 56 126 372
Capital expenditures................................ 40 16 56
For the three months ended December 31, 1997
Revenues............................................ $20,098 $ 4,324 $ 24,422
Operating income (loss)............................. (2,518) 593 $(11,643) (13,568)
Interest income, net................................ 234 234
Identifiable assets................................. 46,604 7,517 21,046 75,167
Depreciation and amortization....................... 271 80 181 532
Capital expenditures................................ 461 18 442 921
For the nine months ended December 31, 1998
Revenues............................................ $58,607 $15,568 $ 74,175
Operating income (loss)............................. (849) 6,407 $(15,334) (9,776)
Interest income, net................................ 528 528
Identifiable assets................................. 27,368 4,414 12,360 44,142
Depreciation and amortization....................... 575 169 384 1,128
Capital expenditures................................ 130 43 173
For the nine months ended December 31, 1997
Revenues............................................ $59,683 $15,514 $ 75,197
Operating income (loss)............................. (2,359) 4,825 $(17,721) (15,255)
Interest income, net................................ 771 771
Identifiable assets................................. 46,604 7,517 21,046 75,167
Depreciation and amortization....................... 805 237 536 1,578
Capital expenditures................................ 947 38 909 1,894
</TABLE>
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5. TRANSACTION WITH THREE CITIES FUNDS
On December 24, 1998, Three Cities Fund II, L.P. and Three Cities Offshore
II, C.V. (the "Three Cities Funds") purchased approximately 48% of the issued
and outstanding common stock, par value $.01 per share (the "Common Stock"), of
the Company, and TCF Acquisition Corporation, a wholly owned subsidiary of the
Three Cities Funds (the "Purchaser"), entered a Plan and Agreement of Merger
(the "Merger Agreement") with the Company that provided for, among other things,
the acquisition of all remaining Common Stock by the Purchaser at a price of
$5.375 per share (which would have increased to $6.375 per share if the Company
settled certain existing stockholder litigation on a basis which would not
require it to pay more than $3.0 million, net of any insurance proceeds) and,
under certain circumstances, the merger of the Purchaser with and into the
Company.
In response to a proposal by a third party to purchase the Company, the
Purchaser and the Company entered into an Amended and Restated Plan and
Agreement of Merger, dated as of February 4, 1999 (the "Amended Merger
Agreement"), pursuant to which the Purchaser modified its outstanding tender
offer to, among other things, increase the price to $6.50 per share and extend
its expiration to 12:00 midnight, Eastern Standard Time, on February 24, 1999,
unless it is further extended. The Amended Merger Agreement provides for the
subsequent merger of the Purchaser with and into the Company (the "Merger"), and
each share of Common Stock outstanding at the time of the Merger (other than
Common Stock held by the Three Cities Funds, the Purchaser, or shares held by
stockholders validly exercising appraisal rights pursuant to the General
Corporation Law of the State of Delaware) will, by virtue of the Merger and
without any action by the holder thereof, be converted into the right to
receive, without interest, $6.50 per share in cash.
The Company's Board of Directors unanimously approved the terms of the
Amended Merger Agreement, the tender offer, and the Merger contemplated
thereunder, determined that the such tender offer and the Merger are fair to,
and in the best interests of, the holders of Common Stock, and recommended that
all such holders accept such offer and tender their shares pursuant thereto.
6. RECLASSIFICATIONS
Certain reclassifications have been made to the prior period's consolidated
financial statements to conform to the current period's presentation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis of the Company's unaudited
consolidated results of operations and financial position should be read in
conjunction with the Company's unaudited consolidated financial statements,
including the notes thereto, appearing elsewhere in this Quarterly Report.
GENERAL
The Company is a national outsourcing service company, providing equipment
servicing and sales, group purchasing and other ancillary services to hospitals,
integrated health systems and alternative site providers.
During the fourth quarter of fiscal year 1998 and the first three quarters
of fiscal year 1999, the Company undertook a cost-reduction program which
resulted in a reduction in overall personnel, the closing or restructuring of
certain MasterPlan refurbishment and service operations, the closing of certain
under-utilized MasterPlan field offices and the decision to dispose of a
claims-management software business. The Company will continue to pursue
additional cost-reduction opportunities during the balance of fiscal year 1999.
The goal to improve profitability may include the elimination or repricing of
certain low margin or unprofitable contracts. The Company has also instituted
stronger credit and collection policies.
In connection with the Company's fiscal year end audit at March 31, 1998,
the Company's auditors noted certain conditions involving the Company's internal
control structure and its operations that were deemed to be material weaknesses
during the period from April 1, 1997 to March 31, 1998. The Company has
initiated actions it deems to be appropriate to address these conditions,
including the hiring of a new management
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team, improving communications between departments, centralizing certain
accounting functions and formalizing methodologies for certain accounting
procedures.
Federal and state civil lawsuits have been filed against the Company
alleging, among other things, federal and/or state securities law violations and
the Securities and Exchange Commission (the "SEC") and the NASDAQ Listing
Investigations, a division of the NASDAQ Stock Market, have commenced formal
investigations of the Company. See Part II, Item 1 "Legal Proceedings" below.
RESULTS OF OPERATIONS
NINE MONTHS ENDED DECEMBER 31, 1998 VERSUS NINE MONTHS ENDED DECEMBER 31, 1997
Revenues. The Company's revenues for the nine months ended December 31,
1998 totaled $74.2 million, a decrease of $1 million or 1.4% from revenues of
$75.2 million for the nine months ended December 31, 1997. Revenues of the COHR
MasterPlan segment declined 1.8% to $58.6 million in the nine months ended
December 31, 1998 from $59.7 million in the same period last year. An increase
in COHR MasterPlan contract revenues was more than offset by a decrease in
equipment sales. The Purchase Connection segment, which consists primarily of
the Company's group purchasing organization (GPO) but includes other ancillary
businesses, experienced a slight increase in revenues to $15.6 million in the
nine months ended December 31, 1998 over $15.5 million in the same period last
year. Revenue growth in the GPO more than offset the decline in revenues for the
ancillary businesses.
Direct Operating Expenses. The Company's direct expenses for the nine
months ended December 31, 1998 totaled $57.1 million, which represented an
increase of $1.3 million or 2.3% over the nine months ended December 31, 1997
total of $55.8 million. This increase was primarily attributable to the
write-down of inventory related to operations to be closed which was offset in
part by the cost-reduction program implemented during the fourth quarter of
fiscal year 1998 and the first three quarters of fiscal year 1999. Direct
operating expenses as a percentage of revenues for the nine months ended
December 31, 1998 increased to 76.9% compared to 74.1% for the same period ended
December 31, 1997.
Gross Margin. The Company's gross margin for the nine months ended December
31, 1998 totaled $17.1 million, a decrease of $2.3 million or 12% from the nine
months ended December 31, 1997 total of $19.4 million. Gross margin as a
percentage of revenues decreased to 23.1% for the nine months ended December 31,
1998 compared to 25.9% for the same period ended December 31, 1997.
Selling, General and Administrative Expenses. The Company's selling,
general and administrative expenses for the nine months ended December 31, 1998
totaled $23.4 million, a decrease of $7.2 million or 23.3% from the nine months
ended December 31, 1997 total of $30.6 million. The decrease was primarily
attributable to lower personnel and administrative expenses resulting from the
Company's ongoing cost-reduction program and a reduction in the provision for
doubtful accounts. These reductions were partially offset by higher professional
outside services and insurance costs. As a percentage of revenues, selling,
general and administrative expenses decreased during the nine months ended
December 31, 1998 to 31.6% from 40.7% during the nine months ended December 31,
1997.
Special Charges. The Company's special charges totaled $3.4 million for the
nine months ended December 31, 1998, a decrease of $700,000 from special charges
of $4.1 million for the nine months ended December 31, 1997. Special charges for
the nine months ended December 31, 1998 consisted of disposition costs and the
write-down of certain assets related to operations to be abandoned or closed,
financial advisory services and severance costs for those officers and employees
who were terminated or removed from office by the Company and so notified during
the nine months ended December 31, 1998. Special charges for the nine months
ended December 31, 1997 consisted of a write-off of approximately $2.6 million
of goodwill related to an acquisition of one of its operating units, legal,
accounting and related costs resulting from the special review conducted at the
direction of the Board of Directors and severance costs for an officer who was
removed from office by the Company as of December 31, 1997.
Operating Loss. The Company's operating loss for the nine months ended
December 31, 1998 totaled $9.8 million, a decrease of $5.5 million from the
operating loss for the nine months ended December 31, 1997
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of $15.3 million. The operating loss as a percentage of revenues for the nine
months ended December 31, 1998 was 13.2% compared to 20.3% for the nine months
ended December 31, 1997.
Income Tax Benefit. The Company recognized no income tax benefit for the
nine months ended December 31, 1998 due to the Company's being in a net
operating loss carryforward position. The income tax benefit for the nine months
ended December 31, 1997 was $3.1 million. The Company's effective tax benefit
rate was 21.2% for the nine months ended December 31, 1997 which was lower than
it would have otherwise been due to the fact that the Company was unable to
utilize a tax benefit of $1.9 million due to limitations on the carryback of net
operating losses.
Net Loss. The Company's net loss for the nine months ended December 31,
1998 totaled $9.2 million, a decrease of $2.2 million from the net loss for the
nine months ended December 31, 1997 of $11.4 million. As a percentage of
revenues, the net loss was 12.5% for the nine months ended December 31, 1998
compared to 15.2% for the nine months ended December 31, 1997.
THREE MONTHS ENDED DECEMBER 31, 1998 VERSUS THREE MONTHS ENDED DECEMBER 31, 1997
Revenues. The Company's revenues for the three months ended December 31,
1998 totaled $22.9 million, a decrease of $1.5 million or 6.4% from revenues of
$24.4 million for the three months ended December 31, 1997. The decline in
revenues was attributable primarily to operations that were either disposed of
or identified for closure or sale during the past four quarters. The COHR
MasterPlan segment generated revenues of $18.0 million in the three months ended
December 31, 1998, compared to $20.1 million in the same quarter last year,
which primarily represented a decrease in equipment sales. The Purchase
Connection segment, which consists primarily of the Company's group purchasing
organization (GPO) but includes other ancillary businesses, produced revenues of
$4.8 million in the three months ended December 31, 1998, compared to $4.3
million in the same quarter last year. Revenue growth in the GPO more than
offset revenue declines in the ancillary businesses.
Direct Operating Expenses. The Company's direct expenses for the three
months ended December 31, 1998 totaled $17.6 million, which represented a
decrease of $3 million or 14.8% from the three months ended December 31, 1997
total of $20.6 million. This decrease was primarily attributable to lower parts
and equipment costs and personnel costs associated with the cost reduction
program implemented during the past four quarters. As a percentage of revenues,
direct operating expenses decreased to 76.8% for the three month period ended
December 31, 1998 from 84.4% for the three months ended December 31, 1997.
Gross Margin. The Company's gross margin for the three months ended
December 31, 1998 totaled $5.3 million, an increase of $1.5 million or 39.3%
over the three months ended December 31, 1997 total of $3.8 million. Gross
margin as a percentage of revenues increased to 23.2% for the three months ended
December 31, 1998 from 15.6% for the three months ended December 31, 1997.
Selling, General and Administrative Expenses. The Company's selling,
general and administrative expenses for the three months ended December 31, 1998
totaled $7.2 million, a decrease of $6.1 million or 46% from the three months
ended December 31, 1997 total of $13.3 million. This decrease was primarily
attributable to lower personnel and administrative expenses resulting from the
Company's ongoing cost-reduction program and a reduction in the provision for
doubtful accounts, which were partially offset by higher professional outside
services and insurance costs. As a percentage of revenues, selling, general and
administrative expenses decreased during the three months ended December 31,
1998 to 31.3% from 54.3% during the three months ended December 31, 1997.
Special Charges. Special charges of $1.4 million for the three months ended
December 31, 1998 consisted primarily of financial advisory services and
disposition costs and write-down of certain assets related to operations to be
abandoned or closed. Special charges for the three months ended December 31,
1997 consisted of a write-off of approximately $2.6 million of goodwill related
to an acquisition of one of its operating units, legal, accounting and related
costs resulting from the special review conducted at the direction of the Board
of Directors and severance costs for an officer who was removed from office by
the Company as of December 31, 1997.
12
<PAGE> 13
Operating Loss. The Company's operating loss for the three months ended
December 31, 1998 totaled $3.3 million, a decrease of $10.3 million from an
operating loss for the three months ended December 31, 1997 of $13.6 million.
The operating loss as a percentage of revenues for the three months ended
December 31, 1998 was 14.3% compared to 55.6% for the three months ended
December 31, 1997.
Income Tax Benefit. The Company recognized no income tax benefit for the
three months ended December 31, 1998 due to the Company's being in a net
operating loss carryforward position. The income tax benefit for the three
months ended December 31, 1997 was $2.7 million. The Company's effective tax
benefit rate was 20.1% for the three months ended December 31, 1997.
Net Loss. The Company's net loss for the three months ended December 31,
1998 totaled $3.1 million, a decrease of $7.6 million from the net loss for the
three months ended December 31, 1997 of $10.7 million. As a percentage of
revenues, the net loss was 13.7% for the three months ended December 31, 1998 as
compared to 43.6% for the three months ended December 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of $20.4 million and $28.2 million as of
December 31, 1998 and March 31, 1998, respectively. The Company had cash and
cash equivalents of $11.8 million and $14.0 million at those same respective
dates.
Net cash used in operating activities amounted to $1.7 million and $5.6
million for the nine months ended December 31, 1998 and 1997, respectively. The
factors contributing to the negative cash flow from operations for the nine
months ended December 31, 1998 were the net loss (offset in part by non-cash
charges for depreciation and amortization, provision for doubtful accounts and
certain special charges) and a reduction in trade accounts payable which were
partially offset by the receipt of a $2.7 million income tax refund and a $2.1
million reduction in accounts receivable. Included in accrued expenses at
December 31, 1998 are unpaid amounts related to special charges, primarily
financial advisory services and severance expense for officers and employees.
Accrued expenses will be charged when these payments are made.
Net cash (used in) provided by investing activities was $(161,000) and $1.3
million in the nine months ended December 31, 1998 and 1997, respectively. There
were acquisitions of businesses and or assets of $44,000 for the nine months
ended December 31, 1998 as compared to spending on acquisitions of $1.3 million
for the same period in the prior year. The Company had sale of investments of
$4.5 million for the nine months ended December 31, 1997. The Company also had
capital expenditures of $173,000 for the nine months ended December 31, 1998
compared to capital expenditures of $1.9 million for the same period in the
prior year.
Cash used in financing activities for the repayment of long-term debt and
notes payable totaled $366,000 for the nine months ended December 31, 1998 as
compared to $2.2 million for the nine months ended December 31, 1997.
At present, the Company does not have a credit facility or line of credit.
The Company believes that its cash on hand and anticipated cash flows will be
sufficient to meet the Company's operating needs for the next twelve months. The
Company has not paid dividends since its initial public offering in February of
1996.
The Company is subject to various commitments and contingencies. See Part
II, Item 1 "Legal Proceedings" and "Additional Factors Affecting Operating
Results" below.
INFLATION
The Company believes that its operations have not been materially adversely
affected by inflation. The Company expects that salary and wage increases for
its skilled staff will continue to be higher than average wage increases, as is
common in the Company's industry.
13
<PAGE> 14
ADDITIONAL FACTORS AFFECTING OPERATING RESULTS
The Company's business is subject to a number of risks, some of which are
beyond the Company's control. In addition to the factors described herein, the
Company has identified in "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Risk Factors" in its Annual Report on
Form 10-K for the fiscal year ending March 31, 1998, important factors that
could cause actual results to differ materially from those projected in any
forward-looking statements the Company may make from time to time.
RISKS ASSOCIATED WITH MANAGEMENT OF DATA AND YEAR 2000 ISSUES
The Company's business is dependent upon its ongoing ability to obtain,
process, analyze and manage data and to maintain and upgrade its data processing
capabilities. Interruption of data processing capabilities for any extended
period of time, the failure to upgrade data services, difficulties in converting
data and information systems after acquisitions, loss of stored data,
programming errors or other computer programs could have a material adverse
effect on the Company's business. As the year 2000 approaches, an issue ("Year
2000 Issue") affecting many companies has emerged regarding how existing
application software programs and operating systems can accommodate the date
value as described herein. In brief, many existing applications in the
marketplace and some proprietary database applications developed by the Company
were designed to use a two-digit data position to represent the year (e.g., "98"
is stored on the systems and represents the year 1998). The Company has
initiated an assessment of its own computer systems and other date-sensitive
electronic systems, such as security systems. The financial and general ledger
systems of the Company are substantially compliant already; the cost to upgrade
these systems is not expected to be material. The Company is currently in
varying stages of assessing year 2000 related modifications and conversions to
its own systems and software, including testing, and its target date for
completion of year 2000 compliant efforts is June 1999. The Company has also
commenced communications with suppliers, customers, financial institutions and
others with whom it conducts business to assess whether the systems of these
other companies, with which the Company interfaces or on which the Company
relies, will be upgraded on a timely basis or that such systems will not have an
adverse effect on the Company's systems. The Company does not believe that it
will incur a material financial impact from the risk, or from assessing the
risk, arising from the Year 2000 Issues. However, there can be no assurance that
the Company's initial assessment of this risk will be accurate or that the Year
2000 Issue will not materially affect future financial results or future
financial conditions.
Another area of potential risk is with certain medical equipment which
belongs to the Company's customers but which is maintained or serviced by the
Company and has microprocessors with date functionality which could malfunction
in the year 2000. Among other steps, the Company has initiated formal
communications with all of its customers and with all of the major suppliers of
medical equipment to ensure that these third parties are also working to
remediate their own Year 2000 Issues, if applicable. Unless the Company has
contracted with a customer specifically to provide year 2000 services, the
Company believes that its maintenance agreements do not require the provision of
such services because of the latent nature of the problem. However, the Company
is unable to determine whether the Year 2000 Issue related to customer's medical
equipment which is serviced or maintained by the Company will materially affect
future financial results or future financial conditions.
Upon the completion of the Company's assessment of its exposure to the risk
of Year 2000 non-compliance by third parties, the Company will formulate
contingency plans to handle the most likely worst-case Year 2000 scenarios.
Until the assessment is completed, the Company cannot reasonably define what
those scenarios might be.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
None.
14
<PAGE> 15
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company, certain of its present and former officers and directors and
others are named as defendants in four purported class action lawsuits which
allege, among other things, false and misleading statements in various public
disclosures in violation of federal and/or state securities laws. Sherleigh
Associates Inc. Profit Sharing Plan v. Cohr Inc. et al. (Case No. 98-3028 JSL)
was filed in the United States District Court for Central District of California
on or about April 21, 1998. Zabronsky et al. v. Cohr Inc. et al.(Case No. 98-
3493 JSL) was filed in the same court on May 6, 1998. Bird v. Cohr Inc. et al.
(Case No. 98-4177 WMB) was filed in the same court on May 27, 1998. Leeds v.
Malhotra et al. (Case No. BC198490) was filed in the Superior Court of the State
of California, Los Angeles County, on April 16, 1998. The plaintiffs in each
action seek to represent a class of purchasers of the Company's common stock
during various time periods between 1996 and 1998.
The plaintiffs in each of the three federal actions filed in the United
States District Court for the Central District of California assert claims of
violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934,
and of certain regulations promulgated thereunder. The plaintiffs in each of the
three federal actions seek unspecified compensatory damages, interest,
attorneys' fees and costs, and injunctive and/or other relief as permitted by
law. The plaintiff in the action filed in California Superior Court asserts
claims of violations of California Corporations Code Section 25400 and 25500.
The plaintiff in that action seeks unspecified compensatory damages, interest,
attorneys' fees and costs, and injunctive and/or other relief as permitted by
law. No class has been certified in any of these actions.
A shareholder of the Company has brought a derivative lawsuit purportedly
on behalf of the Company, alleging breaches of fiduciary duty and related
claims, and naming certain of its present and former officers and directors as
defendants, with the Company as a nominal defendant. This action, which is
entitled Schug v. Chopra et al. (Case No. BC190933) was filed in the Superior
Court for the State of California, Los Angeles County, on May 12, 1998. The
shareholder-plaintiff seeks unspecified compensatory and punitive damages,
disgorgement of profits and gains, attorneys' fees and costs, injunctive relief,
and other relief as permitted by law.
The SEC is conducting an investigation relating to the Company. The Company
understands that the investigation relates to, among other things: (1) the
accuracy of the Company's financial statements and periodic filings with the
SEC; (2) the accuracy of the Company's books and records; (3) the adequacy of
the Company's system of internal accounting controls; and (4) trading of the
Company's securities by certain present or former officers, directors, or
employees, or other persons. In addition, the NASDAQ Listing Investigations, a
division of the NASDAQ Stock Market, has requested from the Company certain
documents in connection with its review of the Restatement and the Company's
compliance with its rules and regulations. The Company is cooperating fully with
the inquiries from all regulatory agencies.
Management is unable to predict at this time the final outcome of the
matters described above or whether the resolution of such matters will
materially affect the Company's results of operations, cash flows or financial
position.
The Company is also involved from time to time in various legal proceedings
incidental to the normal conduct of its business. Management does not believe
that such proceedings are likely, individually or in the aggregate, to have a
material adverse effect on the Company's business.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
15
<PAGE> 16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
Three Cities Transactions
On December 24, 1998, Three Cities Fund II, L.P. and Three Cities Offshore
II, C.V. (the "Three Cities Funds") purchased approximately 48% of the issued
and outstanding common stock, par value $.01 per share (the "Common Stock"), of
the Company, and TCF Acquisition Corporation, a wholly owned subsidiary of the
Three Cities Funds (the "Purchaser"), entered a Plan and Agreement of Merger
with the Company that provided for, among other things, the acquisition of all
remaining Common Stock by the Purchaser at a price of $5.375 per share (which
would have increased to $6.375 per share if the Company settled certain existing
stockholder litigation on a basis which would not require it to pay more than
$3.0 million, net of any insurance proceeds) and, under certain circumstances,
the merger of the Purchaser with and into the Company.
In response to a proposal by a third party to purchase the Company, the
Purchaser and the Company entered into an Amended and Restated Plan and
Agreement of Merger, dated as of February 4, 1999 (the "Amended Merger
Agreement"), pursuant to which the Purchaser modified its outstanding tender
offer to, among other things, increase the price to $6.50 per share and extend
its expiration to 12:00 midnight, Eastern Standard Time, on February 24, 1999,
unless it is further extended. The Amended Merger Agreement provides for the
subsequent merger of the Purchaser with and into the Company (the "Merger"), and
each share of Common Stock outstanding at the time of the Merger (other than
Common Stock held by the Three Cities Funds, the Purchaser, or shares held by
stockholders validly exercising appraisal rights pursuant to the General
Corporation Law of the State of Delaware) will, by virtue of the Merger and
without any action by the holder thereof, be converted into the right to
receive, without interest, $6.50 per share in cash.
The Company's Board of Directors unanimously approved the terms of the
Amended Merger Agreement, the tender offer, and the Merger contemplated
thereunder, determined that the such tender offer and the Merger are fair to,
and in the best interests of, the holders of Common Stock, and recommended that
all such holders accept such offer and tender their shares pursuant thereto.
Pacific Health Services Group, LLC
Effective December 1, 1998, COHR Pacific Health, Inc., a wholly owned
subsidiary of the Company, together with AllHealth, Inc. ("AllHealth") and
California Hospitals Investments and Publications, Inc. ("CHIP"), formed Pacific
Health Services Group, LLC ("PHSG") to engage in the businesses of medical
credentials verification and operational quality and managed care consulting
(the "Businesses"). AllHealth is an affiliate of Healthcare Association of
Southern California, a significant stockholder of the Company, and CHIP is an
affiliate of California Healthcare Association.
The Company contributed substantially all of its assets related to the
Businesses to PHSG (and PHSG assumed the related obligations and liabilities)
for a forty percent (40%) membership interest therein, and AllHealth and CHIP
contributed cash to PHSG for a forty percent (40%) and twenty percent (20%)
membership interest, respectively.
Employment Agreements
(a) Raymond E. List, President and Chief Executive Officer of the Company,
(b) Daniel F. Clark, Chief Financial Officer of the Company, and (c) Steven W.
Ritterbush, Managing Director of the Company, had each previously agreed in
principle to new employment agreements with the Company, and in January 1999
Messrs. List and Clark each executed a three-year employment agreement, and Mr.
Ritterbush executed a one-year employment agreement, with the Company, each of
which is effective as of September 1, 1998.
16
<PAGE> 17
Matters Related to Paul Chopra
As described in the Company's Proxy Statement dated July 24, 1998 for the
Annual Meeting of Stockholders, the Company and Mr. Paul Chopra, the Company's
former Chief Executive Officer, entered into a Standstill Agreement, dated April
3, 1998 (the "Standstill Agreement"), pursuant to which each party has agreed
that the passage of time will not waive or prejudice the rights of either of the
parties with respect to the termination of Mr. Chopra's employment. As of
November 10, 1998, the parties extended the period of the Standstill Agreement,
which was to expire on November 10, 1998, to January 31, 1999 on substantially
the same terms as the prior agreement (except that Mr. Chopra was paid $5,000
per month instead of $10,000 per month and agreed to the cancellation of 182,500
of his 280,000 stock options outstanding), and as of January 31, 1999, the
parties again extended the period of the Standstill Agreement to February 28,
1999 on substantially the same terms as the prior amendment (except that there
was no cancellation of stock options).
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits included or incorporated herein:
See Index to Exhibits
(b) Reports on Form 8-K:
A Current Report on Form 8-K was filed on December 21, 1998 concerning the
dividend of one preferred share purchase right (a "Right") for each outstanding
share of Common Stock declared and distributed by the Company and issued
pursuant to a rights agreement.
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COHR INC.
(Registrant)
Date: February 16, 1999 /s/ RAYMOND E. LIST
--------------------------------------
Raymond E. List
President and Chief Executive Officer
(Principal Executive Officer)
Date: February 16, 1999 /s/ DANIEL F. CLARK
--------------------------------------
Daniel F. Clark
Executive Vice President and Chief
Financial Officer
(Principal Accounting and Financial
Officer)
18
<PAGE> 19
COHR INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
2.1* Amended and Restated Plan and Agreement of Merger, dated as
of February 4, 1999, by and between Registrant and TCF
Acquisition Corp.
3.1** Certificate of Incorporation of Registrant
3.2** By-laws of Registrant
3.3+ By-laws of Registrant as amended on June 29, 1998
3.4 Amendment to Bylaws effective as of December 24, 1998
4.1** Form of Warrant to be issued to the Representatives of the
Underwriters
4.2** Form of Registration Rights Agreement between Registrant,
Healthcare Association of Southern California ("HASC") and
Hospital Council Coordinated Programs, Inc
4.3** Specimen Stock Certificate
4.4++ Rights Agreement dated as of November 23, 1998 (the "Rights
Agreement"), by and between Registrant and ChaseMellon
Shareholder Services LLC, as Rights Agent (the "Rights
Agent")
4.5 Amendment to Rights Agreement dated as of December 24, 1998
by and between Registrant and the Rights Agent
4.6++ Certificate of the Designations, Preferences and Rights of
Series A Junior Participating Cumulative Preferred Stock of
Registrant, dated November 25, 1998
10.2c Amendment to Standstill Agreement dated as of January 31,
1999 between Registrant and Mr. Paul Chopra
10.15 Employment Agreement, dated as of January 20, 1999 and
effective as of September 1, 1998, between Registrant and
Daniel F. Clark
10.16 Employment Agreement, dated as of January 20, 1999 and
effective as of September 1, 1998, between Registrant and
Raymond E. List
10.18 Employment Agreement, dated as of January 20, 1999 and
effective as of September 1, 1998, between Registrant and
Stephen W. Ritterbush
11 Computation of Net Loss Per Share
27.1 Financial Data Schedule
</TABLE>
- ---------------
* Incorporated by reference from Registrant's Amendment No. 2 to Schedule 14D-9
filed on February 8, 1999 (File No. 0-27506).
** Incorporated by reference from Registrant's Registration Statement on Form
S-1, Registration No. 33-80635.
+ Incorporated by reference from Registrant's Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 1998 (File No. 0-27506).
++ Incorporated by reference from Registrant's Registration Statement on Form
8-A, filed on November 25, 1998 (File No. 0-27506).
19
<PAGE> 1
EXHIBIT 3.4
AMENDMENT OF
BYLAWS OF
COHR INC.
A DELAWARE CORPORATION
I, Daniel F. Clark, hereby certify that I am the duly elected and acting
Secretary of COHR Inc., a Delaware corporation (the "Corporation"), and that at
a duly called meeting of the Corporation's Board of Directors held on December
23, 1998, Section 3.2 of the Bylaws of the Corporation was amended to read,
effective upon the execution of that certain Plan and Agreement of Merger by and
between the Corporation and TCF Acquisition Corporation, in its entirety as
follows:
SECTION 3.2 EXACT NUMBER OF DIRECTORS
The exact number of directors of this Corporation shall be
ten (10) until this Section 3.2 shall be changed by an amendment,
not in contravention of the Certificate of Incorporation and duly
adopted by the Board of Directors or by the stockholders.
Executed on January 11, 1999 at Chatsworth, California.
/S/ DANIEL F. CLARK
-----------------------------
Daniel F. Clark
Secretary
<PAGE> 1
EXHIBIT 4.5
AMENDMENT TO RIGHTS AGREEMENT
AMENDMENT, dated as of December 24, 1998 (this "Amendment"), to the
Rights Agreement, dated as of November 23, 1998 (the "Rights Agreement"), by and
between COHR Inc., a Delaware corporation (the "Company"), and ChaseMellon
Shareholder Services LLC, a New Jersey limited liability company, as Rights
Agent (the "Rights Agent").
WHEREAS, shortly following the execution of this Amendment, the Three
Cities Fund II L.P. and Three Cities Offshore II C.V. (collectively, the "Three
Cities Funds") will purchase from funds managed by Franklin Research, Inc. and
by Strong Capital Management, Inc. an aggregate of 3,085,425 shares of common
stock, par value $.01 per share (the "Common Stock"), of the Company, which
constitutes approximately 48% of the total issued and outstanding Common Stock
as of the date hereof (the "Initial Purchase");
WHEREAS, the Three Cities Funds are the sole stockholders of TCF
Acquisition Corporation, a Delaware corporation ("Acquisition");
WHEREAS, shortly following the execution of this Amendment, the Company
and Acquisition will enter into that certain Plan and Agreement of Merger (the
"Merger Agreement") pursuant to which Acquisition will agree, among other
things, to make a tender offer for all outstanding shares of Common Stock (the
"Tender Offer") and, if Acquisition, the Three Cities Funds, and any other
stockholders of Acquisition collectively own 85% or greater of the Common Stock
following consummation of such tender offer, to merge Acquisition with and into
the Company (the "Merger");
WHEREAS, it is in the best interests of the holders of the Common Stock
that the Rights Agreement be amended as set forth herein; and
WHEREAS, Section 26 of the Rights Agreement provides that prior to the
Distribution Date (as defined in the Rights Agreement), the Company may, and the
Rights Agent shall if the Company so directs, supplement or amend any provision
of the Rights Agreement without the approval of the holders of Common Stock;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties agree to amend the Rights Agreement as
follows:
1. The first sentence of the definition of "Acquiring Person" in
Section 1 of the Rights Agreement is hereby amended to read in its entirety as
follows:
"Acquiring Person" shall mean any Person who or which, alone
or together with all Affiliates and Associates of such Person, shall be
the Beneficial Owner of more than 15% of the Common Shares then
outstanding, but shall not include (a) the Company, any Subsidiary of
the Company, any employee benefit plan of the Company or of any of its
Subsidiaries, or any Person holding Common Shares for or pursuant to
the terms of any such employee benefit plan; (b) any such Person who
has become such a Beneficial Owner
<PAGE> 2
solely because (i) of a change in the aggregate number of Common Shares
outstanding since the last date on which such Person acquired
Beneficial Ownership of any Common Shares or (ii) (A) it acquired such
Beneficial Ownership in the good faith belief that such acquisition
would not (x) cause such Beneficial Ownership to exceed 15% of the
Common Shares then outstanding and such Person relied in good faith in
computing the percentage of its Beneficial Ownership on publicly filed
reports or documents of the Company which are inaccurate or out-of-date
or (y) otherwise cause a Distribution Date or the adjustment provided
for in Section 11(a) to occur, or (B) it otherwise inadvertently
acquired such Beneficial Ownership; or (c) the Three Cities Funds,
together with all of its Affiliates and Associates, from and after
consummation of the Initial Purchase but only until the earlier of the
occurrence of the Three Cities Funds, together with all of its
Affiliates and Associates, ceasing to own 15% of the Common Shares
outstanding.
2. The definition of "Expiration Date" in Section 1.1 of the Rights
Agreement is hereby amended to read in its entirety as follows:
"Expiration Date" shall mean the earlier of (i) if, after
Acquisition (as defined in the Amendment to Rights Agreement, dated as
of December 24, 1998, by and between the Company and the Rights Agent)
purchases all Common Shares of the Company which are properly tendered
in response to the Tender Offer and not withdrawn, Acquisition, the
Three Cities Funds, and any other stockholders of Acquisition
collectively own eighty-five percent (85%) or greater of the total
outstanding Common Shares of the Company as of the Expiration Time (as
defined in the Merger Agreement), the Close of Business on the date on
which Acquisition consummates such purchases of Common Shares pursuant
to the Tender Offer, and (ii) the Close of Business on the 10th
anniversary of the date of the Rights Agreement.
3. Effective immediately following the Initial Purchase, the definition
of "Grandfathered Stockholder" in Section 1.1 is hereby deleted from the Rights
Agreement and all references to "Grandfathered Stockholder" in the Rights
Agreement are hereby deleted.
4. The first sentence of Section 3(b) of the Rights Agreement is hereby
amended to read in its entirety as follows:
Until the earlier of (i) such time as the Company learns that a Person
has become an Acquiring Person or (ii) the Close of Business on such
date, if any, as may be designated by the Board of Directors of the
Company following the commencement of, or first public disclosure of an
intent to commence, a tender or exchange offer by any Person (other
than Acquisition as contemplated by the Merger Agreement, the Company,
any Subsidiary of the Company, any employee benefit plan of the Company
or of any of its Subsidiaries, or any Person holding Common Shares for
or pursuant to the terms of any such employee benefit plan) for
outstanding Common Shares, if upon consummation of such tender or
exchange offer such Person could be the Beneficial Owner of more than
15% of the outstanding
-2-
<PAGE> 3
Common Shares (the Close of Business on the earlier of such dates being
the "Distribution Date"), (x) the Rights will be evidenced by the
certificates for Common Shares registered in the names of the holders
thereof and not by separate Right Certificates and (y) the Rights,
including the right to receive Right Certificates, will be transferable
only in connection with the transfer of Common Shares.
5. Section 7(a) of the Rights Agreement is hereby amended to read in
its entirety as follows:
(a) Subject to Section 7(e) and except as otherwise provided
herein (including Section 11), each Right shall entitle the registered
holder thereof, upon exercise thereof as provided herein, to purchase
for the Purchase Price, at any time after the Distribution Date and at
or prior to the earlier of (i) the Expiration Date, or (ii) the
Redemption Date, one one-thousandth (1/1000th) of a Preferred Share,
subject to adjustment from time to time as provided in Sections 11 and
12.
6. Section 21 of the Rights Agreement is hereby amended by adding the
following to the end of Section 21(j) thereof:
The indemnity provided herein shall survive the termination of this
Agreement and the termination and the expiration of the Rights. The
costs and expenses incurred in enforcing this right of indemnification
shall be paid by the Company. Anything to the contrary notwithstanding,
in no event shall the Rights Agent be liable for special, punitive,
indirect, consequential or incidental loss or damage of any kind
whatsoever (including but not limited to lost profits), even if the
Rights Agent has been advised of the likelihood of such loss or damage.
Any liability of the Rights Agent under this Rights Agreement will be
limited to the amount of fees paid by the Company to the Rights Agent.
7. For the avoidance of doubt and notwithstanding anything to the
contrary in the Rights Agreement (including this Amendment), it is the intent of
the parties that so long as the Three Cities Funds, together with all of its
Affiliates and Associates (including, without limitation, Acquisition), is not
an "Acquiring Person," no transaction contemplated by the Merger Agreement will
cause a Distribution Date under the Rights Agreement.
8. The Rights Agreement, as amended hereby, shall remain in full force
and effect.
9. This Amendment shall be deemed to be a contract made under the laws
of the State of Delaware and for all purposes shall be governed by and construed
in accordance with the laws of such State applicable to contracts to be made and
performed entirely within such State.
10. This Amendment may be executed in any number of counterparts, and
each such counterpart shall for all purposes be deemed to be an original, and
all such counterparts shall together constitute but one and the same instrument.
-3-
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the day and year first above written.
COHR INC.
By: /S/ LYNN REITNOUER
-------------------------------
Lynn Reitnouer
Chairman
CHASEMELLON SHAREHOLDER SERVICES LLC,
as Rights Agent
By: /S/ JOSEPH CANNATA
-------------------------------
Joseph Cannata
Assistant Vice President
-4-
<PAGE> 1
EXHIBIT 10.2c
AMENDMENT TO STANDSTILL AGREEMENT
This Amendment to Standstill Agreement (the "Amendment") is entered into
by and between Paul Chopra, an individual ("Chopra"), on the one hand, and COHR
Inc., a Delaware corporation ("COHR"), on the other hand. (Chopra and COHR are
collectively referred to as "the Parties".) The Effective Date of this Amendment
is January 31, 1999.
Recitals
A. The Parties entered into a Standstill Agreement dated April 3,
1998.
B. The Ending Date of that Standstill Agreement initially was
November 10, 1998, and was extended by previous Amendment to January 31, 1999.
C. The Parties have agreed that the Standstill Agreement Effective
Period should be extended to a new Ending Date pursuant to the terms set forth
herein.
Agreement
1. Ending Date
The "Ending Date" of the Standstill Agreement shall be amended to be the
earliest of the following:
(a) Fourteen (14) days following the date on which either party gives
written notice to the other party that it is terminating this Agreement;
or (b) February 28, 1999.
All rights and obligations existing prior to this Amendment (except as revised
herein or by separate written agreement) or arising under this Amendment shall
survive the termination of this Agreement.
2. Certain Continuing Benefits
(a) The Standstill Agreement paragraph 4(b) is amended to provide for a
salary of $5,000 per month from the Effective Date of this Amendment
onward. (b) All other terms and conditions of the Standstill Agreement
continue in effect.
3. Integration
The Standstill Agreement and this Amendment thereto contain the entire
agreement between the parties with respect to the subject matter hereof and
supersede all prior agreements, understandings, commitments and practices,
whether written or oral, except that the Standstill Agreement and this Amendment
thereto are an amendment of that certain Employment Agreement dated January 1,
1996. No amendments to the Standstill Agreement and this Amendment thereto may
<PAGE> 2
be made except by a writing signed by both parties.
This Amendment may be executed in counterparts, each of which will be an
original agreement. The undersigned have executed this Agreement as of the date
first above written.
Chopra COHR Inc.
/S/ PAUL CHOPRA By /S/ LYNN P. REITNOUER
- -------------------------- ------------------------------
Paul Chopra Lynn P. Reitnouer
Chairman of the Board
<PAGE> 1
EXHIBIT 10.15
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement"), dated as of January 20, 1999, is made and
entered into by and between COHR, Inc., a Delaware corporation ("Company"), and
Daniel F. Clark, an individual ("Executive").
RECITAL
Executive is a key executive of the Company and an integral part of its
management. This Agreement is being entered into in connection with the
Company's continued employment of Executive.
AGREEMENT
NOW, THEREFORE, Company and Executive agree as follows:
1. a. This Agreement shall initially be in effect from September 1,
1998 through August 31, 2001, unless renewed or terminated earlier as provided
herein (the "Initial Term"). At the expiration of the Initial Term and each
anniversary thereafter, the term of this agreement shall automatically be
extended for an additional year (the "Extension Term") unless a written notice
of non-renewal is given by either party on or before ninety (90) days prior to
the end of the Initial Term or the Extension Term, as the case may be, that it
does not desire to extend the term of this Agreement.
b. Executive is and will continue to be employed by the Company
in the position held by Executive as of the effective date of this Agreement and
pursuant to its terms. Executive's job description as of the effective date
hereof is attached as Exhibit A. During his employment hereunder, and subject to
the next sentence, Executive shall devote substantially all of his attention and
business during normal business hours to the performance of this Agreement and
shall, without the Company's prior written consent in each instance, refrain
from rendering services of any kind to others for compensation or services which
would materially interfere with the performance with his duties under this
Agreement.
2. During the term of employment, Company shall pay a base salary to
Executive. The base salary for the first year hereof shall be at a rate of Two
Hundred Seventy-Five Thousand Dollars ($275,000) per year. The amount of
Executive's base salary increase, if any, in future years shall be reviewed and
set annually by the Compensation Committee, but in no event shall such salary be
decreased. The base salary shall be paid in equal semimonthly installments.
3. In addition to his base salary, during the term of his employment
(but commencing
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<PAGE> 2
with the fiscal year ended March 31, 2000), Executive shall be eligible to
receive an annual bonus for the period from April 1 through March 31 of each
year as shown in Exhibit B and as set forth below.
a. The amount of this bonus shall be up to forty percent (40%) of
Executive's base salary or a higher percentage at the discretion of the Board.
The amount of the bonus shall depend on the Company's achievement of quantified
goals, to include target corporate pretax earnings, as provided in Exhibit B,
with Executive receiving 40% of base salary if the targets are met and a pro
rata portion, in the discretion of the Board, if the target is not met. For
years after the year ended March 31, 2000, the targets shall be negotiated in
good faith by Executive and the Board.
b. The amount of the bonus shall be based on performance results
as of March 31 of each fiscal year and shall be effective as of that date
("Bonus Date"). Any bonus due shall be paid in two installments. The first
installment shall represent fifty percent (50%) of the total bonus due and, to
the extent not applied to prepay any outstanding loan, will be paid within
ninety (90) days of the Bonus Date. The second installment shall represent the
remaining fifty percent (50%) of the total bonus due and, to the extent not
applied to prepay any outstanding loan, shall be paid within ninety (90) days of
the first anniversary of the Bonus Date. Notwithstanding anything in this
Agreement to the contrary, the first installment shall be payable only if
Executive is still employed on the Bonus Date. The second installment shall be
payable unless Executive is no longer employed with the Company on the first
anniversary of the Bonus Date by reason of voluntary resignation, retirement, or
termination for cause.
c. The first installment of a bonus shall be paid in cash.
d. The second installment of a bonus shall be paid in cash,
stock, or stock options, at the discretion of the Company. For the bonus earned
effective as of March 31, 1999 or thereafter, the second installment (due on
March 31, 2000 or thereafter on each subsequent March 31), if paid in Company
Stock is subject to approval by the Company's stockholders. Executive shall be
entitled to receive Company common stock with a fair market value equal in value
to the remaining fifty percent of the such bonus, where the fair market value of
each share of stock shall be the average closing sales price of a share of
common stock on the composite tape for the NASDAQ exchange for the five (5)
business days prior to the Bonus Date (e.g. March 31, 2000 or each March 31
thereafter). The Company shall make reasonable efforts to cause such stock to be
registered under the Securities Act of 1933, as amended, or, in the event the
Company is unable to register such securities, the Company shall make reasonable
efforts to afford Executive access to customary piggyback registration rights.
Notwithstanding the above, if the Company's stockholders do not approve the
issuance of stock to Executive pursuant to this Agreement, or if at the time the
bonus is due the Company has no class of securities registered under the
Securities Exchange Act of 1934, as amended, then the Company shall pay the
second installment of the bonus in cash rather than stock.
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<PAGE> 3
e. In the event the Company pays the second installment of the
bonus in stock that is not registered under the Securities Act of 1933, as
amended, by accepting such stock as part of his bonus, Executive represents that
the stock will be for Executive's purposes only and not with a view toward the
distribution of such shares. Executive understands that such stock will not have
been registered with any state or federal agency and that such shares cannot be
transferred by Executive unless the shares are registered under applicable
securities laws or unless an exemption from registration is available.
f. In determining whether the corporate pretax earnings targets
set forth in Exhibit B (or the targets agreed to with respect to any subsequent
years) are satisfied, the amount of any bonus to be paid Executive hereunder
shall be included in such determination.
4. a. In addition to the base compensation and bonus provided in
this Agreement, Executive shall throughout the term hereof be entitled to and
shall receive all other benefits no less favorable to Executive than the
benefits generally available to other executives of the Company of the same
status, level and length of service as Executive. Executive shall also be
entitled to reimbursement of reasonable and necessary business expenses
including, without limitation, travel and entertainment expenses, and
subscriptions and related professional expenses (not including primary
membership expenses, which are paid by Executive), in accordance with the
Company's then prevailing policy (which shall include appropriate itemization
and substantiation of expenses incurred).
b. Executive shall be entitled to a minimum of three weeks paid
vacation, or, if more, to such vacation and holidays in accordance with the
policy of the Company generally applicable to other executives of Company with
similar length of service.
c. Executive shall be entitled to the standard health, dental,
and pension benefits provided to other executives of the Company of the same
level and length of service as Executive. The Company shall pay the premiums on
Executive's current health and dental coverage for that period of time required
for Executive to become covered under the Company plans.
5. All compensation provided pursuant to Sections 2, 3, and 4 shall
be subject to customary income tax withholding and such other employee
deductions as are required by law with respect to compensation paid to an
employee.
6. Executive's employment may be terminated before end of the
Initial Term or any Extension Term in the event one of the following occurs
during such term of this Agreement or any extension thereof:
a. Executive is given 60 days written notice of the termination
of this Agreement and Executive's employment other than for cause (as defined
herein below), where such termination is other than a notice of non-renewal, as
provided in Section 1(a);
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<PAGE> 4
b. Executive's responsibilities are materially reduced and
Executive resigns within three (3) months of such reduction;
c. The Agreement is assumed, as contemplated in Section 21, and
within eighteen months of such assumption Executive is terminated for reasons
other than cause;
d. Executive voluntarily resigns or retires from his
employment;
e. Executive is terminated for cause.
For purposes of this Section 6 and Section 8 herein below, a termination
"for cause" occurs if Executive is terminated for any of the following reasons:
(i) theft, dishonesty, or falsification of any employment or Company records;
(ii) knowing and improper disclosure of Company's confidential or proprietary
information; (iii) conduct by Executive of a criminal nature (commonly defined
as a "felony" in criminal statutes) which has a material adverse effect on
COHR's reputation or standing in the community or on its continuing
relationships with its customers or those who purchase and use its products;
(iv) habitual neglect of duties or wanton negligence by Executive in the
performance of duties; (v) violation of a material Company policy or procedure
or any material law or regulation, which breach is not cured within thirty (30)
days following receipt by Executive of written notice of such breach from
Company; or (vi) material wrongdoing or misconduct; or (vii) any material breach
of this Agreement, which breach is not cured within thirty (30) days following
receipt by Executive of written notice of such breach from Company.
7. Subject to Section 8 hereof, and in lieu of payments under
Sections 2, 3 and 4, Executive shall receive the following compensation and
benefits if his employment terminates during the Initial Term or any Extension
Term pursuant to Section 6.a, b, or c above:
a. Executive shall be paid eighteen (18) months at the rate of
Two Hundred Seventy-Five Thousand Dollars ($275,000) per year, or the base pay
rate in effect at the time of termination. Executive shall also receive an
additional amount as a prorated bonus, which amount shall be calculated by
multiplying Executive's annual bonus, estimated in good faith by the Company,
times a fraction representing the fraction of the year (rounded to the nearest
whole number of months) Executive was employed by the Company during the year of
termination. These amounts shall be paid monthly in eighteen (18) equal payments
commencing on the first day of each month following the effective date of such
termination or resignation. Such payments shall be subject to Federal and State
Income Tax withholding, social security and SDI withholding, and such other
employee deductions as are required by federal, state or local law or authorized
in writing by the Executive. The amount of continued base salary or prorated
bonus provided for in this paragraph shall not be reduced, offset or subject to
recovery by reason of any compensation earned by Executive with a subsequent
employer or from self employment unless the subsequent employer agrees to assume
and be bound by all of the obligations under this Agreement, and Executive has
consented to such assumption, in accordance with the provisions of Section 21
herein below.
-4-
<PAGE> 5
b. During the same eighteen (18) month period, the Company will
also continue at its contributions to Executive's 401(k) plans, pension plans,
and medical/dental insurance coverage at the same coverage level that he would
have received if he had remained an employee during the eighteen month period.
Should Executive accept dental coverage or PPO or PPO-equivalent health coverage
by a subsequent employer, the dental coverage or medical insurance coverage
provided at the Company's expense (i.e., whichever is so provided by the
subsequent employer) shall be terminated.
c. Notwithstanding the foregoing, if (i) the Company exercises
its right to not renew the Initial Term or the Extension Term as set forth in
Section 1(a) hereof, the time period set forth above in Sections 7.a and 7.b
shall be twelve (12) months rather than eighteen (18) months so that Executive
shall be entitled to receive payments with respect to a period of twelve (12)
months rather than eighteen (18) months from the effective date of non-renewal
or termination, as the case may be, or (ii) Executive's employment terminates
during any Extension Term pursuant to Section 6.a, b or c, the time periods set
forth above in Sections 7.a and 7.b shall be twelve (12) months instead of
eighteen (18) months.
8. Neither Company nor its successor in interest shall be required
to make any payments under Section 7 above in the event Executive is terminated
for cause, retires, or voluntarily resigns. Payments under Section 7 shall be
made to Executive's estate in the event Executive dies or to Executive in the
event Executive becomes disabled, as disability is defined in the next sentence,
in lieu of payments under Sections 2, 3 and 4 hereof. For the purposes of this
Agreement, "disability" will mean if at the end of any calendar month, Executive
is and has, for three (3) full consecutive months out of any twelve (12) month
period continuously been unable due to mental or physical illness or injury to
perform his duties under this Agreement in his normal or regular manner.
9. Except as required for the purposes of proxy disclosure, NASDAQ
rules or applicable laws or regulations, the parties each represent and agree
that they will keep the terms, contents and existence of this Agreement
completely confidential, and will not hereafter disclose any information
concerning this Agreement, including any negotiations leading to this Agreement,
to anyone except as required by law or to individuals who reasonably must be
informed of its terms, and who will be advised of and bound by this
confidentiality clause. Notwithstanding the foregoing, either party may disclose
this Agreement or its terms or contents in any arbitration pursuant to Section
16 hereof. Any failure by any parties, their attorneys, agents or
representatives to maintain the confidentiality of the negotiations leading to
this Agreement, the fact of, or the terms of this Agreement shall constitute a
material breach of this Agreement.
10. Executive acknowledges that he is a fiduciary of the Company and
as such is subject to duties to the Company, its Board of Directors and
Stockholders, including but not limited to the obligation to discharge his
duties (a) in good faith, (b) with the care of an ordinarily prudent person in a
like position would exercise under similar circumstances, and (c) in a manner he
reasonably believes to be in the best interests of the Corporation.
-5-
<PAGE> 6
11. Executive and the Company agree that Executive's services for the
Company create a relationship of confidence and trust between the Company and
Executive with respect to any information (a) applicable to the business of the
Company or (b) applicable to the business of any client or customer of the
Company which may be made known to Executive by the Company or by any client of
the Company, or learned by Executive in such context during the period of
Executive's service. All such information has commercial value in the business
in which Company is engaged and is hereinafter referred to as "Proprietary
Information."
The Company acknowledges and agrees that prior to his engagement
Executive possessed, and continues to possess, a broad body of knowledge of
health care and information technology generally, and specific expertise in the
areas of health care information systems, electronic commerce within health care
and other industries, health care group purchasing organizations and inventory
management.
Executive and the Company agree that all Proprietary Information
is the sole property of the Company, its assigns and its customers, and the
Company, its assigns and its customers shall be the sole owner of all patents,
copyrights, trade secrets and other rights in connection therewith. Executive
hereby assigns to the Company any rights he may have or acquire in such
Proprietary Information. At all times, both during Executive's services for the
Company and for a period of eighteen (18) months after its termination,
Executive will keep in confidence and trust all Proprietary Information or
anything directly relating to it without the written consent of the Company,
except as may be necessary in the ordinary course of performing Executive's
duties hereunder.
Notwithstanding the foregoing, Proprietary Information shall not
be deemed to include, and Executive shall not be under any of the aforementioned
obligations with respect to, information that Executive can document (a) was in
the public domain at the time it was communicated to Executive, (b) entered the
public domain subsequent to the time it was communicated to Executive through no
fault of Executive, (c) was in Executive's possession free of any obligation of
confidence at the time it was communicated to Executive, (d) is part of
Executive's own skill, knowledge, know-how and experience or (e) was disclosed
in response to a valid order by a court or other governmental body, and
Executive provided the Company with prior written notice of such disclosure in
order to permit the Company to seek confidential treatment of such information.
12. Executive acknowledges that as an executive of the Company he has
been and will be instrumental in the business of the Company and its success.
Accordingly, Executive agrees that during the term of this Agreement, he will
not, directly or indirectly, within any location in the United States where the
Company is transacting business during the term of this Agreement, if earlier,
or at the time of the termination of Executive's services hereunder, as the case
may be, engage or participate or make financial investments in or become
employed by or render advisory or other services to or for any person, firm or
corporation directly or indirectly engaged in the business of, and deriving
substantially all of its revenues from, owning and operating medical
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<PAGE> 7
group purchasing organizations and/or the sale, lease and/or servicing of
medical equipment (the "Restricted Business") directly or indirectly in
competition with the Company. Nothing herein contained, however, shall restrict
Executive from making any investment in any company whose stock is listed on the
National Securities Exchange or actively traded in the over-the-counter market,
so long as such investment does not give him the right to control or influence
the policy decisions of any such business or enterprise which is engaged in and
derives substantially all of its revenues from the Restricted Business, nor
shall Executive be precluded from investing in entities engaged in the
Restricted Business and being able to nominate and elect a representative to
serve on the Board of Directors of any such companies.
13. For a period of eighteen (18) months from and after the effective
date of termination or expiration of Executive's employment with Company,
whether pursuant to the terms of this Agreement or otherwise, Executive shall
not:
a. Directly or indirectly solicit any executive or managerial
employee of the Company to discontinue working for or representing the Company
for the purpose of working for or representing any subsequent employer of
Executive which is a competitor of Company; or
b. Authorize or knowingly approve the taking of such actions as
those described above by other persons (on behalf of any such competitor) or
assist any such person, firm or corporation in taking such action.
14. In the event that Executive becomes involved in any claim, action
or legal proceeding brought by or against any person, including stockholders of
the Company, in connection with or as a result of the rendering of services
under this Agreement, the Company will pay Executive's legal and other expenses
(including the cost of any investigation or preparation) in connection therewith
as incurred, except to the extent that Executive has engaged in bad faith or
willful misconduct. The Company will also indemnify and hold the Executive
harmless against any and all losses, liabilities, suits, claims, costs, damages
or expenses (including reasonable attorneys' fees) to Executive in connection
with or as a result of the rendering of services under this Agreement, except to
the extent that any such loss, liability, suit, claim, cost, damage, or expense
results from the bad faith or willful misconduct of Executive in performing the
services that are the subject of this Agreement.
15. Executive acknowledges that he has been advised to seek an
attorney for advice regarding the effect of this Agreement prior to signing it.
16. If any claim (including those arising under state or federal
statutes) is brought under this Agreement, or any dispute of any nature
whatsoever arises regarding the termination of this Agreement or the termination
of Executive's employment (except alleged violations of Executive's obligations
under Sections 10, 11, 12, 13 and 14; which may be enforced by the Company
through a temporary restraining order, preliminary injunction and/or injunction
in a judicial forum), the Company and Executive agree that such claim shall be
resolved in an arbitration
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<PAGE> 8
proceeding before a single arbitrator, conducted under the auspices of the
American Arbitration Association, Los Angeles, California and in accordance with
its Employment Dispute Resolution rules. Executive understands, acknowledges and
agrees that he is waiving any right to a jury to decide any claim (including
statutory claims), subject to this Section. The arbitrator agreed to under such
rules shall be empowered to resolve the dispute through consideration of the
facts, the terms of this Agreement, and any statute, law, regulation or defense
asserted by either party. The arbitrator shall be experienced in employment law
and his/her decision shall be in writing and contain findings of fact and
conclusions of law. If so authorized by the arbitrator, the prevailing party
shall be entitled to recover from the non-prevailing party such damages as the
arbitrator determines appropriate based upon the legal theories asserted by
either party in such arbitration and reasonable expenses, including without
limitation reasonable attorneys' fees. The arbitration decision shall be final
and binding and may be confirmed in any court of competent jurisdiction.
17. If any of the above provisions is found null, void, or
inoperative, for any reason, the remaining provisions will remain in full force
and effect.
18. This Agreement may be executed by facsimile and in identical
counterparts. The Agreement will be binding on the parties once it has been
fully executed. Thereafter, the parties will exchange hard copies and all the
counterparts together shall constitute a single agreement, and it shall not be
necessary to introduce more than one fully executed counterpart to enforce this
Agreement.
19. Any notice to the Company required or permitted hereunder shall
be given in writing to the secretary of Company either by personal service or by
registered mail postage prepaid addressed to Company at its then principal place
of business. Any such notice to Executive shall be given in like manner and mail
shall be addressed to the Executive at his home address then shown in the files
of Company. Notice by mail will be deemed received three (3) business days after
the notice is deposited in the United Sates mail, postage prepaid.
20. This Agreement may be extended for an additional period and
subject to additional or different terms by written agreement of the parties.
21. This Agreement shall inure to the benefit of, and shall be
binding upon, the parties hereto and their respective successors, assigns, heirs
and legal representatives, including any entity with which the Company may merge
or consolidate (in which the Company is not the surviving entity) or to which
all or substantially all of its assets may be transferred; provided, however,
that the assignee agrees to assume and be bound by the terms by the terms and
conditions of this Agreement and Executive consents to such assignment and
assumption. When Executive consents to the assignment and the Agreement is
assumed by the assignee, Executive shall not be entitled to any payments and
benefits set forth in paragraph 7 hereof until an event under Section 7(a),(b),
or (c) other than such assignment and assumption occurs.
22. This Agreement supersedes all prior agreements, oral or written,
between the
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<PAGE> 9
parties with respect to Executive's employment (other than Executive's stock
option agreements with the Company) and constitutes a complete and exhaustive
statement of the terms of the agreement between the parties with respect to its
subject matter. Specifically, this Agreement amends and restates in its entirety
the Employment Agreement between Executive and Company dated March 1, 1998. This
Agreement may not be amended except by a written agreement executed by the party
to be charged with the amendment.
23. This Agreement shall be governed by California law.
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<PAGE> 10
IN WITNESS WHEREOF, the undersigned have executed this Employment
Agreement as of the date above written.
"Company" "Executive"
COHR, INC. /S/ DANIEL F. CLARK
-----------------------------
Daniel F. Clark
By: /S/ LYNN REITNOUR
------------------------
Its: CHAIRMAN
------------------------
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<PAGE> 11
EXHIBIT A
EXECUTIVE JOB DESCRIPTION
OFFICER OF COHR, INC.
Chief Financial Officer
A-1
<PAGE> 12
EXHIBIT B
COHR INC. FINANCIAL TARGETS
($M)
<TABLE>
<CAPTION>
Full Year
Q1, FY00 Q2, FY00 Q3, FY00 Q4, FY00 FY2000
Fcst. Fcst. Fcst. Fcst. Fcst.
<S> <C> <C> <C> <C> <C>
REVENUES
Master Plan $15,045 $15,775 $17,005 $18,625 $66,450
GPO 4,167 3,688 3,798 3,870 15,523
Security/Insurance 825 825 845 845 3,340
Corporate 45 45 45 45 180
$20,082 $20,333 $21,693 $23,385 $85,493
OPERATING
PROFIT/(LOSS)
Master Plan $ 1 $ 1,057 $ 1,577 $ 1,867 $ 4,502
GPO 2,205 1,955 2,013 2,051 8,224
Security/Insurance 74 74 76 76 300
PHSG @ 40% 30 30 30 30 120
Ownership
Corporate (2,928) (2,776) (2,676) (2,676) (11,056)
TOTAL $ (618) $ 340 $ 1,020 $ 1,348 $ 2,090
Interest Income-Net 137 137 138 138 550
Pretax $ (481) $ 477 $ 1,158 $ 1,486 $ 2,640
Income/(Loss)
EPS (6,433M $ 0.41
Shares)
</TABLE>
B-1
<PAGE> 1
EXHIBIT 10.16
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement"), dated as of January 20, 1999, is made and
entered into by and between COHR, Inc., a Delaware corporation ("Company"), and
Raymond E. List, an individual ("Executive").
RECITAL
Executive is a key executive of the Company and an integral part of its
management. This Agreement is being entered into in connection with the
Company's continued employment of Executive.
AGREEMENT
NOW, THEREFORE, Company and Executive agree as follows:
1. a. This Agreement shall initially be in effect from September
1, 1998 through August 31, 2001, unless renewed or terminated earlier as
provided herein (the "Initial Term"). At the expiration of the Initial Term and
each anniversary thereafter, the term of this agreement shall automatically be
extended for an additional year (the "Extension Term") unless a written notice
of non-renewal is given by either party on or before ninety (90) days prior to
the end of the Initial Term or the Extension Term, as the case may be, that it
does not desire to extend the term of this Agreement.
b. Executive is and will continue to be employed by the Company
in the position held by Executive as of the effective date of this Agreement and
pursuant to its terms. Executive's job description as of the effective date
hereof is attached as Exhibit A. During his employment hereunder, and subject to
the next sentence, Executive shall devote substantially all of his attention and
business during normal business hours to the performance of this Agreement and
shall, without the Company's prior written consent in each instance, refrain
from rendering services of any kind to others for compensation or services which
would materially interfere with the performance with his duties under this
Agreement.
c. Notwithstanding the above, the Company and the Executive
agree that nothing herein shall preclude the Executive from managing or devoting
time to his personal investments and receiving compensation therefrom,
including, but not limited to, serving as an owner of SRL, Inc.; a member of
Fairfax Consulting Company, LLC and its affiliated entities; managing or
devoting time to the portfolio companies of Fairfax Partners/The Venture Fund of
Washington, L.P., Fairfax Management Company II, LLC or their affiliated
entities; serving on the board of directors of any such companies; or serving on
the board of directors of other profit
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<PAGE> 2
or non-profit entities, such as Vista Restaurants, Inc., Orincon Technologies,
Inc., the Civil Engineering Research Foundation, and ENSEC International Inc.,
provided that such activities do not materially adversely interfere with his
duties to the Company. In the aggregate, however, such activities or commitments
shall not exceed in the aggregate ten percent (10%) of Executive's business
time.
2. During the term of employment, Company shall pay a base salary to
Executive. The base salary for the first year hereof shall be at a rate of Two
Hundred Seventy-Five Thousand Dollars ($275,000) per year. The amount of
Executive's base salary increase (if any) in future years shall be reviewed and
set annually by the Compensation Committee, but in no event shall be reduced.
The base salary shall be paid in equal semimonthly installments.
3. The Company shall award options to purchase 81,250 shares of COHR
common stock at seven dollars ($7.00) per share. The option grant is made under
the existing COHR stock option plan pursuant to a grant agreement attached
hereto as Exhibit C.
4. Company shall also loan One Hundred Thousand Dollars ($100,000)
to Executive as of October 19, 1998, which loan shall be used to acquire Company
stock. The terms of the loan shall be as set forth in this paragraph.
a. The term of the loan will begin on October 19, 1998, and
end on August 31, 2000.
b. Unpaid principal amounts of the loan will bear interest at
a rate of 5.06% per annum from October 19, 1998, the applicable federal rate for
short-term loans as of October 1, 1998.
c. Principal and accrued interest shall be due and payable on
August 31, 2000. However, any cash bonus amounts due and payable to Executive
under this Section shall be applied to prepay unpaid principal and interest.
Each such prepayment shall be applied first to interest and then to principal.
That is, any amount due under the following bonuses shall be applied as follows
to unpaid principal and accrued interest:
(i) to the extent paid in cash, the first installment of any
March 31, 1999 bonus, to be applied and effective as of March 31,
1999;
(ii) to the extent paid in cash, the second installment of any
March 31, 1999 bonus, to be applied and effective as of March 31,
2000; and
(iii) to the extent paid in cash, the first installment of any
March 31, 2000 bonus, to be applied and effective as of March 31,
2000.
d. If at any time while the loan is outstanding the Executive
voluntarily resigns,
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<PAGE> 3
retires, or is terminated for cause, the amount of the principal and accrued
interest outstanding shall be due and payable on the date of such termination of
employment. If Executive's employment with the Company terminates for any reason
other than those listed in the previous sentence, then Executive (or, if
Executive is deceased, his legal representative) and the Company shall determine
a mutually agreeable repayment schedule. In no event, however, shall repayment
occur later than August 31, 2000.
e. The Executive shall pledge the stock purchased with the loan
proceeds to the Company as collateral for the loan. The Company shall retain
possession of the stock until such time as Executive has completely repaid both
the loan's principal and any accrued interest. If the ratio of fair market value
of the stock held as collateral to the amount of unpaid principal of the loan
exceeds two (2) to one (1) based on the average fair market value of the stock
for two (2) consecutive months, the shares of stock representing a fair market
value in excess of such two (2) to one (1) ratio shall be released as
collateral.
5. In addition to his base salary, during the term of his employment
(but commencing with the fiscal year ended March 31, 2000), Executive shall be
eligible to receive an annual bonus for the period from April 1 through March 31
of each year as shown in Exhibit B and as set forth below.
a. The amount of this bonus shall be up to one hundred percent
(100%) of Executive's base salary. The amount of the bonus shall depend on the
Company's achievement of quantified goals, to include target corporate pretax
earnings, as provided in Exhibit B, with Executive receiving 100% of base salary
if the targets are met and a pro rata portion, in the discretion of the Board,
if the target is not met. For years after the year ended March 31, 2000, the
targets shall be negotiated in good faith by Executive and the Board.
b. The amount of the bonus shall be based on performance
results as of March 31 of each fiscal year and shall be effective as of that
date ("Bonus Date"). Any bonus due shall be paid in two installments. The first
installment shall represent fifty percent (50%) of the total bonus due and, to
the extent not applied to prepay any outstanding loan, will be paid within
ninety (90) days of the Bonus Date. The second installment shall represent the
remaining fifty percent (50%) of the total bonus due and, to the extent not
applied to prepay any outstanding loan, shall be paid within ninety (90) days of
the first anniversary of the Bonus Date. Notwithstanding anything in this
Agreement to the contrary, the first installment shall be payable only if
Executive is still employed on the Bonus Date. The second installment shall be
payable unless Executive is no longer employed with the Company on the first
anniversary of the Bonus Date by reason of voluntary resignation, retirement, or
termination for cause.
c. The first installment of a bonus shall be paid in cash.
d. The second installment of a bonus shall be paid in cash,
stock, or stock options, at the discretion of the Company. For the bonus earned
effective as of March 31, 1999
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<PAGE> 4
or thereafter, the second installment (due on March 31, 2000 or thereafter on
each subsequent March 31), if paid in Company Stock is subject to approval by
the Company's stockholders. Executive shall be entitled to receive Company
common stock with a fair market value equal in value to the remaining fifty
percent of the such bonus, where the fair market value of each share of stock
shall be the average closing sales price of a share of common stock on the
composite tape for the NASDAQ exchange for the five (5) business days prior to
the Bonus Date (e.g. March 31, 1999 or each March 31 thereafter). The Company
shall make reasonable efforts to cause such stock to be registered under the
Securities Act of 1933, as amended, or, in the event the Company is unable to
register such securities, the Company shall make reasonable efforts to afford
Executive access to customary piggyback registration rights. Notwithstanding the
above, if the Company's stockholders do not approve the issuance of stock to
Executive pursuant to this Agreement, or if at the time the bonus is due the
Company has no class of securities registered under the Securities Exchange Act
of 1934, as amended, then the Company shall pay the second installment of the
bonus in cash rather than stock.
e. In the event the Company pays the second installment of the
bonus in stock that is not registered under the Securities Act of 1933, as
amended, by accepting such stock as part of his bonus, Executive represents that
the stock will be for Executive's purposes only and not with a view toward the
distribution of such shares. Executive understands that such stock will not have
been registered with any state or federal agency and that such shares cannot be
transferred by Executive unless the shares are registered under applicable
securities laws or unless an exemption from registration is available.
f. In determining whether the corporate pretax earnings targets
set forth in Exhibit B (or the targets agreed to with respect to any subsequent
years) are satisfied, the amount of any bonus to be paid Executive hereunder
shall be included in such determination.
6. a. In addition to the base compensation and bonus provided in
this Agreement, Executive shall throughout the term hereof be entitled to and
shall receive all other benefits no less favorable to Executive than the
benefits generally available to other executives of the Company of the same
status, level and length of service as Executive. Executive shall also be
entitled to reimbursement of reasonable and necessary business expenses
including, without limitation, travel and entertainment expenses, expenses for
an office in northern California, automobile rental expenses when on Company
business away from Executive's northern California home, and subscriptions and
related professional expenses (not including primary membership expenses, which
are paid by Executive), in accordance with the Company's then prevailing policy
(which shall include appropriate itemization and substantiation of expenses
incurred). Other than provided above, such expenses will not include the use of
an automobile or an allowance for automobile expenses.
b. Executive shall be entitled to a minimum of three weeks paid
vacation, or, if more, to such vacation and holidays in accordance with the
policy of the Company generally applicable to other executives of Company with
similar length of service.
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<PAGE> 5
c. Executive shall be entitled to the standard health, dental,
and pension benefits provided to other executives of the Company of the same
level and length of service as Executive. The Company shall pay the premiums on
Executive's current health and dental coverage for that period of time required
for Executive to become covered under the Company plans.
7. Should the Company and Executive agree that Executive will
relocate from northern to southern California, the Company agrees to pay such
expenses which, in the determination of the Company, are necessary for such
relocation. In the event that the payment of any relocation expenses is
considered compensation to the employee under the Internal Revenue Code, and
therefore subject to federal and/or state income taxes ("Compensation Payment"),
then Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by Executive of all taxes,
including any income taxes imposed upon the Gross-Up Payment, Executive retains
an amount of the Gross-Up Payment equal to the income tax imposed on both the
Compensation and the Gross-Up Payments.
8. All compensation provided pursuant to Sections 2, 3, 4, 5 and 7
shall be subject to customary income tax withholding and such other employee
deductions as are required by law with respect to compensation paid to an
employee.
9. Executive's employment may be terminated before end of the
Initial Term or any Extension Term in the event one of the following occurs
during such term of this Agreement or any extension thereof:
a. Executive is given 60 days written notice of the termination
of this Agreement and Executive's employment other than for cause (as defined
herein below), where such termination is other than a notice of non-renewal, as
provided in Section 1(a);
b. Executive's responsibilities are materially reduced and
Executive resigns within three (3) months of such reduction;
c. The Agreement is assumed, as contemplated in Section 24, and
within eighteen months of such assumption Executive is terminated for reasons
other than cause;
d. Executive voluntarily resigns or retires from his
employment;
e. Executive is terminated for cause.
For purposes of this Section 9 and Section 11 herein below, a
termination "for cause" occurs if Executive is terminated for any of the
following reasons: (i) theft, dishonesty, or falsification of any employment or
Company records; (ii) knowing and improper disclosure of Company's confidential
or proprietary information; (iii) conduct by Executive of a criminal nature
(commonly defined as a "felony" in criminal statutes) which has a material
adverse effect on
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<PAGE> 6
COHR's reputation or standing in the community or on its continuing
relationships with its customers or those who purchase and use its products;
(iv) habitual neglect of duties or wanton negligence by Executive in the
performance of duties; (v) violation of a material Company policy or procedure
or any material law or regulation, which breach is not cured within thirty (30)
days following receipt by Executive of written notice of such breach from
Company; or (vi) material wrongdoing or misconduct; or (vii) any material breach
of this Agreement, which breach is not cured within thirty (30) days following
receipt by Executive of written notice of such breach from Company.
10. Subject to Section 11 hereof, and in lieu of payments under
Sections 2, 4, 5, 6 and 7 hereof, Executive shall receive the following
compensation and benefits if his employment terminates during the Initial Term
or any Extension Term pursuant to Section 9(a), (b), or (c) above:
a. Executive shall be paid eighteen (18) months at the rate of
Two Hundred Seventy-Five Thousand Dollars ($275,000) per year, or the base pay
rate in effect at the time of termination. Executive shall also receive an
additional amount as a prorated bonus, which amount shall be calculated by
multiplying Executive's annual bonus, estimated in good faith by the Company,
times a fraction representing the fraction of the year (rounded to the nearest
whole number of months) Executive was employed by the Company during the year of
termination. These amounts shall be paid monthly in eighteen (18) equal payments
commencing on the first day of each month following the effective date of such
termination or resignation. Such payments shall be subject to Federal and State
Income Tax withholding, social security and SDI withholding, and such other
employee deductions as are required by federal, state or local law or authorized
in writing by the Executive. The amount of continued base salary or prorated
bonus provided for in this paragraph shall not be reduced, offset or subject to
recovery by reason of any compensation earned by Executive with a subsequent
employer or from self employment unless the subsequent employer agrees to assume
and be bound by all of the obligations under this Agreement, and Executive has
consented to such assumption, in accordance with the provisions of Section 24
herein below.
b. During the same eighteen (18) month period, the Company will
also continue at its contributions to Executive's 401(k) plans, pension plans,
and medical/dental insurance coverage at the same coverage level that he would
have received if he had remained an employee during the eighteen month period.
Should Executive accept dental coverage or PPO or PPO-equivalent health coverage
by a subsequent employer, the dental coverage or medical insurance coverage
provided at the Company's expense (i.e.,whichever is so provided by the
subsequent employer) shall be terminated.
c. Notwithstanding the foregoing, if (i) the Company exercises
its right to not renew the Initial Term or the Extension Term as set forth in
Section 1(a) hereof, the time period set forth above in Sections 10(a) and 10(b)
shall be twelve (12) months rather than eighteen (18) months so that Executive
shall be entitled to receive payments with respect to a period of twelve
-6-
<PAGE> 7
(12) months rather than eighteen (18) months from the effective date of
non-renewal or termination, as the case may be, or (ii) Executive's employment
terminates during any Extension Term pursuant to Section 9(a), (b) or (c), the
time periods set forth above in Sections 10(a) and 10.b shall be twelve (12)
months instead of eighteen (18) months.
11. Neither Company nor its successor in interest shall be required
to make any payments under Section 10 above in the event Executive is terminated
for cause, retires, or voluntarily resigns. Payments under Section 10 shall be
made to Executive's estate in the event Executive dies or to Executive in the
event Executive becomes disabled as disability is defined in the next sentence,
in lieu of payments under Sections 2, 4, 5, 6 and 7 hereof. For the purposes of
this Agreement, "disability" will mean if at the end of any calendar month,
Executive is and has, for three (3) full consecutive months out of any twelve
(12) month period continuously been unable due to mental or physical illness or
injury to perform his duties under this Agreement in his normal or regular
manner.
12. Except as required for the purposes of proxy disclosure, NASDAQ
rules or applicable laws or regulations, the parties each represent and agree
that they will keep the terms, contents and existence of this Agreement
completely confidential, and will not hereafter disclose any information
concerning this Agreement, including any negotiations leading to this Agreement,
to anyone except as required by law or to individuals who reasonably must be
informed of its terms, and who will be advised of and bound by this
confidentiality clause. Notwithstanding the foregoing, either party may disclose
this Agreement or its terms or contents in any arbitration pursuant to Section
19 hereof. Any failure by any parties, their attorneys, agents or
representatives to maintain the confidentiality of the negotiations leading to
this Agreement, the fact of, or the terms of this Agreement shall constitute a
material breach of this Agreement.
13. Executive acknowledges that he is a fiduciary of the Company and
as such is subject to duties to the Company, its Board of Directors and
Stockholders, including but not limited to the obligation to discharge his
duties (a) in good faith, (b) with the care of an ordinarily prudent person in a
like position would exercise under similar circumstances, and (c) in a manner he
reasonably believes to be in the best interests of the Corporation.
14. Executive and the Company agree that Executive's services for the
Company create a relationship of confidence and trust between the Company and
Executive with respect to any information (a) applicable to the business of the
Company or (b) applicable to the business of any client or customer of the
Company which may be made known to Executive by the Company or by any client of
the Company, or learned by Executive in such context during the period of
Executive's service. All such information has commercial value in the business
in which Company is engaged and is hereinafter referred to as "Proprietary
Information."
The Company acknowledges and agrees that prior to his engagement
Executive possessed, and continues to possess, a broad body of knowledge of
health care and information technology generally, and specific expertise in the
areas of health care information systems,
-7-
<PAGE> 8
electronic commerce within health care and other industries, health care group
purchasing organizations and inventory management.
Executive and the Company agree that all Proprietary Information
is the sole property of the Company, its assigns and its customers, and the
Company, its assigns and its customers shall be the sole owner of all patents,
copyrights, trade secrets and other rights in connection therewith. Executive
hereby assigns to the Company any rights he may have or acquire in such
Proprietary Information. At all times, both during Executive's services for the
Company and for a period of eighteen (18) months after its termination,
Executive will keep in confidence and trust all Proprietary Information or
anything directly relating to it without the written consent of the Company,
except as may be necessary in the ordinary course of performing Executive's
duties hereunder.
Notwithstanding the foregoing, Proprietary Information shall not
be deemed to include, and Executive shall not be under any of the aforementioned
obligations with respect to, information that Executive can document (a) was in
the public domain at the time it was communicated to Executive, (b) entered the
public domain subsequent to the time it was communicated to Executive through no
fault of Executive, (c) was in Executive's possession free of any obligation of
confidence at the time it was communicated to Executive, (d) is part of
Executive's own skill, knowledge, know-how and experience or (e) was disclosed
in response to a valid order by a court or other governmental body, and
Executive provided the Company with prior written notice of such disclosure in
order to permit the Company to seek confidential treatment of such information.
15. Executive acknowledges that as an executive of the Company he has
been and will be instrumental in the business of the Company and its success.
Accordingly, Executive agrees that during the term of this Agreement, he will
not, directly or indirectly, within any location in the United States where the
Company is transacting business during the term of this Agreement, if earlier,
or at the time of the termination of Executive's services hereunder, as the case
may be, engage or participate or make financial investments in or become
employed by or render advisory or other services to or for any person, firm or
corporation directly or indirectly engaged in the business of, and deriving
substantially all of its revenues from, owning and operating medical group
purchasing organizations and/or the sale, lease and/or servicing of medical
equipment (the "Restricted Business") directly or indirectly in competition with
the Company. Nothing herein contained, however, shall restrict Executive from
making any investment in any company whose stock is listed on the National
Securities Exchange or actively traded in the over-the-counter market, so long
as such investment does not give him the right to control or influence the
policy decisions of any such business or enterprise which is engaged in and
derives substantially all of its revenues from the Restricted Business, nor
shall Executive be precluded from investing in entities engaged in the
Restricted Business and being able to nominate and elect a representative to
serve on the Board of Directors of any such companies.
16. For a period of eighteen (18) months from and after the effective
date of
-8-
<PAGE> 9
termination or expiration of Executive's employment with Company, whether
pursuant to the terms of this Agreement or otherwise, Executive shall not:
a. Directly or indirectly solicit any executive or managerial
employee of the Company to discontinue working for or representing the Company
for the purpose of working for or representing any subsequent employer of
Executive which is a competitor of Company; or
b. Authorize or knowingly approve the taking of such actions as
those described above by other persons (on behalf of any such competitor) or
assist any such person, firm or corporation in taking such action.
17. In the event that Executive becomes involved in any claim, action
or legal proceeding brought by or against any person, including stockholders of
the Company, in connection with or as a result of the rendering of services
under this Agreement, the Company will pay Executive's legal and other expenses
(including the cost of any investigation or preparation) in connection therewith
as incurred, except to the extent that Executive has engaged in bad faith or
willful misconduct. The Company will also indemnify and hold the Executive
harmless against any and all losses, liabilities, suits, claims, costs, damages
or expenses (including reasonable attorneys' fees) to Executive in connection
with or as a result of the rendering of services under this Agreement, except to
the extent that any such loss, liability, suit, claim, cost, damage, or expense
results from the bad faith or willful misconduct of Executive in performing the
services that are the subject of this Agreement.
18. Executive acknowledges that he has been advised to seek an
attorney for advice regarding the effect of this Agreement prior to signing it.
19. If any claim (including those arising under state or federal
statutes) is brought under this Agreement, or any dispute of any nature
whatsoever arises regarding the termination of this Agreement or the termination
of Executive's employment (except alleged violations of Executive's obligations
under Sections 12, 13, 14, 15 and 16; which may be enforced by the Company
through a temporary restraining order, preliminary injunction and/or injunction
in a judicial forum), the Company and Executive agree that such claim shall be
resolved in an arbitration proceeding before a single arbitrator, conducted
under the auspices of the American Arbitration Association, Los Angeles,
California and in accordance with its Employment Dispute Resolution rules.
Executive understands, acknowledges and agrees that he is waiving any right to a
jury to decide any claim (including statutory claims), subject to this Section.
The arbitrator agreed to under such rules shall be empowered to resolve the
dispute through consideration of the facts, the terms of this Agreement, and any
statute, law, regulation or defense asserted by either party. The arbitrator
shall be experienced in employment law and his/her decision shall be in writing
and contain findings of fact and conclusions of law. If so authorized by the
arbitrator, the prevailing party shall be entitled to recover from the
non-prevailing party such damages as the arbitrator determines appropriate based
upon the legal theories asserted by either party in such arbitration and
reasonable expenses, including without limitation reasonable attorneys' fees.
The arbitration
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<PAGE> 10
decision shall be final and binding and may be confirmed in any court of
competent jurisdiction.
20. If any of the above provisions is found null, void, or
inoperative, for any reason, the remaining provisions will remain in full force
and effect.
21. This Agreement may be executed by facsimile and in identical
counterparts. The Agreement will be binding on the parties once it has been
fully executed. Thereafter, the parties will exchange hard copies and all the
counterparts together shall constitute a single agreement, and it shall not be
necessary to introduce more than one fully executed counterpart to enforce this
Agreement.
22. Any notice to the Company required or permitted hereunder shall
be given in writing to the secretary of Company either by personal service or by
registered mail postage prepaid addressed to Company at its then principal place
of business. Any such notice to Executive shall be given in like manner and mail
shall be addressed to the Executive at his home address then shown in the files
of Company. Notice by mail will be deemed received three (3) business days after
the notice is deposited in the United Sates mail, postage prepaid.
23. This Agreement may be extended for an additional period and
subject to additional or different terms by written agreement of the parties.
24. This Agreement shall inure to the benefit of, and shall be
binding upon, the parties hereto and their respective successors, assigns, heirs
and legal representatives, including any entity with which the Company may merge
or consolidate (in which the Company is not the surviving entity) or to which
all or substantially all of its assets may be transferred; provided, however,
that the assignee agrees to assume and be bound by the terms by the terms and
conditions of this Agreement and Executive consents to such assignment and
assumption. When Executive consents to the assignment and the Agreement is
assumed by the assignee, Executive shall not be entitled to any payments and
benefits set forth in paragraph 10 hereof until an event under Section 9(a),(b),
or (c) other than such assignment and assumption occurs.
25. This Agreement supersedes all prior agreements, oral or written,
between the parties with respect to Executive's employment (other than
Executive's stock option agreements with the Company) and constitutes a complete
and exhaustive statement of the terms of the agreement between the parties with
respect to its subject matter. Specifically, this Agreement amends and restates
in its entirety the Employment Agreement between Executive and Company dated
August 1998. This Agreement may not be amended except by a written agreement
executed by the party to be charged with the amendment.
26. This Agreement shall be governed by California law.
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<PAGE> 11
IN WITNESS WHEREOF, the undersigned have executed this Employment
Agreement as of the date above written.
"Company" "Executive"
COHR, INC. /S/ RAYMOND E. LIST
-----------------------------
Raymond E. List
By: /S/ LYNN REITNOUR
------------------------------
Its: CHAIRMAN
------------------------------
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<PAGE> 12
EXHIBIT A
EXECUTIVE JOB DESCRIPTION
PRESIDENT AND CHIEF EXECUTIVE OFFICER OF COHR, INC.
- - Responsible to Chairman and Board of Directors for the performance of COHR,
Inc.
- - President and Chief Executive Officer of COHR, Inc. and any spin-offs,
derivatives, successor entities or subsidiary entities.
- - Member of COHR, Inc. Board of Directors.
A-1
<PAGE> 13
EXHIBIT B
COHR INC. FINANCIAL TARGETS
($M)
<TABLE>
<CAPTION>
Full Year
Q1, FY00 Q2, FY00 Q3, FY00 Q4, FY00 FY2000
Fcst. Fcst. Fcst. Fcst. Fcst.
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
REVENUES
Master Plan $15,045 $15,775 $17,005 $18,625 $66,450
GPO 4,167 3,688 3,798 3,870 15,523
Security/Insurance 825 825 845 845 3,340
Corporate 45 45 45 45 180
$20,082 $20,333 $21,693 $23,385 $85,493
OPERATING
PROFIT/(LOSS)
GPO $ 1 $ 1,057 $ 1,577 $ 1,867 $ 4,502
Security/Insurance 2,205 1,955 2,013 2,051 8,224
PHSG @ 40% 30 30 30 30 120
Ownership
Corporate (2,928) (2,776) (2,676) (2,676) (11,056)
TOTAL $ (618) $ 340 $ 1,020 $ 1,348 $ 2,090
Interest Income-Net 137 137 138 138 550
Pretax $ (481) $ 477 $ 1,158 $ 1,486 $ 2,640
Income/(Loss)
EPS (6,433M $ 0.41
Shares)
</TABLE>
B-1
<PAGE> 14
EXHIBIT C
STOCK OPTION GRANT
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") is made and entered
into as of September 1, 1998 (the "Date of Grant") by and between COHR Inc., a
Delaware corporation (the "Company"), and Raymond E. List ("Optionee").
RECITALS
Optionee is an employee of the Company.
The Company has adopted the 1995 Stock Option Plan of COHR Inc.
(the "Plan") for the benefit of officers and managerial employees and
nonemployee members of the Company's Board of Directors.
The Compensation Committee of the Board of Directors of the
Company (the "Committee") has approved the grant to Optionee of an option to
purchase shares of the common stock, $.01 par value, of the Company (the "Common
Stock") under the Plan and is accordance with the other terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals and
the covenants set forth herein, the parties hereto hereby agree as follows:
1. Grant of Option; Certain Terms and Conditions. As of the date
hereof ("Date of Grant"), the Company hereby grants to Optionee, and Optionee
hereby accepts, an option (the "Option") to purchase 81,250 shares of Common
Stock (the "Option Shares") at the Exercise Price per share of $7.00 ("Exercise
Price"). This Option shall expire at 5:00 p.m., Pacific Standard Time, on
September 1, 2008 (the "Expiration Date"), or on such earlier date as provided
herein, and shall be subject to all of the terms and conditions set forth in
this Agreement.
2. Vesting. The Optionee's right to exercise an Option shall be
become vested in accordance with the following schedule:
<TABLE>
<CAPTION>
Date of Vesting Percentage Vested
--------------- -----------------
<S> <C>
September 1, 1998 25% Vested (20,312 shares)
September 1, 1999 50% Vested (40,625 shares)
September 1, 2000 75% Vested (60,937 shares)
</TABLE>
C-1
<PAGE> 15
<TABLE>
<S> <C>
September 1, 2001 100% Vested (81,250 shares)
</TABLE>
For purposes of this Agreement, a "Vested Option" shall refer to that portion of
the Option which is exercisable pursuant to the above vesting schedule. This
Option is not intended to qualify as an incentive stock option under section 422
of the Internal Revenue Code of 1986, as amended.
3. Accelerated Vesting.
(a) Change in Control. In the event of a Change in Control
(as defined in the 1996 Stock Option Plan of COHR, Inc. (the "Plan"))
prior to the third anniversary of the Date of Grant, Optionee shall
automatically become 100% vested in the Option Shares and such Option
shall be immediately exercisable as to all shares covered thereby.
(b) Underwritten Public Offering. Notwithstanding
paragraph 2 above, in the event of an underwritten public offering of
Common Stock of the Company or by an Affiliate of the Company on or
after January 1, 1997, Optionee shall become 50% vested in the nonvested
portion of the Option awarded to such Optionee, determined as of the
date of the underwritten public offering. In such event, the remaining
nonvested portion of the Option awarded to Optionee, after application
of the subparagraph (b), shall thereafter become vested as follows:
(i) If the underwritten public offering occurs
prior to the first anniversary of the date the Option is granted,
then:
<TABLE>
<CAPTION>
Anniversary of
Date Option Granted Percentage Vested
------------------- -----------------
<S> <C>
First Anniversary 33%
Second Anniversary 66%
Third Anniversary 100%
</TABLE>
(ii) If the underwritten public offering occurs
after the first anniversary but prior to the second anniversary
of the date the Option is granted, then:
<TABLE>
<CAPTION>
Anniversary of
Date Option Granted Percentage Vested
------------------- -----------------
<S> <C>
Second Anniversary 50%
Third Anniversary 100%
</TABLE>
(iii) If the underwritten public offering occurs
after the
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<PAGE> 16
second anniversary but prior to the third anniversary of the date
the Option is granted, then:
<TABLE>
<CAPTION>
Anniversary of
Date Option Granted Percentage Vested
------------------- -----------------
<S> <C>
Third Anniversary 100%
</TABLE>
4. Termination of Option.
(a) Expiration Date. Except as otherwise provided herein,
the Option shall terminate on the Expiration Date.
(b) If the Optionee dies while an Option is exercisable
under the terms of this Agreement, the Optionee's beneficiary may
exercise such rights, to the extent the Optionee could have done so
immediately preceding his death, within twelve (12) months after the
Optionee's death, but not later than the Option's Expiration Date.
(c) If the Optionee's employment is terminated due to his
permanent and total disability, as determined by the Committee, the
Optionee may exercise his Option, to the extent exercisable as of his
termination of employment, within twelve (12) months after termination,
but not later than the Option's Expiration Date.
(d) If the Optionee's employment is terminated for any
reason other than those set forth in sections 4(b) or (c) above, the
Optionee may exercise his Option, to the extent exercisable as of his
termination of employment, within nine (9) months after termination of
employment, but not later than the Option's Expiration Date.
5. Adjustments. In the event that the outstanding shares of
Common Stock are changed into or exchanged for cash or for a different number or
kind of shares or other securities of the Company, or of another corporation, by
reason of reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, stock dividend or combination of shares (other
than for shares or securities of another corporation or by reason of
reorganization), then the Committee shall make appropriate and equitable
adjustments in the number and kind of shares that may thereafter be acquired
upon the exercise of the Option and the Exercise Price per share; provided,
however, that any such adjustments in the Option shall be made without changing
the aggregate Exercise Price of the then unexercised portion of the Option.
In the event of a "spin-off" or other substantial
distribution of
C-3
<PAGE> 17
assets of the Company which has a material diminutive effect upon the Fair
Market Value (as defined in the Plan) of the Company's Common Stock, the
Committee may in its discretion make an appropriate and equitable adjustment to
the per share and the aggregate Option Exercise Price to reflect such
diminution.
Any adjustments made under this Section shall parallel the
adjustments made by the Committee under the Plan.
6. Exercise. Subject to Section 4 of this Agreement, the Option
shall be exercisable during Optionee's lifetime only by Optionee or by his
guardian or legal representative, and after Optionee's death only by the
Optionee's beneficiary. Optionee may designate his or her beneficiary or
beneficiaries or change such designation by delivery of a written beneficiary
designation to the Company, on such terms and conditions as determined by the
Committee. The Option may be exercised only by the delivery to the Company of a
written notice of such exercise, accompanied by payment in full of the aggregate
Exercise Price by any one or more of the following means:
(a) Certified or cashier's check payable to the Company.
(b) By the delivery to the Company of a certificate or
certificates representing shares of Common Stock, duly endorsed or
accompanied by duly executed stock powers, which delivery effectively
transfers to the Company good and valid title to such shares, free and
clear of any pledge, commitment, lien, claim or other encumbrance, such
shares to be valued on the basis of the aggregate Fair Market Value (as
defined in the Plan) on the date the Option is exercised, provided that
the Company is not then prohibited from purchasing or acquiring such
shares of Common Stock and provided that Optionee has either owned such
shares of Common Stock for at least 6 months (or such longer period as
is determined by the Company to be required by applicable accounting
standards to avoid a charge to the Company's earnings) or Optionee
purchased such shares on the open market.
(c) Subject to the timing requirements of Section 5.5 of
the Plan, pursuant to procedures previously approved by the Company,
through the sale of the shares of Common Stock acquired on exercise of
this Option through a broker-dealer to whom Optionee has submitted an
irrevocable notice of exercise and irrevocable instructions to deliver
promptly to the Company the amount of sale proceeds sufficient to pay
for such shares, together with, if requested by the Company, the amount
of federal, state, local or foreign withholding taxes payable by reason
of such exercise.
C-4
<PAGE> 18
7. Tax Withholding. The Company shall be entitled to require
payment or deduction from other compensation payable to Optionee of any sums
required by federal, state or local tax law to be withheld with respect to the
Option in accordance with the provisions of Section 7.6 of the Plan. Optionee
may elect the withholding ("Share Withholding") by the Company of a portion of
the shares of Common Stock otherwise deliverable to Optionee upon the exercise
of the Option to satisfy the Company's withholding obligation. Optionee's Share
Withholding election is subject to the terms and conditions in Section 7.6 of
the Plan, including the Committee's discretion to revoke Optionee's right to
elect Share Withholding at any time before such election.
8. Notices. All notices and other communications required or
permitted to be given pursuant to this Agreement shall be in writing and shall
be deemed given if delivered personally, or five days after mailing by certified
or registered mail, postage prepaid, return receipt requested, to the Company,
at 21540 Plummer Street, Chatsworth, California 91311-4103, Attention: Chief
Financial Officer, or to Optionee at the address set forth beneath his or her
signature on the signature page hereto, or at such other addresses as each may
designate by written notice in the manner aforesaid.
9. Stock Exchange Requirements; Applicable Laws.
Notwithstanding anything to the contrary in this Agreement, no shares of stock
purchased upon exercise of the Option, and no certificate representing all or
any part of such shares, shall be issued or delivered until: (a) such shares
have been admitted to listing upon official notice of issuance on such stock
exchange upon which shares of that class are then listed, (b) the completion of
any registration or other qualification of such shares which the Committee
shall, in its absolute discretion, deem necessary or advisable, (c) any approval
or other clearance from any state or federal governmental regulatory body which
the Committee shall, in its absolute discretion, deem necessary or advisable has
been obtained and (d) the lapse of the reasonable time period following the
exercise of the Option as the Committee may establish from time to time.
10. Transferability. The Option and any interest therein may not
be sold, assigned, conveyed, gifted, pledged, hypothecated or otherwise
transferred in any manner, other than by will or by the laws of descent and
distribution. An Option shall be exercised only by the Optionee or his guardian
or legal representative.
11. Plan. The Option is being awarded pursuant to the Plan, as
in effect on the Date of Grant, and is subject to all the terms and conditions
of the Plan, as the same may be amended from time to time, provided, however,
that no such amendment shall deprive Optionee, without his or her consent, of
the Option or any of Optionee's rights under this Agreement. The interpretation
C-5
<PAGE> 19
and construction by the Committee of the Plan, this Agreement and such rules and
regulations as may be adopted by the Committee for the purpose of administering
the Plan shall be final and binding upon Optionee. Until the Option shall be
exercised or be forfeited or otherwise terminated, the Company shall, upon
written request therefor, send a copy of the Plan in its current form, to the
holder of record of the Option.
12. Stockholder Rights. No person or entity shall be entitled to
vote, receive dividends, or be deemed for any purpose the holder of any Option
Shares until the Option shall have been duly exercised to purchase such Option
Shares in accordance with the provisions of this Agreement.
13. Employment Rights. No provision of this Agreement or of the
Option granted hereunder shall (a) confer upon Optionee any right to continue in
the employ of the Company, or any of its subsidiaries or other affiliates, (b)
affect the right of the Company, and each of its subsidiaries or other
affiliates, to terminate the services of Optionee, with or without cause, or (c)
confer upon Optionee any right to participate in any employee welfare or benefit
plan or other program of the Company, or any of its subsidiaries or other
affiliates, other than the Plan. Optionee hereby acknowledges and agrees that
the Company and each of its subsidiaries or other affiliates may terminate the
services of Optionee at any time and for any reason, or for no reason, unless
Optionee and the Company, or such subsidiary or other affiliate, are parties to
a written agreement that expressly provides otherwise.
14. Amendments. This Agreement may be amended only by a writing
executed by the Company and Optionee which specifically states that it is
amending this Agreement.
15. Governing Law. This Agreement and the Option granted
hereunder shall be governed by, construed, and enforced in accordance with the
laws of the State of California.
16. Severability. If any part of this Agreement is declared by
any court or governmental authority to be unlawful or invalid, such unlawfulness
or invalidity shall not serve to invalidate any part of this Agreement not
declared to be unlawful or invalid. Any part so declared unlawful or invalid
shall, if possible, be construed in a manner which gives effect to the terms of
such part to the fullest extent possible while remaining lawful and valid.
IN WITNESS WHEREOF, the Company and the Optionee have duly
executed this Agreement as of the Date of Grant.
C-6
<PAGE> 20
COHR Inc., a Delaware corporation
By:______________________________
Title:
BY SIGNING BELOW, OPTIONEE ACKNOWLEDGES RECEIPT OF A COPY OF THE PLAN,
REPRESENTS THAT HE OR SHE IS FAMILIAR WITH THE TERMS AND PROVISIONS THEREOF AND
HEREBY ACCEPTS THIS OPTION SUBJECT TO ALL OF THE TERMS AND PROVISIONS THEREOF.
OPTIONEE FURTHER ACKNOWLEDGES THAT HE OR SHE HAS REVIEWED THE PLAN AND THIS
AGREEMENT IN THEIR ENTIRETY, HAS HAD AN OPPORTUNITY TO OBTAIN THE ADVICE OF
COUNSEL PRIOR TO EXECUTING THIS AGREEMENT AND FULLY UNDERSTANDS ALL PROVISIONS
OF THIS AGREEMENT. OPTIONEE HEREBY AGREES TO ACCEPT AS BINDING, CONCLUSIVE AND
FINAL INTERPRETATIONS OF THE BOARD OF DIRECTORS OR OF THE COMMITTEE UPON ANY
QUESTIONS ARISING UNDER THE PLAN.
C-7
<PAGE> 21
OPTIONEE
-------------------------------
Signature
-------------------------------
Street Address
-------------------------------
City, State and Zip Code
-------------------------------
Social Security Number
C-8
<PAGE> 1
EXHIBIT 10.18
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement"), dated as of January 20, 1999, is made and
entered into by and between COHR Inc., a Delaware corporation ("Company"), and
Stephen W. Ritterbush, an individual ("Executive").
RECITAL
Executive is a key executive of the Company and an integral part of its
management. This Agreement is being entered into in connection with the
Company's continued employment of Executive.
AGREEMENT
NOW, THEREFORE, Company and Executive agree as follows:
1. a. This Agreement shall be in effect from September 1, 1998
through August 31, 1999, unless renewed or terminated earlier as provided
herein. The term of this Agreement will automatically extend for one (1)
additional year (until August 31, 2000) unless a written notice of non-renewal
is given by either party on or before sixty (60) days prior to August 31, 1999.
b. Executive will be employed by the Company in the position
held by Executive as of the effective date of this Agreement and pursuant to its
terms. Executive's job description as of the effective date hereof is attached
as Exhibit A. Executive shall devote his time, attention, skill and energy to
the performance of this Agreement. Executive shall, without the Company's prior
written consent in each instance, refrain from rendering (a) services of any
kind to others for compensation or (b) services which would materially interfere
with the performance with his duties under this Agreement.
c. During the term of this Agreement, Executive will work three
quarter time, or 63 of the 84 total business days occurring from September 1,
1998 to December 31, 1998; and one-half time of the total business days
occurring from January 1, 1999 to August 31, 1999. Commencing January 1, 1999,
Executive will maintain a record of time worked under this Agreement and provide
each month's total number of days worked to the CFO of the Company no later than
the fifth day of the subsequent month.
d. Notwithstanding the above, the Company and Executive agree
that nothing herein shall preclude Executive from managing or devoting time to
his personal investments and
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<PAGE> 2
receiving compensation therefore, including serving as a member of Fairfax
Consulting Company, LLC ("Fairfax") and its affiliated entities; managing or
devoting time to the portfolio companies of Fairfax Partners/The Venture Fund of
Washington, L.P., Fairfax Management Company II, LLC or their affiliated
entities; serving on the board of directors of any such companies; or serving on
the board of directors of other profit or non-profit entities, provided that
such activities do not materially adversely interfere with Executive's duties to
the Company.
2. Company shall pay a base salary to Executive of $180,000
annualized for the period in which Executive works three quarter time and
$120,000 annualized for the period in which Executive works halftime. The base
salary shall be paid in equal semi-monthly installments.
3. In addition to his base salary, Executive shall be eligible to
receive an annual bonus for the period from April 1 through March 31 of each
fiscal year during the term of this Agreement, such bonus to be negotiated in
good faith between the Company's Board of Directors and Executive.
4. a. In addition to the salary and bonus provided in this
Agreement, Executive shall throughout the term hereof be entitled to receive all
other benefits, at levels no less favorable than the benefit levels generally
afforded executives of the Company and on the same terms as such benefits are
made available to such executives; provided, however, the Company shall
reimburse Fairfax for the premiums paid by Fairfax to include Executive on its
medical and dental plans (approximately $8300 per year). The Company shall also
pay directly or reimburse the Executive for all reasonable business expenses,
including but not limited to travel expenses (including the cost of commercial
coach airline tickets, business meals and rental cars) incurred by him in
connection with his duties hereunder; in accordance with the Company's then
prevailing policy (which shall include appropriate itemization and
substantiation of expenses incurred). These expenses will not include the costs
of an automobile or automobile allowance.
b. Executive shall be entitled to a minimum of three weeks paid
vacation, or, if more, to such vacation and holidays in accordance with the
policy of the Company generally applicable to other executives of Company with
similar length of service.
5. All compensation provided pursuant to Sections 2, 3 and 4 shall
be subject to customary income tax withholding and such other employee
deductions as are required by law with respect to compensation paid to an
employee.
6. Executive's employment may be terminated before August 31, 1999
in the event one of the following occurs during the term of this Agreement or
any extension thereof:
a. Executive is given 60 days written notice of the termination
of this Agreement and Executive's employment other than for cause (as defined
herein below);
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<PAGE> 3
b. Executive's responsibilities are materially reduced and
Executive resigns within three (3) months of such reduction;
c. Executive voluntarily resigns or retires from his
employment; or
d. Executive is terminated for cause.
For purposes of this Section 6 and Section 8 herein below, a
termination "for cause" occurs if Executive is terminated for any of the
following reasons: (i) theft, dishonesty, or falsification of any employment or
Company records; (ii) knowing and improper disclosure of Company's confidential
or proprietary information; (iii) conduct by Executive of a criminal nature
(commonly defined as a "felony" in criminal statutes) which has a material
adverse effect on COHR's reputation or standing in the community or on its
continuing relationships with its customers or those who purchase and use its
products; (iv) habitual neglect of duties or wanton negligence by Executive in
the performance of duties; (v) violation of a material Company policy or
procedure or material law or regulation, which breach is not cured within thirty
(30) days following receipt by Executive of written notice of such breach from
Company; (vi) material wrongdoing or misconduct; or (vii) any material breach of
this Agreement, which breach is not cured within thirty (30) days following
receipt by Executive of written notice of such breach from Company.
e. Executive does not consent to an assignment, or a successor
to the Company does not assume this Agreement, as contemplated in Section 21.
7. Subject to Section 8 hereof, in lieu of payments under Sections
2, 3 and 4 hereof, Executive shall receive the following compensation and
benefits if his employment terminates pursuant to Section 6(a), (b) or (e)
above:
a. Executive shall be paid the remaining base salary under this
Agreement. Executive shall also receive an additional amount as a prorated
bonus, which amount shall be calculated by multiplying Executive's annual bonus,
estimated in good faith by the Company, times a fraction representing the
fraction of the year (rounded to the nearest whole number of months) Executive
was employed by the Company during the year of termination. These amounts shall
be paid monthly (through the remaining months left under the term of this
Agreement) in equal payments commencing on the first day of each month following
the effective date of such termination or resignation. Such payments shall be
subject to Federal and State Income Tax withholding, social security and SDI
withholding, and such other employee deductions as are required by federal,
state or local law or authorized in writing by the Executive. The amount of
continued base salary or prorated bonus provided for in this Section shall not
be reduced, offset or subject to recovery by reason of any compensation earned
by Executive with a subsequent employer or from self employment unless the
subsequent employer agrees to assume and be bound by all of the obligations
under this Agreement, and Executive
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<PAGE> 4
has consented to such assumption, in accordance with the provisions of Section
21 herein below.
8. Neither Company nor its successor in interest shall be required
to make any payments under Section 7 above in the event Executive is terminated
for cause, retires, or voluntarily resigns. Payments under Section 7 shall be
made to Executive's estate in the event Executive dies, or to Executive in the
event Executive becomes disabled, as "disability" is defined in the next
sentence, in lieu of any payments under Sections 2, 3 and 4 hereof. For the
purposes of this Agreement, "disability" will mean if at the end of any calendar
month, Executive is and has, for three (3) full consecutive months out of any
twelve (12) month period continuously been unable due to mental or physical
illness or injury to perform his duties under this Agreement in his normal or
regular manner.
9. Except as required for the purposes of proxy disclosure, NASDAQ
rules or applicable laws or regulations, the parties each represent and agree
that they will keep the terms, contents and existence of this Agreement
completely confidential and will not hereafter disclose any information
concerning this Agreement, including any negotiations leading to this Agreement,
to anyone except as required by law or to individuals who reasonably must be
informed of its terms, and who will be advised of and bound by this
confidentiality clause. Notwithstanding the foregoing, either party may disclose
this Agreement or its terms or contents in any arbitration pursuant to Section
16 hereof. Any failure by any parties, their attorneys, agents or
representatives to maintain the confidentiality of the negotiations leading to
this Agreement, the fact of, or the terms of this Agreement shall constitute a
material breach of this Agreement.
10. Executive acknowledges that he is a fiduciary of the Company and
as such is subject to duties to the Company, its Board of Directors and
Stockholders, including but not limited to the obligation to discharge his
duties (a) in good faith, (b) with the care an ordinarily prudent person in a
like position would exercise under similar circumstances, and (c) in a manner he
reasonably believes to be in the best interests of the Corporation.
11. Executive and the Company agree that Executive's services for the
Company create a relationship of confidence and trust between the Company and
Executive with respect to any information applicable to the business of the
Company learned by Executive in such context during the period of Executive's
service. All such information has commercial value in the business in which
Company is engaged and is hereinafter referred to as "Proprietary Information."
The Company acknowledges and agrees that prior to his engagement,
Executive possessed, and continues to possess, a broad body of knowledge of
health care and information technology generally, and specific expertise in the
areas of health care information systems, electronic commerce within health care
and other industries, health care group purchasing organizations and inventory
management.
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<PAGE> 5
Executive and the Company agree that all Proprietary Information
is the sole property of the Company, its assigns and its customers, and the
Company, its assigns and its customers shall be the sole owner of all patents,
copyrights, trade secrets and other rights in connection therewith. Executive
hereby assigns to the Company any rights he may have or acquire in such
Proprietary Information. At all times, both during Executive's services for the
Company and for a period of 12 months after its termination, Executive will keep
in confidence and trust all Proprietary Information or anything directly
relating to it without the written consent of the Company, except as may be
necessary in the ordinary course of performing Executive's duties hereunder.
Notwithstanding the foregoing, Proprietary Information shall not
be deemed to include, and Executive shall not be under any of the aforementioned
obligations with respect to, information that Executive can document (a) was in
the public domain at the time it was communicated to Executive, (b) entered the
public domain subsequent to the time it was communicated to Executive through no
fault of Executive, (c) was in Executive's possession free of any obligation of
confidence at the time it was communicated to Executive, (d) is part of
Executive's own skill, knowledge, know-how and experience or (e) was disclosed
in response to a valid order by a court or other governmental body, and
Executive provided the Company with prior written notice of such disclosure in
order to permit the Company to seek confidential treatment of such information.
12. Executive acknowledges that as an executive of the Company he has
been and will be instrumental in the business of the Company and its success.
Accordingly, Executive agrees that during the term of this Agreement, he will
not, directly or indirectly, within any location in the United States where the
Company is transacting business during the term of this Agreement, if earlier,
or at the time of the termination of Executive's services hereunder, as the case
may be, engage or participate or make financial investments in or become
employed by or render advisory or other services to or for any person, firm or
corporation directly or indirectly engaged in the business of, and deriving
substantially all of its revenues from, owning and operating medical group
purchasing organizations and/or the servicing of medical equipment (the
"Restricted Business") directly or indirectly in competition with the Company.
Nothing herein contained, however, shall restrict Executive from making any
investment in any company whose stock is listed on the National Securities
Exchange or actively traded in the over-the-counter market, so long as such
investment does not give him the right to control or influence the policy
decisions of any such business or enterprise which is engaged in and derives
substantially all of its revenues from the Restricted Business, nor shall
Executive be precluded from investing in entities engaged in the Restricted
Business and being able to nominate and elect a representative to serve on the
Board of Directors of any such companies.
13. For a period of one (1) year from and after the effective date of
termination or expiration of Executive's employment with Company, whether
pursuant to the terms of this Agreement or otherwise, Executive shall not:
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<PAGE> 6
a. Directly or indirectly solicit any executive or managerial
employee of Company to discontinue working for or representing Company for the
purpose of working for or representing any subsequent employer of Executive
which is a competitor of Company; or
b. Authorize or knowingly approve the taking of such actions as
those described above by other persons (on behalf of any such competitor) or
assist any such person, firm or corporation in taking such action.
14. In the event that Executive becomes involved in any claim, action
or legal proceeding brought by or against any person, including stockholders of
the Company, in connection with or as a result of the rendering of services
under this Agreement, the Company will pay Executive's legal and other expenses
(including the cost of any investigation or preparation) in connection therewith
as incurred, except to the extent that Executive has engaged in bad faith or
willful misconduct. The Company will also indemnify and hold the Executive
harmless against any and all losses, liabilities, suits, claims, costs, damages
or expenses (including reasonable attorneys' fees) to Executive in connection
with or as a result of the rendering of services under this Agreement, except to
the extent that any such loss, liability, suit, claim, cost, damage, or expense
results from the bad faith or willful misconduct of Executive in performing the
services that are the subject of this Agreement.
15. Executive acknowledges that he has been advised to seek an
attorney for advice regarding the effect of this Agreement prior to signing it.
16. If any claim (including those arising under state or federal
statutes) is brought under this Agreement, or any dispute of any nature
whatsoever arises regarding the termination of this Agreement or the termination
of Executive's employment (except alleged violations of Executive's obligations
under Sections 10, 11, and 12, which may be enforced by the Company through a
temporary restraining order, preliminary injunction and/or injunction in a
judicial forum), the Company and Executive agree that such claim shall be
resolved in an arbitration proceeding before a single arbitrator, conducted
under the auspices of the American Arbitration Association, Los Angeles,
California and in accordance with its Employment Dispute Resolution rules.
Executive understands, acknowledges and agrees that he is waiving any right to a
jury to decide any claim (including statutory claims) subject to this Section.
The arbitrator agreed to under such rules shall be empowered to resolve the
dispute through consideration of the facts, the terms of this Agreement, and any
statute, law, regulation or defense asserted by either party. The arbitrator
shall be experienced in employment law and his/her decision shall be in writing
and contain findings of fact and conclusions of law. If so authorized by the
arbitrator, the prevailing party shall be entitled to recover from the
non-prevailing party such damages as the arbitrator determines appropriate based
upon the legal theories asserted by either party in such arbitration and
reasonable expenses, including without limitation reasonable attorneys' fees.
The arbitration decision shall be final and binding and may be confirmed in any
court of competent jurisdiction.
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<PAGE> 7
17. If any of the above provisions is found null, void, or
inoperative for any reason, the remaining provisions will remain in full force
and effect.
18. This Agreement may be executed by facsimile and in identical
counterparts. The Agreement will be binding on the parties once it has been
fully executed. Thereafter, the parties will exchange hard copies and all the
counterparts together shall constitute a single agreement, and it shall not be
necessary to introduce more than one fully executed counterpart to enforce this
Agreement.
19. Any notice to the Company required or permitted hereunder shall
be given in writing to the secretary of Company either by personal service or by
registered mail postage prepaid addressed to Company at its then principal place
of business. Any such notice to Executive shall be given in like manner, and
mail shall be addressed to the Executive at his home address then shown in the
files of Company. Notice by mail will be deemed received three (3) business days
after the notice is deposited in the United States mail, postage prepaid.
20. This Agreement may be extended for an additional period and
subject to additional or different terms by written agreement of the parties.
21. This Agreement shall inure to the benefit of, and shall be
binding upon, the parties hereto and their respective successors, assigns, heirs
and legal representatives, including any entity with which the Company may merge
or consolidate or to which all or substantially all of its assets may be
transferred; provided, however, that the assignee agrees to assume and be bound
by the terms by the terms and conditions of this Agreement and Executive
consents to such assignment and assumption.
When Executive consents to the assignment and the Agreement is
assumed by the assignee, Executive shall not be entitled to any payments and
benefits set forth in Section 7 hereof until an event under Sections 6(a) and
(b) other than such assignment and assumption occurs.
22. This Agreement supersedes all prior agreements, oral or written,
between the parties with respect to Executive's employment (other than the
Executive's existing stock option agreement) and constitutes a complete and
exhaustive statement of the terms of the agreement between the parties with
respect to its subject matter. Specifically, this Agreement amends and restates
in its entirety the Employment Agreement between Executive and Company dated
August 1998. This Agreement may not be amended except by a written agreement
executed by the party to be charged with the amendment.
23. This Agreement shall be governed by California law.
IN WITNESS WHEREOF, the undersigned have executed this Employment
Agreement
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<PAGE> 8
as of the date above written.
"Company" "Executive"
COHR INC. /S/ STEPHEN W. RITTERBUSH
-----------------------------
Stephen W. Ritterbush
By: /S/ LYNN REITNOUR
-------------------------------
Its: CHAIRMAN
-------------------------------
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<PAGE> 9
EXHIBIT A
STEPHEN RITTERBUSH JOB DESCRIPTION
Stephen Ritterbush is the Managing Director of COHR Inc. responsible for (i)
identifying new business that can be added to COHR's business base and (ii)
raising capital for the Company. He shall report to the Chairman of the Board
and the President. During the term of this Agreement, he shall serve on the
Board of Directors.
A-1
<PAGE> 1
EXHIBIT 11
COHR INC. AND SUBSIDIARIES
COMPUTATION OF NET LOSS PER SHARE
(UNAUDITED)
(IN THOUSANDS, EXCEPT NET LOSS PER SHARE)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------- -------------------
1998 1997 1998 1997
------- -------- ------- --------
<S> <C> <C> <C> <C>
Net loss attributable to common stock............. $(3,127) $(10,655) $(9,248) $(11,409)
======= ======== ======= ========
Common share information:
Average shares outstanding for basic loss per
share........................................ 6,433 6,433 6,433 6,429
------- -------- ------- --------
Dilutive effect of stock options and warrants
Shares for diluted loss per share............ 6,433 6,433 6,433 6,429
======= ======== ======= ========
Net loss per common share:
Basic and Diluted............................... $ (0.49) $ (1.66) $ (1.44) $ (1.77)
======= ======== ======= ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 11,769
<SECURITIES> 0
<RECEIVABLES> 13,390
<ALLOWANCES> 3,199
<INVENTORY> 4,567
<CURRENT-ASSETS> 36,133
<PP&E> 5,127
<DEPRECIATION> 6,518
<TOTAL-ASSETS> 44,142
<CURRENT-LIABILITIES> 15,749
<BONDS> 278
0
0
<COMMON> 887
<OTHER-SE> 27,035
<TOTAL-LIABILITY-AND-EQUITY> 44,142
<SALES> 74,175
<TOTAL-REVENUES> 74,175
<CGS> 57,061
<TOTAL-COSTS> 23,446
<OTHER-EXPENSES> 3,444
<LOSS-PROVISION> 530
<INTEREST-EXPENSE> 27
<INCOME-PRETAX> (9,248)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,248)
<EPS-PRIMARY> (1.44)<F1>
<EPS-DILUTED> (1.44)
<FN>
<F1>For Purposes of This Exhibit, Primary means Basic.
</FN>
</TABLE>
